In the last decade, the commodity downturn hit the zinc market hard, with many zinc mines scaled back or depleted with minimal investment in finding new reserves.
Compounding the situation is China’s recent stricter environmental regulations, which led to a curtailment of zinc mining and processing throughout the country.
Due to a combination of the above and the increasing use of zinc in new technology, the global zinc market has slipped into a supply deficit, which continues to expand as the metal is consumed faster than it is mined.
With demand now outstripping supply, the zinc price hit 10-year highs last Wednesday, with the cash buyer price spiking at US$3,369.5 a tonne on the London Metals Exchange – the highest price the metal has commanded since the global financial crisis (GFC) struck in mid-2007.
In the last month alone, the zinc price increased 12% from US$2,993 per tonne on the 14 September to its US$3,369.5 peak on Wednesday 4 October 2017.
If the metal continues its upward trajectory to pre-GFC levels of more than $4,500 per tonne, what stocks are poised to benefit?
ASX-listed zinc stocks:
Listed below are some of the more notable small cap and micro cap zinc plays on the ASX.
Consolidated Tin Mines (ASX: CSD)
First off the rank is Consolidated Tin Mines, which is already producing.
After appointing administrators in mid-2016, the company came back 12-months later with a new focus: base metals, including zinc.
Consolidated Tin Mines recently commissioned its Mt Garnet processing plant in northern Queensland with first concentrate produced in late July 2017.
The company is also undertaking a drilling campaign at its Einasleigh project exploring for zinc, lead and silver.
Red River Resources (ASX: RVR)
Next off the mark is Red River Resources’ Thalanga zinc project in Queensland, with its mill completing ramp up ahead of schedule in the September 2017 quarter.
With an estimated annual zinc production of 21,400 tonnes, the company is anticipating “imminent” first cash flow from concentrate sales.
Meanwhile, Red River Resources is working on proving up resources at various other targets in the project area.
Energia Minerals (ASX: EMX)
In an attempt to take advantage of the prevailing zinc prices, Energia Minerals is fast-tracking exploration at its Gorno zinc project in northern Italy which was mined in the early 1980s before being shut down.
Historic production yielded 55-60% zinc sulphide concentrates and 30-40% zinc oxide concentrates with minimal contaminants.
Recent drilling has validated the historic results and in May 2017, Energia reported updated indicated and inferred resources of 160,000t of contained zinc at a 1% cut-off.
Energia is aiming to begin producing in 2018.
Heron Resources (ASX: HRR)
Heron Resources owns the Woodlawn zinc-copper project in New South Wales.
Located about 30km south of Goulburn, Woodlawn was mined between 1978 and 1998, producing zinc grading, on average, 9.1%.
Heron Resources acquired the project in 2014 through a merger and has been focused on redeveloping the mine since. After securing a $141 million funding package in early September, the company announced on 4 October 2017 it was ramping up project development in order to target commissioning in late 2018.
Venturex Resources (ASX: VXR)
With production a little further away, Venturex anticipates first output from its Sulphur Springs zinc-copper project in the Western Australia to occur in mid-2019.
Venturex Resources released a study in February that reveals the project has an initial 12-year mine life and could produce up to 32,000tpa of zinc.
Sulphur Springs has defined zinc reserves of 255,000t and a further 740,000t in resources.
PNX Metals (ASX: PNX)
PNX Metals is conducting a definitive feasibility study (DFS) at its Hayes Creek zinc-gold-silver project in the Northern Territory. The DFS is expected to be completed in 2018.
An earlier pre-feasibility study at Hayes Creek forecast annual production of 18,200t zinc.
The company is also accelerating zinc exploration at its Moline project, which is about 65km of Hayes Creek.
Metals Australia (ASX: MLS)
Metals Australia has a drilling campaign underway at its Manindi zinc project in WA’s mid west, which has a current JORC resource of 70,102 contained zinc.
To-date, drilling at the project has returned zinc grading between 6.91% and 16.46%.
The drilling campaign is testing multiple targets including the Kultarr resource to target the main zinc mineralisation source.
Pursuit Minerals Ltd (ASX: PUR)
Another zinc hopeful, Pursuit Minerals Ltd kicked off a busy October with a drilling campaign at its Bluebush zinc project in Queensland’s north west.
Drilling has returned a 20m intersection of zinc and lead.
The region is known for hosting zinc mineralisation and Bluebush is 75km from New Century Resources’ Century zinc project, which was the world’s third largest zinc mine until its previous owners shut down operations in 2016.
As with other zinc explorers, Pursuit Minerals’ strategy is to advance exploration to take advantage of the commodity’s rising price.
Trek Metals (ASX: TKM)
West Africa-focussed Trek Metals is currently investigating the potential for open pit mining at its Niambokamba and Dikaki prospects, part of the Kroussou project in Gabon. Exploration has revealed zinc grading between 2% and 8.6%.
