Issue link: http://resourceworld.uberflip.com/i/685011
14 www.resourceworld.com J U N E / J U L Y 2 0 1 6 i t has been accepted wisdom, for many months now, that a looming supply crunch would make zinc a star per- former in the base metals sector. Analysts at Scotia Capital, for example, recently forecast that zinc could jump to US $1.35/lb this year and even higher in 2017, buoyed by a lack of investment in new operations and expected shut- downs at large operations in Australia and Ireland. That view was reinforced when Swiss metals trader, Glencore, sent prices surging to US $0.78/lb in October 2015 after announcing that it was shutting down 500,000 tonnes of mine production. The fact that zinc is still trading at US $0.86/lb (at the time of writing) may be due to investor skepticism caused by the time it takes for remaining stockpiles at shuttered mines to be used up, explained Mark Cruise, President and CEO of Trevali Mining, a Vancouver-based zinc producer. "It is not like you just shut a mine down and prices react overnight," he said during a recent interview. "People have to realize that it takes [zinc contained in] concen- trates a while to work through the global logistics system,'' he said. Zinc is primarily used for galvanizing steel to protect it against corrosion. Zinc is also used to improve crop yields and quality. Assuming that global economic condi- tions remain as predicted and there are no external shocks, Cruise believes zinc prices should be trading closer to a US $1/lb in the second half of this year. His optimism is shared by Scotiabank Commodity Strategist, Patricia Mohr, who says zinc concentrate supply is likely to be critically low by the end of this year and will lift zinc prices to US $1.25/lb in 2017 and US $1.55/lb in 2018. "Smelter treatment charges have already turned in favour of miners this year,'' she said. "The fundamentals remain very good for zinc,'' added Graham Carman, CEO at Tinka Resources, which is attempting to position itself as a preferred destination for investors who like zinc by developing a potentially large discovery in Peru, the Ayawilca deposit. "It is not the sexiest of metals but nonetheless, it is very useful and on the supply side there are going to be some constraints," he said. "That means there is going to be a run in the zinc price at some point. We just don't know exactly when." Data collected from International Lead Zinc Study Group (ILZSG) member coun- tries indicates that global demand for refined zinc metal will exceed supply by 352,000 tonnes in 2016. This deficit is higher than that indicated by the group during its meetings last October with the difference due primarily to additional cut- backs in mine production announced over the past six months. "The short to medium term outlook for copper is probably subdued," said Cruise. "So the question is, can zinc break out from the rest of the base metals complex and not get held down?" He said it may take a while to do that, "But once it breaks out, based on supply and demand funda- mentals, it should run pretty hard." ZiNc outlook & roundup by Peter Kennedy The Canada Zinc Metals Akie exploration camp located in the Kechika Trough approximately 260 km north-northwest of Mackenzie, northern British Columbia. Photo courtesy Canada Zinc Metals Corp.