Zinc Deficit ‘Visible’ as Mines Set to Close, Teck Says
Stock Chart for Teck Resources Ltd (TCK/B)
Teck Resources Ltd. (TCK/B), the world’s fourth-largest zinc miner, sees demand exceeding supply because of mine closures and rising demand for the metal in China and India, Chief Executive Officer Don Lindsay said.
“We now think that the deficit is visible, that it’s coming,” Lindsay said yesterday in an interview. “We see the potential for the zinc market to look very exciting indeed.”
Teck, based in Vancouver, derived 24 percent of its C$11.5 billion ($11.56 billion) of 2011 revenue from its zinc operations, according to data compiled by Bloomberg. Mines that represent more than 1 million tons of combined annual zinc production will be closed in the next four years, Lindsay said.
He declined to be more specific on when the deficit may occur. There is “no question” that inventories of the metal remain high and that the market is currently still in a supply surplus, Lindsay said in an interview in Hollywood, Florida, where he was attending BMO Capital Markets’ Global Metals & Mining Conference.
Supply will outpace demand this year by 539,000 metric tons, the most since 1993, according to Standard Bank Plc. Stockpiles of the metal used in brass and steel will reach 2.2 million tons, Barclays Capital estimates. Zinc prices, which fell in four of the past five years in London, have gained 15 percent this year on signs economic growth is accelerating.
Teck, Canada’s largest diversified miner, also produces steelmaking coal and copper. The company agreed last month to buy Calgary-based oil-sands explorer SilverBirch Energy Corp. (SBE) for about C$435 million to acquire the part of the Frontier oil- sands project that it didn’t own.
Teck has taken a long-term view on the price of oil, Lindsay said.
“We can build quite a substantial business here,” he said, referring to the company’s oil-sands assets. “This will take 10 years plus, but once built will be worth more than all of Teck is today.”
Lindsay said his company is “working cooperatively” with NovaGold Resources Inc. (NG), which said this month it’s started a process to sell a stake in the Galore Creek copper and gold project in British Columbia. Teck and NovaGold each own 50 percent of the asset. Lindsay declined to comment on whether Teck intends to exercise a right of first refusal on NovaGold’s stake.
“We’re in a good position, we can sit and see who shows up,” Lindsay said. “If we like the partner we will say let’s work together. If we don’t like the partner we could pre-empt or we could just do nothing.”
Lindsay said an expansion at its Quebrada Blanca copper mine and development of its Relincho copper project, both in Chile, are “ahead in the queue” of priorities before Galore Creek.
A production decision on Galore Creek is “some time away,” Lindsay said.
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