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Edited Transcript of TV.TO earnings conference call or presentation 1-Aug-19 3:00pm GMT

Q2 2019 Trevali Mining Corp Earnings Call

VANCOUVER Aug 7, 2019 (Thomson StreetEvents) -- Edited Transcript of Trevali Mining Corp earnings conference call or presentation Thursday, August 1, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gerbrand Van Heerden

Trevali Mining Corporation - CFO

* Johannes Fredericus Grimbeek

Trevali Mining Corporation - President & CEO

* Yan Bourassa

Trevali Mining Corporation - VP of Mineral Resource Management

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Conference Call Participants

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* Craig Hutchison

TD Securities Equity Research - Research Analyst

* Jackie Przybylowski

BMO Capital Markets Equity Research - Analyst

* Orest Wowkodaw

Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals

* Oscar M. Cabrera

CIBC Capital Markets, Research Division - Research Analyst

* Ralph M. Profiti

Eight Capital, Research Division - Research Analyst

* Stefan Ioannou

Cormark Securities Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Trevali Mining Corporation Q2 2019 Financial and Earnings Conference Call. (Operator Instructions) I would like to remind everyone that this conference call is being recorded. And as a reminder, a replay webcast will be available 1 hour after today's call. Trevali's second quarter results were issued yesterday and are available both on our website at www.trevali.com and online at SEDAR. Additionally, a corresponding news release was issued yesterday with our financial results. In conjunction with this conference call, there is an accompanying PDF presentation available on the Events section of the Trevali's website under the Investors tab. This link to our live webcast is also on Trevali's website under Events. (Operator Instructions)

 

The main presenter today is Ricus Grimbeek, Trevali's President and CEO, who will be accompanied by Gerbrand Van Heerden, Trevali's Chief Financial Officer; and Yan Bourassa, Trevali's Vice President of Mineral Resource Management.

 

In today's presentation, there may be some forward-looking statements made, and I draw your attention to the customary disclosure in our Corporate Materials.

 

I would now like to turn the call over to Ricus Grimbeek, Trevali's President and CEO. You may begin your conference.

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [2]

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Thank you very much and good morning, ladies and gentlemen. It's the end of my first 100 days, and I am so excited to be able to talk to you about our second quarter highlights.

 

I'll start with sustainable development. I'm very excited to say that we published our first inaugural sustainability report in June this year. And that we've recently been given some leading score ratings in environment, social and governance. That just shows what -- how committed we are to sustainability. And we believe it's going to be one of the areas that distinguishes us in future.

 

I'm also very glad to say that we had a strong operational quarter, and we've been talking to the market a lot about this over the last couple of months and the focus on reducing costs but also to getting a record quarterly production of 105.2 million payable pounds of zinc is just great performance.

 

Also at Caribou, we had record recoveries and throughput rates for the quarter. And we can talk a bit later in the updates -- on the operational updates the issues that we had at Caribou associated with the strike.

 

And the operating cost performance is definitely better than expectation. We had a C1 cash cost of $0.86, that's down 9% quarter-on-quarter. We're in a very strong financial position, and our net debt reduced by $27 million during H1 -- H2. And we also still going to do work on reducing debt further in the second half of the year.

 

I'm also really glad to be able to talk about Rosh Pinah internal study that we completed. It's indicating at least up to a 30% increase in output. And it also shows a very strong IRR. The study has gone -- is absolutely fully underway at the moment. Very excited about the work that they're doing. And we think the feasibility study will be completed by Q2 2020.

 

I'm very, very glad that we've been able to attract some really good industry experts. I say some of the best in the industry is now working for us in the Chief Technology Officer and also the Chief Sustainability Officer that will be joining us. You would also have seen yesterday the election of some new Board members that brings new diversity and a lot of strength to our Board.

 

I'll go to the next slide and talk about the focus areas for the second half of the year. And it's very much the same as what we said in the first half, we really want to focus on reducing our cost. I showed and spoken to many of you over the last couple of months, and showed that our operations are in the fourth quartile of the cost curve. And we have been working on finding ways to reduce and move our operations back on the cost curve. And the great thing for me is that the initial benchmarking that we showed, we saw some opportunities, and we've done some more work and I'm getting more and more excited about the possibility to move these operations back into the second and third quartile over the next 12 to 18 months.

