Scotiabank economist Patricia Mohr is bullish on the outlook for zinc.
“I think zinc is going to do very well in the medium term,’’ said the Scotiabank commodities specialist, who expects prices to jump to around US$1.40 per pound by 2015 from US88 cents this week.
In an interview with Stockhouse, Mohr said prices will likely be driven higher by a variety of factors, including:
The depletion of large zinc mining operations around the world.
Reduced production at high cost smelters in China, which currently ranks as the world’s leading zinc producer.
A middle of the decade recovery in construction activity in G7 countries, that will boost demand for zinc that is needed for everything from galvanized steel to doors and windows in residential homes.
Published reports say a boom in zinc demand could deliver sizeable profits to large miners such as
Glencore Xstrata, the world’s leading producer and trader of zinc, as well as Canada’s
Teck Resources Ltd. (
TSX: T.TCK.B,
Stock Forum).
Teck shares fell 1% Thursday to $29.31, leaving a market cap of $16.6 billion, based on 566.8 million shares outstanding. The 52-week range is $38.13 and $21.11.
Haywood Securities Inc. analyst Stefan Ioannou also likes the outlook for zinc and suggests that emerging producer
Trevali Mining Corp. (
TSX: T.TV,
Stock Forum) is another way to gain exposure to any rise in the price of the metal.
In a research report, Haywood said Trevali is poised to become a (the) marquee mid-tier zinc producer in a market facing a significant medium-term supply issue.
“This zinc market outlook is underpinned by a number of key mine shutdowns (accounting for 11% of global supply) expected within the next three years and a lack of new significant advanced-stage projects positioned to replace them,’’ Ioannou said in his report.
“Furthermore, unlike copper, we would argue the list of ‘good’ zinc-focused equity names can be counted on one hand, which will likely attract additional market attention to Trevali,’’ he said.
Haywood currently has a buy rating on Trevali and a target price of $1.35. On Thursday, the stock closed at 97 cents, leaving Trevali with a market cap of $217.2 million, based on 223.9 million outstanding. The 52-week range is $1.26 and 49 cents.
Trevali is working to initiate zinc production at two mines within the next year, including the company’s 100%-owned Bathurst project in New Brunswick and wholly-owned Santander mine in Peru.
Disclosure: Trevali mining is a Stockhouse client, but the company has not paid for this content.