321 Gold founder Bob Moriarty turns his attention to Canada Zinc (V:CZX), a company that has a giant zinc deposit in northern British Columbia.
In 2013 I wrote about an interesting company named Canada Zinc (CZX-V) with a giant zinc deposit in Northern British Columbia that had $6 billion worth of silver, lead and zinc in the ground. The company had an absurd market cap of $31 million while they had $15 million in cash. They were $0.22 a share. Yawn, yawn.
I covered them again a year later as they climbed to $0.38 a share. Nothing much had changed in a year but Teck and Korea Zinc did option three of Canada Zinc's projects. The big zinc companies have been saying for years that there was a big shortage of zinc production right around the corner. Yawn, yawn.
So why should you consider buying a stock that has done little for three years? Actually that's exactly why you should buy them.
The company slowed down, preserved capital and slowly moved the premier project, the Akie property, forward. The stock did collapse with the rest of the resource world as commodities in general cratered in early 2016 at 5,000-year lows. Starting in April of 2016 the company began to climb out of the hole at $0.095 to a high of $0.48 in November as the market began to take the actual shortage of zinc production seriously.
Canada Zinc is as close to a zero brainer as you will find in the resource world. They tout an 8.1 million ton inferred resource of $225.48 rock. That's USD not the Canadian pesos.
If you multiply the tons in the ground by value of the rock and adjust it for the Canadian currency that's $2.4 billion dollars worth of rock in the ground for a company with a $55 million market cap. It works out to $14.94 in metal per share of Canada Zinc. But it gets worse.
The company has 19.6 tons of $275.39 rock USD in the indicated category. That has a gross metal value in the ground of $7.01 billion and $44.16 CAD per share of CZX.
Now granted, nobody can mine every ounce of any resource in any deposit. There are always constraints. But having almost $60 gross metal value for every share and only pricing it at $0.36 is pretty close to absurd. A one percent valuation would give you a $0.60 stock. And given that the company is working hard to increase their visibility, I think shareholders will see that soon enough.
Canada Zinc is mobilizing for an aggressive 2017 exploration program at the Cardiac Creek deposit that is part of the Akie project. The deposit has seen 139 drill holes totaling 59,260 meters but only 104 of those holes were used in the existing 43-101. There are another 35 holes consisting of about 12,500 meters of core that will be factored in the next 43-101. This year's program consists of two rigs doing a total of 7,500 meters of drilling. The program will begin in early June and continue through September. Results will be released on a regular basis.
While focused on zinc in Northern BC, Canada Zinc is hardly a one trick pony. In September of 2013 they optioned properties nearby to Akie they call the Pie, Yuen and Cirque East projects. Teck and Korea Zinc agreed to spend $8.5 million in combined exploration to acquire a 70% interest in the three deposits. So far the partnership has spent about $3.2 million. They have until the end of December 2019 to complete their earn-in to get the 70%.
In the past year zinc has been a star performer, moving over 100% higher from just over $0.60 in December of 2015 to $1.33 two weeks ago. While interest in zinc has increased, the share price of CZX has yet to even match their peer group. According to a study done by TD Securities, the average zinc stock gets $0.026 per pound of zinc equivalent in the ground while Canada zinc gets less than 1/3 of that at $0.008 per pound of zinc equivalent.
With $7 million in cash in the bank and three major zinc-mining groups as shareholders, Canada Zinc looks very attractive. Their story is compelling. I think they are an easy triple and higher as the market gets it.
Canada Zinc is an advertiser and I have bought shares in the open market. Their presentation is excellent and I highly suggest anyone interested in zinc to download it and read. Do your own due diligence.
Canada Zinc Metals
CZX-V $0.36 (Feb 24, 2017)
CZXMF-OTCBB 155.2 million shares
Canada Zinc website
Disclosure:
1) Bob Moriarty: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Canada Zinc. Canada Zinc is an advertiser on 321 Gold. I determined which companies would be included in this article based on my research and understanding of the sector.
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