Zinc Market Outlook

We remain very bullish on zinc over the medium-term due to a continuing, and likely, accelerating supply deficit over the next couple of years due to mine closures and production cuts. During the past several years no major zinc mines have been constructed, a couple of modest expansions to existing zinc mines have been built and a few smaller-sized mines came into production in the 2013-2015 timeframe.

Total mined zinc production for 2014 was 13.3 million tonnes of refined zinc. A list of the major zinc mine closures and announced potential production cuts are presented below:

Summarizing the information in the chart above, we have seen a decline of 8.1% in mined zinc production during the past 3 years, and announced new 2016 mine closures and production cutbacks of another 6.4% of 2014 zinc output. Mine closures since 2013 have already impacted the supply/demand balance for zinc as evidenced by the significant reduction of warehoused zinc reported by the London Metals Exchange (LME-see graph below). During the past three years, surplus zinc stored within the LME has dropped from 1,250,000 to 445,000 tonnes, or 65%. Several commodity analysts forecast that the LME warehouse stocks will continue to decline and that the LME warehouse stockpile could drop to a dangerously low level below 200,000 tonnes by the end of 2016. Such a significant decline could be the catalyst to a significant increase in zinc price.

Another issue impacting current and future zinc production is that the average grade of zinc mines has fallen from approximately 7% in 2000 to about 5% in 2014, or nearly a 30% decline in the quality of mined ore on a worldwide basis. Mining these lower grade zinc ores requires a higher zinc price to ensure profitability.

Bongara’s high-grade mineralization is what sets it apart from other developed and undeveloped mines.

Solitario Exploration & Royalty Corp.
4251 Kipling Street, Suite 390; Wheat Ridge, CO 80033 | Tel: 303-534-1030; Fax: 303-534-1809