NEW YORK, NY -- (Marketwired) -- 10/29/13 -- Zinco do Brasil Inc. (OTCQB: ZNBR) (the "Company"), a mine development company focused on bringing into production an advanced stage zinc and lead project in Brazil, is pleased to share with its investors the below article regarding a possible upcoming zinc supply shortage.
Metal Bulls Pin Their Hopes On Zinc As Mines Close
By Martin Sandbu in London
So you think the commodities supercycle is over? For zinc bulls, it may be just beginning.
The price of zinc has remained subdued since the financial crisis even as copper, gold and tin rose to record highs. But the metal, used to rustproof steel in everything from cars to building materials, has an increasingly vocal following among analysts and investors who believe that it could witness a sharp rally in the coming years.
Wood Mackenzie, a leading consultancy, predicts that zinc prices will average more than $3,500 a tonne from 2016-18 -- compared with just $1,940 so far this year.
After years of falling prices, a zinc boom could deliver sizeable profits to large miners such as Glencore Xstrata, the world's biggest producer and trader of zinc; Canada's Teck; and trading houses such as Noble Group, which have carved out positions in the market.
The bullish argument is based on the expected closure of a number of large zinc mines -- together with a lack of new projects ready to replace them. Unlike copper and iron ore, where a wave of new supply is poised to hit the market after mining companies spent billions on new projects and expansion, years of relatively low zinc prices have disincentivised investment.
There is likely to be a structural deficit in the zinc market in the short to medium-term future," said Daniel MatÃ©, head of zinc trading at Glencore Xstrata and one of the trading house's top shareholders, at an investor briefing last month.
At issue is the closure of some of the world's largest zinc mines. Brunswick and Perseverance in Canada, owned by Xstrata, closed this year. Then late next year Vedanta is planning to close Lisheen in Ireland, among the dozen largest global mines. And in 2016 the world's third-largest zinc mine, Century in Australia, is due to cease production.
At the same time, there are few large-scale zinc projects ready to fill the gap left by these closures. And those that exist are suffering delays. On Friday, MMG, the international mining arm of Minmetals of China, said its Dugald River project in Australia was "unlikely" to meet a previously announced plan of starting production in 2015.
"We are in an environment in which mining companies are reviewing, deferring or cancelling potential projects generally," says Sanjay Saraf, head of base metals research at consultancy Thomson Reuters GFMS.
"More than 2m tonnes of new supply is needed by 2016," argues Mr MatÃ© of Glencore Xstrata. "There is a real shortage of quality projects in the pipeline which are anywhere near ready for production."
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Additional reporting by Jack Farchy and James Wilson
About Zinco do Brasil, Inc.
Zinco do Brasil is a publicly listed company (OTCQB: ZNBR). The Company is in the process of acquiring 99.9% of Zinco do Brasil Mineracao Ltda., which owns 57 mineral rights for a total of 82,379 hectares in the Brazilian state of Minas Gerais. The mineral rights of Porteirinha Project are split between three blocks: Salobro, which consists of 2 mining rights for an area of 1,210 hectares, Gorutuba covering 44761 ha in 33 tenements and Tocandira with 22 mining rights for an area of 36,408 hectares.