SYDNEY A global hunt is on to find new deposits of zinc as China buys more of the metal to rust-proof new cars and coat steel used to build bridges and skyscrapers.
Multinationals such as Swiss-based Glencore Xstrata (GLEN.L), Belgium's Nyrstar (NYR.BR) and China's MMG (1208.HK) are funding new mines from Africa to the Yukon on expectations that an oversupply of zinc will turn into a deficit.
Along with mining veterans such as former Newmont (NEM.N) head Pierre Lassonde, who holds a stake in Canada's Foran Mining (FOM.V), they are also investing just as ageing mines accounting for a tenth of world consumption start to shut.
Even old workings are being rehabilitated, including silver-zinc mines built by Hunt brothers Nelson and William in Canada in the 1970s. The Texan duo famously hoarded silver to corner the market and control global prices, only to go bust when silver prices crashed in 1980.
"After peddling the zinc story for so long I'm hopeful we'll soon have our day in the sun," said Jonathan Downes, who is managing director of Ironbark Zinc Ltd (IBG.AX).
The Australian prospector is digging a zinc mine in Greenland with help from international producers.
London Metal Exchange zinc prices have tumbled as much as 15 percent this year, one of the worst performers among base metals, but the outlook is turning, thanks in part to a growing appetite for the metal among China's steel producers.
Within five years prices could almost double if the pace of Chinese demand growth continues.
Already the world's largest consumer, China still needs more zinc to lift rust-proofing of its steel closer to international levels. Typically, steel manufactured in China contains only a quarter of the zinc found in western steel.
Chinese car makers need to buy more steel coated with zinc, known as galvanizing, to make their vehicles more rust resistant.
The issue of rust problems with Chinese-made cars was highlighted in a consumer program by state broadcaster CCTV.
The program drove home the idea that if Chinese automakers want to effectively compete against the global manufacturers they will have to use more zinc, said an auto-industry insider.
Headway is being made. Growth in China's automotive sector, the world's biggest, is already encouraging steelmakers to put more zinc in their steel.
One of the latest developments has been the expansion of a joint venture between Thyssenkrupp Steel TKAGE.DE and Anshan Iron and Steel ASIG.UL.
Under the plan announced in September, output of galvanized steel from the partnership in Liaoning Province will be boosted by incorporating two existing galvanizing lines with a combined capacity of 800,000 tons a year at Anshan's main Chinese site.
"MONSTER MINES" SHUTTING
China's refined zinc imports rose more than 10 percent in the first nine months of 2013, trade data shows.
And the pending shut down of older zinc mines will collectively eliminate 1.7 million tons of production, or 11 percent of world consumption.
MMG's 500,000-tonnes-per-year Century mine in Australia, the biggest of those set to close, runs out of ore in 2016.
Ireland's Lisheen mine, owned by Vedanta Resources (VED.L) and producing 170,000 tons a year, shuts in 2014.
Others including Anglo American (AAL.L) of South Africa's Skorpion mine and Stalprodukt's STP.WA Pomorzany-Olkusz mine in Poland are also shutting inside three years.
"You've got a lot of monster mines that are departing from the trade," said UBS commodities analyst Tom Price.
"The sorts of operations that are going to replace them are small ones, so there is a risk that there could be a shortfall of mined zinc supply," Price said.
The International Lead and Zinc Study Group forecasts a world awash with too much zinc through at least 2014, but sees the global oversupply shrinking to 120,000 tons this year and 115,000 tons in 2014 - below each of the previous four years.
That compares with a Reuters poll of analysts pointing to a 110,000 ton surplus in 2013, dropping to just 52,000 tons in 2014.
BNP Paribas analyst Stephen Briggs believes zinc is already in short supply and forecasts a 20,000 ton deficit this year and a 15,000 ton deficit next year.
The last time zinc entered a supply deficit, its value more than quadrupled. The price went from under $0.40/lb in 2003 to over $2/lb in 2006.
Wood Mackenzie predicts zinc will average more than $1.59/lb from 2016-18 versus $0.88/lb so far this year.
China produces more zinc than any other country and stands to benefit the most from any price uplift.
ZINC MINING IN GREENLAND
Ironbark's Downes will this week accompany Greenland's minister for mines to a business conference in China, where he hopes to encourage more foreign zinc mining in Greenland.
China Nonferrous has already agreed to engineer and construct Ironbark's mine and to arrange funding from banks in China. Glencore Xstrata meanwhile is providing Ironbark with a $50 million convertible note.
China Nonferrous has also agreed to buy a 50 percent stake in a joint venture to develop the Ozernoye deposit in Russia's Republic of Buryatia - one of the world's largest by zinc reserves - and build an ore mining and processing plant.
South African Mike Oppenheimer favors Burkina Faso. Oppenheimer is acting chief executive of Blackthorn Resources BTR.AX, which this month made its first shipment via neighboring Ivory Coast. It is Burkina Faso's first zinc mine.
Glencore Xstrata owns 62.7 percent of the project and has agreed to buy all the zinc the company can mine.
In Canada's Northwest Territories, Canadian Zinc (CZN.TO) wants to rehabilitate ground worked by the Hunt brothers. Costing $185 million, the plan is to produce about 76 million pounds of zinc annually, along with silver and lead.
(In paragraph 20 corrects to show Pomorzany-Olkusz mine is owned by Stalprodukt, not Rathdowney Resources. In paragraph 33, corrects to show Glencore Xstrata owns 62.7 percent of Blackthorn's mine project, not 62.2 percent of Blackthorn.)
(Additional reporting by Norihiko Shirouzu in BEIJING; Editing by Ed Davies and Stephen Coates)