*Please note that a September 14, 2017 update follows near the end of this Letter.
The world is on tilt.
Events have taken place precisely as predicted. And it’s about to change everything.
I urge you read this Letter in its entirety because I am about to introduce you to one of the most undervalued companies set to benefit from this incredible change.
You’re going to be shocked that you haven’t heard of this one before.
Right now, millions of Americans are shaking in their boots.
Even my landscaper said that he and his wife are now more worried than ever – and they’re Canadian.
And yes, it’s because Donald Trump will soon be in full control of the world’s most powerful nation.
And I mean full.
The Power of Trump
Democratic control has now been reduced to levels not seen since the Civil War.
Republicans are now in control of over 67 per cent of the 98 partisan state legislative chambers in the nation.
This has NEVER happened before.
Republicans will also hold more total seats than they have since 1920.
And starting next year, the GOP will control both legislative chambers in 32 states – another all-time high.
That means Trump will have his way.
Given his promises and business track record, he will surely leverage the heck out of the financial system.
He will borrow money and spend it – lots of it.
The combination of both monetary (Fed) and fiscal (Trump) policies, combined with deregulation (Trump), could unleash a new era of price discovery the world has never seen.
And as I mentioned last week, I plan on taking advantage of this trend before the masses do.
Inflation to Gear Up
Over the past years, I have talked about the velocity of money and how monetary policies simply cannot force people to spend money.
When people don’t spend, inflation doesn’t occur.
But a massive increase in spending via fiscal policy, in conjunction with a Trump-policy, could force money into the economy at a much faster rate than before.
That means inflation is likely to pick up.
We’re already witnessing a precursor to inflation right now.
That’s why Ray Dalio, founder of one of the world’s largest hedge funds managing over US$130 billion, just told the world that the 30-year bull market in bonds is likely over
High inflation is not a good sign for bonds as their yields become increasingly unattractive.
Dalio believes inflation is about to kick in.
If he is right, we may be in store for the opportunity of a lifetime.
That’s because one sector is set to immediately benefit from a rise in inflation.
Real Assets: Lowest Level Since 1926
Back in 2011, commodities hit a cyclical peak before beginning their downward trend as
inflation dropped to all-time lows.
When inflation drops, the price of real assets, such as commodities, drops as well.
By January 2016, the Bloomberg Commodity Index had lost half its value.
But since then, commodities have made a sharp rebound – just as signs of inflation are finally appearing.
Take a look:
This could be just the beginning.
I’m not the only one who thinks so.
In fact, big banks, such as Bank of America, do too.
“Inflation is on the horizon and it’s time to get out of financial assets and into real things, according to Bank of America Merrill Lynch.
After eight years of global central bank stimulus pumping up the price of stocks and bonds, it’s time to rotate “from Wall Street to Main Street”, say strategists at the US investment bank.
Michael Hartnett, BAML’s chief investment strategist, notes the relative price of “real assets” (real estate, commodities, collectibles) to financial assets (bonds and equities) is at its lowest level since 1926.”
In other words, if large financial firms and banks begin to shift from financial assets to real assets, we could be in for a major bull market cycle for commodities.
The ones that stand to make the biggest gains are the world’s most important economic metals with an immediate supply deficit.
And one metal fits this bill: Zinc.
Zinc: A Most Important Metal
According to Goldman, zinc is likely to be in a 360,000 tonne deficit this year, as an environmental crackdown on zinc mines in China limits the country from restarting production.
“…That could boost prices to $2,500 a tonne by the end of the year from $2,371 a tonne currently, analyst Yubin Fu said.”
Goldman isn’t the only who thinks so.
TD is expecting a continuation of supply/demand deficits through 2017.
Via TD Research Note:
“Over the long term, there are few, funded new mining projects in the development pipeline, suggesting that any substantial mine supply response to higher prices may be protracted.”
But that’s not all.
