Garimpeiro made a call three months ago that the galvanizing metal zinc was looking sexy because the energy crisis in Europe was pressuring output from the region’s big fleet of smelters.

Zinc was trading at $1.87/lb at the time and now it is back at $US1.67/lb, a fall of almost 11%. The fall is due to the same inflation/recession concerns that has hit all base metal prices hard, and equity markets.

But Garimpeiro stands by that sexy call three months ago. In fact, zinc is sexier than ever at the moment because Europe’s ongoing energy crisis has driven LME stockpiles to the lowest level in more than 25 years.

That has been reflected in the spot price being at a premium to the three-month price – a situation traders call backwardation and a sure sign that a panic situation is developing around buyers being able to get their hands on the metal.

As mentioned three months ago, there was a clear disconnect between zinc’s strong price performance in recent years and the performance of the ASX-listed zinc companies.

Now that the zinc companies are sporting smashed equity values because of the broad market sell-off, the disconnect argument remains valid.

While zinc is down from its March levels, it remains at elevated levels (producers are happy with a $US1.10/lb price in the long run). What’s more, the developing supply squeeze in the metal should at least put a floor under the price.

That sort of thinking was behind the pop in the zinc stocks on Friday in response to the news that the LME was closely monitoring the stockpile situation.

New Century (ASX:NCZ), mentioned here three months ago when it was $1.90, popped 24c or 16% to $1.74.

Billy Beament’s Develop (ASX:DVP) put on 8c or 4% to $2.12. It was $3.28 when mentioned here three months ago.

Its zinc-inspired recovery from lower levels, caused mainly by the broader market sell-off, is welcome stuff. And it stands to benefit should the developing squeeze in zinc in fact fuel a price spike.

But Garimpeiro has gone looking for greater leverage to zinc’s upside from the supply squeeze amongst the exploration juniors. One was mentioned three months ago (Alicanto), and there’s a revisit of another (Rumble).

ALICANTO (ASX:AQI): Trading at 5.6c compared with 10.5c three months ago. Ouch! But hey, the story at its Sala zinc-silver project in Sweden has got better since. In May, drilling returned a spectacular 4.7m intersection grading 24.2% zinc, 875g/t silver and 3.7% lead.

Sala has a 500-year history and provided most of the silver for the kings of Europe. Zinc grading around 12% was pretty much ignored but it won’t be in the modern era. A maiden resource estimate is not far off.

Alicanto MD Peter George is a friendly bloke but admitted a couple of weeks ago at the Resources Rising Stars conference on the Gold Coast that he was annoyed by a share price graph he put up on the big screen (it was 7c at the time for a $27m market cap).

“This graph annoys me. But at the same time it gets me really excited as I see a massive opportunity for investors to jump in at extremely low prices. Our market capitalisation of $27m (it is now $22m) is quite ridiculous in my opinion.’’

RUMBLE (ASX:RTR): Trading at 29.5c, down from 42c three months ago. But Friday’s close did represent a 4.5c or 18% pop on the zinc supply squeeze thematic.

It has been mentioned here many times in the past on the basis that its Earaheedy project north of Wiluna in WA is an emerging world class base metals system. The identification of higher grade “feeder’’ zones to the laterally extensive mineralisation has enhanced its world-class credentials.

Rumble’s stock exchange compliant “exploration target’’ of 100-120 million tonnes grading 3.5-4.5% combined zinc-lead is very much a “first stage’’ target.

And to juice things up, Rumble is free-carried in the gold-copper hunt in WA’s Paterson province in a joint venture with AIC Mines (A1M). A drilling program has just started at the Lamil project, about 30km west of Newcrest’s (NCM) Telfer gold-copper mine.


Alicanto, Rumble Resources share price today