 

We completed the Rosh Pinah internal study. And as I said earlier, that is something that I'm excited about and will be part of the cost reduction initiatives for Rosh Pinah. Rosh Pinah is a world-class operation. It's got an amazing ore body. And I just -- I'm very excited about what can be done there.

 

We've done some -- the team at Caribou has done some amazing work on understanding the strato control issues that we've been dealing with for the last 12 months. They have done an amazing amount of work on catching up developments to give us more flexibility on the mining side. And we're looking at ways to increase the mill throughputs. The maintenance work that we've done there has been really, really successful. The impact in the quarter has been 8 days of no production because we had some transport issues due to the Belledune smelter strike and that we solved during the quarter and we are transporting ore to -- or concentrate to our customer at the moment.

 

The exploration, and I'm very glad that Yan will talk to you a little bit later about some of the work we're doing on the exploration side. We are absolutely going on with our program. And the main focus is to extend the mine lives of our operations.

 

And we will keep on pushing on the sustainability side. We want to be able to guaranty people safety. We want to make sure that we are known as the best and so most sustainable mining company in the world.

 

I'll go to the next slide and just give you a short update on some of the mine operations. As I mentioned, Caribou has done some amazing work on understanding the issues that we had with the strata control. We've identified a new mining method that could be a lower-cost mining method and also will allow us to go and mine some of the sill pillars. The mining method will also allow us not to leave sill pillars in the future. And that in itself would be quite a good benefit. Trial mining will start in the second half, and we're doing this in an area of the mine that's not going to impact production. So we can definitely see what needs to be done with this mining method to be used -- and so we can use it across the mine in the future.

 

At Perkoa, we commissioned the heavy fuel oil and generation facility, and we expect that the cost savings will start flowing through in the third quarter.

 

At Rosh Pinah, the filtration and grinding upgrades remain on track to the end of the year. And as I said, the internal study is being completed for the expansion.

 

At Santander, they're really doing an amazing job on the cost reduction and strategy at Santander, and Yan will also talk a bit more about the exploration work that we're doing there.

 

I'll now hand over to Gerbrand to talk to you about the financial position of the company.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [3]

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Thank you, Ricus, and also, good morning to all. Looking at our financial position and the progress made during the quarter, we are in a very strong financial position. We increased our cash by $30 million, to $53 million, making it an overall cash positive quarter for us. We voluntarily paid back another $13 million in principal, and we will continue to pay back debt as we generate cash and improve our working capital position. Our net debt reduced by $27 million, with net debt now sitting at $35 million at the end of the quarter.

 

In addition, we have $182 million available on our revolving credit facility with no principal repayments due on course of end of 2022. We also improved our working capital position by $57 million since the beginning of the year. In summary, we will continue into the second half of the year with meaningful cost improvements, as already mentioned by Ricus. Also, our underlying operating performance is strong, and our balance sheet is in a solid shape, positioning Trevali well to manage our commitments and deliver on our plans.

 

Moving over to the financial overview for the quarter, despite the very strong operating results with record quarterly production, Trevali's earnings for the quarter were negatively impacted by the decline in the zinc price over the course of the quarter. Adjusted EBITDA for the quarter was breakeven, with sales of 93 million pounds, approximately 12 million pounds below our production volume, with the buildup of concentrate inventory at Rosh Pinah contributing to the shortfall. On a positive note, the project to install the new concentrate filter press remains on schedule for completion by year-end, which will result in reduced sales volatility.

 

 

As sales settled during the second quarter, we saw a slight benefit in April, with zinc prices were up a few cents, but then negative adjustments in May and June when monthly average prices dropped more than $0.15 per pound. The provisional price adjustment amounted to $17 million for the quarter. The $3 million of that relating to volume adjustments and $14 million to price adjustments. The volume adjustment relates to the volume changes between the provisional invoicing and the finalized invoicing.

