Picture from The Simpsons: A World Without Zinc
Almost 89 percent of LME zinc inventory is in a New Orleans warehousing complex. What should not be surprising for a Big Easy location is that the facility is partly below sea level. That chunk of zinc represents a staggering 50 per cent of current global zinc inventories. What happens when there is a hurricane?
Why would you store 50 per cent of total global zinc inventory a hemisphere away from the big end users in Asia? And why would you use a warehouse below sea-level in the fickle path of hurricanes? There is no significant end-user demand for zinc in the Bayou hinterland which makes the location all the more surprising. In 2005 Hurricane Katrina washed over New Orleans leaving a trail of destruction. At the time the CEO of the New Orleans depot, Simon Heale, suspended delivery of warranted zinc metal until stores were inspected for storm damage. Some 70,000 tonnes of zinc stored in LME warehouses may have been compromised because of flood damage because of interaction with sea water. The higher the temperature of sea waters then the higher the corrosion rate especially in polluted water. Some punters are saying that much of the inventory stored in New Orleans is “off spec” since the storm in 2005.
There is zinc in human semen. It originates in the prostate gland and the concentration is about 125 microgrammes. If you are a man you might say that zinc puts lead back in your pencil. In semen analysis the count (concentration) motility percentage and morphology – the percentage of “normal forms” are the three major components of interest. In biology motility is the ability of unicellular or simple multicellular organs to move spontaneously and actively while consuming energy in the process. A progressively motile sperm swims forward in an essentially straight line, whereas a non-progressively motile sperm swims with an abnormal path and sometimes around in circles. The motility of zinc in the shipping lanes of the world appears to me to follow an abnormal path. The shipments of a big chunk of the metal may exhibit non progressive motility as in going around in circles and ending up in New Orleans. The “Big Easy” is about as far from the end user “egg” in China as you can get on this oblate spheroid.
The “Big Easy” has been a dumping ground for unwanted zinc. Maybe it is because of its isolation from trading hubs in the rest of the world. Zinc stock movements in and out of New Orleans have been like a merry go round during recent years. Stocks depart daily only at times to reappear in noteworthy quantities. For example when stocks are very low there is a sudden arrival of a clip of 40,000 tonnes of zinc which may never have left New Orleans at all. If you store something far way from the buyer at a cheaper rate and if it takes longer to ship that block of metal to that buyer then you can create a short-term supply squeeze. Pacorini used to dominate zinc storage in the “Big Easy” and was sold to Glencore in 2011. Financiers and warehouse operators profit from zinc surpluses not shortages. Maybe the location of these LME zinc warehouses is just down to a lot of old jazz.
In any event this is a side story to what is really driving the zinc price. The supply squeeze on concentrate is becoming a real pinch. The zinc price has doubled in the last 20 months. On January 19th Zinc just one month ago Cancelled Warrants were at a 16 month high. Clients simply wanted to get their zinc out of storage. Cancellations were nearly all in New Orleans. On-Warrant LME Zinc inventories stood at only 291,000 tonnes which is the lowest on-warrant inventory for zinc on the LME in over eight years. With Smelter treatment charges below $50 per tonne as against $200 per tonne a year ago it is a clarion call for exploration because there is a severe lack of zinc concentrate from mines. The overcapacity in Chinese smelting is now coming home to roost. Some smelters in China are closing because they cannot charge so little and stay in business. The weakest in the herd are falling by the wayside.
My doctor told me to take zinc. Zinc is essential for life. The zinc aspect was very interesting indeed. I told him I was exploring for zinc. Zinc contributes to the normal function of the immune system. It is found in every cell of your body. The human body needs zinc to make white blood cells. Zinc stimulates brain activity and is good for hair (of which I have very little left) and nails (which grow at the speed of drifting continents) healthy. “Galvanised” creams protect skin from the sun and babies bottoms form nappy rash.
It cost me €24 for 250 tablets and that was half price. Each tablet contains 250mg Zn and 250 percent nutrient reference value which is the same as recommended daily intake. This is two and a half times the recommended daily intake so I am assured that what I will not pass away will help maintain progressive motility and keeping lead in the pencil.
