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Edited Transcript of TV.TO earnings conference call or presentation 6-May-19 3:00pm GMT

Q1 2019 Trevali Mining Corp Earnings Call

VANCOUVER May 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Trevali Mining Corp earnings conference call or presentation Monday, May 6, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alexander Terentiew

Trevali Mining Corporation - SVP of Corporate Development & IR

* Gerbrand Van Heerden

Trevali Mining Corporation - CFO

* Ricus Grimbeek

Trevali Mining Corporation - President & CEO

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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 Q1 2019 Financial and Earnings Conference Call. (Operator Instructions) I would like to remind everyone that this conference call is being recorded.

I would now like to turn the call over to Alex Terentiew, Trevali's Senior Vice President of Corporate Development and Investor Relations. You may begin your conference.

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Alexander Terentiew, Trevali Mining Corporation - SVP of Corporate Development & IR [2]

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Thank you, Julie. Good morning, everyone, and welcome to Trevali Mining's First Quarter 2019 Financial and Operating Results Conference Call. Trevali's first quarter results were issued this morning and are available both on our website at www.trevali.com and online at SEDAR. Additionally, a corresponding news release was issued with our financial results to review the company's financial performance as well as production and sales from our 4 mines. In conjunction with this conference call, there is an accompanying presentation available under the Events and Presentations section of our website under the Investors section and also directly on our webcast as well.

Main presenter today is Ricus Grimbeek, Trevali's new President and CEO, who will be accompanied by Gerbrand Van Heerden, Trevali's Chief Financial Officer; and myself, Alex Terentiew, Trevali's Senior Vice President of Corporate Development and IR.

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

Now I'll turn the call over to Ricus.

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

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Thank you, Alex, and good morning, and good afternoon, good evening to everyone on the line. I think if we will move on to the slide that shows my beautiful face, and I'll give you a little bit of my background. I'm a mining engineer. I've worked in whole bunch of different commodities across the world. Most recently was the Chief Operating Officer for the North Atlantic at Vale running the nickel business. Before that, Chief Operating Officer for South32, the Australian operations. And before that, multiple roles in different commodities in different parts of the world.

Why did I join Trevali? I -- this is an amazing company that I'm so excited and honored to be part of. What I've seen in my first couple of weeks have been very exciting. I can see a company that I thought when I looked at from the outside, thought that this would be a great opportunity to build the mining company of the future. And what I've seen in the last couple of weeks have really just fully supported that. I'm very excited about what we can do and how we can create something that is going to be the world leader in terms of safety, sustainability, cost efficiency. And ultimately, I would love for us to be seen as the best underground miners in the world.

Plan for next few months, I'll keep on visiting the operations. I will meet as many people as I can, including all our stakeholders and the government officials, communities, unions and employees, wherever I go. And I will also -- in a bit later, I'll just reiterate again that this is -- the focus for now is on keeping the ship steady, being really effective in reducing our costs, keeping the operations safe and delivering on the promises.

Turning on to the next slides, give you a bit of an overview of the first quarter. Trevali's focus on safety resulted in a reduction of lost time injuries with 1 incident recorded in the first quarter of 2019, down from 11 in the same prior time or in the prior quarter last year. Operationally, it was a solid quarter with payable metal production of 100 million pounds of zinc, 11.5 million pounds of lead and 0.4 million ounces of silver. Annual zinc production remains on track to achieve 2019 guidance of between 361 million and 401 million payable ounces.

The site did very well on costs, on the cost front, with on-site operating cost of $70 per tonne, [most] down 9% from last quarter. Three of the 4 mines delivered strong on-site cost performance and -- at the bottom end or below the annual cost guidance.

C1 cash costs and all-inclusive sustaining costs increased in the quarter driven by zinc concentrate treatment charges and costs associated with selling additional concentrate.

