Trevali Mining

The Primary Zinc Producer

This profile is part of a paid investor education campaign.*

Overview

Trevali Mining Corporation (TSX:TV) is a zinc-focused base metal producer with four mines across the American and African continents: the Perkoa mine in Burkina Faso, the Rosh Pinah mine in Namibia, the Caribou mine in Canada, and the Santander mine in Peru. The company is committed to creating value for their shareholders by creating a strong financial position in three ways: optimizing their existing operations, pursuing organic growth opportunities and by participating in accretive investment opportunities.

As part of their commitment to creating value, Trevali remains focused on exploration to extend the life of all four mines. Trevali has budgeted $8 million to go towards exploration with the goal of releasing updated resource and reserve estimates at all projects. The exploration expenditures will include over 36,000 metres of drilling, which will be primarily focused on the Perkoa and Santander mineral systems.

Trevali recently released its Q1-2019 financial and operating results, posting strong performance. Highlights from Q1-2019 include a total zinc production of 101 million payable pounds, which is in line with the 2019 annual forecast guidance of 361 to 401 million pounds.

Trevali is led by a highly-experienced management team that has been substantially added to over the past year to help optimize operations and efficiencies within the company.  Supporting the team is significant shareholder Glencore PLC (LSE:GLEN), which owns 25.8 percent of the company’s shares and provides technical, supply chain and logistical support to Trevali.

Company Highlights

  • A global top-10 zinc producer with four operating zinc mines in mining-friendly jurisdictions of Burkina Faso, Canada, Namibia and Peru.
  • Industry-leading zinc leverage with approx. 85 percent of revenue derived from the production of zinc.
  • Production has increased annually for five straight years.
  • 2018 production was 407 million payable pounds of zinc, 41.7 million payable pounds of lead and 1.2 million ounces of silver.
  • Expected 2019 production between 361 million to 401 million pounds of zinc, 44 million to 49 million pounds of lead and 1.3 million to 1.4 million ounces of silver.
  • Glencore strategically holds 25.8 percent of the company’s shares and provides strong technical and logistical support.
  • Led by experienced management and technical teams with a track record of success.

Strong Financial Position

Trevali has strong financial positioning due to a commitment to optimizing their existing operations, pursuing organic growth opportunities and participating in accretive investment opportunities.

As to optimizing their operations, Trevali has been implementing best practices and improving efficiencies at each mine. The company remains focused on of extending mine life at its operations and continues exploration initiatives with this goal in mind. Trevali is also looking into opportunities to improve cash flow stability and predictability by improving concentrate transportation logistics and mine-to-mill planning and oversight.

Finally, Trevali has entered into an amended and restated credit agreement for a US$275 million revolving credit facility. The facility has reduced interest payments and increases the company’s flexibility financially. The proceeds from the facility will be used for working capital and general corporate purposes.

The Zinc Market

Zinc is used in a variety of applications and new initiatives are expanding the metal’s applications. Currently, approximately 60 percent of zinc is used in anti-corrosion and galvanizing. Most of the remaining 40 percent is utilized in the production of brass and bronze, die-casting and in oxides and chemicals. However, there is an increasing demand for the metal due to its use in fertilizers, renewable power storage and fuel cells.

In total, 14 million tonnes of zinc are produced and consumed annually and the demand for the metal is forecasted to increase by one to two percent per year through 2022, which amounts up to approximately 280,000 tonnes per year. The US-China trade war, concerns about global growth and rising interest rates have led to a disconnect between the current pricing environment and supply. However, analysts remain positive and expect zinc prices to rise to US$1.28 per pound in the long-term. More conservative forecasts expect a long-term price of US$1.14 per pound.

 

Summary of Operations

Perkoa Mine – Burkina Faso

The Perkoa mine is a 2,000-tonne-per-day milling operation located approximately 120 kilometers west of the capital city of Ouagadougou, Burkina Faso. The mine has been in commercial operation since 2013 and produces a zinc concentrate.

