This article was first published by Seeking Alpha on May 18, 2015.
By Sarfaraz A. Khan
Amid the downturn in the commodities, zinc is a rare bright spot. The prices of the base metal, which is used to protect steel from corrosion, has been rising on the back of speculation as well as improving fundamentals. This was highlighted in my previous article, in which I also mentioned the names of a few zinc miners that should be on investor's radar. Seeking Alpha commentator TMFDeej pointed out that a small-cap company Horsehead Holding Corp. (NASDAQ:ZINC) should be on that list as well, and he's right.
Not a zinc miner
Horsehead is the biggest producer of zinc and the largest manufacturer of related products, such as zinc powder, in the United States. But unlike a majority of its peers such as Hudbay Minerals (NYSE:HBM), Teck Resources (NYSE:TCK) and Nyrstar (OTCPK:NYRSY), Horsehead does not actually mine zinc. Rather, Horsehead produces the base metal from recycled sources, and also gets paid for this service. Horsehead takes a waste product called electric-arc furnace (EAF) dust from steel producers for a certain fee. The company then processes the EAF dust for recovery of zinc.
The availability of EAF dust, therefore, is an integral part of the company's business model. Fortunately, Horsehead faces little competition for EAF dust management contracts. In fact, Mexico - based Zinc Nacional's subsidiary Steel Dust Recycling is the only major rival.
Horsehead has a great business model in which it actually gets paid for the raw material. Although that has given the company a cost advantage, with breakeven … read full article at Seeking Alpha.