Possible junior zinc takeover targets – by Kip Keen (Mineweb.com – October 17, 2012)


A supply crunch in zinc is predicted by leading analysts and some miners have already said they’re on the hunt for acquisitions leaving open the question of which juniors might get taken out.

HALIFAX, NS (MINEWEB) – It wasn’t so long ago, as reported by Reuters, that Lundin Mining told the press in Sweden that it was on the prowl for zinc and copper acquisitions. While you’re never going to get too many specifics about potential targets from a miner, Lundin did give some rough parameters of what it was after.

Lundin CEO Paul Conibear said it was interested in copper and zinc mines – especially in Europe, Canada and Mexico with 30,000 to 70,000 tonnes metal production a year. He also signalled Lundin was ready to take a pretty quick shot. “We are going to be very disciplined, but when we find something for the right price, we will act quickly and aggressively,” Reuters quoted Conibear as saying back in late September.

This hunger for base metals, zinc especially, is not all that surprising. It is shaping up to be a good year for zinc hunting and in that Lundin’s pursuit is probably not alone in donning a camouflage jacket and loading its gun with cash, among other kinds of powder. A key theme that has emerged as far as base metals go is a current overabundance of zinc, depressing its short term price, but a medium to longer term supply issue. As Mineweb writer Dorothy Kosich reported earlier this year, Scotiabank’s Patricia Mohr, a commodities specialist, said “Zinc may represent the next big base metal play.

Zinc will shift into ‘deficit’ (at latest by 2014) due to ongoing demand growth in the face of significant global mine depletion in mid-decade.” The supply crunch is chiefly predicated on the closure of a few mines around the world: Brunswick 12 in Canada, Century in Australia and Lisheen in Ireland, Mohr has pointed out. Yet, as covered in these pages, there has not been a concomitant flurry of activity to replace such mines. On this point Mineweb’s Geoff Candy quoted RBC Capital Markets as saying: “The most interesting bit of all this is that none of the majors are investing significantly in zinc.”

Yet analysts predict a ripening zinc market in a few years time. Mohr gave the possible zinc deficit some real world numbers at the Prospectors & Developers Association of Canada Conference in March this year, predicting zinc would hit around $1.40 a pound by mid-decade. Of course, if you’re a base metal miner, and if you hold to the above supply crunch scenario, you aren’t going to want to buy zinc assets come 2014-2015 at such prices when it is going for well under C$1 per pound now.

Indeed, as Lundin’s Conibear made it clear: the miners are looking for assets. Stefan Ioannou, a Haywood Securities analyst that focuses on base metals, put the situation in zinc miners such as Lundin are facing this way: Though at the moment zinc warehouses are overflowing, “the guys are sitting around just scratching their heads wondering what to do about the mid to long term.” There just aren’t that many zinc juniors to takeover, especially producing ones.

This would suggest Lundin, and perhaps others such as Hudbay, have a limited field of opportunity outside exploring new projects or expanding existing operations in shoring up production or betting on improving zinc prices by acquiring juniors.

For the rest of this article, please go to the Mineweb.com website: http://www.mineweb.com/mineweb/view/mineweb/en/page66?oid=160329&sn=Detail&pid=92730