VANCOUVER, British Columbia, July 31, 2019 (GLOBE NEWSWIRE) -- Trevali Mining Corporation (“Trevali” or “we”, “our”) (TSX: TV; BVL: TV; OTCQX: TREVF; Frankfurt: 4TI) today released financial and operating results for the three and six months ended June 30, 2019. A strong focus on operating efficiency delivered record quarterly zinc production of 105.2 million pounds and cash cost reductions over the prior quarter, firmly positioning Trevali to meet, or potentially exceed 2019 operating targets. All financial figures are in U.S. dollars.
Second Quarter Highlights:
(Compared to second quarter 2019, unless otherwise noted)
- Excellent safety performance with a 67% reduction in Total Recordable Injury Frequency in the first half of 2019 compared to prior year.
- Published our inaugural Sustainability Report on June 24, 2019, reflecting our commitment to transparency. We received a leading Environment, Social and Governance quality score rating from Institutional Shareholders Services.
- Record quarterly zinc production of 105.2 million payable pounds. Annual production trending to the high-end of 2019 guidance, with opportunities to exceed.
- Operating efficiencies delivered meaningful cost improvements. Costs outperformed expectations with 9% quarterly reduction of C1 Cash Cost1, offsetting increases in smelting & refining charges. Maintaining 2019 C1 Cash Cost1 and AISC1 guidance, trending towards the middle of previously guided ranges.
- Rosh Pinah 2.0 internal study completed and advancing to next phase; indicating potential for strong IRR and up to 50% increase in output.
- Net debt1 reduced by $26.9 million during the quarter. Continue to maintain a strong balance sheet with net debt reduced to $34.8 million at June 30, 2019.
- Zinc Spot Price Adjusted EBITDA1 of $7.0 million (Adjusted EBITDA1 is ($0.3) million) during the second quarter impacted by lower sales volumes of 93.2 million pounds of zinc payable and build-up of 5.3 million pounds of inventory; June 30, 2019 zinc monthly average spot price = $1.18 per pound.
- Derek du Preez appointed to the new position of Chief Technology Officer, effective July 29, 2019, and Amber Johnston-Billings appointed to the new position of Chief Sustainability Officer, effective September 9, 2019.
Ricus Grimbeek, Trevali’s President and CEO commented, “With record production results for the quarter, we are well-positioned to meet our annual operating targets. Despite the higher-than-anticipated 2019 zinc concentrate treatment charges, on-site costs for the quarter were below budget and we are targeting full-year AISC1 to be in the middle of the previously guided range – a testament to our team’s focus on operating discipline.”
“Since joining Trevali as President and CEO in April 2019, I have visited all four of our mines and met our operations staff and many key stakeholders. I am convinced more than ever that there is tremendous, unrealized potential at Trevali. Our plan to develop Trevali into the best, medium-sized underground mining company can be realized. We are raising our standards and improving our operational excellence in order to become a world-class sustainable mining company. As we proceed down this path, we will create significant value for our shareholders, employees, local governments and communities and our business partners,” added Ricus.
This news release should be read in conjunction with Trevali’s quarterly consolidated financial statements and management’s discussion and analysis for the three months ended June 30, 2019, which is available on Trevali’s website and on SEDAR. Certain financial information is reported herein using non-IFRS measures. See Non-IFRS Financial Performance Measures below and in Trevali’s accompanying Q2-2019 Management’s Discussion and Analysis.
Q2-2019 Results Conference Call
The Company will host a conference call and presentation webcast at 11:00AM Eastern Time on Thursday, August 1, 2019 to review the operating and financial results. Participants are advised to dial in five minutes prior to the scheduled start time of the call. A presentation will be made available on the Company’s website prior to the conference call.
Conference call dial-in details:
Date: Thursday, August 1, 2019 at 11:00AM Eastern Time
Toll-free (North America): 1 (877) 291-4570
International: +1 (647) 788-4919
Financial and Operational Summary
The following table sets forth selected consolidated financial and operating information for each of our eight most recently completed quarters:
|Zinc payable production||Mlbs||205.8||202.6||2%||105.2||100.6||103.9||5%||1%|
|Lead payable production||Mlbs||22.9||22.8||0%||11.4||11.5||10.5||–1%||9%|
|Silver payable production||Moz||0.7||0.7||0%||0.3||0.4||0.3||–25%||0%|
|Net (loss) income||$||(15,447||)||52,030||–130%||(31,563||)||16,116||23,454||–296%||–235%|
|Net (loss) income per share||$||(0.02||)||0.06||–133%||(0.04||)||0.02||0.03||–300%||–233%|
|C1 Cash Cost1||$/lb||0.90||0.74||22%||0.86||0.95||0.68||–9%||26%|
Despite the 2% rise in quarterly average zinc prices in the second quarter, zinc prices declined significantly during May and June. The $0.15 per pound decline in the average 3-month future price of zinc from March to June, combined with the timing of sales year-to-date, resulted in a second quarter provisional pricing adjustment of ($17.1) million, of which $14.0 million is directly price-related and $3.1 million is volume-related. The spot to 3-month backwardation in the month of June was exceptionally large, resulting in a larger-than-expected provisional pricing adjustment on unsettled sales. IFRS requires the use of a forward price, however the impact of using the monthly average spot zinc price would have increased revenues by $7.3 million for both Q2 2019 and YTD. Additionally, the increase in 2019 zinc concentrate smelting and refining benchmark terms has already been provided for on 2019 production.
