Month: April 2017

I’m bullish on uranium’s future and believe those who are positioned in the right companies will see extraordinary gains in the future. One of the companies that I believe will excel with a rising uranium price is Energy Fuels. For those unfamiliar with the Energy Fuels story, check out my article, written last December, here.

Today’s article is an interview that I conducted with a member of the Energy Fuels management team, Curtis Moore. Moore is VP of Marketing and Corporate Development, and is involved in a wide range of company activities, such as uranium sales, mergers and acquisitions, investor and public relations, and corporate legal.

Enjoy!

 

Brian: The uranium spot price has recovered well since hitting a low of $17.75 per pound, late last year. Kazatomprom, Kazakhstan’s giant uranium producer, played a major part in this price appreciation with the following announcement on January 10^th, 2017:

“[A]nnounced today that due to the prolonged recovery in the uranium market, planned 2017 production from Republic of Kazakhstan will be reduced by approximately 10%. This will amount to a volume greater than 2,000 MtU or more than 5 million lb U3O8 reduction in 2017 planned output. For greater context, this is equal to 3% of total global uranium production (based on 2015 UxC Consulting figures)” ~ Kazatomprom

Today, the UxC U3O8 price sits at $23.25 USD per pound, while this is a great appreciation in the spot, prices below $30 USD per pound are still uneconomic.

Where do you think the uranium price is headed in 2017? And, how will it affect the way Energy Fuels does business this year?

Curtis:  We believe the price of uranium will be higher at the end of 2017 than they are today.  However, considerable uncertainty remains.  After shooting up from $18 to the mid-$20’s earlier this year, uranium spot prices have stalled for the time being.  I understand that utilities have not been particularly active in the spot market this year, which actually might be a good thing.  We also understand that utilities intend to enter both the spot and term markets to an increasing extent this year, so that is demand that has not yet materialized.  Indeed, several non-US utilities already have begun to dip their toes into the market to soak up some of the cheap uranium that is available.  I’ll also point out that uranium markets are thinly traded, and there are relatively few market participants.  Therefore, small changes in supply or demand can create large changes in prices.  The price volatility we’ve seen in the spot market this year exemplifies this fact, as we’ve seen large daily increases and decreases in spot prices based on very small quantities of material traded. 

Producers, including Energy Fuels, typically want to minimize exposure to today’s spot market.  This is likely a reason behind some of the recently announced production cuts.  Indeed, as long-term contracts continue to expire, I would expect producers to simply continue to cut production, rather than sell our valuable resources into a weak spot market.  These production cuts, along with the fact that global uranium demand is growing, will eventually create the conditions needed to bring rationality back to uranium prices. 

At Energy Fuels, we are certainly happy to see uranium prices rise off of their near-historic lows in late-2016.  However, we still plan to cut production, thereby preserving cash, until prices rise above about the mid-$30’s to $40 level.  I would like to think we would be one of the first companies back in the market, since we can ramp-up production relatively quickly, and we can make good operating margins from our lower cost sources of production at or above the $40 price level.  But, until that happens, we’re happy to sit back and keep our powder dry.

 

Brian: As you know, a uranium producer can protect itself in periods of low U3O8 prices in two key ways: a hedged contract sales book and access to uranium In-Situ Recovery (ISR) operations. While prices below $30 USD per pound make even low cost ISR operations uneconomic, they are a huge advantage when operating in conjunction with a hedge sales book.

Energy Fuels possesses both conventional uranium mining operations and, most importantly right now, ISR operations within the United States. They also have a hedged sales book, which allows them to sell uranium above the current spot price.

How is Energy Fuels using their long-term contracts and ISR production to their advantage while the uranium price is low?

Curtis:  You are correct that Energy Fuels holds long-term contracts, and those contracts have pricing at levels that are well above our costs of production.  One of the reasons we are not currently profitable is that we do not have enough of these higher-priced contracts.  However, once prices rise into the $40’s per pound, we believe it will be prudent to secure a certain portion of our production into new contracts.  Though, we will leave additional proportions available for sale at even higher prices.

