VANCOUVER, BC, Aug. 15,
2022 /CNW/ - Trevali Mining
Corporation ("Trevali" or the "Company") (TSX: TV)
(BVL: TV) (OTCQX: TREVF) (Frankfurt: 4TI) today released financial and
operating results for the three and six months ended June 30, 2022. All amounts herein are reported in
United States dollars ("US$")
unless otherwise specified.
FINANCIAL AND OPERATIONAL
HIGHLIGHTS FOR THE SECOND QUARTER OF 2022
- Zinc payable production of 34.5 million pounds due to
the suspension of operations at the Perkoa mine and production
challenges at the Caribou mine partially offset by positive
performance from Rosh Pinah.
- C1 Cash Cost1 and AISC1 of
$1.19 and $1.61 per pound, respectively, 12% and 32%
increases from the prior quarter due to a combination of factors,
including higher direct operating costs from continuing
inflationary pressures across the portfolio, lower payable zinc
volume contribution from Perkoa and Caribou, and higher than
planned sustaining capital.
- Caribou's full-year production and cost guidance has been
suspended and the operation is under review, following
continued operational performance issues due to low productivity
rates and equipment and operator availability, from the mining
contractor.
- Perkoa operations remain suspended following the
April 16th flooding event
that resulted in eight fatalities and the suspension of mining and
milling operations. Costs related to the flooding event for Q2
amount to $15.2 million. Operating
cost and production guidance at Perkoa remain suspended.
- A non-cash, after-tax impairment of $23.7 million was recorded on the Perkoa and
Caribou operations and near-mine exploration asset at
Perkoa.
- Revised full-year guidance for Rosh Pinah for 2022 with
production guidance of 62 – 66 million pounds of payable zinc, a C1
Cash Cost1 of $0.84 – 0.90/lb and AISC1
of $1.22 – 1.28/ lb.
- Q2 2022 revenues of $52.0
million, a decrease of 44% over the prior quarter, due
to the suspension of operations at Perkoa and Caribou operational
underperformance.
- Adjusted EBITDA1 of $9.2
million, a decrease of 78% over the prior quarter,
primarily due to the Perkoa mine's suspension of operation on
April 16, 2022 and Caribou
operational underperformance.
- Net Debt1 for Q2 2022 decreased from $81.8 million at March 31,
2022, to $59.4 million due
to the timing of collection of settlement receivables built up from
Q1 2022.
- Updated RP2.0
expansionary capital cost to $121
million with an estimated commissioning date of Q4 2024,
assuming financing is in place by the end of Q3 2022 and a full
funding decision is made. Guidance on the $20 million Early Works program included in the
$121 million, has been suspended and
is under review.
- Financing Initiative to fund the RP2.0 expansion project and refinance the
existing debt that matures in September of 2022, which had
progressed with several capital providers, including Standard Bank,
an Export Credit Agency, Glencore, and a metal streaming company,
has not sufficiently advanced in a manner that will allow for the
refinancing to be completed prior to the maturity of existing Debt
Facilities, if at all.
- A Strategic Review process was initiated in
Q2, in parallel to the Financing Initiative, to solicit
proposals for a broad range of transaction alternatives including a
potential investment in Trevali and the potential sale of all or
part of the business and assets of Trevali. Following recent
developments, there can be no assurance that the Strategic Review
process will progress in a fashion that will allow for the
culmination of a transaction in a timely manner or sufficient value
to refinance the Debt Facilities.
- Based on a review of its available liquidity, the Company
anticipates that it will not be in a position to make a mandatory
prepayment of approximately $7.5
million on its revolving credit facility when such payment
is due on August 17, 2022. The
Company remains in discussions with its senior lenders regarding
this anticipated breach of the terms and potential default of the
Facility.
|
|
YTD
Q2'22
|
YTD Q2'21
|
YoY
|
|
Q2'22
|
Q1'22
|
Q2'21
|
Q2'22 vs
Q1'22
|
Q2'22 vs
Q2'21
|
Zinc payable
production
|
Mlbs
|
96.8
|
162.2
|
–40%
|
|
34.5
|
62.3
|
87.3
|
–45%
|
–60%
|
Lead payable
production
|
Mlbs
|
13.4
|
15.6
|
–14%
|
|
6.8
|
6.6
|
9.7
|
3 %
|
–30%
|
Silver payable
production
|
Moz
|
0.2
|
0.4
|
–50%
|
|
0.1
|
0.1
|
0.3
|
0 %
|
–67%
|
Revenue
|
$
|
145,151
|
173,061
|
–16%
|
|
52,040
|
93,111
|
101,105
|
–44%
|
–49%
|
Adjusted
EBITDA1
|
$
|
50,621
|
56,533
|
–10%
|
|
9,192
|
41,429
|
32,042
|
–78%
|
–71%
|
Operating cash flows
before
working
capital
|
$
|
25,088
|
48,982
|
–49%
|
|
(21,303)
|
46,391
|
33,530
|
–146%
|
–164%
|
Net (loss)
income
|
$
|
(42,154)
|
1,367
|
–3,184%
|
|
(62,209)
|
20,055
|
3,877
|
–410%
|
–1705%
|
Net (loss) income per
share
|
$
|
(0.43)
|
0.01
|
–4400%
|
|
(0.63)
|
0.20
|
0.04
|
–415%
|
–1675%
|
C1 Cash
Cost1
|
$/lb
|
1.10
|
0.86
|
28 %
|
|
1.19
|
1.06
|
0.84
|
12 %
|
42 %
|
AISC1
|
$/lb
|
1.36
|
0.98
|
39 %
|
|
1.61
|
1.22
|
0.97
|
32 %
|
66 %
|
Sustaining capital
expenditure1
|
$
|
21,853
|
15,861
|
38 %
|
|
12,851
|
9,002
|
9,211
|
43 %
|
40 %
|
Expansionary
capital1
|
|
5,001
|
7,710
|
–35%
|
|
2,288
|
2,713
|
3,596
|
–16%
|
–36%
|
Exploration
expenditure
|
$
|
782
|
3,752
|
–79%
|
|
469
|
313
|
2,068
|
50 %
|
–77%
|
BUSINESS OVERVIEW
Trevali is a global base-metals mining company, headquartered in
Vancouver, Canada. The bulk of the
Company's revenue is generated from base-metals mining at the
90%-owned Perkoa mine in Burkina
Faso (which mine's operations are currently suspended
following a flooding event that occurred April 16, 2022), the 90%-owned Rosh Pinah mine in
Namibia and the wholly owned
Caribou mine in New Brunswick. In
addition, Trevali owns the Halfmile and Stratmat properties and the
Restigouche deposit in
New Brunswick, Canada, and the
past producing Ruttan mine in northern Manitoba, Canada. Trevali also owns an
effective 44% interest in the Gergarub project in Namibia. The shares of the Company 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.
