World population is expected to hit 9.7 billion by 2050, according to a recent UN DESA report. This unstoppable increase has sovereign wealth funds, multinational corporations and billionaires racing to secure hard assets. Unlike fiat currency, which has no tangible limit to its creation, resources are finite. Furthermore, demand for precious metals such as gold, with few industrial applications, collapse when economies are strong and money is sound. Rather, zinc, nickel, copper and other base metals surge during periods of economic expansion and declining stockpiles. Zinc demand is not going away, but will rise as developing nations follow through on generational infrastructure projects.

The World May Have a Zinc Problem


Leading producers have shuttered historic zinc mines the world over in recent years; therefore, many global players are now working to shore up new reserves.

zinc mines
Lead-zinc stockpile


Zinc, the fourth most mined metal in the world, has seen its demand steadily increase for decades. The metal is primarily used to galvanize steel, but its use in agriculture as a fertilizer to increase the productivity of soil has increased markedly in recent years. New potential applications in renewable clean energy batteries add a blue sky component to the demand side as well…

As more people consume greater quantities of resources every year, the search for profitable zinc mines will intensify.


Zinc Demand to Rise Fastest in Developing Economies


zinc demand


Demand will remain consistent in the West as new infrastructure bills come to pass (Trump’s infrastructure plan is projected to be $1 trillion – and he’s seeking private, public and foreign investment to fundraise); however, the engine of demand for base metals will remain in Asia – and the developing world. Just recently, reports out of China confirmed the nation would have to increase imports to satisfy demand for concentrate used in steel construction. CNBC reported on May 19th that,

“China’s refined zinc output marked its lowest in more than two years in April as the impact from the closure of major mines in places such as Australia and Ireland stifled the concentrate supplies China relies on to churn out finished metal.

The nation’s ‘war on pollution’ has also curbed output as Beijing clamps down on mining and heavy industry in a drive to clear its skies.”


Infrastructure projects, such as ‘One Belt, One Road’ taking place in Eurasia are beyond our comprehension in the West. We wrote about this in How China Just Neutered America, explaining,

“One Belt, One Road will be an estimated “…$1.4 trillion project potentially touching 64 nations, no less than 4.4 billion people and around 40 per cent of the global economy,” according to Sputnik International.


Millions of tons of zinc concentrate will be needed to complete this project and others like it. Zinc is currently in a supply deficit; and, while it will not last forever, long-term base metal producers are on the hunt to secure future production.

zinc supply deficit
source: Wood Mackenzie


New Zinc Production Moves to Increase Supply


As can be seen above (blue represents supply/red line represents demand), hundreds of thousands of tons of zinc concentrate has come off-line in the past few years. Four zinc mines, being upgraded or brought into production, will shore up supply and move zinc towards a balanced market. However, with populations soaring and new demands for zinc, supply deficits are expected through 2020. That means we are in a period where acquisitions and buyouts occur, according to historical trends.

As it stands today, this is where the supply will come from:


1. Rampura Agucha Zinc-Lead-Silver Mine, India

The Rampura Agucha mine located in India has, at times, been the world’s largest producer of zinc.

According to Hindustan Zinc, owner of the mine,

“It has an ore production capacity of 6.15 million MT per annum, with best-in-class zinc-lead reserves grade of 15.9%. It produced 698,232 MT of mined metal in the year FY 2015 including 640,845 MT of contained zinc and 57,387 MT of contained lead. Reserve and resource of Rampura Agucha Mine as on 31st March 2015 are 103 million MT.”


Production declined in 2015 as the mine began its expansion program. According to a late-2016 press release, the company explained its pace of mine development:

“After deliberations with internal & global technical experts, it has been decided to modify Stage V limiting the incremental pit depth to 30 metres. This will mitigate pit wall challenges and significantly reduce waste-ore ratio, providing a fresh impetus to accelerating mine development at the underground mine in a safe manner. Ore production from Stage V commenced during the quarter and is now being accelerated to complete by March 2018. The expansion target of 1.2 million MT mined metal production remains intact and will be achieved as per plan.”


Hindustan Zinc, which owns Rampura Agucha, is a Vedanta Group company focused in zinc, lead and silver. According to Vedanta,

“Vedanta Limited is India’s largest and world’s second largest zinc miner. Our fully integrated zinc operations currently hold 79% market share in India’s Zinc industry.”


2. Gamsberg Zinc Mine, South Africa

Owned by Vedanta Zinc International, the Gamsberg zinc mine is another Vedanta group company asset. Based in Johannesburg, South Africa, Vedanta is moving its Gamsberg zinc mine into production by mid-2018.

According to the company,

“The first blast for Phase 1 of the Project took place in July 2015 and work to establish the V-cut and access ramp, and pre-stripping is well advanced. Phase 1 will see the production of 4Mtpa of ore, resulting in zinc concentrate of 250,000tpa.”


Aerial shot of Gamsberg April 2017
source: Vedanta Zinc International – Aerial shot of Gamsberg April 2017

Production is not expected to come online at Gamsberg until mid-2018. According to the company,

“With first production expected by mid-2018, Gamsberg will be well positioned to leverage the prevailing zinc price, the current buoyancy of which is expected to continue due to a shortfall in zinc supply arising from recent zinc mine closures, others nearing the end of their productive lives, few new mines coming on stream and exploration cutbacks.”