You are generally correct that ISR production is lower cost than conventional, while conventional production can produce much more pounds of uranium at higher prices.  However, our Canyon Mine, a fully-permitted, mostly-developed, high-grade conventional mine in Arizona, is an exception to this “rule”, as it is probably the lowest cost source of production in our portfolio right now.  Still, we don’t plan to bring Canyon into production until we can realize sales prices at least above the high-$30’s.

Nevertheless, our Nichols Ranch ISR Project, which is currently in production in Wyoming, and our Alta Mesa ISR Project, which is currently on care and maintenance in Texas, have costs that are right behind Canyon.  As prices rise into the $40’s, with Canyon, Nichols Ranch, and Alta Mesa, we believe we have the ability to bring about 2-3 million pounds of annual production into the market within a relatively short period of time.  So, we think we’ll be one of the first companies to benefit from even modest rises in uranium prices.

 

Brian: One thing that I admire about the Energy Fuels management team is that they aren’t afraid to progress their assets during a bear market. This methodology will allow them to capitalize on a turn in the market, and fully focus on production when the uranium bull market returns.

On Febuary 2, 2017, Energy Fuels released some fantastic chemical assay results from their Canyon Mine, which confirm more high-grade uranium and copper mineralization. A couple of the highlights from the assay are: Hole No. 14, intercept length 4 feet, average uranium grade 8.35% U3O8 and average copper grade 1.64%;  Hole 11, intercept length 18 feet, average uranium grade 1.23% U3O8 and average copper grade 7.74%. More assay results can be found in the news release.

NOTE: The World Nuclear Association says that high grade uranium is considered to be about 2% U3O8 and low grade is around 0.1%. This should put Energy Fuels results into perspective.  Also, the lowest % Copper for the typical economic project these days is 0.4% copper, again putting these high grade figures into perspective.

The latest assay results from the Canyon Mine are very promising. What does Energy Fuels have planned for the Canyon Mine in 2017 and beyond?

Curtis:  We are very excited about the Canyon Mine.  According to the WNA table you mention, the only country with significant high- or very high-grade uranium deposits is Canada.  But, ex-Canada, the Canyon Mine is very high-grade on a global basis.  I believe it is the highest-grade uranium mine actually being developed in the World today.  And, keep in mind that most of the high-grade Canadian deposits you hear a lot about are not permitted or developed.  They’ll require large dollars to finance.  As a result, production from these deposits is likely many years away.  In my opinion, these are truly exceptional deposits that will make enormous contributions to uranium supply in the long-term.  But, they probably won’t be ready to produce during the upcoming uranium super cycle.

By contrast, we believe the Canyon Mine can capitalize on the upcoming uranium super cycle.  It has the dual advantage of being high-grade and low-cost on a go-forward basis.  And, all the pieces are in place to start production.  It is fully-permitted, all surface development is complete, the production shaft is complete, and our White Mesa Mill is ready with the capacity to process the ore into salable product. 

The current NI 43-101 Technical Report shows the project having 1.6 million pounds of inferred uranium resources.  However, we recently completed an underground drilling program from the shaft.  And, we intercepted very large areas of previously undiscovered high-grade uranium mineralization.  We expect to release a new technical report later this year incorporating the results of our drilling program, and we hope to significantly increase the size of the resource and upgrade the resource classifications. 

You also mention the copper mineralization we discovered.  We still have a lot of core samples to assay and evaluate.  But, so far we have assayed 509-feet of core with an average grade of over 10% copper.  This is extremely high-grade copper mineralization.   We don’t know yet whether we will be able to economically produce a salable copper concentrate.  However, we are taking a very close look at the potential to reconfigure the White Mesa Mill to produce this copper.  And, if it can be produced as a profitable by-product, it will lower our costs at Canyon even more.

Brian: It should be noted that the process to get a uranium property permitted in North America is long and sometimes difficult. The Energy Fuels team, however, is proficient at getting their properties approved for mining.

