Mining Co. “Finds” $3 Billion in the Trash

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On August 24, 2006, I joined Dr. Steve Sjuggerud on a trip to Tennessee. He asked me to come with him to visit a zinc smelter, of all things.

For those of you who don’t know Dr. Steve, he was one of the most successful newsletter writers and investors ever. He retired from Stansberry Research to surf, invest, and live the good life.

He wanted to go to Clarkesville Tennessee because the company, Zinifex, was an anomaly. His research showed that Zinifex would earn $2.5 billion in profit that year. But its market value was just over $5 billion.

In other words, it traded for about two times earnings. That’s super cheap and an oversight by the market. That’s exactly the kind of thing that Dr. Steve loved to find.

I went along and discovered why the Clarksville refinery was so profitable. It was re-mining old tailings ponds… for germanium.

Tailings ponds are the trash heaps of mines and smelters. It’s where they put the material that isn’t the metals they want. This smelter complex began life back in the late 1970’s. It’s the only primary zinc smelter in the U.S. The ore that carries the zinc also carries associated metals like cadmium, thallium, indium, and germanium.

At that time (2006) the price of Germanium rocketed from around $360 per kg to $660 per kg. The smelter’s waste ponds were full of metal. The company realized it could pad the zinc profits with germanium…

Today, the price of Germanium is over $7,000 per kg. That’s 960% gain since I was there last.

Fast forward almost 20 years and the Clarksville smelter has new owners. Korea Zinc Co. bought the smelter in December and has big plans…that include those same tailings.

Korea Zinc says that it has 600,000 metric tons of material to process now worth more than $3 billion. The ponds contain zinc, copper, lead, silver, and Germanium. The company believes it has about six or seven years’ worth of material stored in the old tailings ponds.

Korea Zinc plans to invest $7.4 billion to convert the old smelter into a critical minerals complex. And this story is part of the bigger U.S. critical metals independence theme going on today. According to the company’s press release:

• Korea Zinc and the U.S. Government, through the Department of War and the Department of Commerce, have concluded an initial, conditional commitment – including U.S. federal and private investment – that will support a domestic critical minerals project with an expected $6.6 billion of capital expenditures. The agreement will support Korea Zinc’s plans to expand operations, including the building of a 650,000 m² smelting facility in Tennessee.
• The Tennessee project aims to create an integrated smelter producing both base metals as well as critical and strategic minerals, with phased commercial operations targeted for 2029.
• 11 out of 13 nonferrous metal products that the U.S. Smelter will produce are designated as “critical minerals” by the U.S. Government. This conditional commitment strengthens the critical minerals supply chain for the U.S., South Korea, and other allied countries, ensuring a consistent, steady supply of key elements and minerals.

This is a huge development for the domestic critical metals industry because there are few smelters in the U.S. The reason for that is smelters are considered “dirty”. Even though, back in 2006, the smelter complex was the least industrial looking campus I’d seen.

However, the result of decades of anti-mining rhetoric left byzantine hurdles to build new smelters. The permitting alone would take years to navigate. Not now. Not anymore. The company says it can get to production in just two years…

I may have to hop another plane to Nashville and revisit the project.

Korea Zinc shares have more than doubled in the past 6 months. Unfortunately, the company doesn’t trade here in the U.S.

But this re-mining story is one that will play out all over the world. We’ll be searching for actionable re-mining plays and will share anything interesting we find.

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