On the sales front, we successfully reduced on-site concentrate stockpiles through improved logistics, leading to zinc sales of 125.4 million pounds in the quarter. This combined with strong on-site performance to deliver adjusted EBIT of $51 million, up from $49 million and $41 million in the first and fourth quarters of 2018, respectively.

I will now pass it over to Gerbrand to take you through some of the financial figures.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [4]

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Thank you, Ricus. We're certainly very excited with our new CEO and what's -- this is going to hold for the future of Trevali.

On Page 6, we provide more detail on the quarterly performance and put into context some of the improvements over the prior quarters. Despite higher treatment charges, quarter net revenue is the highest since the second quarter of 2018, largely reflecting an enhanced focus on logistics that successfully reduced on-site concentrate inventories. Net sales also include a positive provisional pricing adjustment on zinc sales of $5.7 million on the back of stronger commodity prices. Of course, with the high sales in quarter 1, we had about 175 million pounds of zinc provisionally priced at quarter end. Some of those sales closed in April already with others closing shortly. And April zinc price was slightly higher than the average March price. So there were only slight adjustments there. As the quarter progresses, we expect to get down to a more normal level. On the operating front, higher mill throughput and improved recovery shall offset slightly lower grades quarter-over-quarter, delivering total production in line with recent quarters.

Paging over to Slide 7. I'd say with just a recap of our 2019 consolidated production and cost guidance, which remains unchanged. We want to note that while quarter 1 was a strong quarter, we do expect some variability throughout the year. Our production is on track to achieve our guidance of 360 million to [just] over 400 million pounds payable zinc. [Recorded] grades at Rosh Pinah are expected to decline towards 8% over the remainder of the year, but we also expect to see great improvements at Perkoa in Q2 and throughput improvements obviously at Caribou.

On-site operating costs are similarly tracking well at the start of the year with consolidated cost at the bottom end of annual guidance. Relative to guidance, Santander and Rosh Pinah delivered site costs below annual guidance, with Perkoa at the bottom end of targeted range. Caribou was the highest expected, but it's forecast to come down over the course of 2019.

The zinc concentrate treatment charges, however, are substantially higher than 2018 and also in guidance was set at the start of the year, and this will add approximately $0.07 per tonne to cash costs for the year to be expected. The mines, as we've noted, are performing well, and once this -- terms are finalized, we're expecting corporate year-to-date results and provide updated operating cost guidance with our second quarter results. 2019 capital and exploration expenditure guidance remains unchanged.

Paging over to Slide 8. We want to highlight Trevali's strong financial position, certainly something that's standing as well for the company. We ended the first quarter with a healthy balance sheet, remaining focused on reducing debt levels, repaid $40 million in principal debt during the quarter, obviously reducing net debt and total debt by 18%, 23%, respectively. At the end of March, liquidity position remains strong with just below $170 million available and undrawn on our revolving credit facility. A reasonable portion of our sales were made at the end of the quarter with cash coming in early in April, so further improving our net debt position as we go into quarter 2.

We've also intermittently been active on our normal course issuer bid, buying back approximately 2.5 million shares so far this year. We will continue to monitor the zinc price and operating performance as well as our funding needs, and we'll decide accordingly if and how much we buy back.

That said, I will now pass over to Alex to make some comments on the zinc markets. Thanks, Alex.

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Alexander Terentiew, Trevali Mining Corporation - SVP of Corporate Development & IR [5]

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Thanks, Gerbrand. So this is on Slide 9. As we've noted, the zinc concentrate treatment charges have risen significantly since 2018, with market expectations now in the range of about $245 a tonne. That's up substantially from the $147 per tonne benchmark last year. But I think it's important to put the TC rise into context. If we look at the share of recovered zinc price that the miners and smelters get, it's a good graphic to look at, 2017 and '18 were perhaps anomalous and I'd say very much in favor of the miners. But if you look at historic ratios and the trend over the past 2 decades, despite the higher TCs this year, miners are still getting about 70% of the recovered zinc price, with the steel well above its historic ratio and in favor of the miners.