On January 10, 2017, Energy Fuels released news that the U.S. Bureau of Land Management had issued a Final Environmental Impact Statement and Record of Decision for the Sheep Mountain Project. These are the final governmental approvals needed to commence mining at the project.

The Sheep Mountain Project is a conventional type development property located in the Crooks Gap Mining District of central Wyoming. The deposit holds 18.4 Mlbs of U3O8 probable reserves and an indicated resource of 30.3 Mlbs U3O8.

Also, Energy Fuels announced in a news release on March 23^rd, 2017 that they have received permits to expand Nichols Ranch in the future. Nichols Ranch is an ISR property, which is located in the Powder River Basin, Wyoming. Currently the facility has 2 Mlbs U3O8 production capacity per annum and has a measured and indicated resource of 2.8 million pounds (Mlbs) of U₃O₈, with a lot of exploration potential ahead of it.

The Energy Fuels team’s ability to successfully navigate the permitting process is an asset to the company. Can you give us an overview of what the permitting of Nicholas Ranch and Sheep Mountain will do for the company?

 

Curtis:  Thank you for recognizing the success our company enjoys on the permitting front.  It is not easy to permit new uranium projects in the U.S., and we believe our permitting team is truly second-to-none in the U.S.  But for some reason, lots of investors take licenses and permits for granted.  In reality, permitting a project is time-consuming and expensive.  It can take 10 years and millions of dollars to permit a large new mine or mill in the U.S. or Canada.  Even less developed countries have difficult permitting pathways. I can’t emphasize enough that existing permits are an extremely valuable asset to any company.  No permits, no production.

We recently finished permitting the expansion of our Nichols Ranch Project in Wyoming into the Jane Dough wellfields with the EPA, NRC, and Wyoming state agencies.  At Nichols Ranch, we are currently producing from 9 wellfields.  But, under the previous permit, we were only able to develop 4 more wellfields.  However, the recently approved expansion allows us to construct 22 additional new wellfields.  We also have the permits in place to build 8 more wellfields beyond the 22 mentioned prior.  This gives us a lot of runway for future production at Nichols Ranch.  We also recently completed permitting at the Sheep Mountain Project, a large conventional mine located in Wyoming.  And, we have some permits pending for a couple of our other conventional projects, including the Roca Honda Project in New Mexico and the expansion of our La Sal and Daneros projects. 

We also have existing permits for a number of developed projects that are currently on care and maintenance, including the Alta Mesa ISR Project in Texas, the La Sal Complex, the Daneros Mine and Tony M Mines in Utah, and the Whirlwind Mine in Colorado.  Again, these existing permits are valuable assets to Energy Fuels. 

As prices rise, there will be a lot of uranium companies talking about their deposits.  We will be talking about ours, too.  But, we will actually be mining, producing finished product, selling uranium to utilities, and putting those dollars into our treasury.

 

Brian: Last year, I wrote an article entitled, Invest like an Insider, where I discussed how important it can be to watch a company’s insiders’ buying and selling. The actions of a company’s insiders typically, but not always, provide the investor with an indication of the company’s health and future prospects. Over the last few months, Energy Fuels has seen both insider buying and selling.

Curtis, can you give us an overview of the insider buying and selling over the last few months?

Curtis:  No problem.  Investors deserve to understand what is happening.  And despite one Board member selling over the past several months for personal financial reasons, we recently had 11 members of the board and senior management buy stock in the Company.  We believe we put our money where our mouth is.   I would also point out that insiders own about 5.2% of our common shares outstanding.  And, most of these shares have been purchased on the open market over the years, as no one received founders’ shares and we only recently instituted an RSU program to save cash.  In short, our insiders have invested very large sums of our own money into this Company.  We believe in this Company, and we believe in the long-term prospects for uranium.

