Commodities | Apr 04 2023
This story features VARISCAN MINES LIMITED, and other companies. For more info SHARE ANALYSIS: VAR
Forecasts for zinc are as bullish as ever, with the USA declaring it a 'critical' mineral, but are investors paying attention?
By Tim Boreham
Traditionally used to galvanise steel, zinc hasn’t been mentioned as a ‘battery metal’ in the same way as lithium, cobalt or nickel.
But the zinc bulls are finding their voice and the message is the silvery-grey metal – the fourth most widely used – will play a key role in global decarbonisation.
In the case of wind turbines and solar panels exposed to the elements, there’s burgeoning demand for galvanised steel. Indeed, zinc use is expected to double by 2040 in the solar sector.
Also, zinc batteries are less flammable than lithium-ion batteries and this is expected to increase usage in applications such as aviation and marine.
Enhancing the new-age metal vibe, the US and Canada have classed zinc as a critical mineral (and Europe is yet to do so, despite zealous industry lobbying).
“The demand side of the thesis just keeps getting stronger,” says Stewart Dickson, the head of Spanish-focused zinc explorer Variscan Mines ((VAR)).
“If we are to achieve our course to net zero, we will need a lot of zinc.
“Zinc also has extremely strong environmental credentials as the only metal that is 100% recyclable.”
Zinc hit a record high of US$4370 a tonne in April last year, but has since declined to around US$3300/t. That’s still high by historic standards.
For the second year running there’s been a deficit in refined zinc, of about -300,000 tonnes, the result of European smelters curtailing output because of higher energy prices.
Rumble Resources ((RTR)) managing director Shane Sikora points to industry forecasts of a -24m tonne supply deficit by 2040, the result of both burgeoning demand and depleting existing mines.
“Five of the top ten zinc mines are running out of ore, it’s a great time to be in zinc because you’ve now got this green angle,” Sikora says.
Supported by legendary prospector Mark Creasy, Rumble is surfing the zinc wave with its flagship Earaheedy Project, about 110 kilometres north of Wiluna in WA.
Sikora dubs Earaheedy as an “emerging world class zinc discovery”. Since discovering the deposit only in April 2021, Rumble has wasted no time mounting an extensive drilling campaign.
“Outstanding” results included the Chinook discovery hole, which assayed 34 metres at 4.22% zinc and lead from 66 metres, including 15 metres at 6.97%.
Infill drilling on the western extension also recorded gems of eight metres at 3.78% zinc and lead and 80 metres at 1.32%, which supports management’s confidence that a maiden resource estimate is not too far off.
Extension drilling has expanded the strike zone to eight kilometres, with results including 42 metres at 1.65% lead and zinc, with a zone of 17 metres at 2.82%.
Down the road, Strickland Resources ((STK)) notes its initial discovery hole at Iroquois yielded a 23-metre zone of lead and zinc at 5.5%. Rock chip and geochemical sampling point to several additional targets, with a larger drilling campaign slated for next year.
Strickland plans to hive off its 80% owned Iroquois zinc-lead project into a listed spin off, along with its Bryah Basin copper-gold project.
The company promises a demerger update in “due course”, but we dare say current market conditions are not amenable to the bifurcation.
Further afield, New Century Resources ((NCZ)) is among the world’s top zinc producers, albeit with a tailings retreatment operation at its exhausted Century mine in north Queensland.
Such operations don’t float everyone’s boat because of the dearth of big picture prospects, but Century has been a reliable producer. Or at least it was before recent heavy rainfall cut the mine from road access, leading to output being suspended.
As a result, current financial year output of zinc metal is expected to slashed by -15,000 to 20,000 tonnes.
Led by former Northern Star chief Bill Beaumont, Develop Global ((DVP)) recently acquired the Woodlawn copper zinc mine near Canberra, which is also on care and maintenance.
Parts of the Woodlawn site have been repurposed as a rubbish facility by waste management giant Veolia – big holes sure come in handy – but the old sardine cans disguise a resource of 18.2m tonne resource grading 9.8% zinc equivalent.
The company draws on the benefit of $340m sunk into the project by its erstwhile owner, Heron Resources.
In northern Spain’s Cantabria region, Variscan is seeking to ease the pending zinc squeeze with its flagship Novales-Udias project that houses the former San Jose underground mine.
The idea is to restart San Jose in the near term, with a view to extending the operation across tenement.
Variscan recently reported visual mineralisation in two diamond holes, 1200 metres along strike of the main zone.
“We have delineated a nine kilometre over the project, which is drill-bit validated,” Dickson says. “We believe that justifies not only a mine restart but then a mine expansion and a resource to sustain that.”
He says the company is working towards a modest maiden resource estimate for San Jose: “It won’t be a super pit.”
The project is a mere 80 kilometres from Glencore’s San Juan zinc smelter, the world’s second biggest that takes in feedstock from round the world (including Australia).
But given the cost and CO2 emissions involved in shipping he feedstock from afar, Glencore is keen on bolstering local supply from mines such as … San Jose.
While Spain has a long mining history, it’s been overlooked as a mining jurisdiction with some parties lumping it into the environmental too-hard basket.
But don’t say ‘no way, San Jose’.
“Mining is in the DNA of the local people, there is a strong social licence to conduct what we are doing,” Dickson says.
“It’s a great jurisdiction not just from local support, but for European access and the infrastructure in place.”
Further afield, Belararox ((BRX)) is doing its part for the looming zinc deficit by acquiring 100% of an Argentinian base metals and copper-gold project, Toro-Malambo.
Drilling efforts under previous management revealed promising sniffs, including 266 metres averaging 0.76% zinc including a zone of two metres at 8.59% with accompanying gold, silver, copper and lead.
“These finds add further credence to our belief that this asset, located in a region known to be mineral-rich, is highly prospective for zinc,” managing director Arvind Misra says.
In contrast to their lofty aspirations, the zinc juniors trade at extremely modest valuations: Variscan and Belararox both have market capitalisations of around $7m and Rumble and New Century are valued at a slightly more grown-up $130-150m.
In contrast, a slew of lithium plays with once derisory valuations are trading at billion-dollar valuations. So if zinc really is in the pink, now’s the time to take the plunge.
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