Zinc is the preferred commodity of Marindi Metals and continually improving fundamentals have played out as expected. Over the past 12 months, stockpile drawdowns have totalled 500,000 tonnes of metal, a 40% fall in inventories. Despite this the $US Zinc price has not yet materially moved after a modest increase in the middle of last year was followed by a gradual retreat pre-Christmas.
While the $US zinc price has not yet advanced appreciably, the Australian zinc price has increased some 25% owing to the declining Australian Dollar as illustrated below. In the coming calendar year the closure of Lisheen and Century mines will see over 1 million tonnes of zinc metal permanently removed from worldwide zinc production. The declining Australian dollar should make the performance of Australian zinc companies even better when the $US zinc price begins to rally.
Glencore, in conjunction with Wood McKenzie, completed some compelling research late last year addressing the issue of the falling zinc stockpiles and when critical supply levels should be reached. This research highlighted the critical level of inventories required to cause the zinc price to rise strongly at around 3 weeks of supply. Glencore see this occurring between mid-2015 and early-2016.
A recent report by BNP Paribas (Feb 2015) also reports a similar scenario unfolding; they predict the zinc price to reach US $US 2,600 per tonne by December 2015 and $US 3,200/t by December 2016.