Hidden within the depths of the alternative investment market is potentially one of its best kept secrets Minco (LON:MIO), an Irish based exploration and development company who has two very interesting strings to its bow, primarily concerning a potentially "world class" zinc resource in Ireland and quickly progressing silver project in Mexico.
While investors sniff around, trying often in vain to find the next dazzling gold explorer, such as Nyota Minerals or Solomon Gold, many overlook the less glamorous commodity of zinc, which is used in galvanized steel and currently trades at around US$2,455 per tonne on the London Metal Exchange. China currently account for around 30% of the global demand for zinc and have a construction industry growing at about 11% annually along with India, who both have a combined population figure of around 2.5 billion. With half China’s population predicted to migrate from the countryside to its cities by 2015, the demand for zinc could well substantially increase as a result demographic and wealth changes especially in India and China. [1] In addition to infrastructure demand for galvanised steel, China is now the largest manufacturer of cars in the world. When you consider the potential future demand curve for zinc along with the fact that there has been a lack of capital injection and development of new zinc mines coupled with the fact that older mines around the world are becoming rapidly uneconomical, Minco could be one to watch.
According to Credit Suisse, zinc could be a commodity to watch, as they predict supply in 2016 will not meet demand and that a shortfall of around 6mt may exist, suggesting that the effect China has had on steel and copper is likely to happen in the same way to zinc over the next 5 to ten years, and with companies reluctant to develop new mines, supply is unlikely to meet future demand, which could well lead to a “potentially lethal cocktail for a spike in the zinc price in the coming years”. [2] RBC capital markets also suggests that zinc mine shortages could occur as early as 2014, resulting in dwindling inventory levels which may then result in ‘driving a strong rebound in price’. [3]
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