Trevali Mining Corporation (TV) Focuses on Caribou Commissioning Posts Q4 Results

On Wednesday, before the market opened, Trevali Mining Corporation (TSE:TV) posted fourth quarter of 2014 financial results Tuesday after market close. Detailed production volumes had been earlier released. Fourth quarter of 2014 adj. EPS of -$0.01 and cash flow per share of -$0.01 were modestly below our estimates and consensus at $0.00 and $0.01, correspondingly. The miss to our estimates owe somewhat to timing of sales, $1.0 million negative provisional pricing adjustments, and a greater-than-estimated depreciation charge which included a one-time reclassification of $0.5 million, counterbalanced by better-than-estimated operating costs.

Santander’s site operating cash costs of $0.37/payable pound of zinc equivalent production were an 8% quarter on quarter enhancement led by similar improvements on a per tonne milled basis. In fourth quarter of 2014 an average site cost of $43.10/t milled was achieved; well lower than the 2014 average of $47.33/t, and 2015 outlook for $48-$51/t. The Caribou mine and mill restart remains on schedule for a second quarter of 2015 commissioning, as was earlier stated, and in-line with our expectations. We look to the investor conference call for additional detail, and the status of capex.

2015 production and cash cost outlook stable – aiming to repeat 2014 at Santander. We have made no changes to our production or opex assumptions. Mill feed is expected to be sourced mainly from the Magistral North-Rosa and Magistral South zones during first half of 2015 with additional feed from the Central zone during second half of 2015. Head grades are expected to average 4.2%-4.4% zinc, 1.8%-2.1% drive, and 1.5-1.8 oz/t silver. A 6,000 m drill program is underway with the goal of converting inferred tonnes to a higher confidence category, as well as to continue to define the Magistral North-Rosa and Magistral Central-Fatima lead-silver-zinc zones at depth.

We rate TV “Sector Perform” with a $1.25 per share target price. Our target price perseveres to be based 50/50 on 5.5 times 2016 estimate Enterprise value/EBITDA (implying a $1.45 per share target price), and P/net asset value 8% of 0.8 times to mine site assets plus 1.0 times net cash items (implying a $0.96 per share target price). Our 0.8 times mine site net asset value8% target multiple is derived from the weighted average of 1.0 times applied to the producing Santander operation, 0.9 times to the soon-to-be restarted Caribou complex, and 0.3 times our DCF modeling of the Halfmile mine and the Stratmat deposit being developed into a 4,000 tpd operation by end of decade.


Michael Schroeder, CFA, is equity analyst and covers Services, Technology and Healthcare sectors. Prior joining Broadway Leader, Michael Schroeder worked with Wells Fargo. If you have a great story idea for Michael Schroeder, you can write at [].


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