 

Brian: I believe President Trump’s election has played an integral role in the initial rise in the uranium spot price. Jonathan Crawford writes in a Bloomberg article posted on February 7^th, 2017,

“Trump will throw more support behind nuclear power than the Obama administration, which gave a higher priority to wind and solar power, Maria Korsnick, president and chief executive officer of the Nuclear Energy Institute, said in an interview Tuesday at Bloomberg headquarters in New York. The industry’s goal of expanding the number of U.S. nuclear reactors dovetails into Trump’s campaign promise to add jobs and boost investment in infrastructure.” ~Bloomberg

Crawford further states,

“’The U.S. nuclear industry contributes $60 billion to the economy and employs more than 100,000 people, according to the Nuclear Energy Institute. That was a key message the Washington-based group delivered to the White House after Trump campaigned on a promise to boost employment, Korsnick said.” ~Bloomberg

No one has a crystal ball, but can you please give us your best guess as to whether or not nuclear power will play a greater role in America’s energy future?

Curtis:  In our opinion, the U.S. will remain a leader in nuclear energy.  However, we anticipate nuclear to be flat or decline somewhat in the U.S.  We are shutting down some of our smaller, older plants.  But, we are also replacing them with some larger, newer plants.  We are also moving forward with some new small modular reactor (SMR) designs.  However, the growth of nuclear, and hence uranium demand, will not be in the U.S. or Europe.  It will mainly be in Asia, as countries like China, Russia, South Korea, and India move forward with their programs.  China will likely surpass the U.S. in nuclear generating capacity by the early- to mid-2020’s.  And, Energy Fuels is well-positioned to sell our product to the U.S. and nations around the World.  We have a track-record of international sales.  We have accounts at all of the western conversion facilities.  And, our projects are ready to increase production.  In short, we will be ready to produce and sell more uranium when the market wishes to pay us fair value for our product.

 

Brian: Curtis, thank you for taking the time to answer my questions.

 

 

Summarizing from my conversation with Curtis, here are a few of the highlights for Energy Fuels, right now:

• The permitting of their Sheep Mountain project and, most importantly, the permitting for the expansion of their ISR Nichols Ranch operation.
• 11 Energy Fuels insiders are putting their money where their mouth is and are buying Energy Fuels stock
• High grade Canyon Mine continues to release encouraging drill results, and looks to be the source of both high grade / low cost uranium and, potentially, copper concentrate.

These are all positives in the mining business but, of course, as investors, we must be mindful of the potential pitfalls associated with our investments. One big one in any uranium company, at this moment in time, is where is the uranium spot price headed? Most uranium producers and prognosticators feel it is going up, but when and by how much? These are the questions that you need to contemplate and decide where the risks are and how much you’re willing to take on.

For me, I believe in the Energy Fuels management team and their properties, and it’s where I will be putting my money.

Until next time,

Brian Leni   P.Eng

Founder – Junior Stock Review

Disclaimer: The following is not an investment recommendation, it is an investment idea. I am not a certified investment professional, nor do I know you and your individual investment needs. Please perform your own due diligence to decide whether this is a company and sector that is best suited for your personal investment criteria. I do NOT own Energy Fuels stock. All Energy Fuels analytics were taken from their website and press releases. Energy Fuels is a Sponsor of Junior Stock Review. 

Zinc has exploded upward from its low in January of 2016 and it doesn’t appear to be coming down any time soon. Supply constraints caused by mine closures, mining issues and Glencore’s 500K tonne production cut have led the way to higher zinc prices in 2016.

Source: London Metals Exchange

To understand this bullish trend in zinc prices, I’ve put together a 2-part series examining the supply and demand fundamentals of the zinc industry.

Here, in Part 1, I’ll examine the supply side of the zinc market, including a few tidbits on the zinc mineralization and the ore bodies in which it’s found.

Enjoy!

