Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX) announced on March 13th its agreement to purchase a portfolio of zinc assets from Glencore International Plc (GLEN:LSE), "which includes "80% interest in the Rosh Pinah mine in Namibia, a 90% interest in the Perkoa mine in Burkina Faso, an effective 39% interest in the Gergarub project in Namibia and an option to acquire 100% interest in the Heath Steele property in Canada."
Dr. Mark Cruise, president and Chief Executive Officer of Trevali stated, "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."
Glencore will increase its stake in Trevali to 25% from 4% and will gain an additional seat on Trevali's board, bringing Glencore's seats to two. Glencore will also have the offtake from all four of Trevali's mines.
The acquisitions extend Trevali's zinc reach globally, adding mines in Africa to its ongoing operations in Canada at Caribou and in Peru at Santander.
In a Mar. 13 report, Paradigm Capital analyst Jeff Woolley stated that the Santander mine is "generating positive cash flow and its second mine, Caribou, now commercial," is moving Trevali into a path for growth.
Woolley's 2017 forecast has Trevali's "payable production of 178Mlb Zn (+19% y/y) and 216Mlb ZnEq (+10%y/y) at a cash cost of US $0.53/lb Zn or US $0.72/lb ZnEq." Woolley concluded that "Trevali remains our most leveraged name to benefit from the improving zinc and lead pricing environment and a Top Pick for those seeking financial exposure to these commodities."
In Paradigm's Mar. 7 report, Woolley detailed the production increases taking place at Santander, highlighting that "the zinc grade appears to be increasing at depth in the Magistral Deposits with the anticipated head grades mined/milled rising to 5.0–6.0% Zn by 2018 from the current 4.0–4.5%. The higher head grade translates into an increase in our 2018/2019 production forecasts to 75–80Mlb Zn (payable) versus 65Mlb in 2017."
Cormark Securities analyst Stefan Ioannou outlined high expectations for the company in 2017. In a Mar. 13 report, he stated, "With zinc production from two established mines expected to ramp up to ~200 MMlb per annum by 2020, we believe Trevali is poised to become a (the) marquee 'pure-play' zinc producer in a market facing a significant near-to medium-term supply issue. Bottom line, we believe Trevali should be considered as a core position underpinning any investment strategy looking for zinc exposure."
Ioannou went on to support his position with some numbers from Santander and Caribou, highlighting that "the Magistral deposits at Santander remain open at depth, where zinc grade appears to be increasing. Additional drilling in 2017 will facilitate longer-range mine planning, including a potential mill expansion." He also pointed out that "Caribou's H2/16 operating cost profile, in the context of ongoing ramp-up considerations, caught us by surprise—an average onsite operating cost of US$56.39/t milled (including US$54.79/t in Q4/16) came in well below our expectations (+US$75/t milled) and Trevali's H2/16E guidance (US$64-68/t)."
Read what other experts are saying about:
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Melissa Farley compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Trevali Mining Corp. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview or article until after it publishes.
Paradigm Capital, Trevali Mining Corp., March 13, 2017
1. The analyst has an ownership position in the subject company. No.
2. Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the past 12 months. Yes.
3. Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months. Yes.
4. Paradigm Capital Inc. has greater than a 1% ownership position in the subject company. No.
5. The analyst has a family relationship with an Officer/Director of subject company. No.
The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated directly or indirectly from various departments including Investment Banking, based on a system that includes the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance and client feedback. Analysts are not directly compensated for specific Investment Banking transactions.
Paradigm’s disclosure policies and research distribution procedures can be found on our website at www.paradigmcap.com.
Cormark Securities Inc., Trevali Mining, March 13, 2017
I, Stefan Ioannou, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company(ies) and its (their) securities. I also certify that I have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
Click here for Cormark disclosures on Trevali Mining.