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Below is a good article on the zinc market and why zinc is the best metal for investors to focus on. The author particularly likes “the upside of junior explorers right now” as the best way to leverage zinc. We agree that zinc junior miners, having taken a huge hit since the highs in May despite zinc itself trading back near the May highs, have incredible upside from the currently depressed levels. They’re pricing in a collapse in the price of zinc because of fears of a global recession, but if zinc holds up or continues higher, they should regain their huge losses and more.
The author is promoting zinc junior explorer Selkirk Metals because of its 60% interest in Ruddock Creek deposit. He says the big story is the metal in the ground, even though it’s an inferred resource, which is the earliest stage, most speculative level of resource. By comparison, Metalline Mining (MMGG) has 100% ownership of 10 times the zinc resource
at Sierra Mojada, at a higher grade and a far more advanced stage, yet its market cap is only 3 times Selkirk’s. Even if it tripled to get back over $5, we believe MMGG would still be a much better value than Selkirk is now.
The author cites Ruddock Creek’s “most impressive hole” which showed “16.35% zinc and 3.65% lead over 10.25 meters” within their inferred resource area. Compare that to Sierra Mojada’s hole with 29% zinc over 24 meters
that may mean a new zinc deposit separate from their existing resource.
Ruddock Creek is years behind Sierra Mojada in development -- while Ruddock Creek is far from even beginning a feasibility study, Sierra Mojada is well into the feasibility study and nearing completion of the mine plan. Ruddock Creek is also in the snowy mountains with no infrastructure whereas Sierra Mojada is in a warm, flat area with historic silver production and infrastructure.
In addition to all the zinc, Sierra Mojada has historically produced very high-grade silver, with only the ore that was high enough grade to be direct shipped without milling being selectively exploited
. Sierra Mojada has never had a mill to concentrate the lower grade mineralization. Metalline Mining recently has been drilling for silver in the Polymetallic Manto of Sierra Mojada and announced very high-grade silver results: http://www.metalin.com/05-11-06.pdf
Like Metalline Mining and other junior miners, SLK had lost about 2/3 of its value since May in the sector selloff before this article came out on Thursday. However, if you compare what they have, Metalline Mining is far and away the better value. If Selkirk’s “a steal” as the author says, Metalline Mining is grand theft of the highest order.http://www.stockhouse.ca/shfn/article.asp?EdtID=18829
Thursday, October 12, 2006
By Pure Metals
Tight supplies prompt a closer look at zinc exploration company Selkirk Metals.
You use it.
You may not know it, but I can promise you do.
So it's no surprise, after centuries of use zinc has become one of the most important metals known to man. And while this largely ignored metal may not be as sexy as gold, silver or platinum, it plays a fundamental role in a wide range of industrial and consumer products. In fact, the bluish-white metal is now the fourth most common metal in use today -- trailing only iron, aluminum, and copper.
And that's why we're interested. It's a vital cog in the modern economic machine.
The single biggest use of zinc is for galvanizing steel. Galvanized steel is simply standard cold-rolled steel coated with a thin layer of zinc. The zinc layer protects the steel from rust and corrosion making it ideal for commercial and residential construction.
As a matter of fact, you are no doubt surrounded by galvanized steel as we speak.
The United States alone consumes nearly 40 billion pounds of galvanized steel each year for a multitude of uses resulting in steady and increasing zinc demand. But galvanized metal has a multitude of other uses as well.
Zinc is also used for making die-cast components from door knobs to car parts to nuts and bolts and tens of thousands of other products such as casings for electronic components.
And of course, zinc and copper make the alloy brass, which is used in a vast array of products. The myriad other zinc uses include sun screens, phosphors on TV screens, fireworks, paints, cosmetics, plastics…the list goes on and on.
This rapidly growing catalog of applications is progressively adding to zinc's importance in our industrialized, modern world. And with all these applications, it's no wonder why global demand has increased well over 250% in the past 45 years.
In the three decades from 1960 to 1990, worldwide zinc consumption grew at a steady, average annual growth rate of 2%. But since 1993, global zinc consumption has grown annually by 3.2%. And by all accounts this is just the beginning.
The International Lead and Zinc Study Group (ILZSG), one of the oldest and most respected nonferrous metals organizations, says global demand for refined zinc metal will increase 3.9% over last year's demand to 11.06 million tons in 2006. Next year the ILZSG expects demand to increase again to 11.35 million tons.
This demand has been and will be coming from all corners of the Earth. After falling in 2005, U.S. demand is expected to recover strongly this year with an increase of 7% over last year followed by flat growth in 2007. Similarly in Europe, it is anticipated that demand will rise by 3.4% in 2006 but remain unchanged in 2007.
Growth will be strongest in Asia where demand is forecasted to rise year over year by 9.1% in India, 4.5% in Japan and 4.4% in the Republic of Korea.
And let's not forget about China...
As with most every other commodity, escalating consumption in China has been a major factor in the increased demand for zinc.
In the recent years, China has become the largest consumer of zinc in the world increasing at 8% to 10% per year (although it increased an impressive 22% during first nine months of 2003 and 27.8% in 2004). In fact, it is anticipated that China alone will account for nearly 30% of global zinc usage by 2007.
