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Trevali Mining Corp
Symbol TV
Shares Issued 806,849,585
Close 2020-02-20 C$ 0.19
Recent Sedar Documents

Trevali Mining loses $35.41M (U.S.) in 2019

2020-02-20 20:23 ET - News Release

Mr. Ricus Grimbeek reports

TREVALI REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS, BEATS PRODUCTION GUIDANCE WITH RECORD PRODUCTION YEAR

Trevali Mining Corp. has released its financial and operating results for the three and 12 months ended Dec. 31, 2019. A strong focus on operational improvements led Trevali to exceed on annual production guidance and deliver an annual production record of 417 million pounds of zinc at an all-in-sustaining cost (AISC) of $1.01 per pound. All financial figures are in U.S. dollars.

Financial and operational highlights:

  • Significantly improved safety performance with 46-per-cent reduction in total recordable injury frequency in 2019 compared with 2018;
  • Exceeded 2019 zinc production guidance by producing a record annual 417 million payable pounds of zinc (3-per-cent increase on 2018). Total 2019 lead and silver production also exceeded guidance (21-per-cent and 15-per-cent increase, respectively, on 2018);
  • Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $106.9-million ($20.4-million during Q4 2019) and annual operating cash flows of $111.9-million (2018: $119.0-million), which facilitated voluntary debt repayments of $69.5-million during 2019;
  • Successful completion of the Rosh Pinah filtration and grinding upgrade project on schedule and on budget;
  • The T90 program has identified $42-million of the $50-million targeted sustainable efficiencies, $14-million of which have been implemented and will be realized on a continuing annual basis at end of 2019, as part of the goal to achieve an AISC of 90 cents per pound by the beginning of 2022;
  • Advanced the RP2.0 expansion project with the prefeasibility study now expected in Q2 2020;
  • Achieved record zinc payable sales of 440 million pounds in 2019, surpassing the prior year by 9 per cent, reducing stock levels to 15,000 tonnes, a 40-per-cent reduction of zinc concentrate inventories from Q3;
  • A fixed zinc pricing arrangement at $1.10 per pound was entered into for a six-month period, for December, 2019, to May, 2020, equal to 70 per cent of the zinc concentrate produced at Caribou and Santander;
  • Discovered a third VMS (volcanic massive sulphide) lens at Perkoa named T3 and began the resource conversion program at the Santander pipe; exploration spend of $10.4-million achieving 41,000 metres drilled during 2019.

Ricus Grimbeek, Trevali's president and chief executive officer, commented: "We are pleased to report in 2019 we exceeded the top end of production guidance for all metals and broke company annual production records for both zinc and lead. Both cash costs and all-in-sustaining cost came in at the lower end of guidance despite higher-than-expected industry treatment charges demonstrating that our T90 business improvement program is firmly in place.

"While 2019 was a great year, we have much work to do to continue to transform Trevali by developing our operational platform, delivering our organic growth projects, deploying technology, and further integrating safety and sustainability into our business.

"Thank you to everyone that was involved in making 2019 a success and looking forward to keeping the momentum going in 2020."

This news release should be read in conjunction with Trevali's quarterly consolidated financial statements and management's discussion and analysis (MD&A) for the three and 12 months ended Dec. 31, 2019, which is available on Trevali's website and on SEDAR. Certain financial information is reported herein using non-IFRS (international financial reporting standards) measures. See the non-IFRS financial performance measures section in Trevali's Q4 and full-year 2019 MD&A.

                         Q4 AND FULL-YEAR 2019 SUMMARY RESULTS
      (in thousands of U.S. dollars, except per-share amounts and as indicated)

                                            2019       2018    Q4 2019    Q3 2019    Q4 2018

Zinc payable production (million lb)       417.4      406.9      104.8      106.8      102.7
Lead payable production (million lb)        50.3       41.7       13.8       13.6        9.7
Silver payable production (million oz)       1.5        1.3        0.4        0.4        0.3
Revenue                                $ 386,110  $ 464,347  $  91,466  $  87,135  $ 121,763
Adjusted EBITDA                          106,864    198,807     20,364     22,487     39,427
Net (loss) income                        (35,411)  (230,595)    (3,833)   (16,131)  (251,778)
Net (loss) income per share ($)        $   (0.04) $   (0.27) $    0.00  $   (0.02) $   (0.29)
Operating cost ($/t)                          67         68         67         63         76
C1 cash cost ($/lb)                         0.88       0.77       0.86       0.84       0.90
AISC ($/lb)                                 1.01       0.96       1.02       0.96       1.15
Sustaining capital expenditure            52,004     76,781     15,752     11,975     26,373
Exploration expenditure                   10,362     12,837      2,755      2,576      7,952

Conversion of tonnes to pounds, one tonne equals 2,204.62 pounds (lb).