_________________________
|
1
See "Use of Non-IFRS Financial Performance
Measures".
|
PERKOA MINE FLOODING EVENT
INVESTIGATION, ACTIONS UNDERTAKEN AND CURRENT STATUS
Intense and unseasonal rainfall on April
16, 2022, near the Perkoa mine created a flash flood that
entered the mine property and breached the mine's safety controls,
flooding the underground mine, preventing eight workers from
evacuating the mine. A summary of the results of Trevali's
investigation of the flooding event was previously provided to the
Burkina Faso Ministry of Mines and Quarries, and additional
information regarding actions taken and external expert analysis
was provided to the Ministry. The Company and its management team
have worked closely with the Burkinabe authorities throughout the
search and recovery efforts at the mine, with daily briefings at
the site as well as regular inspections of the operations. In
addition, pursuant to applicable Burkina
Faso law, an independent investigation into the flood event
was initiated by the Public Prosecutor. Trevali and its personnel
have been cooperating fully with the investigation which remains
ongoing. The bodies of the eight workers were recovered in May and
June and returned to their families, except for the two expatriates
that still need to be repatriated to their home country. All of us
at Trevali grieve their loss.
By late July, more than 165 million litres of water and more
than 9,000 cubic metres of solids had been removed from the mine.
Perkoa is now dewatered to the lowest mine level, Level 710, all
damaged equipment has been recovered, and all areas of the mine are
fully accessible. A significant amount of mine rehabilitation work
is already complete, including re-establishing the electrical and
communication systems, ventilation, egress and entrapment
infrastructure, backfilling of voids, inspecting the adequacy of
ground support after the flooding event and ensuring that there are
no underground stability concerns. All permits remain in good
standing.
Site investigation
learnings
Trevali and various expert consultants have investigated the
circumstances of the extreme rainfall event and have reached
several conclusions and the Company has committed to actions to
prevent the catastrophic outcome of any future potential flood from
occurring at Perkoa. While we are unable to prevent an extreme
weather event, the result of the investigation allows us to
determine some key lessons that can prevent similar catastrophic
results in the future, and which may also be applicable across the
mining industry:
- Historical climate data used for assumptions: Floods and
other extreme weather events are becoming more intense and frequent
as our climate warms. Historically, we have been able to predict
these extreme events by observing how often they occurred in the
past. The frequency and magnitude of past extreme events are no
longer a reliable indicator. We need to review and modify our
plans, procedures, and designs to ensure they can counter these new
risks.
- Design criteria: The flood protection design criteria at
Perkoa did not anticipate the intensity, scale, or timing of the
rainfall and flooding event. The mining industry and others are
making the transition to more robust designs for facilities,
especially tailings dams, by performing an analysis of consequences
to provide data for the design. It is important to validate the
current designs and conduct an analysis of structures and
facilities in place, and challenge this against the shifts that
climate change has brought.
- Data quality: Historically, many rainfall data
collection stations provide only daily returns, leading to
potential gaps in understanding of short-term intense rain events.
Quality data is needed to understand the potential for weather
events of short duration but of greater intensity, like the one
that occurred at Perkoa.
- Design and implementation of modern early warning and
response time systems: The flooding at the mine was caused by
extreme rain falling some distance from the site. To manage this
risk, early warning systems on-site that can predict off-site
events are needed. Modern detection tools based upstream of all
sites and connected to on-site warning systems will improve both
situational awareness and emergency response times.
Flood response actions taken to
date
The investigation of the flooding event has resulted in Trevali
taking several actions to minimize the impacts of future weather
events at Perkoa, and prevent any future flooding of the
underground operations, including:
- Raised the flood protection berm along the existing berm
alignment to protect the open pit against flooding for a
1:10,000-year event. The guidance to raise the berm follows expert
hydrologic modelling conclusions that indicated that the flooding
event occurred following an intense rainfall over a period of
approximately 45 minutes, which corresponds with a return period of
approximately 300 to 500 years;
- Installed an early warning system that provides updated weather
reporting, real-time weather and rain monitoring and real-time
stream water level indication with automatic triggers when there is
a potential flood risk;
- Improved emergency management plans with the inclusion of
predictive triggers such as: predictive alerting and smart IOT
sensors that detect changes in water levels and various weather
parameters (wind, rain, lightning, pressure) to trigger an
evacuation in advance of a significant weather event impacting the
site.
