Zinc market forecast to continue gains this year

Zinc prices, which have rallied 20% over the past six months, will continue to gain this year on rising demand for the metal used to galvanize steel, according to Canadian zinc-lead-silver miner Trevali Mining.

While metals markets have seen volatility in recent weeks amongst Asian day traders, zinc demand will continue to outpace supply, Trevali CEO Mark Cruise said. Zinc rose to US$1.33/lb in late February before dropping to US$1.20/lb in the last week on market concern of a rate hike by the US Federal Reserve.

"All the metals sector has had a roaring late Q4 and Q1," Cruise said on a conference call to discuss financial results. "Zinc fundamentals are better than copper and overall the trend maintains an upwards tendency."

The zinc market was running at a 286,000t deficit at the end of 2016, according to the International Lead and Zinc Study Group.

Trevali, which operates mines in Peru and Canada, tapped surging zinc, lead and silver prices last year as its Peruvian Santander mine boosted zinc output to a record.

The company posted a Cdn$12.2mn (US$9mn) profit for 2016 compared with a Cdn$14.3mn loss a year earlier, the Vancouver-based miner said in a statement. Sales jumped 86% to Cdn$198mn from Cdn$106mn.

Zinc prices averaged US$1.16/lb in the fourth quarter, compared with US$0.70/lb a year earlier, while lead rose to US$0.98/lb from US$0.74/lb and silver to US$16.68/oz from US$15.10/oz, the company said.

Trevali, which brought online its Caribou mine in Canada last year, produced 98Mlb (44,450t) zinc, 33.05Mlb lead and 1.22Moz silver last year. In 2015, zinc production was 54Mlb.

The company aims to invest US$5mn in exploration at Santander this year after drilling in 2016 enabled it to increase mineral resources at the underground mine, Cruise said. Total capex for 2017 at Santander will run at US$12-14mn, he said.