I attended a recent presentation at Toronto’s The Richmond Club (where investors and high growth companies meet) by Peeyush Varshney, Chairman, President and CEO of Canada Zinc Metals Corp. in which he outlined the outstanding prospects for the company’s 2 major projects in British Columbia. (See the 27:51 minute presentation here)
Written by Lorimer Wilson, editor of munKNEE.com
Chronic shortage of zinc is occurring, coincidental with depletion of major zinc mines and coupled with very limited new mine developments, leading to very bullish views on zinc. That being said, Canada Zinc Metals’ Cardiac Creek deposit as one of the premier undeveloped lead-zinc-silver rich base metal projects in the world.
Canada Zinc Metals Corp. (TSX:CZX) has positioned itself as the dominant land holder in a prolific mineral belt called the Kechika Trough in British Columbia, Canada. The company’s Cardiac Creek deposit measures Indicated 19.6 million tonnes grading 8.2% zinc, 1.6% lead and 13.6 g/t silver (at a 5% zinc cut-off ) and Inferred 8.1 million tonnes grading 6.8% zinc, 1.2% lead and 11.2 g/t silver (at a 5% zinc cut-off ). This establishes the Cardiac Creek deposit as one of the premier undeveloped lead-zinc-silver rich base metal projects in the world.
Jay Taylor has written an excellent article on CZX in his latest Weekly Hotline Message in which he concludes that:
“There are a number of drivers that should start to light up this company’s share price, starting with the fact that management is committed to start telling its story more actively. While this company’s project is most definitely gaining the attention of major base metals mining companies, it seems hardly to be noticed by the professional investor class or by retail investors so, even as this story stands at this moment, I believe CZX shares have considerable upside potential simply by getting the story out to the investing public.
Beyond arm-waving activities, there are quite a few fundamentals that should start to perk up serious investors.
- For starters I’m expecting the remainder of this year’s drill results to provide additional data points that will enlarge an already sizeable high-grade deposit.
- Secondly, more in-depth metallurgical studies should be provided. While metallurgical study results may not excite the retail trade, they will be important, along with an expanded resource calculation, in constructing a PEA, which is expected in the February/March timeframe.
It is my understanding that there could also be some large corporate developments in the works between now and then that could also generate additional attention for this story.
The market is not paying due respect to CZX…As of October 30, 2017, CZX was trading at an EV/lb Zn-equiv as follows: (M&I Resources) of US$0.0076/lb, compared with select peers averaging US$0.0256/lb. Based on total resources (M, I & I), CZX trades at US$0.0057/lb, compared with US$0.0190/lb.
I believe the market price dichotomy is due largely to the fact that this company’s shares are held largely by longterm value-oriented corporations and financial institutions. Once tax loss selling is finished this year and as management begins telling this company’s story more aggressively and if, as I believe, we will see still stronger zinc prices in 2018, picking up shares in this current weak market makes a great deal of sense…
[It also should be noted that,] with the size of this company’s high-grade deposit likely to expand considerably and assuming no metallurgical complications, it seems entirely possible another major miner may express interest in CZX in the near future. The prospects for that should also be enhanced given ongoing engineering and environmental baseline studies over the past number of years.
[In conclusion,] I expect these shares will respond to some arm-waving by management as well as notice of attention given to it by some major mining interests. Simply achieving anything close to peer valuations should lift the price of CZX several-fold from its current levels.”
Zinc is the 3rd most-used non-ferrous metal in the world, after aluminum and copper. It is a “construction & infrastructure” metal primarily used in buildings, bridges, railways and automobiles as a coating on iron and steel to protect against corrosion. As global economic recovery progresses over the next few years with continued growth in China, India & other emerging economies – along with the recovery in the U.S. – a corresponding increase in the demand for zinc is expected to put upward pressure on global zinc prices.
Unfortunately, chronic shortage of supply of zinc is being forecast. Major zinc mine closures during the last year and over the next few years, coupled with a very limited number of new zinc mines in the development pipeline, will remove 15% of the current global zinc concentrate supply which is expected to lead to robust zinc prices. Indeed, RBC Capital Markets forecast an average zinc price of $1.25/lb in 2017, $1.35/lb in 2018, $1.35/lb in 2019, and $1.50/lb in 2020.
As one of the premier undeveloped lead-zinc-silver rich base metal projects in the world Canada Zinc Metals Corp. is ideally suited to benefit from the expected long-term shortage in supply and resultant high zinc prices. Perhaps now is the time to take a position in CZX to take advantage of this eventuality.
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