Higher Zinc Price Creates Opportunity

Higher Zinc Price Creates Opportunity

by the Editor

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Zinc is brittle and crystalline at ordinary temperatures, but when heated to between 110°C and 150°C it becomes ductile and malleable; it can then be rolled into sheets. The bluish-white metal is used principally for galvanizing iron, but also serves as an important alloy for brass, copper, nickel and other white metals. Besides being found in coinage, you will also find zinc being used for roofing and gutters, and in the negative plates for some types of batteries.

There are numerous zinc compounds, including zinc oxide, ZnO, which is the most widely used compound. Zinc oxide is soluble in acids or alkalis, but is nearly insoluble in water. “Zinc white,” the powder form of zinc oxide, is used as a coating on paper, filler in rubber and pigment in paints. It is also found in sun screen lotions because of its ability to absorb ultraviolet light. Zinc chloride is found in adhesives and cements, solder flux and is used as a wood preservative. Zinc sulfide is utilized for x-ray machines and television screens. Zinc is also essential to the growth of plants and animals.

The price of zinc has climbed to about 62 cents (US) per pound (69 cents per pound delivered, as noted on our Mining Stock Quotes page). Unless you make it a habit of following the price on a regular basis, you may not have noticed the price has been steadily climbing. For about 24 months, from June 2001 through May 2003, the average price hung around 35 cents per pound (see chart below).

Zinc miners have certainly welcomed the jump in price, and startup companies working towards eventual production are anxious to get started.

Canadian Zinc is one of those companies in the anxious category.

Their Prairie Creek project, located in the Mackenzie Mountains of the Northwest Territories of Canada, was financed as a silver project in 1980 by none other than the Hunt Brothers. Remember them?

The price of silver in early 1979 was about $5 per ounce. By late 1979 and early 1980, the price hovered around $50 per ounce.

Beginning in the mid-1970s, the Hunt Brothers began accumulating silver, eventually amassing 200 million ounces, equal to half of the world’s deliverable supply at that time. Some of their large silver purchases were made at over $35 per ounce.

Investors joined the stampede, but intervention by the Federal Reserve and rule changes at the New York Metals Market (COMEX) put an end to the frenzy. The price per ounce slid, then plummeted. By the end of March 1980, the per ounce price fell to below $11.

The Hunt Brothers were well into the process of developing the Prairie Creek project when their investment world fell apart. Cadillac Inc., the company set up to develop Prairie Creek, went bankrupt within a few years, and Prairie Creek went into receivership.

Along came Canadian Zinc. Originally doing business as San Andreas Resources, they purchased the property in the early 1990s. Much of the site had already been developed, with a nearly complete mine, Kilborn mill and surrounding infrastructure.

The company had additional exploration work performed since the acquisition to delineate resources. They determined the project has resources of 11.8 million tonnes at 5 ounces per ton (opt) silver, 12.5% zinc, 10.1% lead, and .04% copper. The numbers equate to 70 million ounces silver, 3 billion pounds zinc, and 2.2 billion pounds lead, valued at $3 billion.

Most of the exploration drilling has been performed in an area they have labeled Zone 3. There are a total of 12 Zones to be explored.

As is the case in many areas of Canada, and particularly in the Northwest Territories, permitting has been a challenge. A number of permits have been acquired, and others applications will be filed in the near future.

Negotiations are also continuing with the First Nations and park officials over the nearby Nahanni National Park Reserve.

More recently, Canadian Zinc obtained exploration permits and conducted 6,000 meters of drilling in 2004. They plan more underground work in 2005, including approximately another 10,000 meters of drilling to identify additional resources and further quantify previously established resources.
The company estimates they can operate a profitable mine at 34.5 cents per pound zinc, so you can understand why they desire to get up and running in a timely manner.

A workforce of 230 full-time employees will be necessary to operate the mine. Local and state governments will benefit from the taxes generated, and aboriginals will receive a negotiated portion of profits.

The estimated mine life is 18 years at current measured resources, and the replacement value is pegged at $100 million for the work and infrastructure that has been put in place so far by Canadian Zinc and the previous owners.

Company officials state another $22 million will need to be invested to get the operation into production.

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Interested readers can learn more about the Prairie Creek project at www.canadianzinc.com