Net loss in the second quarter of 2019 was $31.6 million or $0.04 per share, compared to net income of $23.5 million or $0.03 per share, over the same period a year ago. While there were other offsetting movements in 2019, the decrease of income per share in the second quarter of 2019 can be attributed to lower sales volumes, a decline in the price of zinc during the quarter and the compounding effect of negative provisional pricing adjustments, as well as restructuring expenses. The slight shortfall in sales for the quarter is already well on track to be corrected during Q3, with a dedicated Marketing and Logistics function strengthening logistics within the group. Concentrate inventories at quarter end were higher than anticipated at Rosh Pinah due to elevated moisture levels necessitating additional drying time negatively impacting sales volumes. A new zinc concentrate filter press at the mine continues to be on track for installation by year end 2019 and is expected to reduce concentrate sales volatility.
The Company’s mining activities are conducted throughout the year, and there are no notable variations due to seasonality. The Company saw a step up in all metrics in the fourth quarter of 2017, which was the first full quarter of operations following the acquisition of the Rosh Pinah and Perkoa mines. From this point onwards, EBITDA1 and net (loss) income saw a period of stability until the third quarter of 2018 which was negatively impacted by a provisional pricing adjustment of $42.6 million and the fourth quarter of 2018 when a net impairment of $263.0 million was recorded.
EBITDA1 and net income (loss) for first quarter of 2019 was lower than the corresponding quarter from 2018, despite higher sales volumes, due to higher smelting and refining charges and lower zinc prices, while the second quarter of 2019 was additionally negatively impacted by a zinc provisional pricing adjustment of $17.1 million, of which $14.0 million is price-related and $3.1 million is volume-related.
|Zinc head grade||8.2||%||8.0||%||3%||8.2||%||8.2||%||7.9||%||0%||4%|
|Lead head grade||1.4||%||1.4||%||0%||1.4||%||1.5||%||1.3||%||–7%||8%|
|Silver head grade||(ozs/t)||1.4||2.7||–48%||1.3||1.4||1.5||–7%||–13%|
|Cost per unit|
|C1 Cash Cost1||$/lb||0.90||0.74||22%||0.86||0.95||0.68||–9%||26%|
Quarterly zinc payable production was 105.2 million pounds, a record for Trevali and a 5% increase from 100.6 million pounds in the previous quarter and 1% higher than Q2 2018. Ore tonnes milled at Perkoa, Santander and Caribou improved sequentially, with overall grades better than planned due to improved dilution control, primarily at Perkoa and Caribou.
Zinc payable sales in the second quarter were 93.2 million pounds, a 26% decrease from Q1 2019 that benefited from a catch-up on sales of 2018 concentrate inventory and 18% below Q2 2018. The lower sales volume due to a build-up during Q2 2019 of 5.2 million pounds of zinc payable valued at $6.2 million, using June 30, 2019 spot price, combined with a reduction in the price of zinc during the quarter and the corresponding impact on provisional price adjustments, negatively impacted revenues in the quarter. Cost per unit during the quarter have reduced compared to Q1 2019 which saw higher sales volumes distributed over lower production volumes increasing the cost per unit which are calculated on a payable production basis, thereby normalizing the YTD costs. YTD costs in the prior year are lower as they benefited from lower zinc concentrate smelting and refining rates and the release of provisions.