With the recent shutdown of some of the largest zinc mines in the world due to depletion, , forecasts show that we are in an extended, chronic shortage of supply side, with almost 15% of the world’s zinc supply coming to an end.
And there is nothing large enough coming on stream to replace that.
In fact, many analysts and mining groups believe the shortage of zinc in this cycle could last a decade.
If global economic conditions remain stable and the infrastructure policies of some of the world’s largest economic nations follow through, this shortage is going to get even worse.
That’s precisely why I’ve been told by various insider sources that some of the largest financial institutions in Canada have been scrounging for plays in this space.
But there’s a problem.
There simply aren’t many pure zinc plays around because zinc is often a by-product of mining for other metals.
So how can we leverage the rising price of zinc?
One of the Most Undervalued Pure Zinc Opportunities
In my mind, there is no better way to play the structural zinc deficit than to invest in the companies that explore or mine for zinc.
That’s because a small increase in the price of zinc can catapult a pure zinc junior to new highs very quickly.
Unfortunately, there just aren’t many around.
Many are in remote areas with no road access.
Some have existing historical infrastructure but have questionable metallurgy and small deposits.
Which is why I want to introduce you to what I believe is not only one of the best pure zinc plays around, but its extremely undervalued when compared to its peers.
This Company has one of the largest undeveloped zinc deposits in the world.
It also happens to have a district-scale prospective land claim holding with massive blue sky potential.
But don’t just take my word for it.
Here’s what Alec Meikle, metals and mining analyst at Cormark Securities Inc. said in Sept 2016 about this Company:
“I think we all agree this is the most interesting zinc explorer of the dozen or so we’ve now met.”
In fact, he recently concluded that:
“…In my mind (this Company) is the best way to play zinc, and I think I have seen most juniors. I am a buyer. “
He’s not the only one.
Tom Panoulias, Managing Director of Investment Banking at Echelon Wealth Partners said on October 28, 2016, that this Company is:
“One the most compelling stories I’ve seen recently from a valuation perspective.”
Right now, the Company trades at just C$0.36 per share ($0.32 as at September 13, 2017).
It’s priced even less than what some of the biggest zinc players in the world have paid for this Company.
That’s right, this is the only zinc junior I know that has investment from three major mining groups – two of which are some of the world’s largest zinc producers.
And best of all, the Company has NEVER financed below $0.40, so there’s no overhang from a previous financing.
More than $45 million has been spent on the project over the last 10 years, yet the Company is currently worth less than $55 million.
But here’s the real stunner:
Based on today’s zinc price, the Company has a zinc equivalent resource* equal to US$6.5 billion – with more than 70% of the resource in the indicated category!
Best of all, it currently has no institutional or analyst coverage and very little marketing has been done.
But I believe that will soon change.
An asset of this quality with investment from two of the world’s biggest zinc players and another major mining group simply won’t go unnoticed for long.
Especially if zinc continues to climb.
If you’re looking for an undervalued pure zinc play with massive blue sky potential and a world class deposit to back it up, look no further than…
Canada Zinc Metals
(TSX-V: CZX) (OTC: CZXMF)
Canada Zinc Metals (CZX) is the dominant landholder in a prolific mineral belt called the Kechika Trough.
This trough hosts several known Zinc-Lead-Silver base metals deposits, including the Company’s flagship Cardiac Creek deposit.
CZX has two 100% owned extensive tenure packages:
- Akie (hosting the Cardiac Creek deposit)
- Kechika Regional
Both of these packages hold significant blue sky potential.
Together, they represent a massive 140 kilometer strike length of exploration potential over 233 individual claims.
These claims are all contiguous in one large package covering the known extent of the Gunsteel Formation shales within the trough.
That means Canada Zinc Metals (CZX) could become a massive district play.
Not only are district plays precisely what major zinc producers want to own, but there simply aren’t many district zinc plays.
So let’s get into what makes Canada Zinc Metals so special, starting with its flagship asset: Cardiac Creek.
