Burkina Faso news sources report that two Trevali Mining (TSX: TV) executives were arrested in the country due to the tragic flooding at the Perkoa zinc mine that trapped and killed eight miners underground.
Newswire Anadolu Agency reported on Aug. 17 that two people, including the general manager of the Perkoa underground mine in the center-west of the country, have been arrested. The two managers had appeared before the Koudougou High Court and were remanded in custody pending a trial scheduled for Aug. 24, reported the state daily ‘Sidwaya.’
It is unclear what charges the Trevali employees stand trial for.
The Northern Miner has reached out to Trevali for comment but has not received a response by press time.
On Apr. 16, heavy rains outside the usual rainy season poured about 125 mm of rain in less than an hour, triggering flash floods that breached the open pit at Perkoa, located about 120 km west of the capital of Ouagadougou.
The company states on its website that it is working closely with Burkinabe authorities to investigate the cause of the flooding.
Mining and milling operations at Perkoa remain suspended for the foreseeable future, and the company has suspended its production and cost guidance for 2022 for the operation.
In a statement on social media on May 17, the Burkina Faso government confirmed that the rescue teams had found the refuge chamber empty. The eight miners have failed to reach the mine’s refuge chamber more than 500 metres below the surface.
As the water entered the open pit and underground mine, electricity and communications were lost. While most workers escaped, the company hasn’t been able to communicate with the eight missing workers.
Six of the eight missing men are from Burkina Faso, while the other two are from Tanzania and Zambia.
The rescue team and the company have been pumping water from the bottom of the mine at level 710 over the last month. The refuge chamber is located below level 520 of the mine.
The event has to date, cost Trevali more than US$15.2 million.
The Perkoa mine produced 316.2 million payable lb. of zinc in 2021 and generated the bulk of the company’s revenue. Trevali owns 90% of the mine, while Burkina Faso holds a 10% interest.
Meanwhile, the non-governmental organization MiningWatch Canada on May 26 lamented the seeming lack of accountability when Canadian miners operate abroad. It regularly criticizes Canadian mining firms for acting with alleged impunity abroad.
Burkina Faso’s Prime Minister Albert Ouédraogo had reportedly criticized the “irresponsibility” of the mine’s managers, stating that shortly before the accident, “dynamite was used on the open-air [part of the] mine, which weakened the [underground] gallery and enabled the flooding.”
MiningWatch Canada’s Jamie Kneen said in a statement: “From an engineering standpoint, if you’re a mining company, you have a pretty good idea of what the potential worst-case scenarios are, and whether you invest in the backup systems to deal with those emergencies is a management decision.”
Q2 results
Trevali also, on Aug. 15, reported its operating and financial results for the three months ended June, sending alarm bells ringing from financial analysts who have flagged significant uncertainty regarding the company’s balance sheet going forward.
Production came in at 34.5 million lb. zinc, 44.6% less q-o-q, reflecting the ongoing Perkoa suspension and poor performance at the company’s Caribou mine in New Brunswick.
With only one operation producing to plan, all-in sustaining costs climbed 32% sequentially to US$1.61 per pound. Zinc comparatively had an average LME price during the period of US$1.78 per pound.
Trevali has suspended production and cost guidance for the Caribou operation, citing that the entire operation was under review due to poor performance. It pointed the finger at low productivity rates and equipment and operator availability from the mining contractor.
The company has also suspended work on the mine’s rest-of-life plan.
Combined, the struggles at the two mines resulted in an impairment of US$23.7 million on the company’s assets during the quarter.
The top-line came in at US$52 million for the quarter due to these operational issues, compared with US$93.1 million in the first quarter, a 44.1% decline, resulting in a net loss of US$62.2 million for the quarter and adjusted EBITDA of US$9.2 million.
However, things get worse.
Trevali disclosed that it struggled to source additional financing because of the poor performances at key assets. With a planned expansion at the company’s Rosh Pinah mine in Namibia (RP2.0), the company needs extensive capital.
The higher cost profile set against softer zinc prices in the past several months sketches an uncertain path forward.
‘Significant uncertainty’
Trevali has estimated the RP2.0 expansion to cost about US$121 million, up from previous estimates, with the company still looking to source the final capex required to proceed with the development ahead of a construction decision expected this quarter.
More significantly, however, the company has debt due in September, for which it has been unable to source cover funding. The debt, comprising a US$111.9 million credit facility of which US$23 million remains undrawn, and a $13 million facility with Glencore (LSE: GLEN), amounts to US$97.2 million due next month – and for which the company currently has no means to pay.
The company missed a US$7.5 million prepayment this week, defaulting with its lenders and making it even more difficult to obtain future financing.
As of Jun. 30, the company reported cash of US$41.7 million, with total current assets of US$105.1 million. Total liabilities amounted to US$146.5 million.
BMO Capital Markets analyst Rene Cartier pointed out the results painted “significant uncertainty” for the company going forward.
“Caribou continues to run at a deficit for the fixed-price arrangement, and production and cost guidance have been suspended,” the analyst wrote in a note to clients.
“RP2.0 capital has increased with the financing initiative for the project and refinancing existing debt not advancing in a manner to allow refinancing completion prior to maturity (if at all),” wrote Cartier in an Aug. 19 note.
Outside of an ongoing strategic review, the company has guided the Rosh Pinah mine, forecasting between 62 and 66 million lb. of zinc, between 16 and 18 million lb. of lead, and between 168,000 and 178,000 oz silver.
The cash cost guidance has climbed to US84¢ and US90¢ per lb. of zinc, and AISC is expected to come in between US$1.22 and US$1.28 per lb. of zinc.
At 20.5¢ per share, the company’s Toronto-quoted equity has lost 90% in value over the past 12 months, giving it a market capitalization of $20.53 million.
Tragic all round. This was an unforeseen event, the type of criticism from groups like MineWatch do nothing to help investment in mining in the developing world where the investment is much need. The Perkoa mine was a trail blazer in that part of Africa and has shifted the quality of life of many in what is a very improvised area where malnutrition was rife…a pity this is not pointed out in the article