Zinc concentrate output is expected to decline by 1,000 tonnes month-on-month in September, as a mine in North China begins maintenance towards the tail end of this month.
China is the world’s leading zinc producing country, accounting for around a third of global mine production, with annual output of just over 4 million tonnes (Mt).
The expected decline, which was highlighted by Shanghai Metals Market (SMM), reflects a broader challenge facing the global zinc market. The issue is maintaining adequate mine supply at a time when smelters are competing for increasingly scarce concentrate.
While a 1,000-tonne month-on-month reduction from a single Chinese operation is rather modest in the context of global zinc production, the timing can be considered significant.
According to HSBC’s Global Commodity Team, global zinc mine supply is expected to fall 2.1% year-on-year to 12.5Mt this year, driven mainly by lower production in Latin America.
China’s position at the centre of the zinc supply chain makes these developments important for the wider resources economy. Disruptions to domestic mine supply can have a knock-on effect through concentrated trade flows, smelter margins, and the availability of refined zinc for manufacturers.
Knock-on effect
The potential knock-on effect of China’s zinc disruptions is already being reflected in the market.
Zinc prices have climbed past US$3,900 ($5,420) per tonne, reaching the highest level since May 2022, as concern over limited availability intensifies.
According to Trading Economics, disruptions at zinc mines and smelters could keep the market undersupplied. At the same time, London Metal Exchange inventories have fallen sharply, while physical supplies in key markets outside China remain tight.
For the global resources sector, the issue extends beyond the immediate movement in the zinc price. Zinc is considered critically important for preventing steel corrosion. The metal protects iron and steel from rust through a method called hot-dip galvanising.
A sustained shortage of zinc supply could potentially increase the value of projects capable of bringing new zinc units into the market, particularly as more operations mature or go into maintenance.
This creates a supportive backdrop for zinc explorers and developers seeking to bring new sources of supply online.
Replacing declining output
One example is Polymetals Resources (ASX:POL), which provides direct exposure to the zinc production market through its restarted Endeavor mine in New South Wales.
The silver, lead, and zinc mine previously operated continuously from 1982 to 2020, producing 32Mt @ 8.01% zinc (Zn), 5.04% lead (Pb), and 89.4 grams per tonne silver (Ag), yielding around 92 million ounces (Moz) of Ag, 2.6Mt of Zn, and 1.6Mt of Pb.
As previously reported, Polymetals generated revenue of $45.8 million in the June quarter, marking a 65% increase from $27.8 million in the March quarter. Cash reserves rose by 27% to $29.1 million, while debt decreased by 29% to $10.7 million.
Quarterly recovery reached 396,485 ounces of Ag, 3,268 tonnes of Zn, 2,061 tonnes of Pb, and 490 ounces of gold.
“We are now at that stage where we are generating free cash to pay back our capital and debt on a consistent basis,” General Manager of Corporate Development Linden Sproule told this news service.
For producers such as Polymetals, higher zinc prices can potentially strengthen revenue generation and improve the economics of additional mine development and exploration.
Importance of undeveloped resources
The tightening zinc concentrate market also reinforces the importance of undeveloped resources.
For example, Tinka Resources’ (TSX-V:TK) Ayawilca Project in central Peru is positioned as one of the largest undeveloped zinc, silver, and tin assets in the Americas.
In 2024, the company conducted a preliminary economic assessment, revealing Ayawilca to have an initial 21-year mine life, producing 2Mt of zinc-silver-lead annually. Zinc production alone is forecast to be 90,000 tonnes per year.
Ayawilca’s mineral resource is in three key zones: (1) a Zinc Zone (which has polymetallic mineralisation with zinc, silver, and lead), (2) a Tin Zone (which holds separate cassiterite-bearing tin mineralisation), and (3) Colquipucro, which represents the shallow silver-rich deposit.
The Zinc Zone is the largest resource within the asset, at 28Mt @ 7% Zn in indicated mineral resources, with 3.6 billion pounds of contained Zn and 15Moz of contained Ag, as reported.
GEO Graham Carman previously said that at Ayawilca, the company is continuing discussions with local communities to extend social agreements.
“Our expectations remain that the first of these agreements will be coming before the end of Q3 and that activities onsite will ramp up shortly thereafter,” Carman says.
For developers such as Tinka, a structural improvement in the zinc price environment could strengthen the potential economics of bringing projects into production.
On the exploration front
Meanwhile, explorers can also benefit from the same broader investment story, although their exposure is more indirect.
For instance, Lodestar Minerals (ASX:LSR) owns the Earaheedy Project in Western Australia, which is defined by a 450km2 land package.
The project includes zinc-lead-silver targets with a geological setting similar to Rumble Resources’ (ASX:RTR) Chinook discovery.
While Lodestar’s portfolio is diversified across gold, copper, and rare earths, Earaheedy’s exposure to zinc provides potential investors with link to a prospective province at a time when the market is focused on future zinc supply.
Similarly, Vantage Metals (ASX:VAN) has the Toro-Malambo-Tambo Project in Argentina, where previous explorers identified a zinc-lead mineralised zone with homogeneous ‘high zinc grades’ in an extensive vein system and related stockworks associated with igneous units.
This zinc mineralisation is spatially linked to a geophysical induced polarisation anomaly possibly related to a deeper porphyry system.
Together, these companies demonstrate how movements in a major producing market such as China can filter through the entire resources ecosystem.
If zinc concentrate output decreases, the market may turn its attention to companies capable of adding new, economically viable zinc supply.
As such, the next phase of the zinc cycle could be less about short-term disruptions and more about whether the global mining industry can develop enough new output to replace declining production and meet future industrial demand.
Write to Aaliyah Rogan at Mining.com.au
Images: iStock, Polymetals, and Tinka Resources
