A Lovely Zinc Story
It’s not any secret that China is slowing down. The prices for iron and coal are plunging. Australia is literally in a panic. Their iron and coal businesses are dying. It is a secret known by few that there is a looming shortage of zinc. Glencore estimates there will be a shortage of 2 million tonnes of zinc by 2016 and 5 million tonnes by 2020 in spite of a China slowdown.
I wrote a piece about my favorite Canadian zinc stories about a year ago. The stock has doubled since then but it’s a better story now than it was then. The company is named Canada Zinc (CZX-V) and they have a giant zinc deposit in Northern BC.
Teck and Korea Zinc recently joined forces to option three of the projects belonging to Canada Zinc in the Kechika region of Northern BC. The option agreement calls for the pair to spend $8.5 million between now and 2019 to earn 70%. In addition, they invested $500,000 at $.40 a share, double the existing share price.
The president of Teck, Don Lindsay, said 18 months ago that Teck needed to rethink it’s growth strategy in the zinc space given that very few zinc mines are being developed and several large zinc mines are shutting down in the next three years. At present, Teck has only the Red Dog zinc mine in Alaska. Clearly they are looking for a new zinc district.
Canada Zinc has a market cap of about $56 million. Subtract the $12 million they hold in cash, you get an enterprise value of about $44 million. That seems really cheap to me given they have 12.7 million tonnes of ore with a value in the ground of $220 in the indicated category and an additional 16.2 million tonnes of $191 rock in the inferred category. That’s not very far off $6 billion in rock. That’s a lot for a company with a market value of $44 million.
That’s 5 billion pounds of zinc, almost 1 billion pounds of lead and over 11 million ounces in silver. The company has done a wonderful job of telling their story in a current presentation and it can be found here.
The company has excellent management and a solid business plan. They have stayed cashed up as hundreds of juniors have crashed and burned. They know they have a district scale silver/lead/zinc system and have attracted the attention of several major players in the zinc space. As the resource market heats up, anyone wanting an advanced zinc project in a politically stable environment is going to be looking very closely at CZX.
Canada Zinc is an advertiser and as such I have to be biased. I don’t own shares. Please take some responsibility for your own due diligence.
Canada Zinc Metals