 

We have established the marketing and logistics functions within the group, which will manage and track the full amount we're receiving for process across the whole group, to eliminate these adjustments going forward. The $14 million price adjustment is in line with our sensitivities provided at the end of quarter 1. Going forward, we will provide you with additional information to make it easier for the readers, which we referred to as the averaging spot price adjusted EBITDA. To summarize, although lower zinc prices, we reduced costs and increased our cash position as well as repaid debt during the quarter, setting us up well for the second half of the year.

 

At this point, I will hand over to Yan to walk us through the exploration side of the business.

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Yan Bourassa, Trevali Mining Corporation - VP of Mineral Resource Management [4]

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Thank you, Gerbrand. Globally, we've been active in all operations with both exploration and resource conversion drilling programs. And we are currently adding drill rigs turning at all 4 operations. The focus of our exploration program this year is putting a larger emphasis on discovering the next-generation of near-mine deposits that can contribute to extending the life of mines at all 4 operations. The largest exploration investment so far this year has been made at Santander and Perkoa, and we are very excited to have made a near-mine discovery at Perkoa this early in our commitment to increasing regional exploration expenditures.

 

Efforts are also underway at Caribou with resource conversion drilling below the current block along the north rim, targeting Inferred mineral resources to be converted to Indicated mineral resources.

 

At Rosh Pinah, resource conversion programs are also ongoing with additional exploration programs underway, targeting the underexplored northern and eastern extension of the deposit. Electromagnetic surveys are also underway in the second quarter and will continue in the second half of the year.

 

At Santander, permits to commence drilling at the Santander Pipe and some other targets were received in July, and drilling activities will pick up in August with 2 drill rigs. Exploration of the Santander Pipe is targeting to convert Inferred mineral resources to Indicated level in support of the ongoing evaluation of this higher-grade deposits.

 

Moving on to the next slide. The new T3 discovery made at Perkoa represents the third major VMS horizon and was intersected in the hanging wall of the main Perkoa zone. We are very excited of the discovery this early in our commitment to discover new deposit at our various operations. Both exploration holes intersected wide disseminated stratiform VMS intercepts with geophysical and geochemical vectors, indicating that these 2 intercepts could represent the edge of a larger system, and that massive VMS mineralization can be expected at depth.

 

Assay results are still pending, but true width of the system are impressive at 16 and 32 meters, in line with width currently being mined at the main zone. The T3 horizon is located 200 meter in the hanging wall of the main Perkoa VMS zone. We are very pleased with how the exploration programs are progressing at Perkoa and enthusiastic about the T3 discovery made by the Perkoa exploration team. Additional drilling is ongoing to test the up-plunge extension of the T3 horizon and a second drill rig is being mobilized to start testing the down-plunge extension.

 

The T3 horizon has the potential to be future feed source for the Perkoa mill, pending sufficient tonnes are defined at similar grades to the Perkoa main zone. Regional drilling was halted at the beginning of the Q3 due to the rainy season, but EM surveys are still currently ongoing and are expected to provide new targets to be drill tested during the fourth quarter. Exploration expenditures at the end of Q2 amounted to $5 million off an approved budget of $8.4 million. The remaining budget of $3.4 million will be spent in the second half of the year.

 

With that, I will pass it back to Ricus.

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [5]

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Thank you very much, Yan, and I hope you can feel the excitement in the room. I've finished my first 100 days. I've visited all 4 operations. And I met some amazing people in this business, and you would have heard some of them talk today. Obviously, in summary, just go through, again, the key highlights for the quarter. We published our first sustainability report. A really strong operational performance with the record zinc production for the quarter. We've got some really amazing optimization projects to undergo to reduce our cost. We've got a very strong balance sheet. We keep on paying down debt. We've had our first -- or a new discovery at Perkoa on the VMS side. And we started filling the team with some amazing diversified skill set. So I believe we're set up for a great second half of the year and I look forward to delivering the Q3 results later in this year, and we'll hand back to the operator now so that we can take some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Orest Wowkodaw with Scotia Bank.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [2]