The Company is also reviewing its design infrastructure at its
other mine sites and will consider implementing similar measures if
deemed appropriate. Insurance claims have been filed related to
dewatering, rehabilitation, and the replacement of mining,
electrical, ventilation, and other equipment damaged from the mine
flood. Subject to approval by the Burkina
Faso authorities, the Company is undertaking precursory
activities to ensure operational readiness. The Ministry of Mines
and Quarries is currently reviewing the Perkoa restart plan.
Operating cost and production guidance at Perkoa remain
suspended.
________________________
|
1 See "Use
of Non-IFRS Financial Performance Measures".
|
GUIDANCE AND OUTLOOK
Although the performance of Rosh Pinah continues to be
consistent, the second quarter was challenging at Perkoa and
Caribou. The April 16th
flooding event that triggered an evacuation of the Perkoa Mine and
the suspension of mining and milling operations, global
inflationary impacts and continued challenges in contract miner
productivity and equipment and operator availability at Caribou
have resulted in lower production results and higher costs.
The Company is experiencing significant cost inflation since
initial guidance was provided in January, with the prices of key
consumables remaining materially above 2021 levels. Notable
examples include explosives, diesel, grinding media, and ocean
freight rates.
Operating cost and production guidance at Perkoa remain
suspended and Caribou's full year production and cost guidance has
been suspended and the operation is under review.
Management of the Company revises Rosh Pinah production and cost
guidance. Annual production guidance at Rosh Pinah Mine is now
estimated at between 62 – 66 million pounds of payable zinc
(previous: 58 – 66); guidance of 16 – 18 million pounds of payable
lead remains unchanged; and 168 – 178 thousand ounces of payable
silver (previous: 158 – 178). C1 Cash Cost1 guidance is
estimated between $0.84 –
$0.90 per pound of zinc (previous:
$0.71 – $0.78) and AISC1 is expected to range
between $1.22 – $1.28 per pound of zinc (previous: $1.07 – $1.17).
Revised Consolidated 2022 Production
Guidance2
Payable Production
by Asset
|
Actuals
|
Revised Guidance
2
|
Previous Guidance
2
|
Q1
2022
|
Q2
2022
|
FY
2022
|
FY
2022
|
Zinc Production
(Million lbs)
|
Perkoa (100%)
3
|
36.3
|
6.5
|
suspended
|
128 – 145
|
Rosh Pinah (100%)
3
|
17.1
|
16.7
|
62 – 66
|
58 – 66
|
Caribou
|
|
9.0
|
11.3
|
suspended
|
60 – 68
|
Total Zinc
Production4
|
62.4
|
34.5
|
|
247 –
280
|
Lead Production
(Million lbs)
|
Rosh Pinah (100%)
3
|
3.4
|
3.7
|
unchanged
|
16 – 18
|
Caribou
|
|
3.2
|
3.1
|
suspended
|
20 – 23
|
Total Lead
Production4
|
6.6
|
6.8
|
|
36
– 41
|
Silver Production
(Thousand ozs)
|
Rosh Pinah (100%)
3
|
41
|
43
|
168 – 178
|
158 – 178
|
Caribou
|
|
86
|
78
|
suspended
|
530 – 600
|
Total Silver
Production4
|
128
|
122
|
|
688 –
778
|
Revised 2022 Consolidated Operating Cost
Guidance2
Production costs
(US$/lb)
|
Actuals
|
Revised Guidance
2
|
Previous Guidance
2
|
Q1
2022
|
Q2
2022
|
FY
2022
|
FY
2022
|
C1 Cash
Cost1
|
|
|
|
|
|
|
|
|
Perkoa
3
|
1.10
|
1.44
|
suspended
|
0.93
|
–
|
1.01
|
Rosh Pinah
3
|
0.59
|
0.69
|
0.84
|
–
|
0.90
|
0.71
|
–
|
0.78
|
Caribou
|
1.74
|
1.79
|
suspended
|
0.85
|
–
|
0.93
|
Consolidated
|
1.06
|
1.19
|
|
|
|
0.85
|
–
|
0.93
|
AISC1
|
|
|
|
|
|
|
|
|
Perkoa
3
|
1.16
|
1.59
|
suspended
|
0.98
|
–
|
1.08
|
Rosh Pinah
3
|
0.80
|
1.24
|
1.22
|
–
|
1.28
|
1.07
|
–
|
1.17
|
Caribou
|
2.27
|
2.15
|
suspended
|
1.10
|
–
|
1.20
|
Consolidated
|
1.22
|
1.61
|
|
|
|
1.03
|
–
|
1.13
|
Sustaining capital guidance at Rosh Pinah was revised to
$27 million from $24 million and suspended at Perkoa and Caribou.
Planned $2.0 million in exploration
capital is unchanged while the Early Works program at Rosh Pinah is
under review and guidance suspended.
