(Originally Published 2-7-17 to premium subscribers)
An exciting metal breaking into 5 year highs is zinc at $1.30 per pound. Its still way below its pre credit crisis highs at $2 but it looks like it could be headed there later this year. Smart investors are scrambling around for the top zinc assets which can get into production in mining friendly stable jurisdictions.
It was only a few months ago when these assets were ignored as zinc was below eighty cents per pound. Zinc is mostly used in cars which are hitting record high in demand. There may be a supply shortfall over the next couple of years. Look where the smart mining investors are putting their money.
At the end of December I saw some of the smartest mining investors the Lundin and McEwen Family putting seven figures into this new zinc company whose Chairman built Blue Pearl, Thompson Creek, Wheaton River... in the last commodity cycle. He has over 35 years of experience. These stocks he built went from pennies to ten+ dollars per share with a billion market cap. I believe this could be one of the top zinc assets in North America. This asset has 4+ billion pounds of zinc at a time when producers were shutting down.
Why is the market looking at zinc again ? Inventories for zinc are extremely low with a lot of production shutting down globally yet demand is rising as automobile sales are climbing to record highs every year. There are very few large zinc projects in Canada like this one in the cupboard for the major producers such as Teck and Sumitomo.
The Chairman believes he can get this mine into production within 3 years which is pretty amazing as there are very few zinc projects out there with the unique characteristics of this project. Its open pit with great infrastructure located in a mining friendly jurisdiction. It was a profitable past producer in the 60’s, 70’s and 80’s and left behind four billion pounds of zinc as the former operator went after Red Dog in Alaska as prices collapsed in late 80’s to .35 per pound.
However, now the situation is very different as zinc is in deficit with mines being closed and a real dearth of viable projects to replaces that shortfall. This asset may come back into favor as it was once one of the world’s most profitable zinc mines because of the high grades, open pit and nearby infrastructure with rail lines. The company is advancing an updated Preliminary Economic Assessment PEA by mid March which could be quite an important event for this company as it will guide the Feasibility Study. In addition the company has budgeted for a huge drilling campaign as there are a lot of areas under-explored. This has the making of a mine. Metallurgy shows excellent recoveries with historically clean concentrates. Permits are in place to start construction and the exploration upside is extremely apparent. The updated PEA should be a catalyst for the company and put it on the map of some of the majors looking to build out their pipeline of large and low cost zinc projects.
More importantly this is one of the few assets that could get back into production pretty easily. Its an open pit past producer in a friendly jurisdiction. It couldn't operate at $.35 in the eighties but it might be able to at today's prices. Let's see what the Preliminary Economic Assessment says due in a few weeks.
See my interview with the Chairman by clicking here...
Disclosure: I (Jeb Handwerger) own shares in this company linked and they are a website sponsor which means I have been compensated and could benefit from a rising share price. This should be considered an advertorial and not be taken as investment advice. I may buy or sell at anytime with no notice. This contains forward looking statements which may not come to fruition. Buyer beware small cap mining stocks are very risky and I am not a financial advisor..
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