Glencore Deal will Strengthen Trevali Mining’s Zinc Leverage

The transaction will double Trevali's current zinc production and position the company as a top 10 global zinc producer.

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After reaching a $400-million deal to purchase zinc assets from mining giant Glencore (LSE:GLEN), Trevali Mining (TSX:TV) is set to become the world’s only publicly traded, pure-play intermediate global zinc company.

The company currently operates the Santander mine in Peru and the Caribou mine in New Brunswick, and said in a Monday (March 13) press release that the new assets will double its current zinc production and position it as a top 10 global zinc producer.

The purchase includes an 80-percent interest in the Rosh Pinah mine in Namibia, which has been in production since 1969 and is expected to produce for more than 14 more years, as well as a 90-percent interest in the Perkoa mine in Burkina Faso. It has been operating since 2013 and is one of the higher-grade zinc mines operating globally.

“The acquisition of Rosh Pinah and Perkoa is a historic event and unique opportunity for Trevali shareholders, and sets the stage for a multi-asset, low-cost global zinc producer,” Trevali President and CEO Mark Cruise said.

Other assets included in the deal are a 39-percent interest in the Gergarub project in Namibia, which produces lead and silver in addition to zinc, and an option to acquire a 100-percent interest in the Heath Steele property in Canada, a past-producing mine.

Steve Stakiw, Trevali’s vice president of investor relations, said the company reviewed over 500 zinc projects globally before making the deal with Glencore, and found that there were very few attractive production-ready projects available.

“Our growth mandate was to look at acquiring current operating mines or advanced development-stage projects that could give zinc production within a two- to three-year window – to capture and benefit from this current strong zinc cycle,” he said.

Following the completion of the transaction, Trevali’s annual production will stand at 230,000 tonnes of contained zinc. The company will have an operational presence in North America, South America and Africa.

“[Investor] feedback has been overwhelming positive given the highly accretive nature of the transaction and the appetite for a global primary zinc producer,” Stakiw said, noting that the transaction could also make Trevali more appealing to institutional investors.

“Many of the larger institutional investors globally have verbally expressed their desire for a true mid-cap-sized zinc producer that offers strong leverage, or torque, to zinc prices. Post-transaction, the new Trevali will see even stronger zinc leverage with over 80 percent of pro-forma revenue derived from primary zinc production,” he noted.

Trevali is also pleased to have strengthened its relationship with Glencore, which will have a 25-percent stake in the company once the acquisition is complete. “We see good potential for additional opportunities going forward,” Stakiw said.

The transaction is expected to close on or before July 31. Trevali’s share price was sitting at $1.23 at close of day Tuesday, up 8.85 percent year-to-date.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Trevali Mining is a client of the Investing News Network. This article is not paid-for content.

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