A reconciliation of Adjusted EBITDA1 from Q1 2019 to Q2 2019 is provided in the figure below. The negative $23.4 million provisional sales adjustment in Figure A represents the combined impact of a positive $5.7 million adjustment in Q1 2019 and a negative $17.1 million adjustment in Q2 2019, driven by an average zinc price decrease of $0.15 per pound during the quarter.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/31a2f1a0-87f6-46db-af22-760d8bc5ea61
C1 Cash Cost1 in Q2 2019 was $0.86 per pound compared to $0.95 per pound in Q1 2019 and $0.68 per pound in Q2 2018. The significant increase from Q2 2018 mainly resulted from the increase of industry benchmark zinc concentrate smelting and refining charges from $147 per tonne in 2018 to $245 per tonne in 2019 (equates approximately to $0.28 per pound). Relative to Q1 2019, the improvement in C1 Cash Cost1 reflects higher production volumes as well as fewer offsite costs associated with the lower sales volumes and a continued focus on operating efficiency. AISC1 was $1.00 per pound, a $0.07 per pound reduction from the prior quarter primarily for the same reasons that benefited C1 Cash Cost1.
In addition to our operating results, financial performance is directly affected by several factors, including metals prices, foreign exchange rates and input costs, including energy prices. The average LME metals prices are included below, while the Q2 2019 average zinc price increased 2% compared to the previous quarter, the price had been trending steadily downwards to a low at period end.
|LME Average||YTD |
|Zinc spot price||$/lb||1.24||1.48||–16%||1.25||1.23||1.41||2%||–11%|
|Lead spot price||$/lb||0.89||1.11||–20%||0.86||0.92||1.08||–7%||–20%|
|Silver spot price||$/oz||15.23||16.65||–9%||14.89||15.57||16.53||–4%||–10%|
Despite economic headwinds in recent months weighing on global zinc demand, which is forecast by Wood Mackenzie to contract by 1% in 2019, we believe the fundamental outlook for the zinc market is supportive of higher prices. Refined zinc supply continues to be constrained as smelter production in the first half of 2019 has been well below market expectations at the start of the year, which called for annual growth of over 6%. Zinc smelters globally continue to underperform due to the ongoing impact of production cutbacks in the face of the environmental regulations at Chinese smelters and a number of production issues at smelters in the rest of the world. As a result, 2019 global refined supply growth is now forecast by Wood Mackenzie at just 2%. Should the latest smelter production growth rates materialize, 2019 is still forecast to see another deficit in the refined zinc market. Additionally, the current zinc price volatility and weakness may limit supply growth from marginal and restarting operations, helping to remove additional supply. As a consequence, exchange inventories of zinc are forecast to remain at depressed levels for the remainder of the year, providing fundamental support to the zinc price.
The Company previously disclosed the effect of changes in the zinc price on the Company’s 2019 revenue and net income outlook, based on an assumed production of 401 million pounds of payable zinc, in our Management Discussion and Analysis for the year ended December 31, 2018. This sensitivity analysis has been updated to reflect the impact of the finalized increase in smelting and refining costs for 2019 which results in a decrease of $29 million in each of net revenue, EBITDA1 and net income.
Zinc concentrate industry benchmark smelting and refining charge terms for 2019 have not been finalized. However, terms are expected to be finalized shortly at market terms, in line with our expectations during Q1 2019 but above our expectations at the start of the year when 2019 cost guidance was declared. The higher off-site costs are expected to add $0.07 per pound of zinc payable sold. The Company has revisited the C1 Cash Cost1 and AISC1 guidance and concluded that, despite the unexpected increase, no changes are required to the original guidance. We maintain a strong focus on controlling operating costs, enhancing Trevali’s position to generate cash flow despite the recent decline in zinc prices. Given our results year-to-date, along with our expectations for the rest of 2019, full year AISC1 results are firmly on track to be within guidance, trending towards the middle of the ranges provided with an enhanced focus on optimizing our operations to world-class underground mines managed by superior skills and front-end technology.
|Provisional pricing |
|Lead and silver revenue||31,863||35,128||–9%||16,221||15,643||21,368||4%||–24%|
|Provisional pricing |
|Smelting and refining costs||(87,337||)||(61,224||)||43%||(42,157||)||(45,179||)||(32,130||)||–7%||31%|
|Average zinc LME price||$/lb||1.24||1.48||–16%||1.25||1.23||1.41||2%||–11%|
|Average lead LME price||$/lb||0.89||1.11||–20%||0.86||0.92||1.08||–7%||–20%|
|Average silver LBMA price||$/oz||15.23||16.65||–9%||14.89||15.57||16.53||–4%||–10%|
All of Trevali’s zinc and lead concentrate sales contracts provide final pricing in a future month (generally one to six months from the shipment date) based primarily on quoted London Metal Exchange (“LME”) monthly average zinc and lead prices. Trevali recognizes revenues at the time of shipment based on estimated final pricing, with mark-to-market adjustments made each subsequent period until final pricing on the date of settlement. Treatment charges and freight, included within smelting and refining cost, are negotiated at market-related rates.