Zinc Mining

There’s an abundance of zinc in the earth’s crust, but like many metals, abundance doesn’t necessarily mean it can be extracted economically at the current price. Because of zinc’s relative abundance and important uses, zinc is mined in over 50 countries. Here’s a look at the current world zinc reserves:

Source: U.S. Geological Survey

Some commonly found mineral forms of zinc are:

• Sphalerite (zinc blende) – the most commonly mined zinc mineral in the world. The Sphalerite Mineral contains 67% zinc.
• Marmatite – a zinc-iron sulfide, which is commonly found but rarely mined
• Smithsonite (calamine) – zinc carbonate, typically found near surface
• Hemimorphite – hydrated silicate
• Willemitte

Zinc mineralization is commonly found in 4 types of ore bodies:

• Volcanic hosted Massive Sulfides (VMS)
  • “[VMS] deposits are predominantly stratiform accumulations of sulfide minerals that precipitate from hydrothermal fluids at or below the sea floor, in a wide range of ancient and modern geological settings (Figs. 1, 2). They occur within volcanosedimentary stratigraphic successions, and are commonly coeval and coincident with volcanic rocks. As a class, they represent a significant source of the world’s Cu, Zn, Pb, Au, and Ag ores”~ Geo Science World

• Carbonate hosted Lead-Zinc  (Mississippi Valley and Irish Types)
  • “These ore bodies tend to be compact, fairly uniform plug-like or pipe-like replacements of their host carbonate sequences… Mississippi Valley Type or MVT ore deposits, after a number of such deposits along the Mississippi River in the United States…  Irish-type carbonate lead-zinc ores, exemplified by Lisheen Mine in County Tipperary, are formed in similar ways.” ~Wikipedia

• Sediment hosted (SEDEX deposits)
  • “SEDEX deposits form deep under the ocean where vents in the sea floor allow hydrothermal fluids to mix with seawater.  These hot, saline fluids have percolated through several kilometers of sediments and crystalline rocks, picking up precious metals along the way. As the metal-rich hydrothermal fluids hit the cool sea water, they precipitate material onto the sea floor at and near the vents.  Metal-rich minerals are deposited between layers of fine-grained mud, sand and silt.”~ Geology for Investors

• Intrusion related (high sulfidation, skarn, manto, vein)
  • “These deposits are typically found in carbonate rocks in conjunction with magmatic-hydrothermal systems and are characterized by mineral association of calcium and magnesium. Typically the ore body contains more lead than zinc and is associated with silver.” ~International Zinc Association

Zinc is mined in the traditional manners: Underground, in an open pit, or a combination of the two. To note, underground zinc mining is the most common process, representing more than 60% of annual production.

NOTE: Zinc deposits aren’t unlike many other mineral deposits, in that they do have a number of issues that prevent projects from being economic. Here’s a brief list of some of the issues: Poor by-product grades, low grade zinc, remote deposit locations and high impurities such as manganese.

The zinc ore is drilled or blasted, the rough ore is then brought to the surface or to an area on the surface where it is crushed and finely ground. For efficiency and economics, the finely ground ore is then processed through a froth flotation circuit where the zinc concentration is increased anywhere from 3.5 to 15% to an average of around 50%.

The froth flotation process is as follows:

• Zinc ore, water and chemicals are mixed together in banks of flotation cells.
• Air is then constantly blown into the cell, providing constant agitation of the solution.
• The zinc sulphide particles stick to the air bubbles which rise to the top of the cell.
• The tailings or unwanted metals of the solution sink to the bottom of the cell, leaving the concentrated zinc sulphide on the surface.
• After a period of time, the zinc sulphide concentrate can be skimmed from the cell’s surface, dried and packaged for delivery to the smelter, where the concentrate will be further refined.
  • Not all concentrates are created equal, as the residual elements such as the amount of iron make some concentrates more desirable than others due to their lower refinement costs.
• It should be highlighted that the transportation of the concentrate to the smelter is the mine’s responsibility and, therefore, in some cases, makes up a huge portion of their cost. Needless to say, it’s an advantage to have a smelter in close proximity to the zinc mine.

