Published on the Seeking alpha website yesterday was an interesting interview with Matthew O'Keefe, managing director of mining research at Mackie Research Capital Corp. Here were some interesting comments he had about the sector, the commodity outlook, and a recommendation for Canadian Zinc:
"The Metals Report: What's your forecast for the upper range of zinc prices in 2013 and the first half of 2014?
Matthew O'Keefe: I think we're going to start to see a reversal in the fundamentals that should start to drive the price of zinc up. Some major mine closures are coming in North America, so the supply side is going to be a little tighter. Xstrata Plc's (XRAF.PK) Brunswick #12 mine in New Brunswick, a fairly large operation producing around 275,000 tons per year, is closing this month and Perseverance, another Xstrata mine located in Quebec, is also slated to close this year, removing another 228,000 tons from the supply. Zinc inventories have already begun to flatten and drop a little, a trend we expect will continue next year when two other large mines are expected to close, Lisheen in Ireland and Iscaycruz in Peru.
We have a 2013 zinc target of $1 per pound ($1/lb). In 2014, we're moving it up to $1.20/lb, citing this drop in inventories as a price increase catalyst. We're keeping our long-term price pretty low at $0.95/lb."
"TMR: Do you have any zinc names you'd like to discuss?
MO: Yes, Canadian Zinc Corp. (CZICF.OB) is another advanced developer. Again, you can bash me over the head for the fact it's not close to infrastructure. Its Prairie Creek project is located in the western Northwest Territories, but the beauty with this one is that it's already built - there is a mine and a mill. It was built by the Hunt Brothers in the 1980s for the silver because it's a high grade zinc-lead-silver deposit but the Hunt Brothers shut it down within months of completion when silver prices crashed.
I visited the site, and the mill is still in excellent shape. For the past 10 years, the company has been working on the permitting and environmental side, as well as plans for upgrading the mine and mill. The key catalyst is for the company to receive its primary water permit that will allow the discharge of treated water back into the environment. It's a sensitive topic because the mine is within the Nahanni National Park drainage area, so its work is under a lot more scrutiny. Canadian Zinc is expecting the draft of that permit to be issued later this quarter. Once awarded, it is effectively cleared to complete the mine and bring it into production, which could be as early as 2015.
TMR: As far as an offtake agreement goes, who are the potential suitors there?
MO: I believe Canadian Zinc has been talking to metal traders and various Chinese groups. There's mercury in the concentrate, and this adds a little bit of hassle, but it's saleable. It has to negotiate a good price, but there are smelters and metals traders who would be happy to take its concentrates."