Revised 2022 Consolidated Capital Expenditure
Guidance2
Capital Expenditures
(US$m)
|
|
|
Revised Guidance
2
FY
2022
|
Previous Guidance
2
FY
2022
|
Perkoa 3 -
sustaining
|
|
|
suspended
|
7
|
Rosh Pinah 3
- sustaining
|
|
|
27
|
24
|
Caribou -
sustaining
|
|
|
suspended
|
12
|
Expansionary
|
|
|
suspended
|
20
|
Exploration
|
|
|
2
|
2
|
Consolidated
|
|
|
|
61 -
68
|
FINANCING INITIATIVE AND STRATEGIC
REVIEW PROCESS
The Company appointed Endeavour Financial in September
2021 to advise the Company on the formation of a lending
syndicate, coordinate lender due diligence and negotiate financing
documentation with the objective of providing a competitive
non-equity financing solution for the RP2.0 expansion
project at Rosh Pinah and refinancing both the existing Facility
and Glencore Facility which mature in September 2022. The Company is in negotiations
with several capital providers, including Standard Bank, an Export
Credit Agency, Glencore, and a metal streaming company for a
potential financing package (the "Financing Initiative").
Following recent developments, the Financing Initiative which
had progressed with several capital providers, including Standard
Bank, an Export Credit Agency, Glencore, and a metal streaming
company, has not sufficiently advanced in a manner that will allow
for the refinancing to be completed prior to the maturity of
existing Debt Facilities, if at all.
In May 2022, in parallel with the
Financing Initiative, the Company engaged a financial advisor to
conduct a strategic review process (the "Strategic Review") in
order to solicit proposals for a broad range of transaction
alternatives including a potential investment in Trevali and the
potential sale of all or part of the business and assets of
Trevali. Following recent developments, there can be no assurance
that the Strategic Review process will progress in a fashion that
will allow for the culmination of a transaction in a timely manner
or sufficient value to refinance the Debt Facilities.
________________________________________
|
1
See "Use of Non-IFRS Financial Performance
Measures"
|
2
2022 guidance constitutes forward-looking information; see
"Cautionary Note Regarding Forward-Looking
Statements".
|
3
Trevali's ownership interest is 90% of Perkoa mine and 90% of
Rosh Pinah mine.
|
4
Totals may not add due to rounding.
|
GOING CONCERN
IMPLICATIONS
As at June 30, 2022, the Company
had $64.7 million of available
liquidity, comprised of cash and cash equivalents of $41.7 million and $23.0
million of available liquidity from the revolving credit
facility (the "Facility"). As both the Facility and a second lien
secured facility agreement with Glencore of $13.0 million (the "Glencore Facility")
(together, the "Debt Facilities") are due for repayment at maturity
on September 18, 2022, a period of
less than twelve months, these balances are classified as current
liabilities.
Continuation as a going concern is dependent upon the Company's
ability to generate sufficient cash flows from operations to
sustain working capital requirements, and to source external
capital to refinance the Debt Facilities in order to avoid default
on maturity. Alternatively, sufficient funding will be required
until a strategic alternative can be arranged, if at all. As at
June 30, 2022, the Company's total
current liabilities exceeded its current assets by $41.4 million.
The Company appointed an external advisor in September 2021, with the objective of providing a
competitive non-equity financing solution for the RP2.0 expansion project at Rosh Pinah and
refinance the existing Debt Facilities (the "Financing
Initiative"). The Company has been considering several
opportunities for the financing package, including project finance
debt, subordinated debt, and a silver stream on Rosh Pinah's silver
production.
On April 16, 2022, a flash flood
occurred at the Perkoa mine in Burkina
Faso following a period of intense unseasonal rainfall.
After dewatering and search efforts all eight workers' bodies that
were trapped in the underground mine due to the flooding were
recovered. The Company incurred $15.2
million of direct and indirect costs between April 16 and June 30, 2022 related to
dewatering efforts, infrastructure refurbishment and construction
linked to repairs and rehabilitation at the mine. Additional costs
related to the flooding event subsequent to June 30, 2022, continue to be incurred.
As a result of the flooding event at Perkoa, the previously
announced targeted financing amount of $200 million could no
longer be relied upon and the total financing target was suspended
as of May 16, 2022. In addition, the
Caribou operation is under review following continued operational
and financial performance issues due to low productivity rates and
equipment and operator availability, from the mining contractor.
The financing requirement is expected to exceed the previously
targeted financing amount of $200
million.
Following recent developments, the Financing Initiative which
had progressed with several capital providers, including Standard
Bank, an Export Credit Agency, Glencore, and a metal streaming
company, has not sufficiently advanced in a manner that will allow
for the refinancing to be completed prior to the maturity of
existing Debt Facilities, if at all.
In May 2022, in parallel with the
Financing Initiative, the Company engaged a financial advisor to
conduct a strategic review process (the "Strategic Review") in
order to solicit proposals for a broad range of transaction
alternatives including a potential investment in Trevali and the
potential sale of all or part of the business and assets of
Trevali. Following recent developments, there can be no assurance
that the Strategic Review process will progress in a fashion that
will allow for the culmination of a transaction in a timely manner
or sufficient value to refinance the Debt Facilities.
Based on a review of its available liquidity, the Company
anticipates that it will not be in a position to make the mandatory
prepayment of approximately $7.5
million on its revolving credit facility when such payment
is due on August 17, 2022. The
Company remains in discussions with its senior lenders regarding
this anticipated breach of the terms of the Facility.
