SYDNEY, June 1 (Reuters) - Australian penny stock Rox Resources RXL.AX , backed by mining major Teck Resources of Canada TCKb.TO , said it has discovered one of the world's largest zinc deposits in northern Australia, although any decision to mine is years away.
The discovery comes seven months after Chinese conglomerate MMG Ltd 1208.HK shut the nearby exhausted Century zinc mine, once the world's third-biggest, leaving a hole in global supplies of the metal chiefly used to galvanise steel.
The lode, named Teena, holds 14.2 billion pounds of zinc, as well as 2.1 billion pounds of lead, making it around the same size as the Century deposit. Teena is located eight kms (5 miles) from the Glencore GLEN.L -owned McArthur River zinc mine.
Rox's stock more than doubled on Wednesday on news of the find to just under three Australian cents a share, giving it a market value of A$34.2 million ($24.8 million), although it would likely be a decade before a mine is built, if at all.
"We've established that a significant resource is there and now we need to conduct more drilling and metallurgical work, which will not happen overnight," Rox managing director Ian Mulholland said.
"Realistically, we are still anywhere between five and 10 years away from production," Mulholland said.
Shares in Metalicity Ltd MCT.AX , another Australian penny stock sitting on a potentially big zinc mine, known as Admiral Bay, have more than tripled so far this year to 7.5 Australian cents.
"Investors in small miners are hungry to allocate cash even in companies like Rox that have a long way to go," said Keith Goode, an analyst for Eagle Mining Research. "Teena is not a mine yet and will require huge amounts of capital and development work without any guarantees."
The latest find is 49 percent owned by Rox and 51 percent by Teck, which also runs the world's second-biggest operating zinc mine, Red Dog in Canada.
Teck holds an option to increase its stake to 70 percent by spending a further A$1.15 million on exploration having already spent A$13.85 million.
The discovery comes amid some forecasts the zinc market will continue to track higher, with prices already up 20 percent this year to nearly $1,900 a tonne <CMZN3) on concerns major supply sources were drying up. ($1 = 1.3785 Australian dollars)