By: AllPennyStocks.com News

June 1, 2011
On April 11, 2011 New York based Goldman Sachs advised its clients to sell off commodities.

The GSCI index of 24 raw materials subsequently dropped 10%. With assets-under-management of $800 billion, some analysts posited that Goldman Sachs caused the drop rather than predicted it.

Either way, they reversed themselves quickly.

A few weeks later, in the shadow of renewed European debt worries, Goldman Sachs is advising its clients to get back into commodities.

And one of the metals they are most bullish on is Zinc.

With several major zinc mines closing between 2013 and 2015, Goldman Sachs is predicting that the zinc market could sink into deficit.

“Given how low current prices are, relative to industry economics,” states a Goldman Sachs report, “we believe that zinc price risk is skewed to the upside”.

Zinc metal is an anti-corrosion agent used to coat iron and steel.

Galvanised steel is used extensively in construction and engineering, in roadside crash barriers, wire fencing, corrugated iron, street signs and the auto industry. The engineering industry also uses zinc pressure die casting to produce thousands of components for cars and household items.




These range from carburettors, casing, water pumps, mouldings, the side and back panels of washing machines, cookers etc.




China’s infrastructure spending is causing a surging demand for zinc.




Investors looking for a pure zinc play with big upside potential might wish to have a look at Donner Metals Ltd. (TSX-Venture:DON) – a small cap explorer currently transitioning into a producer.

In fact, Donner is currently constructing a joint venture zinc mine with Xstrata Zinc Canada (XTA-L) on the Bracemac-McLeod deposit in Québec.

Donner has completed earn-in on the Matagami Project with Xstrata and is currently in the process of raising $15 million to pay back what Xstrata has already spent on development of the new mine, and then pay $1 million a month until production starts in 18 months’ time.

Details of the financing are not publically available but reliable sources reveal that CEO David Patterson is going to get the deal done.

“We’re asking the banks for senior financing sources to provide the preproduction capital necessary to reach full production,” explained Patterson in a recent interview, “We are advancing our agenda with a number of different lenders and we think we’ll be able to reach an agreement that’s advantageous to Donner.”




Xstrata has an existing 2,950-tonne-per-day mill complex right next door to Donner’s mine, which is currently fed by Xstrata’s Perseverance Mine and is scheduled for Bracemac-McLeod’s mill feed when Perseverance is mined out.

In total the Matagami mining camp boasts historical production of 8,600 million lbs. zinc and 853 million lbs. copper.

At full production in Q1 2013, the Bracemac-McLeod mine will produce 80,000 tonnes of zinc and 10,000 tonnes of copper annually. The total capital cost for the mine is C$158 million, of which Xstrata’s share will be C$104 million.

“The current prices of zinc and copper make our sensitivity to metals prices all the more appealing moving forward,” says Patterson.

Zinc production is dominated by majors like Xstrata (XTA-L) and Teck (TSX:TCK.B). It is relatively rare to find a pure play like Donner, and even rarer to find a company transitioning into a producer with a mill already built and waiting for feed.

If Goldman Sachs is right about the upside to current zinc prices, Donner Metals is an interesting investment opportunity with a mere 18 months to production.

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