A Premier Undeveloped Project
The Akie is a massive 116km2 property that hosts the Company’s flagship Cardiac Creek deposit.
Earlier this year, CZX announced a revised NI 43-101 compliant resource for the Cardiac Creek Deposit:
- Indicated 19.6 million tonnes grading 8.2% zinc, 1.6% lead and 13.6 g/t silver (at a 5% zinc cut-off )
- Inferred 8.1 million tonnes grading 6.8% zinc, 1.2% lead and 11.2 g/t silver (at a 5% zinc cut-off )
This new resource establishes the Cardiac Creek deposit as one of the premier undeveloped zinc-lead-silver rich base metal projects in the world.
Unlike many of the other so-called “zinc plays,” Cardiac Creek is, in fact, a true pure zinc play.
It’s a simple calculation: there’s much more zinc than there is lead (5 to 1 ratio). This is primarily a zinc deposit.
Yet, this world-class resource could become even better.
That’s because the resource occurs as a continuous zone, remains open along strike and at depth, with the high-grade core open primarily down-dip and along strike to the northwest.
It’s 1.3 km along strike, 800 metres down dip, averages over 20 metres in width, and dips around 70 degrees to the southwest.
Grades also appear to be getting higher as they go deeper.
In Layman terms, the full extent of this deposit has yet to be explored and it is expected that the resource could likely grow with further drilling.
And that’s precisely what CZX is planning for next year.
Nothing is more irritating than a great resource that’s hard to mine or understand.
But that’s what makes Cardiac Creek such a valuable and important resource.
Take a look:
Basically, the deposit is this massive slab of mineralization that dips 70 degrees to the southwest.
Why is the 70-degree dip important?
Horizontal veins are harder to mine because you have to pull the rock out along flat drifts. But if Cardiac Creek were to become a mine, the 70-degree dipping slab of mineralization means they can let gravity do the work, making it cheaper and safer to mine.
You could say that the Cardiac Creek deposit has already reached critical mass to become a mine on its own, but starting next year, Canada Zinc Metals plans on exploiting this potential by going even deeper into the system.
If they hit as planned, we’ll see more tonnage and potentially higher grades – all of which will add to the value and economics of the project.
But the deposit is just beginning of Canada Zinc Metal’s potential.
In fact, Canada Zinc Metal’s assets could become one of the biggest zinc discoveries in the world.
The Akie property is about 11,000 hectares in size and is a series of intricate thrust faults that span from west to east.
Through mapping and geophysics, Canada Zinc Metals has identified three main panels of the same repeat stratigraphy, with the Cardiac Creek being situated in the central panel.
We already know that the central panel hosts the world-class Cardiac Creek deposit.
But Canada Zinc Metals has discovered that the western panel is not only of similar age stratigraphy as the central panel, but the host rock might also exist there.
That’s not all.
In 2012, Canada Zinc Metals identified that they might have the same host rock on the eastern panel as well.
And since they know that a SEDEX-style, zinc-lead-silver mineralization exists in these panels, its just a matter of finding out just how much mineralization exists.
What this means is Canada Zinc Metals could make not just one, but numerous new discoveries if they had continued with an aggressive drill plan.
If it weren’t for the collapse of the commodities market, these would have been further explored.
But the market is beginning to heat up now, which means it’s a whole new ball game.
If Canada Zinc Metals can hit on just one of these repeat thrusts, we could witness a brand new zinc discovery.
A discovery of this nature, especially when combined with the Cardiac Creek deposit, would blow the tops off the zinc market.
It could turn Canada Zinc Metals into one of the biggest district-style pure zinc plays in the world.
Of course, no matter the potential, it’s important that they make economic sense.
And one of the biggest and most costly hurdles in building a mine is infrastructure.
Unlike other zinc juniors, you don’t have to fly a helicopter or jump through hurdles to get to Canada Zinc Metal’s flagship asset.