Zinc sales volumes decreased during the quarter, but high sales in Q1 2019 due to timing and the catch-up of 2018 inventory resulted in a strong but normalized YTD. The strong sales YTD has helped offset the lower zinc price and increased smelting and refining rates, with YTD revenues 21% lower compared to the prior year.
|Spot 3-month future price as at March 29, 2019||$/lb||1.32||0.92|
|Provisionally priced metal – March 31, 2019||Mlbs||175.3m||5.1m|
|Average spot price for March 2019||$/lb||1.29||0.93|
|Average 3-month future price for March 2019||$/lb||1.28||0.94|
|Average Q2 LME price||$/lb||1.25||0.86|
|Provisionally priced metal – June 30, 2019||Mlbs||150.8m||2.8m|
|Average spot price for June 2019||$/lb||1.18||0.86|
|Average 3-month future price for June 2019||$/lb||1.13||0.86|
|Spot 3-month future price as at June 30, 2019||$/lb||1.13||0.87|
Trevali estimates that each $0.05 change in the zinc price per pound realized from the June 30, 2019 provisional price recorded of $1.13 per pound would have an average effect of approximately $7.0 million on 2019 revenues.
The negative $17.1 million provisional price adjustment for zinc ($14.0 million is price-related and $3.1 million is volume-related) in the second quarter of 2019 reflects the decrease in the estimated final pricing at June 30, 2019 compared to the average zinc price during the first quarter. A corresponding impact of the inventory sell down in the first quarter is a decrease in provisionally priced sales outstanding at quarter end to 150.8 million pounds.
Perkoa Mine, Burkina Faso
|Zinc head grade||14.2||%||14.8||%||–4%||14.8||%||13.5||%||15.2||%||10%||–3%|
|Zinc concentrate grade||49.6||%||51.0||%||–3%||49.3||%||50.0||%||50.1||%||–1%||–2%|
|C1 Cash Cost1||$/lb||0.96||0.76||26%||0.89||1.04||0.74||–14%||20%|
|Mine operating expenses||59,288||50,055||18%||25,473||33,814||26,336||–25%||–3%|
|Other expense (income) |
|Depreciation, depletion & |
Payable zinc production for the second quarter was 46.3 million pounds, in-line with the corresponding quarter in 2018, with production gains from higher plant throughput mostly offset by lower grades and recoveries. As expected, grades in the second quarter improved, benefiting further from improved dilution control with payable zinc production for Q2 2019 increasing by 19% over the previous quarter with production benefiting from a sequential improvement in milled tonnage, grade and recovery. Higher iron grades from the hanging wall ore continue to be encountered and is expected to impact mill performance for at least the remainder of the year.
C1 Cash Cost1 has increased by $0.15 per pound when compared to the corresponding quarter in 2018 reflecting the increase to industry benchmark zinc concentrate smelting and refining charges, higher volumes of concentrate trucking and higher production costs associated with increased mine production and mill throughput. The AISC1 increase of $0.13 per pound reflects these increased costs, offset by a decrease of $0.7 million in sustaining capital expenditure and lease payments when compared to the same period a year ago. C1 Cash Cost1 and AISC1 improved quarter-over-quarter reflecting fewer costs associated with the incremental sales that were made in the first quarter and higher production volumes.
2019 production and cost guidance remain unchanged. The heavy fuel oil power conversion plant has now been completed, on budget. Cost savings from the more efficient supply of power are anticipated to be realized from the third quarter.
Rosh Pinah Mine, Namibia
|Zinc head grade||9.2||%||7.8||%||18%||8.8||%||9.6||%||7.7||%||–8%||14%|
|Lead head grade||1.0||%||1.2||%||–17%||1.1||%||1.0||%||1.1||%||10%||0%|
|Silver head grade||(ozs/t)||0.4||0.4||0%||0.4||0.4||0.3||0%||33%|
|Zinc concentrate grade||49.3||%||47.4||%||4%||48.5||%||50.1||%||45.0||%||–3%||8%|
|Lead concentrate grade||35.7||%||40.8||%||–12%||38.6||%||32.9||%||35.0||%||17%||10%|
|C1 Cash Cost1||$/lb||0.78||0.70||11%||0.67||0.89||0.47||–25%||43%|
|Mine operating expenses||25,827||26,908||–4%||10,582||15,246||10,870||–31%||–3%|
|Other (income) expense |
|Depreciation, depletion & |
Payable zinc production for the second quarter was 24.0 million pounds, 15% higher than during the corresponding quarter in 2018 as higher grades were milled. Payable zinc production for the second quarter represents a 10% reduction from the previous quarter as grades declined per the Company’s expectations and prior guidance. Ore blending efforts to better manage grade and ore type continue to be successful, improving the process plant reliability. As per normal shipping schedules, lead concentrate was shipped in the second quarter.
