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Teck to capitalize on zinc shortfall: exec

Keywords: Tags  zinc prices, zinc demand, Teck Resources, Andrew Stonkus, Pend Oreille, Saranya Kapur

NEW YORK — The restart of Teck Resources Ltd.’s Pend Oreille Mine in northern Washington will help meet an expected zinc supply shortfall, with the company forecasting that Chinese production will be unable to keep pace with growing demand.

The mine was put on care and maintenance in 2009. With a recent run-up in zinc prices, however, the reopening of Pend Oreille will position the diversified Canadian miner to benefit from the positive price environment, Teck vice president of base metals marketing Andrew Stonkus told AMM.

London Metal Exchange zinc prices have gained momentum since the end of 2013 and crossed the $1-per-pound mark in June for the first time since September 2011.

"We had the opportunity to invest in a couple of business units, and given the economic realities we felt the fundamentals for Pend Oreille’s reopening were strong, given zinc prices. The location of the project close to our Trail zinc smelter (in British Columbia) was also in its favor," Stonkus said. "We’re in a unique position where we have an existing project that can come online very quickly. A greenfield project would have taken years to develop."

Pend Oreille is expected to produce 44,000 tonnes of zinc concentrate annually over a mine life of five years, according to Teck’s website.

Demand for zinc is expected to be driven by urbanization in China, India and other developing countries, Stonkus said, but production in China will not be able to meet the expected demand. "There are a lot of zinc mines in China. They tend to be very small surface mines and usually produce low-grade material. The ore grades from these mines tend to be about 2 to 3 percent, while the ore grades at our Red Dog zinc mine in Alaska are about 17 to 18 percent, so there is a significant difference," he said.

Demand in North America also is picking up, he said, led primarily by the construction and automotive sectors.

And while there is some substitution threat from aluminum, Stonkus is positive about the future of steel in automobiles. "There’s been significant technological improvement to reduce gauge and increase strength. There’s a focus on high-strength steel in the industry to improve safety," he said. "We’re working closely with the steel industry to provide them with the zinc material and coatings they need, and we expect demand to remain elevated."

While some zinc consumers have blamed warehousing queues for elevated premiums, Stonkus believes that the premiums are supported by supply and demand fundamentals.

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