In fact, you can directly drive year-round to the Cardiac Creek deposit because there are existing road infrastructure already in place.
The roads connect to the town of Mackenzie, where existing rail is already present.
This rail line goes down to Trail, British Columbia, where Teck Resources – one of the largest zinc players in the world – has one of the world’s largest fully-integrated zinc & lead smelting and refining operations, with capacity.
This is likely one of the main reasons why Teck has not only optioned some of Canada Zinc Metal’s claims, but has also put money directly into the Company via an equity stake.
That’s right, Teck is an investor, too – and they paid more than what the shares are worth now.
But that’s not all.
That particular rail line also goes west to the town of Prince Rupert.
Prince Rupert is home to a massive deep sea port, which means ore from Cardiac Creek can be shipped overseas.
Perhaps that’s why China’s State-Owned Enterprise, Tongling Nonferrous Metals Group, also bought a massive equity position in CZX.
But they’re not the only Asian group who invested in CZX.
Korea Zinc, one of the largest zinc producers in the world, has also put money into CZX.
I’ll explain more in just a bit.
What about power?
One of the largest hydropower plants, the W.A.C Bennett Dam is right there.
Cardiac Creek is not only in an area with favourable infrastructure, but its also favourable to overseas entities because of the deep sea port nearby.
There’s clearly value when you have a great deposit such as the Cardiac Creek that’s open for expansion near great infrastructure.
It gets even better when you start to add in the potential of new discoveries via the repeat thrusts at Akie I just mentioned.
But what happens when you combine that with the potential for a massive regional district play?
A District Scale Regional Prospective Land Package
In addition to Akie, Canada Zinc Metals also owns a group of 10 contiguous properties, which include some notable assets like the Pie, Yuen, Cirque East and Mt. Alcock properties.
Together, these claims cover 680km2 and extend for ~120km to the northwest from the northern boundary of the Akie property.
These properties cover the extent of the prospective Gunsteel Formation shale – the main host for the known SEDEX Zn-Pb-Ag deposits in the Kechika Trough.
SEDEX deposits are often found in a series of mineralizaed structures, like pearls on a necklace.
One look at their claims and you can see that Canada Zinc Metals has the necklace and one of the pearls of the necklace is right there at Cardiac Creek.
This is further confirmed as several of the properties hosts significant historical drill intercepts.
Just 45km northwest of Akie and 20km northwest of the Cirque deposit*, lies the 92km2 Mt. Alcock property.
(The Cirque deposit is a 50/50 joint venture between Teck and Korea Zinc and is home to a deposit with a historical resource of about 35-40 million tonnes with roughly the same grade as Cardiac Creek – another reason why both of these majors are so interested in Canada Zinc Metals.)
Back in 1989, drilling was done at Mt. Alcock, along strike of the Cirque deposit, and was highlighted by:
- 8.8m grading 9.3% Zn-Pb and 1.2oz/ton Ag; and
- 10.5m at 6.8% Zn-Pb and 0.7 oz/ton Ag.
The Main Barite zone at Mt. Alcock measures 90m-by-500m, and contains anomalous zinc-in-soil values (500-6,888 ppm) coincident with anomalous lead values (100-16,500 ppm).
Grab sampling of stratiform barite-hosted Zn-Pb sulphides in outcrop also returned up to 14.8% Zn-Pb and 0.6oz/ton Ag.
Given that the property covers two large panels of Gunsteel Formation shale and has similar grades and geology to Cardiac Creek, Mt. Alcock could become a deposit on its own with further drilling.
Next year, CZX plans to drill ~3,500m at Mt. Alcock. And that means we could be in store for yet another discovery.
Optioned By Zinc Majors
The Pie, Yuen and Cirque East properties are all under option by Teck and joint-venture partner, Korea Zinc – both of whom own an equity interest in CZX.