Perkoa Q1-2019 Production and 2019 Guidance

Q1-2019 preliminary production (100 percent basis):

2019 production guidance (100 percent basis):

  • 151 million to 168 million payable pounds of zinc.
  • Site operating costs US$106 to US$117 per tonne milled or US$0.84 to US$0.92 per pound zinc (net of by-products).

Ongoing exploration

Trevali is working towards expanding the life of the Perkoa mine. To date, the company has extended the Hanging Wall lens by approximately 300 meters below the current mine plan.

In 2019, Trevali is continuing its regional exploration drill program with the intent of expanding and discovering new resources near the existing mine infrastructure to extend the mine’s life.

Rosh Pinah Mine – Namibia

The Rosh Pinah underground zinc-lead mine is a 2,000-tonne-per-day milling operation located in southwestern Namibia. The mine is 90 percent owned by Trevali and the remaining 10 percent is owned by the Namibian Broad-Based Empowerment Groupings and an Employee Empowerment Participation Scheme (EEPS).

The mine is located approximately 800 kilometers south of Windhoek and 20 kilometers north of the Orange River, at the edge of the Namib Desert. The mine has been in operation since 1969 and currently produces zinc and lead sulphide concentrates that contain trace amounts of copper, silver and gold. The concentrate is transported by road to Luderitz before being shipped to end users across the globe.

Rosh Pinah Q1-2019 Production and 2019 Guidance

Q1-2019 preliminary production (100 percent basis):

2019 production guidance:

  • 80 million to 89 million payable pounds of zinc.
  • 10 million to 11 million payable pounds of lead.
  • 145,000 to 161,000 payable ounces of silver.
  • Site operating costs US$56 to US$63 per tonne milled or US$0.70 to US$0.77 per pound zinc (net of by-products).

Ongoing exploration

The deposit at Rosh Pinah remains open for significant expansion, especially at the Western Orefield zone. To date, Trevali has completed a 6,000-meter surface drill program on the property.

Caribou Mine – New Brunswick, Canada

Trevali’s wholly-owned underground zinc-copper-lead-silver-gold Caribou mine is located 50 kilometers west of Bathurst, New Brunswick, Canada. The operations contain a fully-permitted 3,000-tonne-per-day mill, a sulphide flotation recovery plant, metallurgical and geochemical laboratories and a tailings management facility, among other necessary infrastructure.

The Caribou mine has been in continuous production since the company restarted underground mining operations in 2015 and commercial production was announced in July 2016.

Caribou Q1-2019 Production and 2019 Guidance 

Q1-2019 preliminary production:

2019 production guidance:

  • 71 million to 79 million payable pounds of zinc.
  • 24 million to 27 million payable pounds of lead.
  • 641,000 to 713,000 payable ounces of silver.
  • Site operating costs US$72 to US$79 per tonne milled or US$0.95 to US$1.02 per pound zinc (net of by-products).

Ongoing exploration

The deposit at the Caribou mine remains open. In 2017, Trevali added approximately 4 million tonnes to the inferred category on the Caribou deposit. The following year, the company completed approximately 12,000 meters of follow-up drilling on the Hinge, East Limb and CX zones, which all remain open for extension.

Santander Mine – Peru

The Santander mine is located approximately 215 kilometers northeast of Lima, Peru and is comprised of an underground mine, a 2,000-tonne-per-day processing mill and a sulphide flotation mill. The historic Santander Pipe was mined between 1957 and 1991.

Santander Q1-2019 Production and 2019 Guidance

Q1-2019 preliminary production:

2019 production guidance:

  • 59 million to 65 million payable pounds of zinc.
  • 10 million to 11 million payable pounds of lead.
  • 536,000 to 595,000 payable ounces of silver.
  • Site operating costs US$45 to US$49 per tonne milled or US$0.71 to US$0.78 per pound zinc (net of by-products).

Ongoing exploration

During the first quarter of 2019, four electro-magnetic (“EM”) surveys were completed at Santander while diamond drilling targeted the Pipe and Blato prospects. The Blato prospect is located 700 metres north of the Magistral North mine, additional drilling and EM surveys are planned to further explore this prospect during the remainder of 2019. Drilling is also expected to resume at the Pipe deposit pending results of a preliminary technical review and approval of surface permits.