C1 Cash Cost1 and AISC1 increased by $0.20 per pound and $0.19 per pound, respectively, when compared to the corresponding quarter in 2018 and reflects 62% lower by-product revenues due to a combination of price and volume decrease and the increase to industry benchmark zinc concentrate smelting and refining charges, offset by lower sustaining capital expenditures. C1 Cash Cost1 and AISC1 improved quarter-over-quarter, reflecting reduced offsite costs associated with the reduction in sales made during the second quarter, offset by higher sustaining capital expenditures.
2019 production and cost guidance remain unchanged. Zinc grades for the remainder of 2019 are expected to be approximately 8%, in-line with guidance disclosed at the start of the year. The new zinc concentrate filter press continues to be on track for installation by the end of the year and is expected to not only reduce concentrate moisture content, but also reduce concentrate re-handling costs and variability. The Rosh Pinah 2.0 (“RP2.0”) optimization feasibility study completion is targeted for Q2 2020. Opportunities for Trevali’s longest life mine to increase production, reduce unit costs, improve recoveries and concentrate grades continue to be evaluated as part of the RP2.0 study for up to a 50% increase in output.
Caribou Mine, Canada
|Zinc head grade||5.8||%||5.9||%||–2%||5.6||%||5.9||%||5.9||%||–5%||–5%|
|Lead head grade||2.4||%||2.3||%||4%||2.3||%||2.4||%||2.2||%||–4%||5%|
|Silver head grade||(ozs/t)||2.3||2.0||15%||2.2||2.5||2.0||–12%||10%|
|Zinc concentrate grade||46.7||%||46.9||%||0%||47.1||%||46.3||%||47.8||%||2%||–1%|
|Lead concentrate grade||39.0||%||37.5||%||4%||39.0||%||38.9||%||38.0||%||0%||3%|
|C1 Cash Cost1||$/lb||1.07||0.68||57%||1.09||1.06||0.64||3%||70%|
|Mine operating expenses||34,062||30,285||12%||16,553||17,509||15,723||–5%||5%|
|Other (income) expense |
|Depreciation, depletion & |
Payable zinc production for the second quarter was 18.0 million pounds, 12% lower than the corresponding quarter in 2018 because of lower mill throughput and grades, but in-line with the prior quarter as higher mill throughput and recoveries offset a slight reduction in grade. While milled tonnage improved quarter-over-quarter, the strike at the Belledune lead smelter temporarily impacted concentrate trucking capacity during the month of May, removing on-site storage capacity and necessitating a reduction in concentrate production. Mining activities in the quarter focused on completing rehabilitation, ensuring all active ore drives are safe and supported for the long term. The planned preventative maintenance strategy in the mill is proving to be successful, with every month in 2019 except for June a record month for zinc recovery when compared to previous years.
C1 Cash Cost1 and AISC1 increased when compared to the corresponding quarter in 2018, reflecting increased underground development and contractor costs, lower by-product revenues as a result of lower lead and silver prices and the increase to industry benchmark zinc concentrate smelting and refining charges. C1 Cash Cost1 and AISC1 were higher quarter-over-quarter due to extension of mining contractor services as well as the impact to production of the Belledune strike.
2019 production and cost guidance remain unchanged. Mill throughput is expected to improve in the third quarter, benefiting production and unit costs. A sound understanding of the geotechnical challenges has been established. The ground control failure modes have been quantified and actions plans are in place to mitigate these together with a focus on advancing development which was achieved during the quarter. Plans are now underway to commence trial mining of an alternative sublevel caving mining method. The trials will be conducted in areas currently not in the mine plan to ensure sufficient feed to keep the mill at full capacity. In addition to the trials, the extraction of sill pillars currently excluded from the reserves will be tested. As current mining rates are generating excess mill capacity of approximately 300 tonnes per day, alternative ore sources to utilize the spare capacity are being evaluated.
