Base Metals

The company announced Monday that it’s started mining at its Caribou mine in New Brunswick, then followed that up Tuesday with the release of its 2014 financial results. The company’s share price has seen a modest 2.94-percent rise in those two days, closing Tuesday at $1.05.

Double Whammy for Trevali Mining with Caribou Start Up, 2014 Results

It’s only Tuesday, but already it’s been a busy week for zinc-focused base metals miner Trevali Mining (TSX:TV). The company announced Monday that it’s started mining at its Caribou mine in New Brunswick, then followed that up Tuesday with the release of its 2014 financial results. 

The company’s share price has seen a modest 2.94-percent rise in those two days, closing Tuesday at $1.05. The zinc darling has also once again attracted praise from a variety of analysts since the release of the two reports. Here’s a brief overview of both pieces of news, as well as some highlights from a few analyst notes.

Caribou on schedule

Trevali is perhaps best known for its operating Santander zinc-leadsilver mine in Peru, but it also holds the Caribou polymetallic mine and mill complex, which is located in the New Brunswick-based Bathurst Mining Camp. It’s been working on restarting production there, and, as mentioned, said on Monday that it’s achieved that goal.

Elaborating, the company said in a press release that “surface and underground development programs at Caribou have advanced significantly during the first quarter including the recent commencement of mining activities.” Specifically, initial underground mineral production has started up, with mill feed now being stockpiled at surface — Trevali’s plan is to build a stockpile of 60,000 to 80,000 tonnes before mill commissioning begins in Q2.

In terms of the mill, the company notes in its release that the milling circuit has predominantly been refurbished, also noting that the zinc and lead flotation circuits and associated pipes have been refurbished or replaced, and are ready for commissioning. For its part, the copper circuit has been “completed, tendered, with the majority of equipment sourced … and on-site.” While the delay in readying that circuit might have some concerned, M Partners states in a note that it views the move “as prudent to simplify the commissioning process.”

Haywood Securities notes in a report of its own that it anticipates ramp up to full-scale production of 3,000 tonnes per day to follow mill commissioning. That milestone should be reached by the end of 2015.

2014 results 

While the activity at Caribou is certainly exciting, Trevali’s 2014 results also of course took some of the spotlight this week. The company said Tuesday that it recorded an annual net loss of $7 million, or $0.03 per share, in part due to “a non-recurring loss on disposal of a subsidiary incurred during the year.” Meanwhile, operations income from Santander clocked in at $12.7 million on concentrate sales revenue of $94.2 million.

In terms of production, it came in at 50.4 million payable pounds of zinc, 23.3 million payable pounds of lead and 914,600 payable ounces of silver; that’s above guidance for the year. Under an agreement that Trevali has with Glencore (LSE:GLEN), realized selling prices came in at US$0.96 per pound, $0.95 per pound and $18.99 per ounce for zinc, lead and silver, respectively.

Those numbers are a little off from what most analysts appear to have been expecting. For instance, Dundee Capital Markets expected earnings per share to come in at zero, while M Partners was looking for a loss of $0.01 per share for Q4.

That said, Dr. Mark Cruise, president and CEO of Trevali, appears unconcerned. He said in Tuesday’s release, “[d]espite weakened commodity prices, operational income from concentrate sales remained robust over the fourth quarter and for the year providing a solid platform for growth.”

Analyst upshot

As mentioned, at close of day Tuesday, Trevali’s share price was sitting at $1.05. However, the consensus from analysts seems to be that it won’t stay there for long.

For instance, Dundee has a price target of $2 for Trevali and rates the company a “buy,” while Mackie Research has a slightly lower price target of $1.75, but also rates it a “buy.” M Partners’ 12-month price target for Trevali is $1.90, and it rates the company a “buy” as well. Unsurprisingly given those targets, Dundee has perhaps the highest praise for Trevali, and states in its report that the company is “the best vehicle for zinc leverage on the TSX.”

Interestingly, Haywood’s price target for Trevali is on the lower end, at $1.35. While that lower estimate might be surprising, the firm emphasizes in its note that its outlook is not without reasoning. “Our arguably conservative valuation reflects a cautious stance given Trevali’s near-term efforts to initiate zinc production simultaneously in Peru and New Brunswick,” it states. However, it also rates the company a “buy” and believes that “successful project execution in conjunction with anticipated medium-term zinc price strength should garner a higher (premium) valuation.”

All in all, it looks like more good times are ahead for Trevali, particularly if the zinc price improves as expected. Investors interested in base metals, and zinc in particular, would do well to keep an eye on the company. A conference call will be held April 1, 2015 at 10:30 a.m. EST to discuss the company’s 2014 results.

 

Securities Disclosure: I, Charlotte McLeod, 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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