Title Zinc 2014 Degree of recognition National Media name/outlet ResourceStocks Magazine - Aspermont Media type Duration/Length/Size 1 page Country Australia Date 2/06/14 Description Zinc has very seldom held the title of the mining sector’s favourite commodity. Indeed, the cheap shot from elsewhere across the industry for many years has been that “zinc stinks”.
Star status in recent years as to the commodity popularity stakes has gone to the likes of iron ore (a winner over several years), coking coal, gold and copper. The balance of power among the price outlooks for the various commodities looks now to be gradually changing however – with the once record margins in iron ore eroding, coking coal having already corrected and gold and copper prices well below their highs of recent years.
Enter zinc – accompanied by a far more pleasant aroma than its historical reputation might suggest.
Indeed, recent studies by analysts at CRU group suggest that zinc could top the list of commodities that rise in prices in coming years. Of ten commodities with positive price outlooks to 2018, zinc tops the list in percentage price growth from annual 2013 average prices.
5. Hard Coking Coal (HCC)
Digging Deeper first commented on the positive long-term outlook for zinc back in 2012 – with at that time an expectation of a material rise in price commencing by 2015. Latest research has deferred the timing of the price rise – out to 2017-2018 – but the fundamental story remains unchanged.
With a sizable global market (12.8 million tonnes in 2013), zinc sits firmly in the realm of the mainstream metals. Despite this, on occasions zinc has resembled minor metals in rapid changes in prices, with spectacular spikes in the past – the most recent of which was in 2006 and 2007.
Zinc’s principal uses are for galvanising (anti-rust coating), which is by far the greatest end use consumer, in die-casting alloys, brass, and as rolled zinc. Galvanised steel is used in the automobile industry to increase the corrosion resistance of vehicles. Galvanised steels are also used extensively in construction and engineering applications and in the manufacture of white goods.
China is the largest consumer of zinc, anticipated to exceed 6,000,000 tonnes by 2015. Chinese zinc consumption is estimated to have risen by 5.2% in 2013, with growth forecast to be slightly stronger in 2014, however demand growth will come under pressure as the Chinese govt. is committed to rebalancing its economy.
China is a major supplier of zinc too – with refined production representing over 40 per cent of the global zinc market. It is ex-China mine production that is the cause of concern – and therefore of the price optimism that surrounds zinc.
New large-scale mine production is needed as a number of major western mines, including the Century mine in Queensland, reach the end of production. Specifically MMG, the owners of Century now look unlikely to be able to seamlessly replace Century production (winding down in 2015-16) with new tonnes from the Dugald River project, which is unlikely to produce substantial tonnes until 2018.
Century’s planned closure, following on from the closure of Glencore’s Brunswick and Perseverance Canadian operations and also Vedanta’s Lisheen mine in Ireland are likely to push the zinc market into an early and significant concentrate deficit. Other tonnage reductions include the Rampura Agucha zinc mine in India.
Producers of zinc concentrate are paid for the majority of contained zinc in the concentrate, minus a deduction, and pay a treatment charge to the smelter together with an escalator indexed to the prevailing zinc price
A countervailing force in the zinc concentrate market is the tighter environmental policy decisions in China however which are impacting domestic smelters’ ability to achieve greater utilization rates – thereby speaking to potential metal as well as zinc concentrate shortage.
A number of smaller new mine developments are set to replace the older larger mines – but carry with them development risk and the likelihood of delays in start-up and ramp-up.
Junior ASX companies are planning ahead for the predicted rise in zinc price. For example, Musgrave Minerals (MGV) is earning up to 75% interest in the Menninnie Dam silver-zinc-lead project in South Australia after signing a Heads of Agreement with Terramin Australia Ltd (TZN).
Elsewhere Blackthorn Resources (BTR) has exposure to zinc through its Burkina Faso joint venture with Glencore at Perkoa. More recently, the shareholders of TriAusMin (TRO) received a boost to their hopes of the redevelopment of the high-grade Woodlawn mine in New South Wales with the company looking to tie the corporate knot with cashed-up Heron Resources (HRR).
Producer/Author Allan Trench Persons Allan Trench