Santander Mine, Peru
|Zinc head grade||4.8||%||4.5||%||7%||4.8||%||4.9||%||4.5||%||–2%||7%|
|Lead head grade||0.8||%||0.5||%||60%||0.7||%||0.9||%||0.5||%||–22%||40%|
|Silver head grade||oz/t||1.2||0.9||33%||1.1||1.3||0.9||–15%||22%|
|Zinc concentrate grade||47.4||%||47.5||%||0%||47.0||%||47.8||%||47.5||%||–2%||–1%|
|Lead concentrate grade||50.7||%||49.6||%||2%||48.1||%||53.1||%||49.6||%||–9%||–3%|
|C1 Cash Cost1||$/lb||0.77||0.81||–5%||0.81||0.73||0.64||11%||27%|
|Mine operating expenses||19,920||20,028||–1%||10,368||9,552||10,618||9%||–2%|
|Other (income) expense |
|Depreciation, depletion & |
Payable zinc production for the second quarter was 16.9 million pounds, a 3% improvement over the corresponding quarter in 2018 as higher grades were processed and in-line with the previous quarter. Higher iron content and harder ore from the Magistral Central zone impacted recoveries in the quarter and are expected to persist for the remainder of 2019.
C1 Cash Cost1 and AISC1 increased compared to the corresponding quarter in 2018 mainly due to the higher benchmark zinc concentrate smelting and refining charges and lower by-product revenues because of lower lead and silver prices. The quarter-over-quarter increase in C1 Cash Cost1 reflects lower by-product revenue due to lower lead and silver grades and prices while the incremental increase in AISC1 over the same period is attributed to higher sustaining capital expenditures.
2019 production and cost guidance remain unchanged. Slightly higher-than-expected zinc grades are anticipated to offset the impact of elevated iron levels and ore hardness. With the dry season now underway, underground water pumping requirements are forecast to remain below budgeted levels.
Exploration and Development
The primary goal of Trevali’s 2019 exploration program is to focus on near-mine exploration targets with the objective to discover new resources in proximity to existing mine infrastructure. The Company has committed to invest a minimum of $8.4 million which includes ground geophysical surveys, geochemical surveys, first pass air-core drilling and approximately 36,000 metres of diamond drilling from surface and underground primarily focused on the Perkoa and Santander mineral systems.
Exploration expenditures to the end of Q2 amounted to $5.0 million. The remaining budgeted $3.4 million will be spent in the second half of the year. A total of approximately 17,000 meters of exploration drilling has been completed year to date. Trevali expects to drill the full budgeted amount of 36,000 metres with additional drilling programs planned to start in the third quarter at Santander where drilling permits have now been received and at Rosh Pinah.
Perkoa Exploration, Burkina Faso
A new volcanogenic massive sulfide (“VMS”) horizon was discovered at Perkoa during Q2. Two underground holes intersected a VMS horizon referred to as T3, which is located approximately 200 metres in the hanging wall of the main Footwall lens as illustrated in the figure on the following page. The T3 horizon represents the third VMS horizon discovered at the Perkoa Mine. The discovery was made using a combination of geochemical and alteration vectoring and downhole electromagnetic (“EM”) survey. Drill hole PUX013 intersected the T3 VMS horizon, which consists of banded disseminated sphalerite, from a drill depth of 547m to 593m (46 metres intercept, 32 metres true width) while drill hole PUX020 intersected the T3 horizon from a drill depth of 551m to 573m (22 metres intercept, 16 metres true width). Assay results are pending. Both holes were collared from the deepest level of the mine which is currently located at 520m below surface and intersected the T3 horizon at a depth of approximately 900m below surface.
An additional 2,300 metres underground drilling program is currently underway to test the up-plunge extension of the T3 horizon and infill drill the hanging wall zone down to a depth of approximately 820 metres below the surface. A second underground drill rig is currently being sourced to drill test the down plunge extension of the T3 horizon. This additional drilling is expected to begin during the third quarter.
Regionally, exploration in the second quarter focused on targets located along the approximately 25-kilometre strike Perkoa Mine Horizon using a combination of geophysics (surface and downhole), geochemistry (air-core drilling) and diamond drilling. Several anomalies were targeted during the quarter. To the North-East of the Perkoa Mine, a series of geophysical anomalies referred to as L2T were drill tested with air-core and diamond drilling. To the South-West of the Perkoa Mine, the AF1, AF1 South and South-West anomalies were also drill tested with air-core and diamond drilling. The air-core programs and surface Fluxgate EM surveys were still on-going at the end of the quarter and are expected to provide more regional targets to be tested once the rainy season subsides in Q4.
Several zones of alteration hosted in volcaniclastic sequences interpreted to be the same horizon as the Perkoa Mine were intersected at multiple anomalies so far during the 2019 exploration program, including narrow VMS horizons at L2T1 and AF1. Along with the T3 discovery, these two regional discoveries bring the total known VMS systems at Perkoa to five, showing the potential of the region and Boromo belt to develop into a major VMS district.