The Company's ability to continue as a going concern is
dependent upon its ability to generate cash flows from operations
and to secure a financing package consisting of debt financing,
equity financing and/or the sale of all or part of the business and
assets of Trevali. While the Company has been successful in
arranging financing in the past, it cannot be assured that the
current Financing Initiative will be successful and there is no
guarantee that the Company will ultimately be able to generate
sufficient positive cash flow from operations or that the Company
will find an acceptable strategic alternative. These circumstances
indicate the existence of material uncertainties that create
significant doubt as to the Company's ability to meet its
obligations when due, and accordingly, continue as a going
concern.
CONSOLIDATED FINANCIAL RESULTS
The following table summarizes the change in net income (loss)
YTD and Q2 2022 quarter:
|
|
YTD Q2'22
vs
YTD Q2'21
|
|
Q2'22
vs
Q2'21
|
Net income for
the 2021 period
|
$
|
1,367
|
$
|
3,877
|
Decrease in
revenues
|
|
(27,910)
|
|
(49,065)
|
Expense
components:
|
|
|
|
|
Decrease in Mine
operating expenses
|
|
18,084
|
|
34,608
|
Decrease in
General and administrative
|
|
856
|
|
(285)
|
Increase in
Impairment
|
|
(23,698)
|
|
(23,698)
|
Increase in
Other items
|
|
(4,929)
|
|
(27,338)
|
Increase in
Income tax expense
|
|
(5,924)
|
|
(308)
|
Net loss for the
2022 period
|
$
|
(42,154)
|
$
|
(62,209)
|
|
|
|
|
|
|
There was a net loss YTD Q2 2022 compared to a positive net
income in the corresponding period of 2021 due to a combination of
factors, including decreased revenue related to the suspension of
mining operations at Perkoa following the flood incident on
April 16, 2022 and no revenue from
Santander following the sale of the Santander mine in December 2021. These were partially offset by a
37% increase in the average zinc LME price and a higher volume of
lead payable sold due to the timing of shipments.
The decrease in mine operating expenses in YTD Q2 2022 compared
to the corresponding period of 2021 is primarily due to the
suspension of operations at Perkoa resulting in lower variable
mining and milling costs and lower units of production
depreciation, as well as no costs from Santander following the sale
of the Santander mine in December
2021 and partially offset by Caribou which was restarted in
Q1 2021 and incurred partial mine operating expenses.
The increase in impairment is a result of the flooding event of
the Perkoa underground mine on April 16,
2022, upon which the operations at the site were immediately
suspended. The flooding event triggered an impairment indicator as
of June 30, 2022, and, accordingly, the recoverable amounts of
the Perkoa cash generating unit ("CGU") were estimated and compared
against its carrying values. In addition, the carrying values of
exploration and evaluation assets that would be dependent on
processing ore at the Perkoa mill, and the T3 deposit, were
reviewed for impairment. A non-cash impairment charge of
$17.5 million was recognized at
Perkoa ($13.5 million related to
property, plant and equipment and $4.0
million related to near-mine exploration assets). A non-cash
impairment was also recognized at Caribou following the negative
cash flow for consecutive quarters.
Other items in YTD Q2 2022 include an increase in the settlement
mark-to-market loss on open invoices between February and
May 2022 with a quotational period
between June and September, due to a significant decline in the
commodity prices and Perkoa flood-related costs of $15.2 million.
There was a net loss Q2 2022 compared to a positive net
income in the corresponding period of 2021 primarily due to
decreased revenue related to the suspension of mining operations at
Perkoa following the flood incident on April
16, 2022 as well as no revenue from Santander following the
sale of the Santander mine in December
2021.
Mine operating expenses decreased in Q2 2022 compared to Q2 2021
due to the suspension of operations at Perkoa resulting in lower
variable mining costs and lower units of production depreciation,
and no costs from Santander following the sale of the Santander
mine in December 2021.
Other items in Q2 2022 include an increase in the settlement
mark-to-market loss on open invoices between February and
May 2022 with a quotational period
between June and September due to a significant decline in the
commodity prices, the Perkoa flood-related costs of $15.2 million and the related non-cash impairment
of $17.5 million and unrelated
non-cash impairment of $6.2 million
at Caribou.
Revenues
|
YTD
Q2'22
|
YTD
Q2'21
|
YoY
|
|
Q2'22
|
Q1'22
|
Q2'21
|
Q2'22
vs
Q1'22
|
Q2'22
vs
Q2'21
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Zinc revenue
|
$
|
162,955
|
202,700
|
–20%
|
|
56,424
|
106,531
|
111,899
|
–47%
|
–50%
|
Lead and silver
revenue
|
|
32,304
|
26,410
|
22 %
|
|
15,032
|
17,272
|
22,316
|
–13%
|
–33%
|
Smelting and refining
costs
|
|
(50,108)
|
(56,049)
|
–11%
|
|
(19,416)
|
(30,692)
|
(33,110)
|
–37%
|
–41%
|
Net revenue
|
$
|
145,151
|
173,061
|
–16%
|
|
52,040
|
93,111
|
101,105
|
–44%
|
–49%
|
Average zinc LME
price
|
$/lb
|
1.74
|
1.27
|
37 %
|
|
1.78
|
1.70
|
1.32
|
5 %
|
35 %
|
Average lead LME
price
|
$/lb
|
1.03
|
0.93
|
11 %
|
|
1.00
|
1.06
|
0.96
|
–6%
|
4 %
|
Average silver LBMA
price
|
$/oz
|
23.29
|
26.39
|
–12%
|
|
22.64
|
23.94
|
26.70
|
–5%
|
–15%
|
Sales
quantities
|
|
|
|
|
|
|
|
|
|
|
Payable zinc
|
Mlbs
|
99.7
|
158.9
|
–37%
|
|
35.6
|
64.1
|
86.4
|
–44%
|
–59%
|
Payable lead
|
Mlbs
|
20.9
|
15.2
|
38 %
|
|
9.3
|
11.5
|
13.9
|
–19%
|
–33%
|
Payable
silver
|
Mozs
|
0.3
|
0.4
|
–25%
|
|
0.1
|
0.2
|
0.3
|
–50%
|
–67%
|
The average zinc price in Q2 2022 as quoted on the LME of
$1.78 per pound increased by 5% when
compared to the previous quarter and 35% compared to Q2 2021. The
price of lead decreased by 6% when compared to the prior quarter
while it was 4% higher when compared to the comparative quarter in
2021. The silver price decreased by 5% over the prior quarter while
still 15% below the comparative quarter in 2021.
