Ways to play the expected zinc price uptrend (T.TV) (T.LUN) (T.TCK.B) (T.HBM)

Stockhouse Editorial
3 Comments| February 5, 2014


“We continue to believe that zinc will be the next big base metals play for investors, with prices climbing to US$1.30 to US$1.40 a pound in 2015,’’ writes Scotiabank vice-president economics Patricia Mohr in her latest Commodity Price Index report.

According to the report, the reasons for this are two-fold:
  1. Gains in world mine production over the next four to five years will likely fall behind global demand growth (4.7% a year from 2012 to 2017), given unusually high depletion at major mines in the face of tighter capital availability for new mine development; Century in Australia will close one year early in mid-2015 (515,000 tonnes) and Lisheen will shut in 2015 (172,000 tonnes), following closures in 2013 at Brunsick (190,000 tonnes) and Perseverance (125,000 tonnes) in Canada.
  2. The major end uses of primary zinc in galvanized steel are picking up – particularly in motor vehicle and construction. World vehicle sales reached a record high in 2013 of more than 81 million units and an even bigger record is forecast for 2014 at almost 86 million (plus 5%). China’s passenger car and cross-over utility sales jumped by more than 20%, surpassing U.S. sales last year, and should advance another 12.5% in 2014. U.S. non-residential construction, a sector which has struggled since 2008, also appears to be turning around (especially in office buildings). A broader recovery in non-residential construction is expected across the G7 in the second half of the decade.

Mohr notes in her report that the price of zinc strengthened to US$0.89 cents in December and moved up in January to US$0.93.

Her rosy outlook is good news for zinc levered metal producers including Trevali Mining Corp. (TSX: T.TV, Stock Forum).

“Trevali provides stand-out exposure to zinc as it now has moved into production and operates a producing asset in Peru while concurrently progressing a second operation towards production this year in New Brunswick,’’ writes Dundee Capital Markets analyst David Charles in a research report.

“The company is the only producing pure-play zinc story on the TSX and, moreover, it is undervalued compared to its base metals producing peers,’’ said Charles.

The Dundee analyst has assigned a buy rating to the stock and a $1.50 target price.

Trevali shares were up 2% to $1 on Wednesday, leaving a market cap of $279.3 million, based on 279.3 million shares outstanding. The 52-week range is $1.10 and 49 cents.

Other zinc-levered producers cited by Charles in his report include HudBay Minerals Inc. (TSX: T.HBM, Stock Forum) Lundin Mining Corp. (TSX: T.LUN, Stock Forum), Nevsun Resources Ltd. (TSX: T.NSU, Stock Forum) and Teck Resources Ltd. (TSX: T.TCK.B, Stock Forum).

More speculative names include Canadian Zinc Corp. (TSX: T.CZN, Stock Forum), Rathdowney Resources Ltd. (TSX: V.RTH, Stock Forum), Tirex Resources Ltd. (TSX: V.TXX, Stock Forum), TriAusMin Ltd. (TSX: T.TOR, Stock Forum), and Zazu Metals Corp. (TSX: T.ZAZ, Stock Forum).

Disclosure: Trevali Mining Corp. is a Stockhouse client, but the company has not paid for this content.

Tags: INDUSTRIAL METALS & MINERALS GOLD COPPER

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starsky
No love for Canadian Zinc she's missing the boat
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February 6, 2014
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phoenix_trader
Levon Resources' (LVN -$45 Million cash) Cordero project in Mexico contains at least 6 billion lbs of Zinc with more to come in a new resource estimate due in weeks. "Levon Resources is exploring one of the world's largest silver resources at the company's 100%-owned Cordero Project in northwest Mexico. In less than four years, Levon has amassed a resource at Cordero containing 364M oz silver indicated plus 91M oz silver inferred. Further indicated resources of 945,000 oz go...
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February 5, 2014
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peruchocanuck
Silver Bull Resources (SVB.TO), the next big zinc play: "...Right below the Shallow Silver Zone lays The Zinc Zone. This is a well-defined zinc deposit which will transform this silver mine (once depleted) into an open pittable zinc mine. Also in the Indicated category lies 1.7 Billion pounds of 1.8% Zn (listen to the interview with Tim Barry where he talks about the zinc deposit from the 17:00 minute mark)." Source: http://www.geckoresearch.com/Mexican_Silver_and_an_Obvious_Takeout...
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February 5, 2014
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