On the zinc market and price, LME inventories have been rising over the past couple of weeks, but inventories are still at historically very low levels. The market is anticipating higher treatment charges and a good zinc price to incentivize growth and refine output. Most of this growth is anticipated to come from China. China, which has the greater share of refining capacity of 40%, is, however, still strictly enforcing environmental compliance and limiting many of the smaller-scale smelters from operating. In Q1, Chinese refined output was actually down 9.7% year-over-year. So China continues to surprise the downside on supply, and overall, when we look at the market this year, we do see good support for prices at current levels.

And with that, I'll pass it over to Ricus to talk a little bit more about the operations.

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

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Thank you, Alex. And now the next couple of slides to give a little bit more detail on the specific operations.

Slide 11, we start with Rosh Pinah, Caribou and Santander all delivered higher zinc production over the last quarter. But Perkoa the exception, we had -- where we had the slowest part of the year due to declining rates. We originally anticipated mining higher grades in quarter 1 with lower grades in quarter 2, but with changes in slope sequencing, we now expect quarter 2 to have the higher grades.

On the cost front, the sites performed very well with 3 of the 4 mines delivering on-site operating costs per tonne at the bottom end of or below the annual guidance. Besides from an overall focus on cost control, improved planning across Pinah and blending of the ore and lower-than-expected underground water pumping rights at Santander helps keep costs down.

Costs at Caribou remained high but have come down from quarter 4. Also expected to decline over the course of 2019, and we saw things that -- it will be within guidance.

On the cash cost side, it's important to reiterate that the C1 costs at Perkoa and Rosh Pinah include the costs associated with sales of additional inventory, and this was then included and spread over the production numbers for the quarter.

Sales volatility has been high over the past 1.5 years, and we made substantial efforts to improve our focus on transportation and sales logistics and reduce inventories. Results have been positive with concentrated inventories significantly reduced at Perkoa and Rosh Pinah in the quarter, leading to strong quarterly sales of 125 million pounds of zinc.

Looking forward, a few key initiatives to highlight. Firstly, the heavy fuel oil power plant conversion at Perkoa is nearing completion and is expected to reduce operating costs once operational. Components for the mill upgrade at Rosh Pinah have been ordered and remain on track for installation in the second half of 2019 with concentrate [full to press] in Q4.

In the meantime, increased efficiencies continue to be realized from improving, planning or blending and great control strategies, and underground production development saw strong advancements in the quarter. The RP 2.0 optimization study is ongoing and is expected to be completed in the second half of 2019.

At Caribou, the mine is returning to normal production levels, and development rates have started to catch up to where we expect it to be. I also want to note the strong first quarter recoveries at Caribou in the quarter, which is sitting at [spend], and this was a record quarter for recoveries. Also the mill reliability has improved quite significantly, and that's been the outcome of a very strong focus on the maintenance -- scheduled maintenance. The mining review at Caribou is targeted to be completed later this quarter.

And lastly, at Santander, a water management optimization study is being undertaken. Expect this to be completed later this quarter. The mine is well positioned for the rest of 2019, with oil development in place for the remainder of the year.

I'll go to the next slide, moving to Slide 13. We wanted to give you a quick update on the exploration. In 2019, our focus remains primarily on identifying new orebodies in the vicinity of our current operations, but this is directed mainly at Perkoa and Santander. About 1/4 of our annual budget was spent in the first quarter, with additional spending above the $8 million budget possible contingent on results throughout the year. At Santander, we were successfully -- we successfully converted a portion of the pipe deposits to a 2.8 million tonne, 6.8% deep integrated results, and I believe their scope increases further. But more work needs to be done to confirm the economic potential. We have plans to test additional targets in the area pending approval of surface permits.

At Perkoa, we now have a strong team in place after building a team from scratch last year. We continue to conduct multidisciplinary geology, geochemical and geophysical surveys and have had success extending the depth of Perkoa deposits. We've also had some mineralization in regional targets, focusing along the 25-kilometer strike of Perkoa, which, as I stated, the Perkoa is not an isolated system.

