What's up with Zinc?
There's been a spike in trading with some of the zinc properties. WAR had 4.5 million shares trade yesterday, at least 10x its average. TAM has put in place its plans to start mining and has skyrocketed. Breakwater had two days of enormous trading.
Blue Note is set to start producing at its Cariboo Mine in next month or two.
The production plan for the Cariboo Mine is:
(x'000)200720082009 20102011TotalZinc68,105 104,467107,748107,03988,816476,175 Lead34,94657,47146,571 44,70839,804223,501Copper 8051,2631,9051,9451,699 7,616Silver8471,3171,055 1,0148865,119
At today's prices the gross revenue for Blue Note will exceed the market cap by about 25-30%.
So, What's up with Zinc?
The charts below are the 24 hour spot price, the 5-year LME zinc price, the 5-year warehouse stores and Chinese import/exports.
What caught my interest was the large Chinese imports of Zinc in 2005 when zinc was very cheap and then when zinc was peaking in price in Dec 06-Jan 07 the Chinese exports take off, and their large increase in exports brought the price of zinc down from its peak. The price for zinc was cheaper in China than what they could get on the LME, around $500/US per ton. The media stories went something to the effect that exports went way up because of the ending of some tax benefit for exporting, so there would be a double reason to export, higher LME prices and existing tax benefits.
The level of exports was way up. Meanwhile, there was a Shanghai exchange opened to trade zinc in March.
What's happening with the Shanghai Exchange?
On March 25th the Shanghai price for zinc was 28,510 yuan, which works out to $1.6765 US, but the LME price was just under $1.45, so the price to buy zinc in China was almost 16% higher.
An April 5th article in the Chinadaily reports that zinc prices are around 28-30,000 yuan and that China's demand will rise about 10%.
An April 9th Bloomberg article states "Shanghai zinc for July delivery rose for a fourth day, advancing 990 yuan, or 3.2 percent, to settle at 31,950 yuan a ton. It rose by the maximum 4 percent from the morning session." That's about $1.88/lb, and about 19% more than today's LME price.
An April 10th story on Etrade said Shanghai zinc ended at 32,745, which at today's exchange of 7.7257 works out to $1.93 US/lb zinc, or about 22% more than the current 1.58/lb.
Zinc price are down some here, up they are up in China, and that's looking good for current and near term zinc producers.