A look at zinc stocks

VANCOUVER, March 28, 2017 /CNW/ - Zinc prices reached a 5 year high in February. Just as analysts forecasted, the zinc concentrate market is unravelling and we would not be surprised to see further smelter cutbacks this year.

After a terrific run, zinc equities have pulled back slightly as investors take profits creating a buying opportunity.

Smart resource investors are already placing bets ahead of this pinch point but stocks with exposure to a rise in zinc prices are limited.

The first way to play the sector would be to look at large producers. No surprise that commodity giants Glencore and Teck (5 bagger in last year) rank in the top 10 zinc producers worldwide.

Earlier this month Glencore tightened their grip further down the food chain by taking a 25% stake in the only zinc focused producer on the TSX, Trevali Mining. In exchange Trevali will take control of two zinc mines in Africa and move one step closer to becoming a mid-tier zinc producer. Trevali is a 4 bagger in the last year.

Next on investors radar are zinc development stocks (companies with a resource).

Development companies offer fantastic risk/reward in bull markets as they benefit from the commodity price move, and news catalysts as they move their projects forward, and offer takeover potential.

As the zinc bull market continues, investors will be looking for companies with large proven deposits (increased leverage) in good political jurisdictions.

Company

Project

Resource (zinc lbs)

EV (per lb)

Location

Darnley Bay

Pine Point

5.8 billion

$0.006669

Northwest Territories

Canada Zinc Metals

Akie

5.7 billion

$0.008302

British Columbia

Zazu

Lik South

4.2 billion (*50% interest)

$0.007867

Alaska

Canadian Zinc

Prairie Creek

3.5 billion

$0.041298

Northwest Territories

InZinc

West Desert

2.4 billion

$0.007360

Western Utah

Tinka

Ayawilca

2.4 billion

$0.042131

Peru

*Resources all published reserve/resource categories
*Pine Point resource is historical and not 43-101 compliant

When doing due diligence you also want to check key metrics such as current cash position and upcoming catalysts. Joseph Gallucci, Managing Director Investment Banking at Eight Capital "A majority of zinc development plays will not be in production to catch the cycle, either due to permitting or funding obstacles (or both)."

Company

Cash

Project stage

Darnley Bay

~$10,000,000

PEA in progress

Tinka Resources

~$10,000,000

Resource drilling

Canadian Zinc

~$9,800,000

PFS complete

Canada Zinc Metals

~$7,000,000

Resource drilling

InZinc

<$500,000

PEA complete

Zazu

<$100,000

PFS done

Cash position is critical for investors as it will allow the company to fund additional work that may create shareholder value before the dilution of another financing.

Tinka Resources - Tinka has been a popular zinc stock after an excellent step out drill hole last month from a 10,000 metre drill program that commenced in February.  At the Ayawilca project in Peru the company is targeting resource growth in 2017 from the drill bit. A new resource estimate is expected later in the year and possibly a PEA.

InZinc - InZinc's share price is up close to 50% to start the year, on leverage to the zinc price and a new model about the West Desert Project. InZinc will need to complete a financing and then start drill testing this new thesis.

Canada Zinc Metals - Canada Zinc Metals plans to take full advantage of a potential move in the zinc price this year. The busiest work season in a couple years is planned with 7500 metres of drilling at Akie starting in June as well as the possibility of a PEA in Q4.

Darnley Bay - Darnley Bay is the newcomer to the zinc development group but may be the first to production after acquiring the past producing Pine Point Project. The most profitable zinc-lead mine in Canadian history producing 64 million tonnes of 7% zinc and 3.1% lead from 52 deposits. Past production is a huge advantage with proven mining methods to rely on which should also be a benefit when it comes to permitting. If everything goes well, management is looking to restart production in 2019. A major catalyst will be the Preliminary Economic Assessment (PEA) which is expected in April.

Zinc development stocks look ready to go in 2017 and this pullback presents a fantastic buying opportunity in what is likely to be a hot sector moving forward.

SOURCE Equity.Guru

For further information: Chris Parry, 4751 Steveston Highway, Richmond BC, V7E2K4, 778-927-2485, Chris@equity.guru


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890