So to wrap up on Slide 14, I want to once again reiterate how excited I am to be part of this company and building a world-class, strong mining company of the future. We started 2019 solidly and (inaudible) of operating and financial results that look healthy as well as a balance sheet that makes me feel quite confident that this company will go a long way.

Thank you again for listening, and thank you for taking the time to dial in. We are now going to open it up for questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Ralph Profiti from Eight Capital.

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Ralph M. Profiti, Eight Capital, Research Division - Research Analyst [2]

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Two for me, please, Ricus, if I may. The operating cost per tonne was a positive standout for me in the quarter. But I understand that there's a lot of moving parts in 2019. So in the context of this unit cost guidance that's currently out there for the year, can you talk maybe a little bit about the most impactful, say, 1 or 2 items in the offsite costs that's keep you in this -- that's keeping you in this $69 to $76 a tonne range and where this $0.07 a pound on C1 is coming from?

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

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Ralph, thank you for the question. Yes, if we -- I'll answer a part of it and I'll hand it over to Gerbrand to give a little bit more detail. It's really important for us to focus our attention on the costs that we control directly. So what I've seen in the first quarter is the ability for us to really start knuckling down and getting our arms around managing our costs on-site. We also started some very good work on focusing on the logistics side of our business, and you can expect us to do a lot more in that space in the coming quarters. The more offsite costs, I will ask Gerbrand to maybe give you a bit more flavor on this side.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [4]

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Thank you, Ricus. Ralph, just continuing on that front, so I mean we do expect to pay industry benchmark terms as we go into 2019, and obviously we've started providing for that in 2018 from a prudent point of view. We have assumed, like 2018, that 2019 indices will go up, unfortunately, not to the extent that it has actually turned out to be and still in the process of being finalized. Like Ricus said, the focus on our operating costs where we can make a significant impact on the costs, and we got a couple of projects ongoing at the moment that will start to deliver in the course of quarter 2 and for the rest of the year. And obviously, with that ongoing focus on manageable costs for the rest of the year, that is where most of our attention will go.

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Ralph M. Profiti, Eight Capital, Research Division - Research Analyst [5]

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Okay. Yes, very helpful. If I can ask a follow-up, are you currently being penalized for the higher iron content in the Perkoa concentrate? Is this still within spec? Or is this something that at some point is going to need to be addressed?

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

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I think, Ralph, we have certain specifications that we need to meet. We know that the future of the Perkoa orebody is -- will have some higher iron content, so it's quite prudent on us to just keep on focusing on getting the concentrate specs to where it should be. I think it will be possible to stay within the specifications that we need to. I don't see any big issues for us in the future in that space.

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Operator [7]

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Your next question comes from the line of Orest Wowkodaw from Scotiabank.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [8]

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Ricus, I wanted to get your view, coming in as a new set of eyes and new CEO, if you had a chance to really review the company's portfolio in terms of the 4 operating lines. And I'm wondering if you've -- if you're comfortable with the 4 assets that you have or whether you could see making some strategic changes with the asset base both in terms of potentially divesting any of the assets or maybe adding some new ones to the portfolio.

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [9]

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Thanks, Orest. I'm not surprised you asked that question. I'll start with the 4 assets we have. The great thing is they're all cash flow positive. And I think as we always will look at finding ways to improve them, I believe there are ways to even do better than what we have today with our current assets. I'm also going to take the next 90 days, I think is what MBAs tell you to do, the next 90 days to study the operations in more depths. We'll be taking -- and we started conversations at a Board level around where do we want to take Trevali. And you can expect me to come back to you in the next quarter or second half of this year with a review of the company. I'll make sure that you get a good sense of how I think about the different operations and how I think about the market and how I see the company going forward. But I'm very excited with the 4 operations we've got. They're cash flow positive. We've got great people working at those operations. We have a great management team here that are super keen to both the world-class business and there are so many opportunities that we can tap into in the next couple of quarters. So I can't really expand much more than that, but I'll leave it at that point.

