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Donner Metals - Is At The Starting Gate
May 13th, 2009
Since the beginning of this year, spot zinc prices have steadily gained
nearly fifty percent! This comes after a sharp sell-off in the
commodities market. Zinc reached lows around $0.47 per pound in early
December of last year. In only eight months, zinc has scratched and
clawed its way back to the $0.70 range - allowing many to be optimistic
about the long-term future of zinc.
A closer look at the London Metal Exchange (LME) inventory numbers appears
to paint an even brighter picture. Since February 25 of this year,
the LME-registered inventory has fallen by 33,325 tonnes to 328,950
tonnes. And the less zinc available, the more China seems to wants
it - imports of zinc concentrate into China are up sixteen percent in the
first quarter of this year. Compound this with the imminent closure
of a number of zinc mines, including Xstrata's massive Brunswick zinc
mine (250,000 tonnes of zinc per year), and it becomes evident why zinc
prices have been performing well. (all stats courtesy): http://www.reuters.com/article/privateEquity/idUSL143559020090501)
This strength has even begun to filter down to the smaller pure zinc
plays. Most notably among those is Breakwater Resources (TSX:
BWR). Since spending December 2008 in the $0.05-0.10 range,
Breakwater has been moving up. Last Friday, the company closed at
$0.30. Even posting a $6.5 million loss for the first quarter of
2009 has not slowed the company's rise. While Breakwater has more than
tripled in price, Lundin Mining, another base
metals miner, has quadrupled from its lows.
It will be interesting to see which zinc company will be next to make a
run. One of my clients, Donner Metals(DON-TSX-V),
appears ready at the starting line. The company is presently hovering around
the $0.17-0.19 range, and with some good news going forward, can have a
worthy run. They put out an impressive 43-101 resource number at their Bracemac-McLeod property - a good enough number for
Xstrata to complete a full scoping study on the property; they have half
of the historic Matagami mining camp under
their control; and a town, a mill and infrastructure already provided to
them by their joint venture partner, Xstrata. They appear well
positioned to ride zinc's wave. The only question is when the tide
can reach them.
Source: http://grandich.agoracom.com/2009/05/donner-metals-is-at-the-starting-gate/
From CIBC World Markets, Canadian Portfolio Strategy, May
11, 2009:
Industrial activity is indeed already picking up, not in green shoots
in North America, but in bamboo shoots in East Asia. From extremely
depressed levels that reflected the need for inventory de-stocking and
constraints on trade finance, factories there are sparking back to life. The
same turn will be evident in global activity at some point in the second
half of 2009, and we are overweighting base metals as a result, given
that sector's history as an early mover in the cycle. Oil typically moves
later, and we're skeptical about any follow
through in 2009 to crude's recent run-up given soft demand, bloated
inventories and risks that OPEC would lose the discipline to maintain
recent cutbacks if prices climbed much further.
View the full report
For more information please contact:
Keith Schaefer
Vanguard Shareholder Solutions
Tel: 604 608 0824
Toll Free: 1 866 898 0826
www.donnermetals.com
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