Zinc & Lead
Zinc Continues its Decline
January 2020
Despite a stabilization of the zinc market price during the December Quarter of 2019, AME still anticipates the potential for a subdued price in 2020 following the sustained supply surplus of concentrate in the market as it is realized into downstream refined zinc.

In December, the AME Europe zinc spot price averaged US$2,265/t (US$1.03/lb), down 7% month-on-month compared to the average of US$2,437/t (US$1.11/lb) in November.

Despite the declining prices, LME refined zinc stocks remain low at 54.5kt in November. SHFE deliverable stocks registered 32.48kt in November, showing a 10.9% month-on-month increase. Demand in the construction and automotive sectors could see growth if the US-China trade deal comes to fruition. In addition, the low inventory in the metal exchanges could signal an upturn in zinc prices. However, lacklustre demand should see inventory levels rise as smelters continue to profit from high TC/RCs. Treatment and refining charges for zinc are expected to continue their rise as Chinese smelter capacity is unable to match additional mine supply from Australia and South Africa.

Cerro de Pasco, one of the oldest and largest polymetallic mines in the world, has been acquired by Cerro de Pasco Resources (CDPR). CDPR announced that it would buy the companies that own the mining and processing assets comprising the complex in central Peru from Volcan Compañia Minera for US$30m in cash, a variable consideration and a net smelter royalty. CDPR would acquire all the issued shares of Oxidos de Pasco, Empresa Administradora de Cerro and Remediadora Ambiental. Volcan will receive a royalty of 2% of the net smelter return and enter an offtake agreement in respect of all zinc and lead concentrates from ore resources owned by Cerro SAC, as well as a right of first refusal to purchase all concentrates produced from CDPR’s El Metalurgista concessions. The transaction is expected to close in the March Quarter of 2020.

New supply may emerge from Canada as ScoZinc has announced a new mineral resource estimate at their Scotia Mine near Halifax in Canada. Highlights from the new mineral resource estimate show total measured resources of 25,450,000 tonnes of zinc with an equivalent grade of 2.84%, which is an increase in tonnage of 105% from the previous resource estimates on the deposit. Total inferred resources of 5,010,000 tonnes of zinc equivalent grade of 2.13% and an increase in tonnage of 7% from previous resource estimates. ScoZinc will publish a new feasibility study in 2020 to demonstrate Scotia Mine's viability as a long-term open-pit mine and producer in Nova Scotia.