Zinc One Targets Renewed Zinc Market
As much as one must never try to predict either end of a market trend, some juniors have a knack for it. Last month, the London Metal Exchange recorded a 10-year high of US$3,308 per metric ton of zinc (US$1.50 per pound), while stockpiles on both the LME and SHFE have slumped to some of their lowest levels since the financial crisis.
Just recently Zinc One Resources Inc. (TSXV: Z) (“Zinc One”) received approval from the Peruvian Ministry of Energy and Mines (MEM) to install 130 drill platforms at their high-grade Bongorá zinc deposit. The market requires new supply, and at times such as these, it’s first come first served.
Drilling is expected to commence this month and continue throughout the rainy season in order to define a compliant resource by 2Q18. The planned program now includes holes for previously excluded areas of Mina Chica, Bongarita and south eastern Mina Grande which previous sampling suggested were high-grade.
The mine gave up 358 metric tonnes of ore per day, from which a simple kiln treatment produced up to 70% zinc. Historic results can only offer so much confidence, but more recent surface channel samples included one result of 47.73% zinc over 8.1 metres, another yielded 25.65% zinc over 19.7 metres from a dolomite breccia, and 32.50% zinc over a 3.8-metre depth was found in an exploration pit. The go-ahead for the drill project is still important to properly delineate the resource and potentially expand it, but they don’t come much more proven than Bongará.
The company obtained the prospective Bongará site via the acquisition of Forrester Metals back in June, secured along with a $10 million private placement that was to fund exploration and development costs. The project was originally discovered in 1974 and briefly open-pit mined between 2007 and 2008, but only 37 acres were dug before the mine failed in late 2008 due to collapsing zinc prices.
The permits newly include areas in the southern extension of Mina Grande as well as the Bongaritá and Mina Chica. This gives the technical team more increased confidence in the probability of being able to outline a resource at least as good as the historical one. Zinc One has already hired Energold Drilling Corp., who, at the time of writing, are busy erecting the drilling camp. Quick movement on this project is essential if Zinc One are going to catch peak pricing and enjoy the benefits before the inevitable oversupply pushes prices back down.
I’d say they have a few years to get this project up and running, but they seem to have it covered. The company recently sold a Peruvian silver project to focus all attention on Bongará as a result of its outstanding potential given current market trends that favour technology and industry related sectors. Zinc demand is on the rise largely because the metal is increasingly finding itself in the technology and health sectors, as well as its conventional niches in brass making, as well as galvanizing and alloying steel.
More recently, it has been taken up by agriculture; the governments of China, India and Pakistan are adding zinc to fertilizer as a matter of policy since it is crucial to plant development, particularly in heavily-farmed areas. In addition, mine-closures have pushed zinc production to the point that long-held stockpiles are rapidly diminishing, resulting in the bullish price trend that began in late Spring and doesn’t seem to be stopping anytime soon. Zinc One represents an opportunity to make a large margin on peak zinc pricing for a bargain price; shares have already jumped somewhat over the last eighteen months, but get them while they’re still CAD$0.44 and enjoy the next few years.
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