Metals and mining have always been an important segment of the global economy, however, when most investors think of them, they typically think of precious metals such as gold and silver, or industrial metals such as copper. In recent years mining of rare earth minerals such as lithium has ramped up as the electric vehicle market has grown rapidly. Another metal that is critical to the construction of buildings and railways, and the manufacturing of automobiles that is often overlooked is zinc.
Zinc is the third most commonly used non-ferrous (not containing iron) metal in the world, after aluminum and copper. Its primary use is to coat iron and steel which prevents corrosion, so zinc is vital to the construction of commercial, industrial, and residential buildings as well as to global infrastructure such as bridges, tunnels, and railroads. Zinc is also used in batteries and energy storage solutions, providing an additional and growing use case for the metal.
A pure-play mining and production company for zinc is the Canadian company ZincX Resources (TSXV: ZNX) (OTCQB: ZNCXF). The company has two main projects, the Akie Cardiac Creek and Kechika sites consisting of over 116 square kilometers and 46 mining claims in British Columbia, Canada. A Preliminary Environmental Assessment (PEA) has valued the Akie project at a Net Present Value of $649 million with a base case of $1.21 per pound for zinc. Zinc has been trading in a range of $1.40 and $2.00 per pound in recent months, and the upper end of that range translates into an estimated project value of $2 billion. The project is located in a stable jurisdiction and has ready access to power sources, roads, and an airport.
Pure play zinc producers are rare in the publicly traded markets, and ZincX is a very small company with a market cap of only $16.9 million. This small size makes the company an attractive takeover target for major miners who need to increase their zinc production capacities such as Tongling, Korean Zinc, and Teka. The world is facing a chronic shortage of zinc, which has been exacerbated by the recent closure of several zinc mines called Skorpion, Perseverance, Brunswick, Century, and Lisheen. Few new mines are coming on line, which should continue to put upward pressure on zinc prices. Another catalyst for growth is the push by national and local governments into green energy so greater amounts of zinc will be needed for the energy storage solutions that facilitate these initiatives. Zincx is also considering a spinoff of regional projects into another publicly-traded company for the benefit of existing shareholders, which could unlock value.
The world’s appetite for zinc is growing, and pure-play zinc miners are few. With price appreciation likely for the metal, and big miners on the hunt for acquisitions, ZincX has two major avenues for upside in the coming months and years. This Canadian microcap producer is worth putting on investors’ watchlists as a way to gain exposure to the future production of infrastructure projects and green energy storage.
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