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The preliminary economic assessment for Trevali Mining’s Caribou mine and mill complex calls for pre-production CAPEX of $36.3 million, a post-tax internal rate of return of 56.9 percent and a post-tax net present value of $106 million at a 5-percent discount.
Zinc-focused base metals miner Trevali Mining (TSX:TV) receives a fair amount of attention on Zinc Investing News, but it’s not undeserved, particularly these past few months.
Just since February, the company has gone from achieving commercial production at its Peru-based Santander mine to releasing a preliminary economic assessment (PEA) for its Caribou zinc-lead–silver mine and mill complex in New Brunswick’s Bathurst Mining Camp.
Put out late Tuesday night, the base-case PEA calls for pre-production CAPEX of $36.3 million, a post-tax internal rate of return of 56.9 percent and a post-tax net present value of $106 million at a 5-percent discount. Caribou is expected to operate for 6.3 years, during which time it will put out an average of 93 million pounds of zinc, 32.5 million pounds of lead, 3.1 million pounds of copper, 730,000 ounces of silver and 1,500 ounces of gold per year; respectively, average life-of-mine recoveries should come to 84, 65, 45, 37.5 and 10.6 percent.
Those numbers are based on the following metals prices: zinc at $1 per pound, lead at $1 per pound, copper at $3 per pound, silver at $21 per ounce and gold at $1,200 per ounce. Some of those prices may sound optimistic given what the metals are currently selling for, but Dr. Mark Cruise, president and CEO of Trevali, doesn’t appear concerned. He admitted in yesterday’s press release that the project is sensitive to the zinc price, but noted that “positive consensus forecasts for increasing zinc (and lead) prices should have a beneficial effect on the operation’s economics.”
Cruise isn’t alone in his thinking. Seeking Alpha contributor Itinerant recently published a detailed — and positive — overview of Trevali, noting that while the company is “not without risk,” one definite plus is that it offers “[e]xposure to the zinc price upside.” More specifically, Itinerant states, zinc outlook discussions are “distinctly shifting away from ‘if‘ towards ‘when‘” a price breakout will happen, and Trevali is one of the few pure zinc plays available to take advantage of that eventuality.
Of course, that’s not to say there are no risks involved in the project. Trevali identifies two: external dilution beyond the planned amount, which “would reduce the mill head grade and impact on revenue,” and “uncertainties” about how much time will be needed for full mine dewatering, as well as regarding “the total quantity and scheduling of the rehabilitation/slashing work.”
That said, Cruise emphasized that “there is excellent potential for additional optimization given that approximately 3 million tonnes of mineralized material is presently not included in the mine plan and the deposit remains open for expansion.” Other future opportunities for optimization include the potential conversion of some existing mineral resources to the indicated or measured category.
For now, however, investors should expect Trevali to simply work on getting the Caribou mine and mill complex up and running again.
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.
Related reading:
Trevali Achieves Commercial Production at Peru-based Santander Mine