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Orest Wowkodaw, Scotiabank Global Banking and Markets, Research Division - Senior Equity Research Analyst of Base Metals [10]

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Okay. Fair enough. We'll give you some time. And then just as a follow-up, the -- your cost guidance per tonne at Perkoa, I think, was $106 to $117, and you did $106 in Q1. Given that you're making changes to the power in Q2, what's going to drive those costs higher in the rest of the year? Or is that guidance likely to come down?

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

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Well, we said we're going to do update on guidance at the end of the second quarter. But even mining, they always go deeper, so I think you can expect us to -- the mine is not getting shallower, so we're going to be seeing high costs in that space. But I think if you look at what we've -- given the guidance, we've hit the bottom end of that. We know that the power plant is coming in, so that should be a little bit of a positive. But then you also go deeper, so that will be a negative again. So I think roughly where we are now, what we can tell you is it's the right space, and then we'll come back in the next quarter with some more detail on the cost guidance. Gerbrand, is there anything else you wanted to add?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [12]

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Maybe just as an additional on top of that. We're constantly looking, Orest, at improving costs at our sites, specifically Perkoa. There's definitely some opportunity, and something has started coming through early parts of quarter 2, a reduction on the underground power consumption overall, which is positive, something that we -- better than we anticipated. And obviously, the commissioning of the HFO plant is in progress. So certainly looking forward to a good cost performance from that specific side, but yes, we are consistently challenging inflationary pressures on-site in the West Africa.

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Operator [13]

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

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Stefan Ioannou, Cormark Securities Inc., Research Division - Analyst [14]

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Just 2 quick questions on 2 operations. On Santander, the costs look quite good. Was that largely just a reflection of the improved pumping? Or I mean now you're owner-operated there, and I know there was some talk about improving the power infrastructure. Is it all those things feeding in? Or should we expect to see even further cost improvements going forward?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [15]

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Stefan, Gerbrand here. I'll cover that one. We certainly have improved quarter. Management methods coming off in the first quarter, so has been looking very positive from that front. And we'll try and maintain that kind of operating procedure. But obviously, yes, there is opportunity, and we're continuing to work hard at those 4, Santander specifically.

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Stefan Ioannou, Cormark Securities Inc., Research Division - Analyst [16]

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Okay. Okay. Great. And then just over at Caribou, obviously, the -- it was good to see the recovery up towards at least in the high 70s range. Have you kind of -- do you think you've kind of cracked the nut now in terms of the winter conditions affecting recovery? Or is there still improvement there? Like was there something specific that helped you make that step function change? Or is there still more to do here?

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [17]

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I think the team did a really good job this winter. Just to give you a better sense, I used to run the [Arcadia] business up in the far north of Canada. And I can tell you the winter condition is very, very different to the rest of the year. So I was very impressed with what they've done through the winter. But it's -- [indiscernible] quality of water, and that seems to have improved quite a bit. There is also a lot to do with the maintenance and getting some stability in the plant because every time you stop a plant, you lose recovery on the (inaudible) startup and the shutdown. So that's definitely been able to improve the reliability of the plant, and I think you can expect that to roll through the rest of the year and to the next ones as well.

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Operator [18]

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Your next question comes from the line of Craig Hutchison from TD Bank.

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Craig Hutchison, TD Securities Equity Research - Research Analyst [19]

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Maybe just a follow-up question on Santander. I think CapEx guidance for this year was around $21 million. In Q1, you're, I think, just less than $3 million. Just given some of the improvements you've seen in terms of the water optimization management, do you think you're still going to be in sort of about $21 million for the year? Or can that number come in much later?

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

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Thanks, Craig. Yes, that's -- in mining, we are quite good at not spending capital in the first quarter and then catching up for the rest of the year. I'd love to see us change that over the next year or so and more and more consistently spend money on a certain profile. So my expectation is that we are supposed to stick within the guidance at all the operations in terms of capital spend.