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Ricus, I wanted to follow up with you for my question, I guess, from your first quarter call. Now that you've had a chance to see all the assets, I think you finished your first 100 days. So just curious how you see Trevali moving forward from a strategic level, i.e., are you happy with the existing 4 assets that you have? What do you plan to do with -- obviously, you've got a great balance sheet. What do you plan to do to grow that externally, if anything? Just curious if you've had the chance to really get your head around the company?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [3]

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Thanks, Orest. I visited all 4 operations as I said and met so many people. Also, not just people at the operations, but externally as well. I think the focus for us is what I mentioned last time around is the absolutely running this business as efficiently as possible. My view on the 4 operations and the initial benchmarking that we've done in some of the plants that we've identified now is that these are 4 great operations. They're currently in the fourth quartile and we can now start seeing pathways to bring them down the cost curve to the third and even at plays like Rosh Pinah in the future in the second quartile on the cost curve. So I believe these are great operations, and we'll keep on optimizing and finding new ways to run them more efficiently.

 

As for the strategy for now, it is about delivery. It's about sticking to our commitments. This quarter is another great example of where we stuck to our commitments. We delivered on the production and the production numbers, and we also delivered on the cost and reduction. We -- I'm talking to the Board about a longer-term strategy. And to me, that -- those conversations will unfold over the next 6 months or so. But for now, the focus is absolutely on delivery, and I'm very excited by these operations.

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Operator [4]

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(Operator Instructions) Your next question comes from Stefan Ioannou from Cormark Securities.

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Stefan Ioannou, Cormark Securities Inc., Research Division - Analyst [5]

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Maybe just a little bit of a minutia on this. But just looking at Perkoa, the sales were kind of behind the production. Just wondering, are there any logistical issues there that we should be worried about? Or that just has to do with that long trucking distance that we see from time to time?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [6]

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Thank you, Stefan. Yes. No, there's no -- nothing to worry about there. It's just -- it's a long way to truck the Abidjan port, it's quite a conservative port. I think we had 6,000 tonnes at the end of the quarter that was in the warehouse, but had sold it. And -- but that's already been cleared up in the first month. So not an issue. And we also deliberately -- we did not sell in the warehouse because that costs us money. And for us, we're not running this business quarter-by-quarter. You want to run this for the long-term and make sure that we optimize every piece of revenue that we can get.

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Stefan Ioannou, Cormark Securities Inc., Research Division - Analyst [7]

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Okay. Okay. And just wondering on the volume adjustments related to the provisional pricing, were they sort of -- I guess, were they across all 4 mines? Or were there 1 or 2 mines, in particular, that gave you the most trouble in terms of surprising you on -- in terms of having to make those types of adjustments?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [8]

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Yes. No, so I think we know that this market is struggling a little bit to work at our revenue and the pricing adjustments and so on, and we -- that's why we broke it up into volume and the price adjustment. So the volume piece, my view is, a lot of that is on our side of the fence. We need to make sure that our assays are correct. We need to make sure that we follow up on the assays if there's any differences. That's why we've put the logistics team together. And we're going to get a lot better on that side, because it's both in our control. At least across all 4 operations, not one that stands out. And let's see how we improve that over the next couple of quarters.

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Operator [9]

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Your next question comes from Jackie Przybylowski with BMO Capital Markets.

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Jackie Przybylowski, BMO Capital Markets Equity Research - Analyst [10]

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Congratulations, Ricus, on a good quarter. I wanted to ask you about, specifically, the Chief Technology Officer position that you filled? And maybe if you could talk a little bit about what you see the role for that person? And maybe what the near-term priorities will be?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [11]

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Thank you, Jackie, and glad to hear from you. It is quite funny because the Chief Technology Officer Derek is sitting in the room and he got very nervous because it looks like I was going to pass it over to him. But I'm not -- I'll spare him this quarter. The thing is we're setting up our Center of Excellence for things like rock engineering, ventilation, mine planning, and we -- because we want to make sure that we get the best people in the world to help us design our mines and make sure that we get absolutely the right advice on things like ventilation and rock engineering. And so those functions will sit under Derek.

 

Also the IT and OT functions will sit under Derek. And so that we can get the best digital and IT infrastructure across the business and also use the scale with that. We've got 4 operations. They're quite similar. Not quite actually but it is similar in terms of mining and also milling and floatation. And so there's a huge opportunity for us to standardize on systems and processes and across all these 4 operations and save us a lot of money, but also make us become world-class operators.

