CZX Mentioned Zinc: bullish
2014 is the year everything changes for zinc. Since late 2012, some of the largest zinc mines in the world have been shutting down (or preparing to shut down) primarily due to the fact that they contain no more economic ore. These world-class mines include:
The Century Mine in Australia - largest open pit zinc mine in the world
Xstrata Zinc's Brunswick Mine - largest underground zinc mine in world
Lundin Mining's Galmoy Mine
Lisheen Zinc Mine in Ireland
Over the last 18 months, the zinc market has lost an estimated one million tonnes of annual production thanks to the closure of world-class mines.
In fact, during 2014, zinc production is expected to be eclipsed by demand for the first time in eight years. And until 2017, the global zinc supply deficit is expected to increase significantly year-over-year. This is bringing about new awareness to a metal that the developed and developing world can't grow without.
Brook Hunt of Wood Mackenzie "expects the zinc price to average US$1.24/lb in 2014 and steadily climb thereafter, possibly challenging the previous high of US$2.08/lb that was reached in late 2006" according to a report released from Wood Mackenzie in 2012.
Zinc currently trades at roughly $0.921/lb.
In October of 2012, when it traded for roughly $0.84/lb, we wrote in Weekly Volume #287 "The reality that zinc is heading into a supply deficit within 12-18 months is the reason we are writing you this week. We are not going to miss out on this opportunity."
Our report continued "Although zinc enjoyed a few years of record high prices in the mid-2000s, thanks to a significant supply shortage, the supply deficit approaching is anticipated to be much more severe. For this reason, we believe hitting its old high of US$2.08 per pound is very realistic."
That same month in 2012, we introduced our client and most recent Featured Zinc Company, C
anada Zinc Metals (CZX:TSXV). As of the date we introduced CZX (October 28, 2012), its share price sat at $0.36 and we were in the heart of the TSX Venture bear market. On Friday, the company's shares closed trading at $0.49 - chalking up roughly a 36% gain from our introduction just over 14 months ago. And while a 36% gain won't knock your socks off, it's worth noting that during the same 14 months, the TSX Venture has lost approximately 14%.
Given that the world is expected to enter a prolonged zinc supply deficit, we expect the advanced-staged juniors and near-term producers to garner most of the attention from investors within the sector in 2014.