Potential political issues in South Africa should raise concern for investors. Bloomberg reported this week that, “South African regulators unveiled a new mining charter to force companies to give more ownership to black shareholders, sparking a selloff across the industry.”

Note: Vedanta was the previous operator of the Lisheen Mine in Ireland. The mine closed in December of 2015, after 17 years of operation.

The race to produce is on; yet, as demand rises, due to increased zinc use in agriculture and renewable energy batteries, a supply surplus is not guaranteed.


3. Dugald River Mine, Australia

Australia’s MMG owns the third mine poised to add zinc to global markets. The company’s Dugald River mine will become a top ten zinc producer when operational. According to the company,

“The optimised mine plan will support a 1.7 Mtpa operation with annual production of around 170,000 tonnes of zinc in zinc concentrate, plus by-products. The mine will operate over an estimated 25 years while the ore body remains open at depth.”


Main Decline, Australia, Cloncurry, Queensland, Dugald River Mine
source: MMG – Main Decline, Australia, Cloncurry, Queensland, Dugald River Mine


Like the Gamsberg mine in South Africa, the first concentrate production is on target for 2018.

No Single Mine Can Satisfy Global Zinc Demand


So, the last two mines will be top 10 producers, but are not huge by any means, and one is operating in an uncertain political climate. Further, 250,000tpa (tons per annum) and 170,000tpa alone will not return zinc to a balanced market. Not even close.

The small nature of these mines can only be understood when looking at global demand. According to the International Lead and Zinc Study Group’s spring report for 2017, global demand for refined zinc is expected to increase 2.6% to 14.30 million tons this year.

So, while 420,000 tons (combined production from the above two mines) of zinc concentrate is nothing to shake a stick at, it represents less than 3% of global demand.


4. Antamina Copper-Zinc Mine, Peru

The final mine to monitor closely is Peru’s copper-zinc mine owned by Antamina. In late 2016, the company’s CEO said it had plans to double zinc production in 2017.

Glencore and BHP Billiton each own a 33.75% stake in Antamina, while Teck Resources has 22.5% and Mitsubishi 10%.

According to,

“Antamina completed a $1.3 billion expansion at the end of 2012, which increased ore processing capacity from 94,000 mt/d to 130,000 mt/d after exploration work boosted mineral reserves by 77%.”


Antamina’s CEO, Abraham Chahuan, explained that the mine is expected to produce 340,000-350,000 metric tons of zinc in 2017, up from an estimated 170,000-180,000 metric tons in 2016. According to Chahuan, the open pit operation transitions into richer zinc areas in the skarn orebody.


Antamina mine, Peru
source: – Antamina mine, Peru


The Antamina is a rare skarn deposit, containing copper/zinc, silver, molybdenum and bismuth.  It is considered the largest of its kind in the world; however, its grade with regards to zinc is considered low. Check out the below resources and reserves, reported by, as of 2016:

“Reserves: Proven and probable sulphide reserves as at December 31, 2014, were estimated at 647-million tonnes, grading 0.94% copper, 0.98% zinc and 10.7 g/t silver.

Resources: Measured and indicated sulphide resources as at December 31, 2014, were 1.14-billion tonnes, grading 0.89% copper, 0.82% zinc and 10.6 g/t silver. Inferred sulphide resources were estimated at 1.28-billion tonnes, grading 0.84% copper, 0.66% zinc and 11.4 g/t silver.”


According to a 2016 article by, it has an estimated mine life to 2029.

At Antamina, it’s the tonnage, not the grade that garnered our attention. Less than 1% zinc can work as a by-product; however, we are interested in high-grade zinc plays, averaging between 5-10% zinc.

Production companies can seize unbalanced markets to capitalize on high prices. Antamina’s operating results were impressive in 2016. One advantage to being in production is the ability to increase output when prices surge. Antamina’s management did that in 2016 and may continue to if zinc and other metals remain in supply deficits.

These four mines represent the majority of new zinc production (that we know about) coming online over the next half decade. Critical to point out is that none are located in North America – or anywhere near North America for that matter. North America needs a new zinc mine and we intend to seek out potential candidates.

Key Metrics for Potential Zinc Producers


A strong NI 43-101 zinc resource in the middle of nowhere won’t be bought out in 2017 or 2018. Potential acquisition targets need to show the market the money. In other words, produce a PEA (preliminary economic assessment) which demonstrates compelling economic potential, even in a less than favorable zinc market. Profitable numbers can arise when pre-existing infrastructure, a nearby and committed workforce and friendly political environment are in place. From there, demonstrated metallurgical results that highlight excellent recovery rates and purity may give an asset a shot at a buyout or production scenario.

Most appealing to us are ‘brownfield projects.’ Rather, a past-producing mine that has proven to be profitable in the past. These types of assets can often be moved back into production much faster than a ‘greenfield project.’

With the zinc market in an extended deficit, and new mines not forecasted to come online for over a year, we have been reviewing under-explored past producing zinc assets. A low CAPEX (expected Capital Expenses to build a new mine), defined in a PEA, with potential to be fast-tracked to production is what we sought out for our next investment opportunity. More on this in the days to come…

All the best with your investments,




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