Recently I was on Irish Newstalk Radio talking about zinc on The Pat Kenny Show. I had an introduction from The Simpsons in a short slot called “Come back to zinc”
In late March I will be talking briefly about arguably the highest grade zinc deposit in the world in Turkey at the 9th International Zinc Conference in London organised by Metal Events. Now, I am greatly looking forward to catching up with old friends at biggest gathering in the world of prospectors in Toronto early next month. The Prospectors and Developers Association of Canada (PDAC) falls after the long dark winter. It is before the traditional migration of the now rare bearded grizzlies to the gold belts and mineralised terranes of the north. There are still a few of these guys to be seen lurking in the back corridors of the convention with a bag full of mineralized specimens.
Footnote: The sulphurous mineral of zinc is called sphalerite which comes from the Greek word for treacherous. The name comes from a tendency for people not to recognise it and mistake it for something else. A German synonym for sphalerite is “blende” meaning blind or deceiving. Hardly could we suggest that global zinc stocks are of the “blende” variety.
Disclosure: This blog contains the personal opinions and observations of the author. It is not and should not be construed as a solicitation to purchase or subscribe for any investment. I am Chairman of Group Eleven Resources Ltd which is a private zinc exploration company focused on Ireland. I am also a Director of Pasinex Resources Ltd. I also invest in Zinc ETF shares and various zinc mining and exploration companies.
John P. Barry
Managing Director of Irus Consulting Ltd. and Professional Geologist
A widely travelled and highly experienced economic geologist, John Barry is a confidential counsellor to the likely investor contemplating a considerable investment in the intricate business of mining metals. Dont take a flyer and trust altogether in luck and invest your money in an exploration or mining project on the strength of a printed prospectus or the advice of an interested friend without the preliminary investigation and site visit of a reliable geologist with a basic grasp of commerical reality. Irus Consulting provides strategic and practical management advice and guidance to its clients. Time is a precious commodity for my clients, and indeed myself, as it relentlessly ebbs away and so I try as best I can to avoid the mediocre - those projects and their champions which do not engender enthusiastic belief and passion.
Irus Services Include:
- High-level strategic advice
- Practical guidance and assistance on project sourcing, acquisition and implementation
- Rapid identification of key project value-drivers and potential fatal flaws.
- Capacity building and coordination of external consultants.
- Design and targeting of effective marketing campaigns
John Barry was part of very small teams which discovered and sourced several multi-million ounce gold deposits in Africa. He has worked as an economic geologist since 1988 and as a consultant and then responding to the entrepreneurial spirit he was a founder and manager of three public resource companies which raised a total of US$70million. These resource companies are currently successfully exploring and developing gold and base metal projects in Europe, and sub-Sahara Africa. John has seen a lot of rocks working for consultancies such as CSA in both Ireland and Australia and as Senior Associate Geologist with Chlumsky Armbrust & Meyer LLC which is based in Denver. He is a specialist in zin-lead exploration and in 1992 joined the exploration team which discovered the Lisheen zinc-lead deposit in Ireland as the resource was being expanded in the first couple of years after discovery and in 2008 led the first non Polish exploration company to successfully enter and acquire a major resource-project in the Upper Silesian Mississippi-Valley-Type (MVT) zinc-lead district in southern Poland the worlds largest minerlised district of its kind. John (P.Geo and EurGeol) holds a Masters Degree in Geology from Pennsylvania State University and a MBA from the Edinburgh School of Business, Heriot-Watt University, Scotland.
I would like to think that I have shown the tenacity, patience and focus required to implement many of my better ideas over the years and that I have learned valuable lessons from some failures. I believe one of my strengths is in communicating quite complex technical ideas in a concrete way that can be easily understood. I am a team- builder and motivator by projecting my enthusiasm and vision for a project. I am committed to the development of young geologists through supportive delegation. John is now moving more from managing public companies to freelance consultancy and a more advisory role so as to concentrate increasingly on assisting management in effective exploration and discovery. He is Managing Director of his own Exploration Management and Geological Consultancy: Irus Consulting Ltd. Please visit www.irusconsulting.com for more information and free newsletter registration.
John is now moving more from managing public companies to freelance consultancy and a more advisory role so as to concentrate increasingly on assisting management in effective exploration and discovery. He is MD of his own Exploration Management and Geological Consultancy Irus Consulting Ltd.