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Jackie Przybylowski, BMO Capital Markets Equity Research - Analyst [12]

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That's great. And if I could ask another question. It's noted in the MD&A that you have completed the RP 2.0 internal study. It looks like the results are fairly promising. I know it's still a while before we'll get to see the full feasibility, but can you give us a little bit of color in terms of what you're seeing on the internal study?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [13]

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Yes, it's a good question. And I thought we -- it's also one of the areas that falls under Derek's purview, well all these major projects that we do. And Derek has been working tirelessly for the last month or so to pull all the data together on the RP 2.0. At the end -- and I must say, quite a bit of data, our work has been done, especially on the processing plant side of the study, and that's the highest cost item in the project. And there's also a lot of the issues around recovery and price visibility and volume that the -- that Derek thoroughly studied in quite a lot of detail.

 

The rest of the study is to look at the complete picture. We need to understand the expansion side of the mine, what's the best mining method, what's the best transport method, what's the best strata control method that we need to be using. So the study is -- there's elements that we're now adding to and building out. But overall, I am very, as I said in -- as we said in the presentation, it's at least a 30% -- an increase in volume. And also, at that time, we can implement things that will make us an absolutely Tier 1 operation. I think for many years, it's been -- it's been a bit of a bolt-on improvement. This is the opportunity to really turn this operation into a Tier 1 long-life operation as it should be because it is an amazing ore body.

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Operator [14]

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Your next question comes from Oscar Cabrera with CIBC.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [15]

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Ricus, if I may, just could you possibly repeat. On the first question, you said -- you talked about you benchmarking. Said that most operations were in the fourth quartile, Rosh P, probably down to the second quarter and the other ones to the third. Can you just repeat that, please?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [16]

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Yes. No problem, Oscar. And thanks for the question. What I said was, as far as benchmarking, I think the facts tell that these operations are currently in the fourth quartile on the cost curve. And when we started doing benchmarking, we looked at the quality of the ore body, we looked at the mining methods, we looked at the processability of the ore, we look at the region where we're operating, the electricity prices picked up, for example, and labor cost. And we overlaid all of that. And we said, if you look at that, a play like Rosh Pinah, with the quality of the ore body, the relatively cheap mining method with -- not a lot of support necessary to keep -- to keep the process open and the roof up, with processability of the ore being reasonably easy to process and float, and in a region where labor cost is a bit higher and efficiency -- electricity prices are a bit higher. If you add all those things together, we feel that Rosh Pinah should absolutely be in the second quartile or the early part of the third quartile of the cost curve. And we've done some further benchmarking on looking at specific elements of the mining methods, we looked at the different processes in how we're currently mining, from the drilling, the trucking, the support cycle. And we then overlaid what we think is possible there, identified some specific programs that we can now address. And if you overlay the potential 30% increase in volume, you can absolutely start seeing the pathway for an operation like Rosh Pinah to go into the second quartile of the cost curve. This is not a -- we won't be doing this in the next couple of months. This is a process and it's going to take a while to get that set up. But my view is in the next 12 to 24 months, you'll see a play like Rosh Pinah move down the cost curve quite a lot.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [17]

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No, that's encouraging, Ricus. And just to get context around that. So the all-in sustaining cash cost for zinc, the top of the third quartile are about $0.95 a pound, roughly. So do you expect in the longer-term to try and get your operations below that level?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [18]

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That's practically what I'm saying. And that's what we have to do, if we want to run this business effectively, that's what we've got to be able to do. And then I'm very excited that we'll go -- we've got plans that can deliver on that.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [19]

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Great. And then also, your comments on the provisional prices. I mean zinc prices have been under pressure, and that's outside of your control. But in terms of -- you mentioned something about volumes and assays, was that mainly freight? And then just getting more penalties because the quality of the concentrate wasn't there? Can you just elaborate on that, please?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [20]

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Yes. I'll hand over to Gerbrand to answer that because I've only got 2,000 words today and my words are starting to run out so I will let Gerbrand answer this.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [21]

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Thank you, Ricus. Oscar, no, so it's not penalties-related or anything revenue-related. That's already working through the revenue line. This is purely actual volumes and it effectively relates to our accuracy of assay or testing the quality of our material when it leaves the site versus the final assaying happening at receiving smelter. And those are inconsistencies that we've been tracking and clearing up and making sure that assaying on the site side is a lot more accurate so that we do away with this adjustment.

