Trevali Mining: Another Record Quarter as Caribou Ramps Up

Trevali Mining (TSX:TV) recently released its Q1 production results for 2016. As Dundee Capital Markets noted, it was another record quarter for the company.
For Q1, Trevali’s Santander mine in Peru produced 13.7 million payable pounds of zinc, 6.4 million payable pounds of lead and 221,324 payable ounces of silver. That’s slightly above Dundee’s estimate of 13.1 million pounds of payable zinc, and four percent above Santander’s production for Q4 2015.
The company is still on-track to meet its production guidance of 52-55 million pounds of payable zinc in concentrate, 22-25 million pounds of payable lead in concentrate and 800,000 to 1,000,000 ounces of payable silver.
“Recoveries remained strong across the board and mill throughput was the highest ever at Santander at 209,188 tonnes, 5% above our estimate of 198,550 tonnes,” said Dundee Analyst Joseph Gallucci in a note to clients. “This is one of the best quarterly performances we have seen to date, putting TV in great position to continue focusing on Caribou.”

 
Trevali also provided an update on the mine and mill commissioning for its Caribou zinc mine in New Brunswick. It stated that the commissioning is progressing well as it continues to focus on metallurgical improvements at its operations, including decreasing the primary grind size, improved zinc-cell mixing and retention times with modifications to be implemented during ongoing scheduled maintenance periods.
Interestingly, both Dundee and Haywood Securities noted that the Caribou mine produced more zinc concentrate in Q1 than the Santander mine. Dundee is expecting Trevali to declare commercial production at Santander in June 2016.
“With Santander performing very well and Caribou commercial production just around the corner in New Brunswick, TV should have two operating zinc mines on line by the time positive zinc S&D fundamentals take hold which we estimate to occur in H2/2016,” Dundee’s note read. Overall, the firm gave Trevali a ‘buy’ rating, and a $1.00 target price, adding that the company is one of its top picks.
Stefan Ioannou of Haywood Securities also gave the company a ‘buy’ rating and a more conservative $0.75 target price. While he pointed out that the company’s share price has lost roughly 67 percent since September 2014, he suggested that fall is at least partially due to weakness in the base metals equity markets.
While a continued rout in metals prices could put pressure on the company, he stated that Haywood looked at the company’s valuation in terms of anticipated stronger medium-term zinc pricing.
“With zinc production from two mines anticipated to ramp-up to +170 million pounds per annum by ~2019, we believe that Trevali is poised to become the marquee mid-tier pure-play zinc producer in a market facing a significant medium-term supply issue,” the report read.
To be sure, as Ioannou has explained in the past, there have been a number of key mine shutdowns in the zinc space, with few advanced-stage projects set to come online. “In addition, we would argue that, unlike copper, the list of good zinc-focused equity names can be counted on one hand, a situation which will likely attract additional market attention to Trevali,” Ioannou’s note added.
Shares of Trevali were up 3.57 percent on Thursday to $0.435. The company has a market capitalization of $184.55 million and has traded within a 52-week range of $0.25 to $1.24.

Don’t forget to follow us @INN_Resource for real-time news updates.
 
Securities Disclosure: I, Teresa Matich, 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.