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Craig Hutchison, TD Securities Equity Research - Research Analyst [21]

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So what would be the heavy quarter for the spend at Santander?

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [22]

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It's obvious. You would see -- normally, you would see these things ramp up gradually in second, third, fourth quarter. But I can promise you the one thing I'll be doing and I've started doing is getting very deeply involved in understanding what we're going to spend capital dollars on. And I want to be able to ensure that every single dollar is spent in the right place, gives us the right return both from a return side but also sustainability side because we don't want to end up starving the operations from capital and then end up paying for that in the future. So you can rest assure that I'll be looking at that in a lot of detail. Gerbrand, anything you wanted to add?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [23]

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Obviously, you already got the message from Ricus. We started implementing a process to enhance and optimize our capital spend and emphasis on actually spending our capital in the best places for us to return to the business.

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Operator [24]

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Your next question comes from the line of [David Cay], private investor.

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Unidentified Participant, [25]

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My question refers to the share buyback program. Specifically, you have committed -- I think it was $20 million to buy back the number of shares that would equate to that in the market value. Today, the shares are trading at $0.35. So my question is do you believe the shares are undervalued today at that price? And if so, why would you not commit more funds to buy back more shares?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [26]

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Thank you, David. I want to answer your question the best I can. Obviously, in terms of the NCIB, yes, we have communicated to the market that if we earmark $20 million over the course of 12 months plus/minus, we're certainly going to keep on continuing assessing that situation in terms of our current cash flow requirements, number one. The share price, like you said, we do believe is undervalued. And number three, in terms of commodity price outlook. And management will keep on addressing the NCIB on a daily, weekly basis, assessing it from that point of view. So still actively there, we're all looking at it and decisions will be made at the right time basically in a nutshell.

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Unidentified Participant, [27]

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Yes. I just -- I was looking at when you started the program to today, you probably bought back more shares at a higher price than what the shares are trading for today. So I don't -- I'm just trying to get my thoughts together on if you're buying back more shares at $0.45, $0.46 as opposed to $0.35, I just can't wrap my brain around that.

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [28]

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Exactly for that reason, David, that we are assessing it on a continuing basis. So obviously, we've got our eye out on the NCIB and what we'll do going forward.

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Unidentified Participant, [29]

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So I guess my last question is are you committed to buying back at least the $20 million that you have committed?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [30]

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Yes. We've -- the commitment was -- that we stated up to $20 million, so obviously considering the commodity prices, our share price as well as our future cash flow. So David, I think we'll stick to that as an answer and obviously continuously monitoring that.

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Unidentified Participant, [31]

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Yes. I'm just looking at the company trying to at least protect and ultimately enhance shareholder value here.

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

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Thank you, David. We -- I'll take that. It's -- I think Gerbrand explained that it's a process. We said we were going to be buying up to $20 million. It's -- we've not yet to fix stock at the lowest point, we just buy that and when it comes on to market. We put our views, as we said, on what the value of the company should be and that's why we're buying back stock at the moment.

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Operator [33]

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Your next question comes from the line of Oscar Cabrera from CIBC.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [34]

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Ricus, welcome. Good luck with the new job and look forward to hearing what updates you have later in the year. So I was wondering if you could comment on the focus that you're having on sales logistics contributing to stronger sales. Do you think that this can have an effect on your costs?

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [35]

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Thanks, Oscar. Thanks for the questions, and thanks for the well wishes. I -- so for me, when I say we're going to focus on logistics, we (inaudible) in the first quarter that we have the ability to clean out the stockpiles when we need to. It doesn't make any sense to have big stockpiles of products sitting around that you can sell. So it's important for us to move the stocks when we produce it. Part of what we need -- what you'll see us doing over the next coming quarters is a laser-like focus on understanding exactly what is where in our logistics system, both from a volume and a quality and a cost perspective. We will be utilizing our scale to get the best possible logistics, transport costs, scheduling costs, understanding exactly what the quality of the product is that we produce so that we can also negotiate the best possible cost from our customer. So I think to answer your question in a short way, yes, they will be -- there's really potential to reduce costs, but it is also just running a world-class business is what we want to set up in the logistics side.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [36]

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Okay. And then just following up on that, if I may. You talked about inventories at Perkoa and Rosh Pinah reduced to normal levels. What are those? And I guess what -- on your answer, you're suggesting that there's no seasonality on your operations in terms of just getting product out on your operations in Africa.

