BALTIMORE, MD -- Zinc prices have slumped nearly 10% in just two weeks. And the 12-month rally has seemingly stalled as prices have remained relatively flat since April. But the like I said on Friday, the fundamentals that have been driving the long-term zinc bull haven't changed one bit.
Short-term zinc technicals are certainly nothing to write home about. Over the past 60 days, the galvanizing metal has continued to make slightly lower lows indicating a minor downtrend.
Nevertheless, my long-term zinc sentiment is still very bullish.
Fact is, the story here hasn't changed.
Diminishing warehouse stocks and increasing global demand will continue to power an ongoing, long-term zinc rally.
Here's the deal...
Warehouse zinc stocks at the London Metal Exchange (LME) have dropped 27.6% in just 60 days. At the same time, zinc prices have also dropped 6.3% over the same period. Take a look...
Further out, the story is the same.
LME warehouse stocks have plummeted nearly 50% in six months yet prices have remained relatively flat since April.
Quite frankly, I think zinc could very well be the most undervalued metal on the market right now. That means the metal's position today offers investors a great low-risk opportunity to take advantage of the continuing commodity bull market.
And what better way to leverage the situation with a tiny $18 million company like Selkirk Metals (TSX-V: SLK) that has a historical resource of 600 Million pounds of zinc in just one of their seven properties!
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As we've talked about before, Selkirk's flagship project is without a doubt the Ruddock Creek Property.
Located in South Central British Columbia, just 100 km north of Revelstoke, the company has an option to earn up to a 70% interest in Ruddock Creek. And there's little doubt that they won't want to take the option.
Why's that?
Well, Ruddock Creek's E-Zone has already been explored by two of the biggest names on the base metal industry, Falconbridge and Teck Cominco. And the results from those explorations were quite impressive.
Get this...
An inferred resource was calculated for the E-Zone that resulted in a resource of approximately 4 million tons with an average grading of 7.5% zinc and 2.5% lead.
That's about 600 Million pounds of zinc and 200 million pounds of lead in one property!
So Ruddock Creek is certainly not an early stage project.
Unfortunately, however, this resource was reported prior to (and therefore not compliant with) implementation of National Instrument 43-101, a rule developed by the Canadian Securities Administrators that governs how issuers disclose scientific and technical information about their mineral projects to the public.
Nonetheless, the lack of a NI43-101 certainly doesn't mean that the resource isn't there.
In 2004, of a total of 1838.7 meters was drilled in 11 holes to further define the E-Zone. The program was successful in that all 11 holes intersected significant massive sulphide zinc/lead mineralization confirming the continuity and the dimensions of the E-Zone to the west up to the E-fault.
In August of 2005, Selkirk conducted another deep diamond drill program. The program's best hole was RD-05-113, which found 14.05 meters grading 15.79% zinc and 3.33% lead.
Most recently, Selkirk announced four additional diamond drill results from an ongoing drill program at Ruddock Creek.
Three of the holes encountered narrow zones of massive sulphide mineralization and they have served to establish the eastern limits of the E-Zone mineralization. But the big story here is the fourth hole.
RD-06-123 assayed a mineralization grading 16.35% zinc and 3.65% lead over 10.25 meters. Not too shabby. Results released from the company can be seen below...
(Click on the image to enlarge it)
Selkirk said that diamond drilling will continue to expand the E-Zone until weather conditions halt operations.
After that, the company says they will move to the Oliver Creek Target area which is at a lower elevation and can be worked for a much longer period. (To learn more about Ruddock Creek, check out Selkirk's presentation on the property by clicking here.)
There's little doubt in my mind that Ruddock Creek's E-Zone doesn't contain a decent sized deposit.
Just about a month and a half ago, when zinc was trading for about $1.55/pound, Selkirk's stock traded well over a dollar. Yet today, with zinc trading just a few cents lower at $1.49/pound, Selkirk's stock sits at $0.55.
So I don't think zinc prices will have to rebound very much to move this stock higher. If you haven't already established a position in Selkirk Metals (TSX-V: SLK), I strongly urge you to do it now while shares are ridiculously cheap.
- Luke Burgess
