Resource World Magazine

40 www.resourceworld.com F E B R U A R Y / M A R C H 2 0 1 7 F ollowing up on an impressive 60.6% gain in 2016, zinc is expected to shine once again this year. This is largely because prior-year deficits are expected to translate into critically low inventories and potential price spikes, with zinc being the stand- out preferred commodity among the base metals, said BMO Capital Markets in a report. Zinc is coveted for its corrosion resistant properties, primarily in the steel industry where it is used to prolong the life of metal by preventing rust. After rallying from a low of US $0.66/lb in January 2016, the price shot to over US $1.30/lb in late November, ending the year at US $1.15/lb. Analysts at Scotia Capital recently forecast that zinc could escalate even higher in 2017, buoyed by a lack of investment in new operations and expected shutdowns at large operations in Australia and Ireland. UK-based consultant Wood McKenzie is even more optimistic. It expects to see an average price of US $1.43/lb in 2017, rising to US $1.76/lb in 2018 as markets react to decreasing supply and fall - ing inventory levels. Wood McKenzie is forecasting a long term price of US $1.23/lb. "There has been a lot of talk about looming shortages for a number of years now,'' said Peeyush Varshney, Chairman, President and CEO of Canada Zinc Metals Corp. [CZX-TSXV; A0RAQJ-FSE], which recently raised $3 million for exploration in the prolific Kechika Trough mineral belt in northeast British Columbia. He said the difference now is that the mine closures that everyone was talking about have actually happened. Analysts are predicting a long term supply deficit because there isn't much in the pipeline to replace production from the big mines that have recently closed down. Those include the Lisheen Mine in Ireland, the Century Mine in Australia and others. Industry officials are watching to see how quickly Swiss metals trading giant Glencore will bring on the production that was shut down in late 2015. "We assume that the [Glencore's idled] mines (annual capacity of 300,000 tpa zinc) will restart in early 2017,'' said TD Securities in a report. "If this does not happen, then the supply tightness in the zinc market will be exacerbated, poten - tially leading to a runaway zinc price, TD said. Key to the forecast is a projected 3.7% year-over-year zinc demand growth in China. Meanwhile, China remains one of the key wild cards on the zinc mining scene. BMO Capital Markets said it assumes China's mine supply begins to increase again in 2018. At higher prices, China's miners can better afford to invest in infrastructure required to meet stricter environmental and safety regulations, BMO said. "We do not expect double-digit growth again, but note that China still possesses the second largest known resources of zinc globally after Australia." Industry officials say the 23% drop in metal treatment charges (fees negotiated annually between miners and smelters/refiners) in the past year, is a sure sign that refiners are scrambling to get feed for their operations. Initial indications are pointing towards another significant drop in treatment charges for 2017, Trevali Mining Corp. [TV-TSX] said in a report. Backed by key shareholders, including China's state-owned Tomling Non-Ferrous Metals, Teck Resources Ltd. [TECK.B- TSX; TECK-NYSE] and Korea Zinc Co. Ltd., Canada Zinc may soon launch a PEA on the Cardiac Creek zinc-lead-silver deposit on the Akie property in the Kechika Trough. Cardiac Creek is estimated to host indicated resources of 19.6 million tonnes of 8.17% zinc, 1.58% lead and 13.6 g/t silver, plus another 8.1 mil - lion tonnes inferred grading 6.81% zinc, 1.16% lead and 11.2 g/t silver. Plans for 2017 call for more drilling, likely in May or June, that will target the main deposit while testing for parallel zones and other surface targets. Canada Zinc is also watching for exploration results on nearby properties (Pie, Cirque East and Yuen) that were optioned in 2013 by Teck and Korea Zinc. For its part, Trevali will examine potential for future expan - sion at its flagship Santander Mine, Peru, and Caribou Mine, New Brunswick. Based on results of underground drilling this year, Trevali will consider whether to double the size of the Santander operation to 4,000 tpd. In New Brunswick the company will look at developing two new mines near its existing Caribou operation, which reached commercial production in July 2016. Future plans could involve building a second mill to process material from the Half Mile and Stratmat deposits. Alternatively, the company could opt to wait until Caribou is mined out and truck ore from the two new mines to the existing mill. n 2017 ZINC OUTLOOK by Peter Kennedy ZINC

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