I won’t get into the details of these options but it clearly speaks to the quality of the regional package claims of Canada Zinc Metals.
As more drilling takes place and potential new discoveries are uncovered, it would make perfect sense for one of these majors to own the whole land package.
Big Time Investors
When the commodities market tanked a few years back, raising money as a base metals explorer was near impossible.
But Canada Zinc Metals was not only able to raise money from some of the world’s biggest zinc players, it was able to do it at a massive premium to market.
As we know, major mining groups rarely invest in a company to play the stock market. They invest because the project is something that they may potentially want to own and mine.
I already told you that Teck Resources and Korea Zinc are shareholders of Canada Zinc Metals.
But the biggest investor is China’s State-Owned Tongling Nonferrous Metals, who own around 32% of Canada Zinc Metals.
This is important because the last time Tongling invested in a foreign company outside of China, they ended up buying that Company for its undeveloped copper asset at a whopping price of $678 million.
So when Jintuo, a Chinese investment group, saw Tongling take such a big position in CZX, they wanted to be investors as well. Jintuo now owns 6.5% of CZX.
Take-over target, anyone?
At such a current low valuation, I wouldn’t be surprised to see one of these majors make a move on CZX sooner rather than later.
But just how undervalued is CZX?
Undervalued When Compared to Peers
It’s hard to compare Canada Zinc Metals with other zinc juniors because it’s not an apples to apple comparison.
Many of the other zinc plays have a lot of issues – infrastructure, small deposits, not primarily zinc, low grade. Canada Zinc Metals, for the most part, has derisked much of those issues.
But for the sake of comparing value, here goes.
According to Echelon Wealth Partners’ Base Metals Watchlist from November 4, 2016, CZX trades at an EV/lb Zn-Eq. (M and I resources) of just $1.2 c/lb, compared with select peers averaging $2.7 c/lb.
Based on TD Securities’ Development Company Comparisons (EV/ZnEq Lb) report from a September 30, 2016, CZX trades at an EV/ZnEq lb of just $0.008 compared with the average consolidated peer group of $0.026.
If CZX were to catch up to its peers based on TD’s numbers, that’s a potential return of 222%!
And when you compare CZX to one of the strongest performing zinc plays, the undervaluation is even more apparent.
Take a look:
Now this shouldn’t by any means be a direct comparison – both have two very different projects. But the comparison goes to show you just how undervalued CZX really is.
No Risk, No Reward
It would be ignorant to ignore the risks in any exploration play – even one as advanced as Canada Zinc Metals.
The price of zinc is the obvious risk, but if you believe in its fundamentals, this shouldn’t be an issue.
So the first risk for CZX is the need for additional metallurgical testing. But thus far, initial results suggest a clean concentrate (no deleterious elements) with acceptable zinc recoveries.
And here, management has told me that they plan on doing more in the coming year.
With that additional metallurgical testing, CZX can then move forward with a Preliminary Economic Assessment (PEA) so that we can better understand the economics of the project.
Based on the grades and style of mineralization, none of the above should pose any serious risks, but they need to be addressed.
The further CZX moves next year with eliminating those risks, the higher the chance it becomes an immediate takeover target – especially if the current zinc deficit continues as expected.
Lastly, CZX has a current cash balance of over $5 million. That’s a lot of money for a junior, but CZX isn’t just any junior.
If CZX wants to keep a healthy balance sheet, make new discoveries, and remove the risks I just mentioned, it’s going to have to raise money.
Luckily, management has been more than capable of this in the past.
In fact, not only has the Company never financed below $0.40, its been able to finance the Company at a 100% premium to market with two of the world’s largest zinc players just a few years ago.
I suspect a future financing will take place, but I don’t believe management will do it below $0.40 – they never have before.
If that is the case, investors participating at current levels will likely be protected from paying more than the next round of financiers.
Lastly, its important to note that if the zinc market collapses, for whatever reason – unlikely given the supply deficit – CZX doesn’t have to spend another dime until 2025 to maintain the entire land package – it’s already spent all the money required to do so.