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/658109fe-34e4-41c4-a40c-bb44990b2bd4
Rosh Pinah Exploration, Namibia
Drilling from underground continued during the second quarter at the Western Orefield and the AAB orebody targeting areas at depth for resource conversion. This resource conversion program will continue during the third quarter.
Surface Fluxgate EM surveys were conducted during the second quarter along the Northern Extension of the Western Orefield and along the Eastern Limb of the Rosh Pinah deposit. Both surveys have identified conductive plates which warrant more investigation. More EM surveys are planned for the third quarter on the Eastern portion of the Rosh Pinah deposit and surface drilling is scheduled to begin drill testing the Northern extension of the Western Orefield.
Santander Exploration, Peru
During the second quarter, surface Fluxgate EM surveys were conducted over previously identified anomalies located along strike of the Magistral deposit, with data compilation ongoing and new targets being generated ahead of the Q3 drilling programs. At the Santander Pipe, where a 2.8 million tonne, 6.8% zinc Indicated Mineral Resource is defined, drilling will resume in the third quarter to drill test the down-plunge and lateral extents of both flanks of the deposit. Exploration at the Santander Pipe is targeting an increase in Mineral Inferred Resources and converting additional Mineral Resources to an Indicated level in support of the ongoing evaluation of the deposit’s potential to contribute to production in future years.
Additional geophysical surveys are planned to be undertaken during Q3 at Santander to start probing the deeper potential of the property for potential porphyry and skarn type mineralization, including an air drone magnetic survey and a magneto-telluric survey.
Additionally, several high-priority drill-ready exploration targets (Puajanca, Blato and Blanquita) will also be tested during H2 2019.
Caribou Mine Exploration, Canada
A surface Resource conversion drilling program is scheduled to begin in Q3 to drill test the Northern Extension of the Caribou North Limb below the current development. The Northern Extension is currently estimated to contain grades higher than the Mineral Reserves cut-off grade. The Resource conversion drilling program combined with on-going cost reduction efforts could extend the mine life of the Caribou Mine.
About Trevali Mining Corporation
Trevali is a global base-metals mining company with four mines: the 90% owned Perkoa Mine in Burkina Faso, the 90% owned Rosh Pinah Mine in Namibia, the wholly-owned Caribou Mine in the Bathurst Mining Camp of northern New Brunswick in Canada, and the wholly-owned Santander Mine in Peru.
The shares of Trevali are listed on the TSX (symbol TV), the OTCQX (symbol TREVF), the Lima Stock Exchange (symbol TV), and the Frankfurt Exchange (symbol 4TI). For further details on Trevali, readers are referred to the Company’s website (www.trevali.com) and to Canadian regulatory filings on SEDAR at www.sedar.com.
Alex Terentiew – Senior Vice President, Corporate Development & Investor Relations
Phone: +1 (604) 638-5623
USE OF NON-IFRS FINANCIAL PERFORMANCE MEASURES
This new release refers to the following non-IFRS financial performance measures: Earnings before interest, taxes, depreciation and amortization (“EBITDA”), Earnings before interest and taxes (“EBIT”), Adjusted EBITDA, Adjusted Earnings per Share, Net debt, C1 Cash Cost and All-In Sustaining Cost (“AISC”).
These measures are not recognized under IFRS as they do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. We use these measures internally to evaluate the underlying operating performance of the Company for the reporting periods presented. The use of these measures enables us to assess performance trends and to evaluate the results of the underlying business of the Company. We understand that certain investors, and others who follow the Company’s performance, also assess performance in this way.
We believe that these measures reflect our performance and are useful indicators of our expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
EBITDA and EBIT
EBITDA provides insight into our overall business performance (a combination of cost management and growth) and is the corresponding flow drivers towards the objective of achieving industry-leading returns. This measure assists readers in understanding the ongoing cash generating potential of the business including liquidity to fund working capital, servicing debt, and funding capital expenditures and investments opportunities. EBITDA is profit attributable to shareholders before net finance expense, income taxes and depreciation, depletion, and amortization. EBIT is EBITDA after depreciation, depletion, and amortization. Other companies may calculate EBIT and EBITDA differently.
Adjusted EBITDA, Zinc Spot Price Adjusted EBITDA and Adjusted Earnings per Share
Adjusted EBITDA consists of EBITDA less the impact of impairments or reversals of impairment and other non-cash expenses or recoveries. The non-cash expenses and recoveries are removed from the calculation of EBITDA as the Company does not believe they are reflective of the Company's ability to generate liquidity and its core operating results.
