Teck Resources Ltd. may stand to gain the most of any mining company should a supply shortfall in zinc force smelters to slash the fees they charge miners to refine the metal.
The Vancouver-based company mines more zinc than it refines, resulting in a net-“long” position in unrefined zinc that’s the largest in the world, Teck has said, citing Wood Mackenzie data.
Tight zinc supplies have supported prices, and may push processing fees lower as smelters compete for ore. Global output of refined zinc trailed consumption by 286,000 metric tons in 2016, the International Lead and Zinc Study Group said in a report Feb. 15. Zinc has surged about 50 percent in the past year, and posted the best return in the Bloomberg Commodity Index of raw materials.
Noranda Income Fund, which owns the second largest zinc refinery in North America, posted a $73 million impairment for 2016, citing pressure on treatment charges. Its 2017 production guidance has been suspended due to an ongoing strike at its Quebec refinery.
Should the talks between miners and smelters result in lower processing fees, Teck stands to benefit from its surplus in unprocessed ore.
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