The outlook for the zinc market over the next few years is positive, with the price forecast to reach a cyclical high of more than $3 800/t in 2018, says research and consultancy group Wood Mackenzie zinc markets principal analyst Jonathan Leng.

He notes that the concentrate market is tightening, with stocks moving towards critically low levels, adding that low concentrate stock levels will start to constrain refined output. Together with steady demand growth, this limited output is forecast to result in stocks of refined metal falling to low levels.

Refined market tightness is forecast to become acute in 2017, with stocks expected to remain at historically low levels until 2020. “Inventories falling to well below the historical average will provide fundamental support for prices, which will be amplified by investor interest,” says Leng.

African Zinc Projects
Despite an increase in the zinc price to a high of $2 246/t in July, metal prices remain depressed and threaten the timely development of many new zinc projects, says Leng, pointing out their potential to extend the duration of the challenging conditions in the concentrate and refined metal markets.

He notes that Africa has a relatively limited number of zinc ore deposits and, as a consequence, is a small producer of mined zinc, accounting for only 2% of global production at about 400 000 t/y. There are two dominant zinc mining companies in Africa – diversified miner Glencore, which operates Perkoa, in Burkina Faso, and Rosh Pinah, in Namibia, as well as base metals miner Vedanta, which operates the Skorpion mine and smelter, in Namibia, and Black Mountain, in South Africa.

However, Leng points out that the continent’s mined zinc output is expected to increase in the medium term with the ramp-up of Canadian miner Nevsun Resources’ precious- and base-metals-producing Bisha mine, in Eritrea, and zinc miner Vedanta’s Gamsberg project, in South Africa’s Northern Cape.

Leng explains that the Bisha mine has been producing gold and silver since 2011 and copper since 2013, and completed a zinc circuit in June that is expected to produce an average 120 000 t/y of zinc. Capital expenditure (capex) on the new circuit and infrastructure is estimated at $80-million, which is under the $100-million budget.

Once operational, an estimated four-million tons of ore a year will be mined at the Gamsberg openpit mine, producing 250 000 t/y of 55% zinc concentrate for an initial mine life of 13 years, says Leng. One-third of the zinc concentrate, with a lower manganese content, will be exported to third-party smelters, while the rest of the concentrate, with a higher manganese content, will be treated at Vedanta’s 150 000 t/y Skorpion smelter after the installation of a roaster and acid plant has been completed. This is expected to be by early 2018.

He adds that Vedanta has reduced the expected capital spend on Gamsberg from $630-million to $400-million through the implementation of engineering improvements and the renegotiation of contracts. The capital cost to re-engineer the Skorpion smelter is an estimated $152-million, and is in addition to the Gamsberg mine and mill capex.

“Bisha and Gamsberg should see mined zinc production exceed 600 000 t/y in 2020, which will account for 4% of the forecast global output,” concludes Leng.

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