Global zinc production to rebound

High prices by historical standards have encouraged investment into a pipeline of new projects and restarts, which will continue to come online in 2021.

Elevated zinc prices relative to historical levels will encourage investment in new projects, expansions and restarts as the economics of the projects maintain their attractiveness, Fitch asserts. The analyst also sees scope for some idled capacity to be restarted. Fitch forecasts global zinc mine production to grow at an annual average rate of 1.8% over 2021-2029, compared with 0.2% over the previous decade.

Operations at Antamina were suspended from mid-April to late May 2020 due to the covid-19 pandemic, but nonetheless, Glencore reported 4.0% y-o-y growth in zinc output at the site during H120.

Elevated zinc prices will allow firms to move forward with projects within the pipeline, supporting stable growth. Fitch points out that as of November 2020, Tinka Resources is continuing to develop the Ayawilca asset with it recently beginning a resource expansion drill program which it will continue into 2021. The firm’s current timeline aims to complete the feasibility study by 2021-2022 then begin operations by 2023, producing approximately 140kt of zinc concentrate in its first year.

Fitch also expects Nexa Resources to pick back up the development of its Shalipayco project, which in Q320, was in the pre-feasibility study phase and on hold due to its changed capex strategy in response to covid-19. Peru has the third highest number of new zinc projects in the pipeline at 16, according to Fitch’s Global Mines Database.

Australia trajectory
Following 2019’s year of robust growth, Fitch expects Australia to maintain its positive trajectory over the coming decade. Over 2019, the ramp up of MMG’s Dugald River mine and the restart of Glencore’s Lady Lorreta mine at Mount Isa led the increase in Australia’s zinc mine output by an estimated 14% y-o-y.

Fitch expects New Centruy Resources to be a significant driver of growth as the firm ramps up its Century mine asset. The mine has successfully refurbished its 12mtpa zinc flotation plant and restarted operations. In turn, zinc output reached 33.6kt in Q320, marking a 28.2% y-o-y increase. Fitch estimates the operation is on pace to produce approximately 120-132kt per annum.

Fitch forecasts the country’s zinc production to increase from 1.4mnt in 2021 to 1.6mnt by 2029, averaging 2.4% growth y- o-y, on the back of elevated zinc prices and the solid project pipeline. Junior miners will continue to advance zinc projects in Australia, given the positive outlook for zinc prices over the coming years. Australia currently holds a combined 27 zinc-related new projects, expansions and restarts in the analyst’s Global Mines Database.