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

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Oscar, if I can comment here, it's Gerbrand here. Yes, these are sort of from -- in the value chain there is, I mean, a value or a total quantity of, say, between 25,000 and 35,000 tonnes in the system at all times. We've optimized that to a reasonable level now, and obviously, like Ricus said, we will keep on optimizing and pushing to improve on that front. But from now on in that inquiry, we're going to close -- track closer to sort of our production levels, and that's the aim. If there's any upside, we'll obviously be pushing that from an upcoming quarter point of view. But that's sort of average from an expectation point of view. As I said, we'll be tracking closer to production.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [38]

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Okay. No, that's helpful. And then lastly, on the upgrades in Rosh Pinah for filtration and grinding, do you expect any shutdowns for the balance of the year that may affect production?

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Gerbrand Van Heerden, Trevali Mining Corporation - CFO [39]

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So we'll -- in terms of the scheduled maintenance, Oscar, we will -- those will be aligned with the scheduled maintenance plan. So obviously, will be minimized as far as possible, but it's built into the plan for 2019 as it is. They're fully planned for.

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Oscar M. Cabrera, CIBC Capital Markets, Research Division - Research Analyst [40]

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And are these in the third quarter, second quarter, third or fourth quarter?

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [41]

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Third and fourth quarter.

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Operator [42]

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Your next question comes from the line of Jackie Przybylowski from BMO.

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Jackie Przybylowski, BMO Capital Markets Equity Research - Analyst [43]

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Welcome, Ricus, to the Trevali team. We look forward to working with you going forward. I just wanted to ask about the Rosh P study. I know it says in the MD&A that it's still on track for second half of '19. Just wondering, I know it would probably be a similar answer to what you gave Orest, but are you planning to look at the Rosh P study differently at all? Or do you anticipate that it's going to be completed according to the current plan?

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

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Thank you, Jackie. And yes, that is the beauty of the study. In fact, you actually have the ability to look at all bunch of different angles because it's the same problem. So yes, the study is underway. I'm actually on my way to Rosh Pinah next week, so I really look forward to talking to the team there and getting the best brains in the world to help us figure out what 2.0 for Rosh Pinah looks like.

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Jackie Przybylowski, BMO Capital Markets Equity Research - Analyst [45]

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Great. I was going to ask a different question actually. I was going to ask on Caribou. When we were on site in October, we saw some work being done Restigouche, Murray Brook and some of the other properties nearby. And I've noticed it's kind of quieted down on that front on the development of the -- on the satellite properties. And I was just wondering if you could make any comments on the timing for those.

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Ricus Grimbeek, Trevali Mining Corporation - President & CEO [46]

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Yes. I think when you go back to our presentation, you'll see that the first quarter, the focus of the exploration was really at Santander and Perkoa. But I was out at Caribou last week. Definitely, they -- we will be stepping that up in the next -- this quarter and the next few quarters, the exploration. And also coming back, as I said, I'm also going to come back in the next -- second half of the year with a review of the whole business, and that -- and Caribou will be included in that whole commentary.

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Operator [47]

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There are no further questions at this time. I will turn the call back over to the presenters.

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Alexander Terentiew, Trevali Mining Corporation - SVP of Corporate Development & IR [48]

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All right, guys. Well, thank you very much for dialing in. And we look forward to providing you with updates over the coming months.

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Operator [49]

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This concludes today's conference call. You may now disconnect.