Due to incongruence of the 3-month forward zinc price in relation to the spot LME zinc price, particularly in situations where backwardation and contango exist, the below Zinc Spot Price Adjusted EBITDA provides a better reflection of the valuation of the provisionally priced metal. It is calculated as Adjusted EBITDA plus/ minus the impact on revenue using the monthly average zinc spot price to mark the provisionally priced zinc metal rather than the monthly average 3-month forward zinc price.
C1 Cash Cost
This measures the cash costs to produce a pound of payable zinc. This measure includes mine operating production expenses such as mining, processing, administration, indirect charges (including surface maintenance and camp), and smelting, refining and freight, distribution, royalties, and by-product metal revenues divided by pounds of payable zinc produced. C1 Cash Cost per pound does not include depreciation, depletion, and amortization, reclamation expenses, capital sustaining and exploration expenses.
This measures the cash costs to produce a pound of payable zinc plus the capital sustaining costs to maintain the mine and mill. This measure includes the C1 Cash Cost per pound and capital sustaining costs divided by pounds of payable zinc produced. All-In Sustaining Cost per pound does not include depreciation, depletion, and amortization, reclamation and exploration expenses.
See “Cautionary Notes Regarding Forward-Looking Statements” below as well as “Use of Non-IFRS Financial Performance Measures” in our Management’s Discussion and Analysis for the three months ended June 30, 2019.
Cautionary Note Regarding Forward-Looking Statements
This news release contains “forward-looking information” within the meaning of the Canadian securities legislation and “forward-looking statements” within the meaning of Section 27A of the United States Securities Act of 1933, as amended, Section 21E of the United States Exchange Act of 1934, as amended, and the United States Private Securities Litigation Reform Act of 1995, all as may be amended from time. Statements containing forward-looking information express, as at the date of this news release, the Company’s plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results. Such forward-looking statements and information include, but are not limited to statements as to the Company’s growth strategies, expected annual savings from capital projects, demand for commodities, reduced interest payments, anticipated effects of commodity prices on 2019 revenues, expectations of positive operating cash flow and sufficient resources, estimation of Mineral Reserves and Mineral Resources, the realization of Mineral Reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, future anticipated property acquisitions, the content, cost, timing and results of future anticipated exploration programs, life of mine expectancies and limitations on insurance coverage.
These statements reflect the Company’s current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. If any assumptions are untrue, it could cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such statements. Assumptions have been made regarding, among other things, present and future business strategies and the environment in which the Company will operate in the future, including commodity prices, anticipated costs and ability to achieve goals.
Forward-looking statements are subject to known and unknown risks, uncertainties and other important factors that may cause the Company’s actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to joint venture operations; fluctuations in spot and forward markets for silver, zinc, base metals and certain other commodities (such as natural gas, fuel oil and electricity); fluctuations in currency markets; risks related to the technological and operational nature of the Company’s business; changes in national and local government, legislation, taxation, controls or regulations and political or economic developments in Canada, the United States, Peru, Namibia, Burkina Faso, or other countries where the Company may carry on business in the future; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits and the presence of laws and regulations that may impose restrictions on mining; diminishing quantities or grades of Mineral Resources as properties are mined; global financial conditions; business opportunities that may be presented to, or pursued by, the Company; the Company’s ability to complete and successfully integrate acquisitions and to mitigate other business combination risks; challenges to, or difficulty in maintaining, the Company’s title to properties and continued ownership thereof; the actual results of current exploration activities, conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors; increased competition in the mining industry for properties, equipment, qualified personnel, and their costs, as well as other risks as more fully described in the Company’s annual information form for the year ended December 31, 2018, which is available on the Company’s website (www.trevali.com) and filed under our profile on SEDAR (www.sedar.com). Investors are cautioned against attributing undue certainty or reliance on forward-looking statements.
Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.
Note to United States Investors
In accordance with applicable Canadian securities regulatory requirements, all Mineral Resource estimates of the Company disclosed or incorporated by reference in this news release have been prepared in accordance with Canadian National Instrument 43-101 - Standards of Disclosure for Mineral Projects, classified in accordance with Canadian Institute of Mining Metallurgy and Petroleum's “CIM Standards on Mineral Resources and Reserves Definitions and Guidelines”.
The Company uses the terms "Measured Mineral Resources", "Indicated Mineral Resources" and "Inferred Mineral Resources". While these terms are recognized by Canadian securities regulatory authorities, they are not recognized by the United States Securities and Exchange Commission. US investors are cautioned not to assume that any part or all of the material in these categories will ever be converted into reserves.
1 See “Use of Non-IFRS Financial Performance Measures”.
Source: Trevali Mining Corporation