Speculation based on Tweet To me this tweet is neither hinting at more hedging nor towards a buyout/taking the company private.
Please look at the following data:
| WORLD REFINED ZINC SUPPLY AND USAGE 2016 - 2021 |
| | Actual | Forecast |
| 000 tonnes | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| Mine Production | 12678 | 12682 | 12744 | 12817 | 12266 | 12850 | 13390 |
| Metal Production | 13611 | 13534 | 13151 | 13518 | 13772 | 14130 | 14450 |
| Metal Production exceeded Mine Production by | 933 | 852 | 407 | 701 | 1506 | 1280 | 1060 |
| %age excess Metal Production | 6.85 | 6.30 | 3.09 | 5.19 | 10.94 | 9.06 | 7.34 |
| Metal Usage | 13726 | 13998 | 13718 | 13791 | 13255 | 14090 | 14410 |
| Surplus | -115 | -464 | -567 | -273 | 517 | 40 | 40 |
| Release from China’s National Food and Strategic Reserves | 0 | 0 | 0 | 0 | 0 | 180 | 0 |
| Zinc Metal Balance | -115 | -464 | -567 | -273 | 517 | 220 | 40 |
Points to be noted from above table are:
- Metal Production exceeds Mine Production each year because, in addition to zinc concentrate, zinc scrap is also used for Metal Production.
- Forecasted Metal Production was expected to exceed forecasted Metal Consumption just by 40,000 MT (within margin of error) in both 2021 and 2022.
- Chinese government changed this dynamic in 2021 by releasing 180,000 MT from strategic reserves.
- Despite that, zinc price has skyrocketed, partly because of Power crises in China and Europe.
- If no more strategic reserves are released in 2022, zinc prices will remain elevated in 2022. One can safely say that they will remain above $3,400/MT.
Trevali’s tweet talks of upward trend in zinc price and capitalizing on this upward trend. To me it means that they expect the prices to go further up in 2022, even after the power crises is over, based on the zinc metal balance for 2022. To me the way they are planning to capitalize on this upward trend is by extending the Santander mine life to at least end 2022. So they will be spending more on development. Development costs expensed, rather than capitalized, in Q4 will be more than they had earlier projected.
IMHO