NOTE: In addition to the zinc concentrate, other base metal concentrates such as lead and copper concentrate are commonly created.  Base and precious metal by-products can really add to the bottom line and, in some cases, they are the reason the deposit is economic. In turn, however, when these by-product metal prices fall, so do the economics of the mine which depends on them.

Zinc Mine Supply

Source: International Lead and Zinc Study Group

Zinc is mined all around the world, but a couple of spots in particular make up roughly half of the world’s mine production each year; China and Peru. In reality, China is the heavyweight when it comes to zinc production as its 5.5 million tonnes of zinc production is 4 times as much as the next largest producer, Peru, with 1.3 million tonnes. Australia is an honourable mention as before 2016, it held the position as the 2^nd largest zinc producer in the world.

Over the last year, China has ramped up its production by almost 20%, however, this big leap in mine production was almost erased by the drop in production by the rest of the world. In total, 2016 ended with 22 more tonnes produced than 2015. The caveat to this analysis is that any data from China should be taken with caution as it may not be completely reliable.

The countries with the largest drops in zinc mine production since 2015 were Australia at -43.1% or 680K tonnes, India at -16.8% or 138K tonnes, Peru at -6.0% or 85 tonnes, and the United States at -2.3% or 19 tonnes.

Source: International Lead and Zinc Study Group

Australia

Australia’s production was drastically cut in 2016 due to the shutting down of MMG’s Century Mine. Century was Australia’s largest open cut zinc mine and was highly valued by smelters because its zinc concentrate had such low iron content, which helped minimize the smelter’s refinement costs.  The Century Mine’s loss of production will have to be filled by an increase in production from other mills or new zinc mines coming into production, or a combination of the two.

Additionally, on October 9, 2015, Glencore announced a reduction in its mine production by 500K, or a third of their annual zinc metal production, across their operations in Australia, South America and Kazakhstan. The reason for the reduction? The company states that the low zinc and lead prices do not properly reflect the metals scarcity and, therefore, they’re moving ahead with the cut in production until prices rise.  Glencore’s reduction affects its Australian mines by approximately 380K tonnes, and its Peruvian operations by 80K tonnes.  As the zinc price rises, Glencore may decide to bring this production back online , which will not happen overnight, but will have an impact on the zinc market supply dynamics when it does.

India

Indian zinc is mined by Hindustan Zinc Limited (HZ) a subsidiary of Vedanta Limited. HZ’s production is led by their flagship operation, the Rampura Aqucha Mine (RAM), which has a zinc reserve of 51.1 mt at 14.0% Zn, and an ore capacity of 6.15 mtpa. Details can be found in HZ corporate presentation from last summer and the summer of 2015. In particular, look at the last slide of 2015’s presentation. The last slide details HZ’s mine reserves, highlighting the quickly declining open pit portion of the Rampura Aqucha mine. The open pit will be depleted by 2018, removing a significant source of zinc from the global market. The plan is to transition this into an underground mine, where there is still a substantial amount of zinc contained, however, they’ve experienced issues with the transition.

United States

American zinc mine production was impacted by Nyrstar’s placing of its Middle Tennessee Mines (MTN) on care and maintenance. The news release issued on December 7, 2015 outlines that the company’s decision to put the mining operation on care and maintenance was related to the current zinc price and, therefore, to minimize their cash consumption, they had to take action. MTN’s impact on the market is around 50K tonnes per annum.

On January 7, 2016 Nyrstar announced the formal launch of the sale process for all or the majority of its mining assets. Further, on September 27, 2016, Nyrstar announced that it would be restarting its MTN operations, given the rise in the zinc price and its expected sustainability in the future. The restart of MTN will cost USD $14 million, and it will take over a year until the mill is at full production.  Given the current bullish outlook for zinc prices, I think that these assets will find a buyer.

Also, American production will be affected by zinc production declines from one of the world’s largest producing mines, Teck’s Red Dog, which is located in Alaska. In early 2016, Teck announced a forecasted reduction in its zinc production in the years ahead; see SEDAR for further information.

