Zinc Mining Juniors Ready to Meet Coming Supply Crunch

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While large zinc stockpiles, weak prices and cloudy global economic projections cast a veil of gloom over zinc markets, salvation is not far away. As zinc demand continues to grow globally and key mine sites are set to be taken offline, the long term picture remains one of looming mine-supply shortages.

Commenting on the looming mine shortages in 2010, Graham Deller of the industry consultants CRU Group noted “If you look out three to four years mine production is less than metal demand, but we are wary that enormous stocks of the metal are being built up.” Thus far, Deller seems to be on mark.

Most of concerns and projections for zinc Deller had in 2010 remain, but analysts are beginning to peg 2013 as the beginning of reversal of the current zinc supply excess. As a result, some of the major producers like Xstrata (LSE:XTA), Teck (TSX:TCK.A), Nyrstar (EBR:NYR), and Glencore (LSE:GLEN), have already begun collecting smaller suppliers in order to pad their resource numbers in the coming years.

Nyrstar, the world’s largest producer of zinc, acquired Breakwater Resources (TSX:BWR) this summer for US $663 million, pushing their level of zinc integration from 31 to 43 percent. A few months later, Nyrstar announced that it had lowered its forecast for output from mines for 2011 to 205,000 metric tonnes down from earlier prediction of 210,000 metric tonnes.

Xstrata has also been active with its recently closed acquisition of the Hackett River and Wishbone exploration properties, located in the Western Kitikmeot region of Nunavut, Canada, from Sabina Gold and Silvercorp Metals (TSX:SVM) for a cash consideration of CDN $50 million.

Even Glencore, who will soon become able to issue more stock after its initial IPO lockup period, could potentially shake up the zinc market through continued acquisitions or mergers of the likes already seen this year by the company in other sectors of its operations.

As a result, the buyouts and acquisitions look to be only in their beginning stages. The following is a small list of some of the potential targets for suppliers looking to pad their supply and meet the growing demand for, and shortages of, zinc.