Zinc miners increasingly scarce

With Breakwater Resources Ltd. agreeing to a $663-million takeover from Nyrstar NV on Wednesday, investors looking for zinc exposure are running out of options.

The Breakwater deal comes just months after another Canadian zinc miner, Farallon Mining Ltd., was also taken out by Nyrstar. Adam Low, an analyst at Raymond James, pointed out that those were the only two pure-play zinc producers on the Toronto Stock Exchange.

“The recent acquisitions of Farallon Mining and now Breakwater highlights the scarcity value of pure-play zinc producers… and the tightness of the zinc concentrate market relative to zinc smelter capacity,” Mr. Low wrote in a note.

So where should investors turn if they’re looking for zinc exposure? Mr. Low recommended Trevali Mining Corp., which he expects will be the next zinc company to make the transition from developer to producer. He has an Outperform rating on the stock and a target of $2.40 a share, and noted that the shares look inexpensive as they are trading at just 0.37 times net asset value.