http://seekingalpha.com/article/4005450-nevsun-zinc-sweet-spot
Nevsun Is In The Zinc Sweet Spot
Sep.11.16 | About: Nevsun Resources (NSU)
John Polomny
Summary
Due to mine closures zinc supply has been constrained since the
beginning of the year.
Prices for zinc have soared nearly 50% since January 2016.
Nevsun is in the zinc sweet spot as it has just commissioned the zinc
circuit at its Bisha mine.
Recent acquisition of Timok upper zone and continued exploration also
give upside optionality to the stock.
Zinc prices have soared nearly 50% since the beginning of 2016.
The rise in the zinc price is a perfect example of what happens when
supply becomes constrained in a commodity market. Because of two large
zinc mine closures 60,000 tons of annual zinc supply was removed from
the market earlier this year.
In addition Glencore took the decision in late 2015 to cutback zinc
productiondue to low prices.
"The main reason for the reduction is to preserve the value of
Glencore's reserves in the ground at a time of low zinc and lead
prices, which do not correctly value the scarce nature of our
resources," the Switzerland-based company explained.
Several analysts expect this supply shortage to carry on into 2017
with pricesextending to $1.25/lb.
Scotiabank and CRU see the current market imbalance eroding both the
known and less visible stockpiles of zinc.
Deller said, "The key question in the zinc market is no longer
whether, but is now when will the market run out of metal?"
Scotiabank sees this depletion of stocks happening sooner rather than later.
In its annual Global Outlook report published in early July, the bank
forecast zinc prices to average US$1.25/lb. in 2017.
"Prices are expected to rise over the coming years until sufficient
supply can be incentivized back onto a starved market," the bank
penned in the comprehensive economic report.
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Received on Sun Sep 11 2016 - 21:03:30 EDT