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.