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Operator [22]

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Your next question comes from Craig Hutchison with TD Securities.

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Craig Hutchison, TD Securities Equity Research - Research Analyst [23]

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Just a question on Caribou. You mentioned that there's excess mill capacity. You're looking for potential sources to sort of feed the mill there. I know last year, you guys did a life of mill strategy and you're looking at potentially integrating Restigouche as early as this year. Is Restigouche back on the table? And if it is, can you give us a sense of what the timing of that would be and maybe the CapEx to kind of bring some of that feed into production?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [24]

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Craig, thanks for the question. When you look at Caribou, it's definitely a volume game. So -- and we need to fill the mill and we need to keep it close. And one of the solution is to get more flexibility because the mining method is a lot more complicated and complex at Caribou than, for example, at Rosh Pinah. We have seen an opportunity where we can take some additional material in the mine at the moment to fill the mill plus maybe and start adding some of the excess capacity that we've also identified. We -- the work that -- everything we've done on the maintenance program, preventative maintenance program that they started implementing over the last kind of 6 months, it's really starting to pay off. And we can see a higher volume potential for the mill. In terms of Restigouche, it's definitely on the table. We're studying that at the moment. We're looking at opportunities to bring that in some way in the first half of next year. I don't see it as a massive capital thing. There are other ways to get tonnes to the mine from Restigouche. Restigouche has got some really interesting grade that could be quite beneficial and as we thought, on the blending process. Because that's something else they have started doing quite well at Caribou is to blend the ores and to get the best recoveries out of the plant.

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Operator [25]

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Your next question comes from Ralph Profiti with Eight Capital.

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Ralph M. Profiti, Eight Capital, Research Division - Research Analyst [26]

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Ricus, I wanted to maybe ask Oscar's question in a different way. If the goal is to move the operations down 1 quartile. And in the case of Rosh P, down, perhaps, 2 quartiles. What are you thinking about in terms of the unit cost change that would need to get that done? Are we talking about 5%, 10%, 20%? And having visited -- now having visited all the operations, how are you feeling about those targets?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [27]

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Yes. I think on average, you can say anything between 10% to 12% reduction in cost then will be necessary to do that. So yes. And I'm confident -- I've been to all 4 operations, absolutely, I'm confident that we can do this. Now what I found and I said this to many people over the last couple of months is we have 4 companies on 4 ore bodies. And what we need to build is a company with full operations. And so in that will be a lot of efficiency potential. And then at each one of the operations, there are ways that we're going to be implementing some of the latest technology with very low capital cost investment to help improve on productivity. For example, at Rosh Pinah we are going to be buying our first tele-remote scoop fleet. And that means that we can operate when -- and no one can be underground. We can start operating the scoop from the surface. So it's small changes. We would have had to buy a scoop, but instead of just buying a normal diesel, and one that's a cab on it, we're now going to go to remote to help with those dead hours that we have in the mine.

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Ralph M. Profiti, Eight Capital, Research Division - Research Analyst [28]

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Yes. That one I see. The second question, if I may, just kind of on the balance sheet, and I noticed that the NCIB has been suspended. Certainly, a rational decision in zinc markets. But has there been any thought, Ricus, to perhaps using the balance sheet to hedge out some of the volatility in the provisional pricing, things like derivative contracts and offsetting positions. Do you think that will be a prudent use of the balance sheet? Or would you like to see even stronger shape before you enter into that strategy?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [29]

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Yes. I think if I understood the forward-looking prices, I would have been a billionaire by now. But I -- we did quite a detailed piece of work to understand if hedging would be able to help us smooth out some of the revenues. And what we've landed on firstly is that medium and long-term hedging we will never do because people don't buy us for our hedging. And we started looking at the shorter-term if we could do QP hedging. Again, in the backwardation market, it really is very hard to do. So I think our job is to find ways to -- that's why we started stripping out the volume, and changes there, the price changes, we need to do everything on our side to make sure that we get the numbers very, very clean and make sure that we get every last dollar that we can all for the tonne that we sell. And then look with what's left. The market's going to do what the market's going to do, and that's why we have to get these operations moved one level on the cost curve.

