Trevali Mining rallies as zinc hits 18-month high

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By Peter Kennedy

The price of zinc hit an 18-month high on Wednesday November 18 amid reports that Vendanta Zinc International Ltd. has suspended mining at its Gamsberg zinc mine in South Africa after a geotechnical failure trapped 10 employees. After eight miners were rescued, the company said the search continues for two workers who remain missing.

Trevali Mining Corp. [TV-TSX, LMA; TREVF-OTCQX; 4T1-FS] shares leapt on the news, rising 17.6% or $0.03 to 20 cents on volume of 7.3 million. Shares of the Canadian zinc miner are currently trading in a 52-week range of 26 cents and $0.06.

Vendanta Zinc is South Africa’s largest base metals mining and smelting company and the mine produces approximately 250,000 tonnes per year in concentrate.

Zinc is primarily used for galvanizing steel to protect against weather and corrosion. Zinc is also utilized in die-casting to produce a wide range of metal products.

In a report to investors, Scotiabank said zinc is the metal that is benefitting from strong demand in China, where the steel market has seen double digit growth.

“Galvanizing plants that use zinc have increased activity and domestic mine supply was getting strained,” Scotiabank said. It went on to add that a slump in zinc treatment charges is a sure sign of tight mine supply.

Benchmark zinc on the London Metal Exchange was up 2% to US$2,743 a tonne on Wednesday, after reaching US$2,770 (US$1.24 a pound), the highest level since May 2019.

Trevali is a Vancouver-based zinc mining company. The bulk of its revenue is generated from base metals mining at four operations. They are the 90%-owned Perkoa Mine in Burkina Faso, the 90%-owned Rosh Pinah Mine, the wholly-owned Caribou zinc-lead-silver Mine in New Brunswick, and the wholly-owned Santander Mine in Peru. The Caribou mine was placed on care and maintenance on March 26, 2020.

Earlier this year, the company said it was positioned to be a 400-million-pound annual zinc producer with a reduced cost profile until 2022. At that point, Trevali said it intended to make a step change in production and cost as the RP2.0 expansion project at Rosh Pinah is commissioned.

The company exceeded its 2019 zinc production guidance by producing a record 417 million payable pounds of zinc.

When Trevali announced its Q3 operating results on November 4, 2020, President and CEO Ricus Grimbeek said the market has seen a significant turnaround in the price of zinc due to a tightening market. During Q3 2020, the London Metal Exchange zinc price averaged US$1.06 a pound for the quarter, continuing its recovery from its year low of US$0.82 a pound in March, 2020.

Grimbeek said the rapid rise of the COVID-19 pandemic in Asia resulted in extended shutdowns of smelters and Chinese mine production. “The continued disruption of mine production should continue to provide fundamental support for zinc prices in the midterm as management believes demand will outweigh supply as global economic activity accelerates,” he said.

 


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