Management

Ricus Grimbeek – President and CEO

Ricus Grimbeek is an experienced mining executive with nearly 30 years of progressive experience in the resource sector, and has a proven track record working at all levels of the business. Before joining Trevali, he was the Chief Operating Officer of Vale Base Metals North Atlantic, where he held responsibility for the overall operating and financial performance of 16 mining and refining operations in four countries. He was also previously the President and COO of South32 Australia, overseeing 6 operations in Australia and Colombia.  He has also served as Asset President of Aluminium Australia, Head of Group HSEC for BHP Billiton, President and COO of BHP Billiton’s Ekati Diamond Mine, Executive Vice President Mining and Concentrating for Lonmin Platinum. Ricus holds a Bachelor of Engineering (Mining) from the University of Pretoria, has completed the Management Development Program from the University of Orange Free State, and holds an Advanced Certificate in Mine Ventilation from the Chamber of Mines.

Gerbrand van Heerden – CFO

Gerbrand Van Heerden is a Chartered Accountant from the Institute of Chartered Accountants of South Africa, and he has over 18 years of experience in various senior management roles in the mining industry, specializing in base metals. He commenced his career with Deloitte, following which he joined Metorex Limited, a multi-listed mid-tier mining company as Group Financial Controller in 2004. At Metorex, he held a number of senior management positions, becoming a specialist in a wide field including technical consolidation and accounting, treasury, cross border taxation, trading and marketing of commodities, derivatives, group and debt restructuring, due diligences, feasibilities, as well as a strong operational influencer to improve business profitability and sustainability. He was also involved in numerous green and brownfield projects, in Southern and Central Africa, through commissioning and into operational readiness during this period. He joined Glencore in 2013 as Chief Financial Officer of the newly acquired Rosh Pinah Zinc Corporation and was instrumental in the turn-around and modernization of the operation with a focus on establishing a continuous improvement culture. Gerbrand graduated from the University of Johannesburg, South Africa.

Alex Terentiew – Senior VP of Corporate Development and Investor Relations

Alex Terentiew spent over 12 years in the investment industry as a mining and commodity research analyst at Scotia, Credit Suisse, Raymond James and most recently at BMO Capital Markets. At BMO, he was a top-ranked analyst covering the base metals sector, in addition to providing insightful research focused papers of long-term growth potential, value margins and commodity research. Prior to his career in research, he was a licensed Professional Geoscientist in the Province of Ontario. Alex holds an MBA degree from the Rotman School of Management, a Master of Applied Science in Civil Engineering and a Bachelor of Science from the Department of Geology, both from the University of Toronto.

Steven Molnar – VP of General Counsel and Corporate Secretary

Steven Molnar has over 8 years of experience in corporate and securities law. Before joining Trevali, he practiced corporate and securities law at McCarthy Tétrault LLP, where he provided advice on a wide variety of matters and transactions including corporate governance, regulatory compliance and public company reporting, mergers, acquisitions and dispositions, equity and debt financings, joint ventures and other commercial arrangements in the mining industry. Steven holds a law degree from Osgoode Hall Law School and a Bachelor of Arts from Simon Fraser University. He is a member of both the British Columbia and Ontario Bars.

Joanne Thomopoulos – VP of Human Resources Strategy

Joanne Thomopoulos is an influential senior HR leader with over 15 years of direct leadership experience. Before joining Trevali, she spent over 10 years at BC Hydro and 8 years at BCLC where she championed key strategic HR initiatives that leveraged talent to maximize business efficiencies. She has led workforce redesign projects, developed performance management and talent development frameworks, and provided strategic guidance on mergers, acquisitions and integrations. She is a Chartered Professional in Human Resources, holds a Strategic Human Resources Management Graduate Certification, Advanced Certification in Management and a Diploma in Criminal Justice. She is also a certified coach and facilitator for Kouzes and Posner’s leadership practices.


 

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