Future Mine Production (Restarts / New)

There are some new and existing mining projects that are scheduled to come online in the next few years, stretching out to 2021. Here’s a list of the biggest 4:

• India – HZ’s Underground Portion of RAM
• South Africa – Vendanta’s (Exxarco/Sterlite) Gamsberg mine
• Australia – MMG’s Dugald River mine
• Peru – BHP/ Mitsubishi / Glencore / Teck’s Antamina mine expansion

There are a more projects planned over the same time period, but each is much smaller in size than the 4 that I have listed here.

Mine Contractions and Closures

While there are a few big mines coming back online or starting up, there are a number of closures and contractions that will occur over the next 5 years. The production contraction is headlined by Teck’s Red Dog, Sumitomo’s San Cristobal and Glencore’s Mt Isa, which will all see a steady decline in their output. Mine closures are headlined by the HZ’s RAM open pit and Kayad, Sterlite’s Skorpion (Closure by 2021) and Glencore’s Bracemac-McL in Canada, which is on pace for closure in 2019.

There are more contractions and closures albeit they are much smaller than the ones listed. Cumulatively, however, there is roughly 1,000K tonnes being removed from the market. Unfortunately, we may be able to count on the loss of production with more confidence than the mine expansions and re-starts.

Zinc Stockpiles

Besides mine production, another source of zinc in world markets is from stockpiles.  The International Lead and Zinc Study Group data shows that zinc stockpile inventories have been steadily dropping over the course of the last 4 years. Currently, world zinc inventories sit at 1.3 million tonnes, down 82K tonnes from last year. Currently, the largest stockpile holders are the producers and the London Metals Exchange, which both have inventories around 400k tonnes.

Concluding Remarks

In all, zinc mine production has been relatively flat over the last 4 years, with an increase of only 330K tonnes since 2012. As discussed, MMG’s Century mine production is gone and will need to be filled with new production, if that deficit is to be filled. Glencore’s missing 500K tonnes of production will have an effect on the market when it returns, but that won’t happen overnight. Using Nyrstar’s Middle Tennesse Mine as a gauge for re-start, I think that you can expect it to take 6 to 12 months for Glencore to be back at full production. Finally, India’s giant zinc mine is making a big transition moving to underground mining; time will tell if they are able to maintain production levels from this prolific mine site.  Mine production is falling faster than it’s being replaced, and the bottom line, in my mind anyway, is that until Glencore announces they are bringing their missing capacity back online, the diminishing zinc supply will lead to higher prices.

Disregarding China, the impact of new and re-starting mines will almost be nullified by the amount of mine production contractions and closures over the next 5 years. If new projects aren’t developed, we could be standing in much of the same position that we’re in today, as far as supply is concerned.

China will have an impact on the future of the zinc market – the size of this impact is what’s in question. What’s surprising is that China is paying closer attention to the environmental and safety impacts of mining and manufacturing.  Inspections over the last year have resulted in production suspensions and closures of the smaller producers that couldn’t comply with the more stringent regulations. I think China will continue to lead in zinc production in comparison to the rest of the world, however, the current large difference in production levels may not be as significant in the future as it is today.

Zinc supply fundamentals are bullish, but don’t tell us the whole story. In Part 2 of this series on zinc, I will take a look at world zinc consumption, which should allow us to make some conclusions about where the zinc market is headed in the months and years ahead.

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Until next time,

Brian Leni  P.Eng

Founder – Junior Stock Review

Sources:

Australian Atlas of Minerals Resources, Mines & Processing Centres

CEO.ca – #zinc

Geo Science World

Geology for Investors

International Zinc Association

University of Tasmania

U.S. Geological Survey

Zinc Die Casting

Disclaimer: This is not an investment recommendation, it is an investment idea. I am not an investment professional, nor do I know you and your specific investment criteria. Please due your own due diligence. I have NOT been compensated to write this article and do NOT have a business relationship with any of the companies mentioned in this report. I do NOT own shares in any company mentioned.