Long Zinc One: $Z.V $ZZZOF

LME Zinc Stocks and InventoriesMetalheads, do you still like zinc? Well if you do, and there are a number of reasons to think that zinc might kill it again this year, you will want to start tracking a company called Zinc One Resources right about now. Supply dynamics including production cuts, a lack of concentrates and diminishing inventories should keep upward pressure on the price of zinc going forward. Wood Mackenzie is calling for an average of $3,200 a tonne in 2017 and $4,000 a tonne into 2018, with zinc trading at $2568/MT at the time of writing. Zinc was the best performing LME metal in 2016, with a nine year peak reached in November of last year. Global demand for zinc is predicted to grow at 2.4% over the next few years.

Zinc is the fourth among all metals for global production. It’s primarily used to galvanize steel to prevent corrosion but also consumed through products such as batteries, paints, plastics, cosmetics and more. Almost 90% is consumed through industrial usage. 50% of global zinc demand is attributable to China and with the closing of two major zinc mines, Century and Lisheen, and production cuts from Glencore and Nyrstar, supplies are tight. (Thanks to INN’s free zinc report for those stats).

Zinc 5 Year Chart & Mines
Zinc 5 Year Chart & Mines

In China, a new Megatropolis bigger than Britain and 137 times the size of London is underway to become home to over 100 million people. This is the tap of demand pouring into global infrastructure spending which amounts to a burgeoning $4.5 trillion a year. So we feel good about allocating zinc companies a spot in the portfolio. Read up more with Resource Maven who has a bullish stance with a caveat in: What’s Up With Zinc?  And check out the Angry Geologists’ article titled Not All Zinc Deposits Are Equal.

Zinc One (TSX.V: Z  OTC: ZZZOF) is a recently launched Vancouver based company focused on the acquisition, exploration and development of prospective and advanced world class zinc projects. The company is reviewing multiple high quality zinc projects at various stages of development but recently landed a package of unbelievable projects.

ZZinc One just announced closing the acquisition of all  the issued and outstanding shares of Forrester Metals through a plan of arrangement (deets here), whereby they now own 100% the Bongará zinc mine, the Charlotte Bongará zinc-oxide project in northeastern Peru, and the Azulcolcha West zinc prospect in central Peru. This is the first time these projects have been controlled by one company.

Jumping into the heart of this tale, look at the grade of their historic zinc resource at Bongará Mine Project. Like, what the?

Historic Oxide Resource

1,007,796 tonnes grading 21.61% Zn (Measured and Indicated)

209,018 tonnes grading 21.18% Zn (Inferred)

The resource was done by Corianta S.A. in 2011

These grades would impress any technical team for an underground mining situation, but this deposit happens to be sitting at surface. This is a huge win and Zinc One now has one of the better zinc projects in the world, not just in Peru! They have a plan to prove up a resource by the end of 2017, and 400 drill holes are being permitted to make this happen:

  • TARGET: 1.5 – 2mill MT (Metric Tonnes) at >20% Zn
  • Early 2018: Submit PEA
  • Soon Thereafter: Operations Permits
  • TARGETING PRODUCTION: 24-36 months

Of note is an existing permit still valid from prior production and remediation that will allow them to drill immediately as opposed to a lengthy new permitting process. This project was previously in production for 17 months in 2007-2008, with 148,000 tonnes mined at an average grade of 23.2% Zn- they direct shipped 115,000 tonnes of ore 540km away to Pacasmayo for treatment in a Waelz kiln, with a zinc-oxide concentrate eventually marketed in Peru and the USA. Production stats show that the recoveries were higher than 90%, but the drop in prices in 2008 alongside the financial crisis caused this to be a short lived production span. The prior operator intended to mine 100,000 tonnes but ended up removing the 148,000 tonnes. Zinc One feels that due to wide spacing of the historic drill holes, drill holes ending in ore or not piercing the hanging wall and shallow drilling, the resource area actually contains more ore than what is shown in the historic resource estimate. New tightly-spaced, deeper drilling and other planned measures are what leads Management to believe they can increase the existing historic resource.

Zinc One is charging forward under the leadership of Mr. Jim Walchuck – President, CEO & Director. Mr. Walchuck (BSc., PEng) is a third generation mining professional with over 37 years of national and international experience in the minerals industry. He was born in a mining camp in Nicaragua and eventually settled in Canada. He worked for Noranda in about every engineering field you can imagine.  At only 30 years old he was the Chief Mining Engineer in West Africa for a Mine that was eventually sold to Goldfields. He was also formerly the Manager of Mining for Barrick at the Bulyanhulu Gold Mine in Tanzania building a multi-million-ounce, high-grade underground mine in under 7 years, they also remarkably achieved over 2 million man-hours without a lost-time accident.

Mr. Walchuck focuses on building, developing and advancing to production mines in viable jurisdictions. His team knows Peru well, and they are stating a clear production goal within an aggressive 24 to 36 month timeline. This project has a lot of past data available on development and production information. Plus, Zinc One has a close, working relationship with the company they acquired, including their in country network and very friendly community relations, so the confidence at this juncture, mixed with a $10 million dollar raise, is cogent.

ZincMr. Walchuck gave this project the temperature test, “If this was gold, would it make money?” This project is so unique in that the grade is above 20% Zn, AND it is sitting right on surface. “That’s better than 0.4-0.5 oz/t Au” in the words of Mr. Walchuck from this recent interview, well worth a listen if you are captivated by this company so far.

The Bongará Mine Project was discovered in 1974, and comes with data that includes 8000m of drilling, with impressive assay results a la 29.5% Zn over 15.5m, 26.1% Zn over 12.5m, and 29.7% Zn over 11.5m. The project also boasts good access and infrastructure, and the metallurgy is amenable to straightforward processing techniques. Mineralization runs along a 2.5km strike zone, and pits and trenches have exposed more blue sky to expand this prospective 8,000 hectare property.

Future Plans

Zinc One wants to verify and expand the historic resource to eventually have a good 8-10 year mine life outlined (with potential for decades of supply from all the other known drill tested targets), and they aim to have a PEA by the first half of 2018. Following this, the Feas, and targeting production in 24-to 36 months. The envelope plan is to double the production tonnage which was previously 358 tonnes per day. Near term cash flow, solid community relations already in place from the previous operators, and about 400 drill holes worth of newsflow coming. One property, the Bongara Mine, is driving forward towards production, while the other, Charlotte Bongara, will be advanced in order to grow the resource. Grade, grade and more high grade will contribute to the charts’ strength.

Conclusion

Some very smart, respected people, running very good companies in the mining industry are involved in Z. The management team is second to none. This is a development and production zinc play that we feel is a truly one-of-a-kind situation and a real opportunity for retail with a bit of patience. We bought, we like, we long.

~Disclaimer~

This is not in any way investment advice or any sort of stock recommendation. Please do your own due diligence and talk to a qualified investment advisor.

The contents of this article are for informational purposes only.  Nothing in this article, in any way whatsoever, should be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy, hold or sell any security. Note the inherent risks when investing in microcap stocks.

Zinc One Resources Inc. is a marketing client to an arm’s length company controlled by one of the owners of StockSyndicate.com. One or more of the Stock Syndicate owners does own shares in Zinc One Resources Inc.

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