Payable zinc sales volumes decreased by 44% when compared with
the prior quarter to 35.6 million pounds primarily due to the
impact of limited production at Perkoa caused by the flood incident
that led to the suspension of operations for the majority of the
current quarter. Smelting and refining costs decreased by 37%
primarily due to 44% lower zinc volumes sold, partially offset by
the increase in the annual benchmark treatment charge rate in 2022
to $230 per tonne with a 5% escalator
above a zinc price of $1.72 per pound
(2021 benchmark rate: $159 per
tonne). The 2022 benchmark rate applies to payable zinc produced
during 2022; similarly, the 2021 benchmark rate applies to 2021
production, including amounts in inventory at December 31,
2021 and sold in early 2022.
Payable zinc sales declined compared to the corresponding
quarter in the prior year due to limited production at Perkoa
caused by the flood incident that led to the suspension of
operations for a major part of the current quarter, no sales from
Santander mine in 2022 as it was sold on December 3, 2021 and lower sales volumes at
Caribou and Rosh Pinah due to lower production.
Lead revenues of $9.3 million
decreased by 19% from the prior quarter as a result of the smaller
shipment that could be arranged and the 6% decrease in the lead
price. The YTD 2022 increased lead sales quantities were a result
of the timing of lead shipments from the Rosh Pinah mine, which
typically has two lead shipments annually, one which occurred in
Q1 2022 relating to lead produced in 2021 and the second
occurred in Q2 2022. By-product revenues decreased compared to the
corresponding quarter in the prior year due to the sale of
Santander mine in December 2021 and
lower lead production at the Rosh Pinah mine and the Caribou mine
during the current quarter.
Market Outlook
Although challenged by negative market sentiment, rising
interest rates, inflationary pressures and recession risk,
management of the Company believes that the outlook for the zinc
market is positive. The base metals sector performed poorly in the
second quarter. As measured by the LME Index, the base metal
complex declined by 25%. Despite headwinds, backlogs of work for
manufacturers in many parts of the world remain substantial and for
the year-to-date zinc demand has been robust according to Wood
Mackenzie. As highlighted in past quarters, management of the
Company believes the ongoing structural changes related to "green
energy" initiatives, combined with underinvestment in the mining
sector and a positive global capex cycle provide the Company with
opportunities to further develop the business.
Global manufacturing output has turned lower in recent months as
higher interest rates and business confidence wanes in the western
economies. Euro area manufacturing sector conditions continued to
disappoint at the end of the second quarter. The final reading of
the S&P Global Eurozone Manufacturing Purchasing Managers'
Index ("PMI") for June of 52.1, fell from 54.6 in May, its lowest
reading since August 2020 while the
indicator of sentiment as measured by business confidence slid to a
25-month low. The manufacturing PMI for Japan came in at 52.7 in June, a decrease from
53.3 in May and marking the seventeenth consecutive improvement in
the health of the manufacturing sector. Recall that a PMI reading
above 50 indicates growth or expansion. The Chinese manufacturing
sector registered the first expansion of output since February.
Thus, at 51.7 in June, the headline seasonally adjusted general
manufacturing PMI was up from 48.1 posted in the prior month; the
rate of increase was the strongest since May
2021. Chinese business confidence regarding the 12-month
outlook for output improved to a four-month high in June. Finally,
in the US, the seasonally adjusted US Manufacturing PMI posted 52.7
in June, down from 57.0 in May. Notably, this is the lowest level
since July 2020 as factory output
stagnates and new orders fall. The decrease in client demand was
the first in over two years. Firms stated that inflationary
pressures, weak client confidence in the outlook and supply-chain
disruption drove the decline.
As reported in the media in April, the annual benchmark contract
treatment charge for zinc concentrate was agreed to at $230 per tonne in 2022 versus $159 per tonne established in 2021. Unlike last
year however, the 2022 settlement includes an escalator of +5% for
an LME zinc price above $1.72 per
pound. Trevali's concentrate off-take agreements reference the
annual benchmark treatment charges. According to Wood Mackenzie,
the indicative spot treatment charge for June is $235 per tonne cost, insurance and freight into
China, higher than $175 per tonne observed in March, and within the
range of Chinese spot averages of $285 and $209 per
tonne in 2019 and 2020, respectively.