And get this…From 1990 through 2000, China accounted for about 63% of zinc's global supply growth, resulting in massive exports that undermined prices for years.
But now because of the country's insatiable hunger for the galvanizing metal, China has gone from being a significant zinc exporter to a net importer of the metal.
So what about supplies?
Following several decades of ample supplies, mainly coming from China, a major supply gap is developing in the zinc markets that will likely have a profound impact on future zinc exploration, mine development, and most importantly to you and me, prices. One of the main places we look to gauge base metal supplies as well as the overall the health of the sector is the London Metal Exchange (LME), the largest non-ferrous metals exchange in the world. In April 2004, the LME zinc warehouse stocks topped off at about 784,000 tons. Today, only two and a half years later, these stocks have plummeted a whopping 83% to 133,000 tons.
In the past 12 months alone these warehouse stocks have fallen about 74%. Take a look…
Now here's what really surprises me…
The LME supplies are only enough to satisfy the world's total demand for an unbelievable 4 measly days...talk about tight!
Falling supplies and rising demand have resulted in an unparalleled price rally. Zinc prices have skyrocketed 223.9% since mid-July 2005. Compare that to price changes of other major metals over the same time period:
So the obvious question is: have we missed the move?
Zinc prices are currently around $1.70 per pound, a 97.4% increase year-to-date and less than a dime under its all-time high set back in May. And if stock levels continue to descend at their current pace and demand remains as strong as anticipated, I fully expect ongoing price increases.
So how can you leverage higher zinc prices?
Personally, I like the upside of junior explorers right now…especially those trading on the TSX Venture Exchange. And I believe any junior firm with a proven management and decent land package focused heavily on zinc exploration will do well over the next 12 to 24 months.
To be specific, here's one idea…
Selkirk (TSXV: V.SLK, BullBoards) is a tiny $15.8 million mineral exploration and development firm. The company is focused on the acquisition and subsequent development of base metal properties, specifically zinc properties, in Canada.
The company has a nicely diverse portfolio of seven properties ranging from early to advance stages of exploration and development.
But the one that I'm most excited about, and the one I want to tell you about today, is Selkirk's flagship prospect: The Ruddock Creek Property.
Selkirk has recently completed its obligations to acquire a 60% interest from Doublestar Resources (TSX: V.DSR, BullBoards) in the property. But the big story here is the metal in the ground.
Here's the deal…
Located in beautiful South Central British Columbia, just 100 km north of Revelstoke, Ruddock Creek's E-Zone has already been previously explored by two of the biggest names on the base metal industry, Falconbridge (TSX: T.FAL, BullBoards) and Teck Cominco (TSX: T.TCK.A, BullBoards) / (TSX: T.TCK.B, BullBoards). And the results from those explorations were quite impressive.
Get this…An inferred resource was calculated for the E-Zone that showed approximately 4 million tons with an average grading of 7.5% zinc and 2.5% lead.
That's about 600 Million pounds of zinc and 200 million pounds of lead.
Unfortunately, however, this resource was reported prior to (and therefore not compliant with) implementation of National Instrument 43-101, a rule developed by the Canadian Securities Administrators that governs how issuers disclose scientific and technical information about their mineral projects to the public. Nonetheless, the lack of a NI43-101 certainly doesn't mean that the resource isn't there.
In 2004, of a total of 1838.7 meters was drilled in 11 holes to further define the E-Zone. The program was successful in that all 11 holes intersected significant massive sulphide zinc/lead mineralization confirming the continuity and the dimensions of the E-Zone to the west up to the E-fault.
In August of 2005, Selkirk conducted another deep diamond drill program. The program's best hole was RD-05-113, which found 14.05 meters grading 15.79% zinc and 3.33% lead.
Most recently, Selkirk announced four additional diamond drill results from an ongoing drill program at Ruddock Creek.
Three of the holes encountered narrow zones of massive sulphide mineralization and they have served to establish the eastern limits of the E-Zone mineralization. But the most impressive hole was the fourth.
RD-06-123 assayed mineralization grading with16.35% zinc and 3.65% lead over 10.25 meters. Not too shabby. Results released from the company can be seen below...
Selkirk also announced yesterday that that drilling has begun on the first of 12 additional zones of massive sulphide mineralization that serve to outline the SEDEX basin at Ruddock Creek. (Read more about this by clicking here)
Yesterday Selkirk closed at 48 cents, which I think is a steal considering the last time zinc prices were at $1.70/pound the stock was trading in the 80 cents to $1.00 range.
For more information on Selkirk's Ruddock Creek project, check out the company presentation on the property by clicking here
. Or for more information on the company in general and their other six properties, visit their website at www.selkirkmetals.com
Luke Burgess covers Selkirk Metals at his Goldworld.com website, but has no interest in the stock, nor does he accept advertising from the company.
Luke Burgess is the managing editor and publisher of GoldWorld.Com
. He also writes a weekly column for EnergyAndCapital.Com
, and WealthDaily.Net
. Furthermore, Luke co-edits The Pure Energy Report
and Secret Stock Files
with Michael Schaefer
Disclaimer: Great Investments may have a position in all or some of the stocks discussed in this blog, but is not paid by any company to promote their stock.
Great Investments contains opinions, none of which constitute a recommendation that any particular security, transaction, or investment strategy is suitable
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