The company also has an option to purchase the Lawn Hill project in the Northern Territory, which is close to the Century deposit which has zinc grading 8.2%.
Mithril Resources (ASX: MTH)
In late August, Mithril Resources joined the zinc bandwagon when it applied for a tenement known the Billy Hills project in WA’s west Kimberley region. The project area adjoins the Pilbara zinc mine, which had a pre-mine resource grading 7.7% zinc and was operating until 2008.
Mithril Resources is currently reviewing data and generating targets at Billy Hills while awaiting official granting of the exploration licence, which the company anticipates will be in the next 12 months.
Rumble Resources (ASX: RTR)
Mineral explorer Rumble Resources, is actively exploring its Braeside Zinc-Lead Project in Western Australia. A drilling program is expected to be underway by years’ end.
Additionally, Rumble recently announced it had entered an agreement to acquire up to 75% of the Earaheedy Zinc Project, located approximately 110km north of Wiluna, WA.
Zinc of Ireland (ASX: ZMI)
European-focused base metals explorer Zinc of Ireland is currently looking at developing several zinc-lead deposits across Ireland.
Zinc of Ireland possesses 1,000 square kilometres in tenements throughout the country from the north to the south and across both east and west coasts.
The company’s flagship Kildare project which has an inferred resource of 5.2 million tonnes grading 7.2% zinc for 374,400t of contained zinc.
Recent diamond drilling at the resource has returned higher grade zinc including on 23.25 intersection grading 12.7% zinc.
Ironbark Zinc (ASX: IBG)
Ironbark Zinc is aiming to develop its Citronen Zinc-Lead Project located in Greenland.
According to the company there are over 12.8 billion pounds of zinc defined at their 100% owned Citronen project, making it a world class project if the company can progress it through to production.
New Century Resources leads the tonnage charge
As one of the near-term zinc producers, New Century Resources (ASX: NCZ) enjoys the largest JORC-compliant resource of 2.6 million tonnes of contained zinc for its flagship Century zinc project in Queensland, Australia.
This week, New Century Resources announced it had bagged US$45 million in funding to enable the company to fast-track Century’s development.
Little more than a week earlier, New Century Resources reported it had agreed to acquire Century Bull Pty Ltd’s remaining 30% stake in the project.
Once finalised, this will increase New Century Resources’ holding in Century to 100%.
The company is currently investigating recommissioning the unused processing plant. Other pre-existing infrastructure includes a 700-person camp, private airport with sealed runway, mining fleet, grid power connection, a 304km slurry pipeline and its own shipping port and vessel in Karumba.
To keep costs down and remain viable in a lower pricing environment, New Century Resources has begun rolling out solar power generation which is initially expected to offset 70,000 litres of diesel per annum.
New Century Resources utilities manager Michael Pitt said the solar infrastructure enables the company to meet its environmental objectives as well as offset power costs.
Peru, the new zinc frontier?
Peru-focussed Inca Minerals (ASX: ICG) reported last Friday it had intercepted zinc grading 40.92% at its Cerro Rayas project in the country. Sampling at previous small-scale mines had returned assays in excess of 30% zinc.
Inca Minerals’ managing director Ross Brown said the Cerro Rayas was proving to be an “exciting” project for the company.
It looks like Inca Minerals may be onto a good thing, with Swiss-based heavy weight Glencore Plc (LON: GLEN) announcing last week it was increasing its stake from 7.68% up to 28.07% by purchasing between US$531 million and US$956 million shares in Peru’s largest zinc miner Volcan Compania Minera SAA.
Due to the quality of its ore deposits, Volcan is considered one of the world’s lowest cost zinc producers, making it economically viable during lower pricing environments.
Bullish zinc market fundamentals
At its October meeting, the International Lead and Zinc Study Group published data showing refined zinc had a 287,000t shortfall in the first eight months of 2017.
The group also revealed China’s zinc concentrate imports soared to almost 40% to 714,000t between January and August this year.
As one of the world’s largest zinc miners, Teck Resources revealed it anticipated zinc production would not be able to keep up with consumption till at least 2020.
Teck Resources added more than 4.3 million tonnes per annum of additional zinc output was required to meet zinc consumption by 2025. According to the company, the current global zinc project pipeline is insufficient to meet this need.
Zinc end uses
Zinc is essential to human development and growth.
As well as being vital to human health, zinc is used in a variety of everyday applications including sunscreen, cars, cosmetics, aerospace, medicine and fertiliser.
When combined with other metals, zinc can increase the life span by protecting the alloy against corrosion.
When included in batteries, zinc can store six times more power than traditional battery systems. It also can increase the range of electrical vehicles.
With its ability to protect against corrosion and extend an application’s life, zinc is consumed in almost all industry applications including buildings, cars, ships and steel structures.
The American Galvanizers Association claims coating galvanised steel in zinc can prolong the unit’s life up to 150 years.