The zinc industry faces a “chronic supply problem” as limited funding for smaller companies hinders new-mine development, said Harlan Meade, the chief executive officer of Canadian producer Selwyn Resources Ltd.
About 550,000 metric tons of additional supply is needed in the next few years to meet demand as older mines start to close next year and the metal is more widely used in new applications such as fertilizer, Meade said in a presentation today at the International Zinc Conference in Rancho Mirage, California. Zinc is commonly used to rust-proof steel.
The appeal of zinc equities as an investment is less than it is for other metals, and debt capital is expensive for small producers that are often the ones who explore and develop new mines, Meade said. The result will be high zinc prices, sustained by “a chronic supply problem” and further industry consolidation, he said.
“Mine-development financing is the major challenge for the zinc industry,” Meade said. It is “a challenge that will be difficult to overcome given the lack of market interest in zinc companies.”
Zinc for delivery in three months rose 2.3 percent to $2,028 a metric ton today on the London Metal Exchange. The metal has gained 9.9 percent this year, after dropping 25 percent in 2011.
Selwyn, based in Vancouver, explores for lead and zinc in Canada.