The zinc price began the quarter at $1.96 per pound and ended the quarter at
$1.47 per pound and traded in a very
wide $0.58 per pound range. During Q2
2022, the LME zinc price averaged $1.78 per pound, maintaining its improvement from
its pandemic low of $0.82 per pound
reached back in March 2020. LME
exchange inventories decreased to 81,075 tonnes by the end of Q2
2022 versus 139,950 tonnes on March 31, 2022. Shanghai Futures
Exchange zinc stocks decreased to 112,959 tonnes versus 176,177
tonnes at the end of Q1 2022. Total exchange stocks decreased into
quarter end, and now stand at the equivalent of just 5 days of
global consumption, very low by historical standards, and do not
provide much of a buffer against any further supply disruptions to
smelter production.
Relatively low refined zinc stocks and strong demand continue to
put upward pressure on spot zinc premiums which remain elevated. In
the US high freight costs and shortages of trucking capacity have
pushed spot premiums as high as 35 to 40
cents per pound, meanwhile in Europe they are in the territory of
$450 to $500 per tonne (20.4 to 22.7 cents per pound).
CORPORATE DEVELOPMENTS
On January 20, 2022, the Company
announced that Trevali was working toward securing project
financing for the RP2.0 expansion
project and refinancing both the existing corporate revolving
credit facility (the "Facility") and the secured facility agreement
with Glencore (the "Glencore Facility"), maturing in September 2022. In parallel, an early works
program commenced for RP2.0.
On January 24, 2022, the Company
announced preliminary 2021 full year and Q4 production results and
2022 operating, capital and exploration expenditure guidance.
On January 24, 2022 and
February 4, 2022, the Company
announced that the Perkoa mine in Burkina
Faso was unaffected by, and continued to closely monitor,
the ongoing political situation.
On March 31, 2022, the Company
reported its Mineral Reserves and Mineral Resources statements as
of December 31, 2021. Proven and
Probable Mineral Reserves increased 50% at the Rosh Pinah mine and
there was a 4.9 million tonne increase in the Company's
consolidated Proven and Probable Mineral Reserves, which was a 28%
increase over the year ended 2020. For further information, refer
to the March 31, 2022 press
release.
On April 7, 2022, the Company
announced the appointment of Derek du Preez as Chief Operating
Officer effective immediately.
On April 16, 2022, the Company
reported a flooding event at the Perkoa mine in Burkina Faso following intense and unseasonal
rainfall. The mine was evacuated, and mine rescue efforts were
immediately initiated and continue to be incurred.
On April 21, 2022, the Company
provided an update on search and rescue efforts at the Perkoa mine
and announced the suspension of production and cost guidance at the
Perkoa mine.
During May and June, the Company provided multiple updates on
the dewatering progress and search efforts at the Perkoa mine,
culminating with a final update on June 20,
2022, when the Company reported that the remaining missing
workers were found with no survivors.
On June 28, 2022, the Company
published its 2021 Sustainability Report.
On June 29, 2022, the Company
announced the results of the Annual General and Special Meeting of
Shareholders.
On August 3, 2022 the Company
announced that it had received credit approval from Standard Bank
of Namibia Limited and The Standard Bank of South Africa Limited
for a Senior Secured Financing Facility of $110
million to fund the expansion of the Company's Rosh Pinah Mine
in Namibia. Closing of the Senior Secured Financing Facility
is subject to a number of conditions, including the negotiation and
settlement of definitive loan facility and security documentation,
the execution and delivery of definitive documentation in respect
of the other elements of the comprehensive financing package,
including an intercreditor agreement between Standard Bank and the
various subordinated secured lenders, and the consent of and
release of existing security by Trevali's existing senior secured
lenders. While the Company is progressing these various
workstreams, there is no certainty that the conditions set out in
the Standard Bank credit approval will be satisfied in a timely
manner or at all. Negotiations for other components of the
comprehensive funding package for RP2.0 and the
refinancing of both the existing corporate revolving credit
facility and Glencore loan facility, which mature in September
2022, are ongoing.
Q2-2022 FINANCIAL AND OPERATIONAL
RESULTS CONFERENCE CALL AND WEBCAST CANCELLED
The Company has cancelled a conference call and webcast
presentation regarding the second quarter financial and operational
results. For additional detail, please see Trevali's quarterly
consolidated financial statements and management's discussion and
analysis for the three and six months ended June 30, 2022, which are available on Trevali's
website and the Company's profile on SEDAR at www.sedar.com.
About Trevali Mining
Corporation
Trevali is a global base-metals mining Company headquartered in
Vancouver, Canada. The bulk of
Trevali's revenue is generated from zinc and lead concentrate
production at its three operational assets: the 90%-owned Perkoa
Mine in Burkina Faso, the
90%-owned Rosh Pinah Mine in Namibia, and the wholly owned Caribou Mine in
northern New Brunswick, Canada. In
addition, Trevali owns the Halfmile and Stratmat Properties and the
Restigouche Deposit in New Brunswick,
Canada. Trevali also owns an effective 44% interest in the
Gergarub Project in Namibia. The
Company's growth strategy is focused on the exploration,
development, operation, and optimization of properties within its
portfolio, as well as other mineral assets it may acquire that fit
its strategic criteria. Trevali's vision is to be a responsible,
top-tier operator of long-life, low-cost mines in stable pro-mining
jurisdictions. Trevali is committed to socially responsible mining,
working safely, ethically, and with integrity. Integrating
responsible practices into its management systems, standards, and
decision-making processes is essential to ensuring everyone and
every community's long-term sustainability.
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.
