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.