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Operator [30]

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Your next question comes from Orest Wowkodaw with Scotia Bank.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [31]

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Just a quick follow up. Ricus, I'm just curious, given your market cap and your share price, any thoughts to basically doing a reverse split on 800 million shares outstanding to get that to a more manageable number?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [32]

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That's a good question. We went around talking to a lot of our investors. And you can see, yes, [it's like sale]. And we got mixed responses. So anything is definitely on the table. We're thinking through that. But it's not something that we'll do in the short term.

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Operator [33]

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Your next question comes from [David Kaye], a private investor.

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Unidentified Participant, [34]

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I've got a couple of questions. The first one relates to the all-in sustained cost currently. Including G&A, roughly, how much is that a pound?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [35]

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David, thank you for the question. We're looking all-inclusive for the group at about just north of $1 zinc per pound what we're managing at the moment. And obviously, on the back of Ricus' discussion around the cost improvements that we're planning, that will be coming down over the course of the year.

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Unidentified Participant, [36]

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So I looked at the price of zinc this morning, it was $1.08. So at $1.08, then you would not be making any money. Is that correct? Currently.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [37]

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Yes. Although we've got some headroom on the balance sheet and working harder toward working capital improvements, which will last us for a while. We are hardly working -- or we are working hard at the cost improvements and getting us down that cost curve.

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [38]

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It's a good question. And if you go back to what we've put down as guidance. Our guidance is between a $1 and a $1.09 for full year. And we are -- we've got hit by about $0.07 of higher treatment charges during the year. But we're still guiding the market down to a midrange of the $1 to $1.09. So even at $1.08, if we get our cost down, we'll be making a smidgen of money there.

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Unidentified Participant, [39]

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The current TC charges, will that last throughout 2019?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [40]

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Yes. So we haven't finalized our negotiations yet. But normally, that gets finalized in the next month or so, and that applies for the full year.

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Unidentified Participant, [41]

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So any way you can see those TC charges coming down at some point?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [42]

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My goodness, would I love to see that, I'm telling you there. It's not what we now control. And so we -- that was set by the market, we look at some but we've -- the charges in Europe and the charges in other parts of the world, and our contracts are based on that. So it's one of those things that we negotiate hard, but that's -- it is more based at the marketplace.

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Unidentified Participant, [43]

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Yes. Okay. The other question relates to the share buyback program. Specifically, how many shares have been repurchased and canceled to date? And are you continuing to buy back some more shares?

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [44]

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I'll let Gerbrand answer the question on the specific numbers of shares that we've bought and canceled. But in the broader term, we look at capital management across the board from different angles, and share buyback is one of the levers that we can pull to -- on our capital management framework. At the moment, we've identified that buying back debt is absolutely the best way to invest the money. We've also, as I said earlier, we've done quite a bit of work identifying improvement projects for the business that might need some capital. So as we set up our 2020 budget, we are in the process of adding some of those projects to the budget that's -- or to the pipeline, if you want to put to the Board. And so we want to make sure that we've got capital to deal with that. But mainly, at the moment, the best use for your money, free cash is to buy back debt. And Gerbrand can tell you the exact numbers.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [45]

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[David], it's about 80 million shares at an average price of $0.37.

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Unidentified Participant, [46]

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Okay. So what you're saying is that temporarily at least you're suspending the buyback -- share buyback program in favor of using the money for other better reasons.

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Johannes Fredericus Grimbeek, Trevali Mining Corporation - President & CEO [47]

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Yes, that's right.

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Operator [48]

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Thank you all very much for dialing in. As a reminder, there is an accompanying PDF presentation available on Trevali's website under the Investors tab. You will also find the link to the recorded webcast presentation on the Events page. This concludes today's conference call, you may now disconnect.