Good Monday morning everyone. I hope you all had an enjoyable Holiday weekend with family and friends. We're back for what will probably be another exciting week, especially with the markets' recent volatility swings. However, we do continue to see significant strength in commodities, a topic we've talked about on several occasions in recent months - and one that clearly supports the reflationary theme our economy is sure to be a part of over the next several years.
You've also probably noticed we've spent a lot more time over the last several months bringing you a number of junior mining stocks to take advantage of in the event commodities continue to be among some of the best performing sectors this year and beyond. Not only do we think it's smart to expose one's self to commodities going forward, we think it's going to be tremendously profitable.
With that, we were introduced to another new junior mining play recently - and we're excited to bring you this new idea to kick off the new week. But, this time around we're going to diversify out of the normal realm of the precious metal space, and delve into the not so popular mining of zinc. Make no mistake though, zinc has and will continue to be one of the world's most precious commodities.
To appreciate Kootenay Zinc Corp (OTCQB: KTNNF) (CSE: ZNK.CN) it is important first to appreciate zinc. Represented by the chemical element Zn in the Periodic Table, zinc is the 24th most abundant element is the earth's crust and has five stable isotopes. Way beyond its use as a dietary supplement or sun block - both of which are retail products that are growing in consumer use - zinc is commonly used as a rust inhibitor, an anode material in batteries, and in the making of alloys. Over 50% of global zinc mined goes toward making galvanized steel. Zinc is the fourth most consumed metal in the world, after iron, aluminum and copper. Combined with copper, zinc forms brass. Circling back to the health properties of zinc, as a supplement it is believed to be an antioxidant that inhibits ageing, and it has also been used to alleviate symptoms of depression. It's hardly as sexy or well revered as gold, but in terms of value, zinc is a workhorse.
Kootenay Zinc Corp (OTCQB: KTNNF) (CSE: ZNK.CN) is a mineral exploration and development company based in Vancouver, British Columbia. The company holds an exclusive option and right to acquire an 80% interest in the Sully Property located in the Fort Steel Mining Division in the southeast corner of British Columbia.
Kootenay's primary focus is on The Sully Project, a zinc mining opportunity that is located only 30 km away from the legendary Sullivan Mine. Since the discovery of deposits in 1892, the Sullivan Mine, one of the world's largest SEDEX deposits, has yielded over 17 million tons of zinc and lead, as well as over 337 million ounces of silver, for combined present value of more than $49 billion. SEDEX deposits (sedimentary exhalative deposits) are the most important source of lead, zinc, and barite, a major component of silver, copper, gold, bismuth and tungsten.
After 92 years of active production, the Sullivan Mine was closed and decommissioned in 2001. The Sully Project presents new drilling and mining opportunities for Kootenay Zinc Corp (OTCQB: KTNNF) (CSE: ZNK.CN). The geological features that made the Sullivan Mine such a rich and fertile drilling and mining opportunity are present in the area that comprises the Sully Project. Paul Ransom, P.Geo, who is referred to as The Core Whisperer, has said "...The Sully Project presents the best exploration target of Sullivan (Mine) size that I have seen in my career..." Rather than get bogged down in geological and chemical jargon and terminology, what is significant about the Sully Project is its geological similarity and proximity to the rich mining basin of Sullivan Mine.
Kootenay Zinc Corp has a strong and deep management team and advisory board. Comprised of leading mining directors and executives at some of the world's best mining companies, these individuals have been involved in world-class mining discoveries that have been cultivated and sold for billions of dollars. The Board of Directors brings together leaders with experience in natural resources, early stage venture financing, mineral exploration, bio-technology, and law.
The technical team includes industry experts that have worked on mega-mining projects in the Sullivan Mine area, as well as in other countries. They have both regional and global familiarity with mineral mining, and are noted geologist and geophysicists. The combined experience and expertise of the operating and technical team offers a depth of knowledge and understanding of the land and the abundance of riches that lie within.
So why zinc? Shifting focus away from the southern region of British Columbia, we need to take a look at what is happening in China.
With one of the world's largest populations, and an expected market growth of 6% in 2017, China's passive use of zinc is staggering; spending by Chinese consumers on refrigerators, cars, and laptop computers has caused a surge in demand for zinc, creating a production shortfall that is the largest for that particular metal in almost 10 years. Moreover, according to Reuters, China's economy grew by a solid 6.8 percent in the first quarter of 2017, the same pace as the previous quarter, due primarily to sustained government infrastructure spending and housing market starts. All that steel need to be galvanized, and what is the primary component of rust inhibitors...? Zinc.
China is not the only consumer of zinc and zinc related products. India too has significant demand for the element. The domestic Indian Zinc industry is completely privatized, and there is an assumption that zinc demand will grow in that country by 10% until 2020, based again on infrastructure and consumer products demand.
Worldwide demand for zinc rose 3.5% in 2016, and heading into the second quarter of 2017 the metal is seeing a bullish trend. Unlike gold and silver, zinc is not considered a crisis asset, but rather benefits from traditional industrial commodity supply and demand. Geopolitical uncertainty may also contribute to a brighter spotlight on the zinc market as investors consider a breadth of commodities in their portfolios. Analysts are expecting a decline in global zinc supplies in the coming years, so coupled with an increase in demand (thank you China, among others) it makes Kootenay Zinc Corp's (OTCQB: KTNNF) (CSE: ZNK.CN) focus on The Sully Project that much more valuable. Goldman Sachs views zinc as a bullish metal. "Zinc is the most exposed base metal to Chinese infrastructure" say Goldman's analysts. The company forecast a 114,000 ton shortage of zinc in 2016, which it expects to increase to 360,00 tons in 2017. Goldman expects zinc could hit a $2,500 per metric ton price in 6 months. Looking at Q1'17 market performance, base metals were all over the place, but zinc spiked 20%, slightly ahead of gold at 15.9%. While gold's performance may have been a reaction to concerns about the Administration in Washington and some profit taking, the performance of zinc was better than expected. Of all major metals, zinc is the metal most closely connected to infrastructure growth and spending, which will continue to put pressure on zinc mining and production into the foreseeable future.
Kootenay released information in early April 2017 that The Sully Project team completed a detailed interpretation of recent gravity work that highlights a distinct drill target located immediately south of recently completed holes. This is good news for the discovery and mining of new deposits. To date the company has met targets on their intended project timeline, and continues to cultivate exploration of the rich mining basin that makes up Sully.
If you're looking to have some nice exposure to a potentially promising young zinc junior miner, Kootenay Zinc Corp (OTCQB: KTNNF) (CSE: ZNK.CN) is one definitely worth considering. Remember what we've said in a few of our previous newsletter editions this month; the best time to buy penny stocks is when nobody wants then - and then sell them when everyone wants them.
Well, we're going to go ahead add one more very apropos statement to the first half of that SCN motto today - the best time to buy them is when nobody knows about them yet.
By the looks of KTNNF's chart above, this clearly appears to be the case. It's been my 15 years of covering small stocks though that has taught me it's usually far better to jump into a promising mover earlier and position yourself better for what may start developing in the idea once others start to take notice.