Trevali ‘more than a one-trick pony,’ Haywood says

New Brunswick has given the green light to Trevali Mining (TV-T) to operate its Caribou mine and mill complex in the Atlantic province’s Bathurst mining camp, and the zinc-focused development company says it expects to fire up the mill early next year. The announcement comes the same week that Xstrata (XTA-L) officially closed its Brunswick mine in the province, which had operated for half a century and accounted for roughly 1.6% of the global supply of zinc, according to estimates from Haywood Securities.

The Vancouver-based junior is currently juggling two projects on as many continents and hopes to start production at both within the next 12 months. By the middle of this year, Trevali expects to ramp up its 100%-owned brownfield Santander zinc-lead-silver mine in Peru to 2,000 tonnes per day and expand it to a daily 4,000 tonnes in 2015. Santander is forecast to produce more than 90 million lb. of zinc and more than 35 million lb. of lead a year.

“With zinc production from two mines anticipated to ramp-up to +210 million pounds per annum by about 2016, we believe Trevali is poised to become a marquee mid-tier zinc producer in a market facing a significant medium-term supply issue,” Stefan Ioannou of Haywood Securities writes in a note. “This zinc market outlook is underpinned by a number of key mine shutdowns (accounting for about 11% of global supply) expected within the next three years and a lack of new significant advanced-stage projects positioned to replace them.”

And Ioannou notes that Trevali’s production profile extends beyond zinc. “Significant by-product lead and silver credits at Bathurst and Santander account for approximately 30% of the company’s life-of-mine gross revenue in our model and translate into a corporate life-of-mine average total zinc cash cost of US$0.60 per lb. net of by-product credits — positioning the company within the lower half of the zinc cost curve.”

Ioannou further points out that unlike copper, “the list of ‘good’ zinc-focused equity names can be counted on one hand, which will likely attract additional market attention to Trevali.”

The Toronto-based mining analyst speculates that the junior developer “could attract significant third-party interest.” The company already has concentrate off-take agreements lined up with Glencore and Xstrata, he reasons, and its production profile looks good, backed as it is with “high grades, low capital-cost intensity, relatively low operating costs, established infrastructure, and politically stable project addresses.”

Trevali’s 100%-owned Bathurst project is made up of three deposits: Halfmile, Caribou and Stratmat, as well as the Caribou mill complex. The junior picked up the former producing Caribou mine and mill complex complete with significant underground development workings and a 3,000-tonne-per-day processing plant through a $22-million acquisition (in the form of equity) in November 2012 of Maple Minerals, a privately held company in the province. The mine and mill, which will produce zinc, lead and copper concentrates, also came with a permitted tailings treatment facility.

The Caribou deposit remains open for expansion; the deepest underground intercept returned to date has been 34.77 metres grading 7.22% zinc, 2.69% lead, 0.25% copper, 76.8 grams silver per tonne and 2.19 grams gold per tonne.

Earlier this week, Trevali announced that it had finalized US$30 million of funding associated with its previously announced US$60 million senior debt and prepaid precious metals facility from RMB Resources, the resource financing division of South Africa’s FirstRand Group. The money will go towards repaying current debt, funding development at Caribou, and Halfmile mine in the Bathurst Camp, and general corporate working capital purposes. The company anticipates that the $60-million senior debt and prepaid precious metals facility will be approved subject to the receipt of positive ongoing technical studies relating to the commencement of production in New Brunswick.

Trevali initiated trial production from the Halfmile mine last year and produced saleable metal concentrates. Trevali plans to batch process ore from both Halfmile and Caribou at its Caribou mill. Provincial approval to operate the Caribou project authorizes Trevali to operate the underground mine, surface mineralized-material storage and crushing facility, the concentrator plant, mine-water treatment plant and tailings impoundment. The permit also includes land, buildings, processes and activities associated with the operation of the Caribou mine, and allows the company to build new structures in the currently disturbed area, Trevali says.

In the boardroom, Trevali has added veteran mining executive Peter Meredith as a director, replacing a resigning Ted Bassett. Meredith’s most high-profile role in recent years was serving as chief financial officer of Ivanhoe Mines, now called Turquoise Hill Resources.