NAI500 Commentary: Can Zinc stay hot in 2018?
Zinc leads all the base metals in terms of price rally since midyear last year, why did this happen and can this trend continue in 2018?
- Zinc metal market has been in deficit since 2016
- The inventory of Zinc continues to be eaten up, with the supplies look to be down for another year.
- Zinc is more or less a “construction & infrastructure” metal, with the demand increase from China, India and even in USA, it puts upward pressure on the metal price
Will the Zinc metal price be sustainable in 2018?
- The strong global economic recovery looks very likely to continue in 2018, that’s always a good sign for base metals including Zinc.
- owing in large part to primary mined supply constraints, it will push the refined market balance into an even more substantial deficit position.
- No major new Zinc mine productions are in sight
The average price of Zinc metal is about USD $1.31/lb in 2017 (source: Bloomberg, Paradigm Capital), some analysts are forecasting the average price will reach $1.50 or above in 2018
If Zinc continues to stay hot in 2018, what kind of companies will benefit and investors should follow?
Besides the obvious choice of producers like Hudbay Minerals (TSX:HBM) and Trevali Mining (TSX:TV), there are other virtually unknown juniors that investors can also follow and track, some of the names are as follow:
- Aston Bay Holdings (TSXV:BAY) ~$10M market cap
- A speculative play with Zinc and Copper projects in Nunavut, an active area for polymetallic exploration potential
- The chief geologist David Broughton is well known personnel in his major Copper discoveries in his Ivanhoe times.
- Group Eleven Resources (TSXV:ZNG) ~ $7M market cap
- A new company with Zinc projects in Ireland, one of places in the world with largest Zinc deposits (not many people actually aware of this fact)
- Strong shareholder support with MAG Silver, and also has a Chinese partner Nonfemet on the project side
- Fireweed Zinc (TSXV:FWZ) ~ $42M market cap
- A more advanced exploration company than the above 2, so the valuation is a bit higher. It is actively exploring and developing Zinc deposits in the mine-friendly province of Yukon.
- Recently raised $12.5M, which is a good indication of how strong the shareholder support is in this type of environment.
- Canada Zinc Metals (TSXV:CZX) ~ $60M market cap
- Its Cardiac Creek deposit (Akie) is in a prospective Zinc region in BC, recently announced a revised 43-101 compliant resource calculation with indicated resource of 22.7M tonnes grading 8.3% Zn, 1.6% Pb, 14.1g/t Ag (5% Zn cut-off grade)
- Strategic investors and shareholders include big names like Teck Resources, Korea Zinc and Tongling Non-ferrous Metals Group from China
Written by Gilbert Chan
Disclaimer: The companies mentioned in the above article may be paid clients of NAI500, the author may or may not own shares in the above mentioned equities.