Cautionary Note Regarding
Forward–Looking Information and Statements
This news release contains "forward–looking information" within
the meaning of Canadian securities legislation and "forward–looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995 (collectively,
"forward–looking statements"). Forward–looking statements are based
on the beliefs, expectations and opinions of management of the
Company as of the date the statements are published, and the
Company assumes no obligation to update any forward–looking
statement, except as required by law. In certain cases,
forward–looking statements can be identified by the use of words
such as "plans", "expects", "outlook", "guidance", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might", "will be taken", "occur" or "be achieved" or the negative
of these terms or comparable terminology.
Forward-looking statements relate to future events or future
performance and reflect management's expectations or beliefs
regarding future events including, but not limited to, statements
with respect to the Company's revised financial and operational
guidance for fiscal 2022, including the Company's forecast AISC, C1
Cash Costs, production and capital expenditures, growth strategies,
expected annual savings from capital projects, anticipated supply,
demand and market outlook for commodities, future commodity prices,
anticipated effects of commodity prices on revenues, estimation of
Mineral Reserves and Mineral Resources, the realization of mineral
reserve estimates, the timing and amount of estimated future
production, costs of production and capital expenditures, success
and restart of mining operations, environmental risks,
unanticipated reclamation expenses, title disputes or claims,
future anticipated property acquisitions, the content, cost, timing
and results of future exploration programs and life of mine
expectancies, the approval of up to 100% of the amount of a new
financing package, the completion and satisfaction of the condition
precedent to receive a new financing package, the securing of
additional financing from mining-focused alternative lenders,
including Standard Bank, an Export Credit Agency, Glencore and a
metal streaming company, before the maturity of the Debt
Facilities, if at all, the timing of the release of the PEA, the
proposed mining methods at Caribou and their anticipated effects on
recoveries and mining flexibility, the Company's planned
development activities at Caribou and their ability to extend the
Caribou mine life, the restart of processing operations at the
Perkoa and Caribou mines and the anticipated timing thereof, the
efficacy of the Company's implemented recommendations following the
incident investigation, the Company's assessment of the effect of
the flooding on the safety and structural integrity of the Perkoa
mine's underground areas, the delivery of critical mining equipment
to replace equipment damaged in the flooding incident, the
Company's expectations to fund its current liabilities from cash
flows generated by operating activities and to renegotiate the Debt
Facilities with current and new prospective lenders and the
Company's belief that it may default on the mandatory prepayment
and therefore breach the terms of the Facility. In certain cases,
forward-looking statements can be identified by the use of words
such as "plans", "expects", "outlook", "guidance", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates" or
"believes", or variations of such words and phrases or statements
that certain actions, events or results "may", "could", "would",
"might", "will be taken", "occur" or "be achieved" or the negative
of these terms or comparable terminology. By their very nature,
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to the fact that the
Company's cost, expenditure and production guidance may not
accurately estimate the Company's actual costs, expenditures or
production at the Company's projects; securing additional financing
and the timing thereof; the anticipated default on a mandatory
prepayment and therefore breach of the Facility; actual results of
current exploration activities; the flooding of the Perkoa mine may
have a material adverse effect on the mine and Trevali; the
Company's implemented recommendations following the incident
investigation may not guarantee sufficient protection; the timing
of the delivery of critical mining equipment to replace equipment
damaged in the flooding incident; changes in project parameters as
plans continue to be refined; the suspension of the Caribou mine's
full-year production and cost guidance; the review of the Caribou
mine's operations; the review of the Early Works Program; the
suspension of capital spending guidance of the Early Works Program;
future prices of zinc, lead, silver and other minerals and the
anticipated sensitivity of our financial performance to such
prices; possible variations in ore reserves, grade or recoveries;
results of current and planned exploration activities; dependence
on key personnel; potential conflicts of interest involving our
directors and officers; labour pool constraints; labour disputes;
availability of infrastructure required for the development of
mining projects; delays or inability to obtain governmental and
regulatory approvals for mining operations, including the restart
of operations at the Perkoa and Caribou mines, or financing or in
the completion of development or construction activities;
counterparty risks; increased operating and capital costs; foreign
currency exchange rate fluctuations; operating in foreign
jurisdictions with risk of changes to governmental regulation;
compliance with governmental regulations; compliance with
environmental laws and regulations; land reclamation and mine
closure obligations; challenges to title or ownership interest of
our mineral properties; maintaining ongoing social license to
operate; impact of climatic conditions on the Company's mining
operations; corruption and bribery; limitations inherent in our
insurance coverage; compliance with debt covenants; competition in
the mining industry; our ability to integrate new acquisitions into
our operations; cybersecurity threats; litigation; and other risks
of the mining industry including, without limitation, other risks
and uncertainties that are more fully described in the Company's
annual information form, interim and annual audited consolidated
financial statements and management's discussion and analysis of
those statements, all of which are filed and available for review
under the Company's profile on SEDAR at www.sedar.com. Although the
Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from
those described in forward–looking statements, there may be other
factors that cause actions, events or results not to be as
anticipated, estimated or intended. Trevali provides no assurance
that forward–looking statements will prove to be accurate, as
actual results and future events may differ from those anticipated
in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
Non-IFRS Financial Performance
Measures
The items marked with a "1" are non-IFRS measures. This press
release may refer 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. Trevali uses these measures internally to evaluate the
underlying operating performance of the Company for the reporting
periods presented. The use of these measures enables the Company to
assess performance trends and to evaluate the results of the
underlying business. Trevali understands that certain investors,
and others who follow the Company's performance, also assess
performance in this way.
The Company believes 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.
SOURCE Trevali Mining Corporation