I know this has been a lot to take in.
However, I want you to be fully aware of the potential that Canada Zinc Metals provides and the amount of research I have done uncovering this opportunity.
This isn’t just another junior or short-term trade – this has the potential to become something massive.
Canada Zinc Metals’ Cardiac Creek deposit is a tremendous flagship asset with a Zn/Eq resource of nearly 30 million metric tonnes – with 71% of the resource in the indicated category.
The deposit is fully permitted for surface and advanced underground exploration, and all of the claims are in good standing without spending another dime until 2025.
Then they also have the upside of nearly 70,000 hectares of mineral claims in the Kechika Trough area, while owning 100% of all the assets.
The Company has significant investment from some of the world’s biggest mining companies.
I don’t know of any junior – let alone one in the zinc space – that has three major mining groups as shareholders.
And lastly, upside also exists in that there isn’t one analyst covering the story…yet.
Last year, I introduced a gold producer at $0.82/share, shortly before it received coverage from analysts.
Over the next year, analysts began to cover the story and the stock climbed to over $5/share.
This was for a company in a sector where the underlying commodity climbed just 24% from its lows.
Zinc is now up 73% from its lows.
What could that mean for Canada Zinc Metals if analysts begin to cover the story?
The growing supply deficit for zinc is real and institutions are still looking for zinc assets to invest in.
And I believe Canada Zinc Metals represents one of the most undervalued pure zinc explorers in the market today.
I am a buyer.
*September 14, 2017 Update:
With the “summer doldrums” soon to be ending and given how undervalued the Company currently is against its peers, management is preparing to aggressively begin marketing – with upcoming investor meetings and presentations in Toronto in mid-September, Asia (Hong Kong and Japan) in mid-October, and London and Zurich in November. The marketing will coincide with the receipt of drill assay results from this summer’s recently completed 2 drill exploration program on the Company’s flagship Akie property. The first set of assay results is anticipated to be out before the end of the week and then regularly over the next 6 to 8 weeks. All indications are that the drilling program was very successful and management anticipates high-grade significant intervals (based on visuals of the core – and as described in the Company’s last few news releases).
At today‘s metal prices – Canada Zinc Metals has almost Cdn$10 Billion of metal in the ground (“in situ value”).
With the price of zinc remaining at near decade highs of $1.40 – and a dearth of high quality zinc companies, with over $5 million in the treasury, 3 major mining companies as shareholders (Teck Resources, Korea Zinc and Tongling Nonferrous Metals) and a market capitalization of only $50 million, there is potential for strong gains over the next year should management be able to play catch up with its marketing efforts.
Canada Zinc Metals Corp
Canadian Trading Symbol: (TSX-V: CZX)
US Trading Symbol: (OTC: CZXMF)
Seek the truth,
The Equedia Letter
We are biased towards Canada Zinc Metals Corp. because the Company is an advertiser on www.equedia.com. We currently own shares in Canada Zinc Metals Corp. You can do the math. Our reputation is built upon the companies we feature. That is why we invest in every company we feature in our Equedia Special Report Editions. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence and consult your own professional advisers before investing in Canada Zinc Metals Corp. or trading in Canada Zinc Metals Corp. securities. Equedia.com and Equedia Network Corporation are not registered as investment advisers, broker-dealers or other securities professionals with any financial or securities regulatory authority. Remember, past performance is not indicative of future performance. This article also contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the forward looking statements made in this article. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. Canada Zinc Metals Corp. and its management have no control over our editorial content and any opinions expressed in this article are our own. We’re not obligated to write a report on any of our advertisers and we’re not obligated to talk about them just because they advertise with us. For a complete disclosure of the compensation received by us from Canada Zinc Metals Corp., please review our Terms of Service and full disclaimer at www.equedia.com/terms-of-use/.