The Stars are aligning in time for RVR starting production in 4th Qtr 2017.
Macquarie calling zinc US$ 1.45 per lb in 1st Qtr 2017 – Actually I think this is conservative. (see article below)
Note recent Cancord recent valuation for RVR, which I already thought was conservative on revenues for 2018 assumes zinc prices of US$ 1.28 per lb in 2018 and US$1.35 in 2019 - Remember every cent over that assumed price should drop direct to the bottom line assuming the same ore grade and production
Draw down on zinc inventories continues and is gathering pace (see attached screen shot courtesy of namehij on the stockhouse T.TV board (Trevali up about 20%+ in the last 2 weeks)
- Another good drawn down of 3,125 tons on the LME today will be reflected on ***** on next Monday or Tuesday – so we end June 2017under 295,000 tons in LME zinc storage
- Note from namehij’s chart below you can see draw downs are increasing and quite significantly whether this is
+ Lower Production - China zinc production appears to be down quite significantly around 15% over the last 2 months
+ Actual demand – Despite worries about China etc infrastructure spending is alive and well globally (every country needs a bridge to nowhere !!)
+ Trading – one can expect that Private Equity and Trading Houses etc will look to increase holdings (hoarding) in anticipation of any shortage /price increase
+ no significant new supply of zinc until end 2018 at the very latest. (Sorry RVR is not considered significant it a global perspective – but it will be significant for us I hope !!!
Macquarie calls for $1.45 in q1 2018
By Eva Brocklehurst Zinc Macquarie suggests the stars are aligning for zinc. Speculators have reacted to signals from London Metals Exchange warehouse data and Chinese output numbers, something the broker was anticipating. This is on the back of falling Chinese production and global stocks, and rising ingot premiums and imports. The issue of hidden stocks has been ongoing and, now stocks appear to be drawing down inside China, Macquarie sets about estimating the state of the market.
The broker notes there was a substantially large number of cancelled warrants recently in New Orleans, which means the metal has been earmarked for delivery and the warrants can no longer be traded within the system. The broker finds it difficult to believe that this tonnage, of which more than 90% is in New Orleans, is all the zinc that exists outside of China, noting the LME has admitted that the storage network is a location of last resort.
Hence, the broker suggests there must have been inventory hidden from view in order for the market to function. On the supply side, zinc ingot output, officially, in China was down -9.9% in May following a -5.6% drop in the month before.
All up, Macquarie believes the bulls are in play, in line with a forecast full year deficit in 2017 of 689,000t. The broker reiterates its view that zinc prices will move above US$3, 000/t by the end of the year and average US$3, 200/t in the first quarter of 2018 before a demand-led re-balancing begins.
Namehij’s chart – global inventory draw downs are increasing
RVR Price at posting:
22.5¢ Sentiment: Buy Disclosure: Held