Revenue amounts, including previous and comparative annual and quarterly amounts, have been 
restated to reflect the change in accounting policy set out in note 3 of the audited 
consolidated financial statements for the year ended Dec. 31, 2019.

Q4 and full-year 2019 results conference call

The company will host a conference call and presentation webcast at 1 p.m. Eastern Time on Friday, Feb. 21, 2020, to review the operating and financial results. Participants are advised to dial in five minutes prior to the scheduled start time of the call. A presentation will be made available on the company's website prior to the conference call.

Conference call dial-in details

Date:  Friday, Feb. 21, 2020, at 1 p.m. Eastern Time

Toll-free (North America):  1-877-291-4570

International:  1-647-788-4919

Webcast:  A webcast will be available.

T90 program

At the end of Q3 2019, Trevali launched the T90 business improvement program, which targets $50-million of annual sustainable efficiencies and a reduction in AISC to 90 cents per pound of zinc by the beginning of 2022. As of the end of 2019, $42-million in annual sustainable efficiencies have been identified and $14-million in sustainable efficiencies have been implemented and will be realized on a continuing annual basis.

Financial and operational summary

The attached table sets forth selected consolidated financial and operating information for each of the eight most recently completed quarters.

                                                   QUARTERLY SUMMARY
                              (in thousands of U.S. dollars, except per-share amounts)

                                   Q4 2019    Q3 2019    Q2 2019    Q1 2019    Q4 2018    Q3 2018    Q2 2018    Q1 2018

Revenues                          $ 91,466   $ 87,135   $ 82,297  $125,212    $121,763   $ 73,095   $151,593   $117,895
Zinc sales (million lb)                110        111         93        125        124         76        114         89
EBITDA                              19,611     12,945     (7,443)    46,674   (271,499)   (22,401)    58,785     58,546
Adjusted EBITDA                     20,364     22,487     17,558     46,455     39,427     21,249     83,039     52,427
Net (loss) income                   (3,833)   (16,131)   (31,563)    16,116   (251,778)   (30,846)    23,454     28,575
Net (loss) income per share -- 
basic and diluted                 $   0.00   $  (0.02)  $  (0.04) $    0.02  $   (0.29)  $  (0.04)  $   0.03   $   0.03
Adjusted (loss) income 
per share                         $   0.00   $  (0.01)  $  (0.01) $    0.02  $    0.01   $  (0.04)  $   0.04   $   0.02

Revenue amounts have been restated to reflect the company's change in accounting policy.

Revenues increased by 5 per cent from Q3 2019 due to higher quarterly lead payable sales as quarterly London Metal Exchange (LME) average zinc prices and zinc payable sales remained consistent. EBITDA and adjusted EBITDA were similar during the quarter due to minimal settlement mark-to-market adjustments.

Net loss in Q4 2019 was $3.8-million or nil per share, compared with a net loss of $251.8-million or 29 cents per share for the same period a year ago. The decrease in loss per share during Q4 2019 is largely attributable to the 2018 Q4 net non-cash impairment charge of $263.0-million primarily driven by the decline in the price of zinc.

Quarterly adjusted EBITDA has stabilized during 2019, with the main source of variations being commodity price fluctuations and improved logistics of concentrate inventories at the African operations. The company's mining activities are conducted throughout the year and there are no notable variations due to seasonality.

EBITDA was higher and net loss was lower for Q4 2019 compared with Q4 2018 despite significantly higher benchmark smelting and refining charges and lower zinc prices. The Q4 2019 negative settlement mark-to-market amounted to $300,000 compared with a positive settlement mark-to-market of $1.7-million during the same period in 2018.

                                  ANNUAL SUMMARY
    (in thousands of U.S. dollars, except per-share amounts and as indicated)

                                                       2019        2018        2017   

Revenues                                         $  386,110  $  464,347  $  328,614
Zinc sales (million lb)                                 440         403         244
EBITDA                                               71,787    (176,569)    100,960
Adjusted EBITDA                                     106,864     198,807     117,110
Net (loss) income                                   (35,411)   (230,595)     20,227
Net (loss) income per share -- basic and diluted $    (0.04) $    (0.27) $     0.03
Adjusted income per share                        $     0.00  $     0.12  $     0.07
Totals assets                                       744,570     825,740   1,180,159

Revenue amounts have been restated to reflect the company's change in accounting 
policy.

The trend analysis shows a large increase in zinc sales volumes during 2018, which is the first full year of operations following the acquisition of the Perkoa and Rosh Pinah mines in September, 2017. A net loss was reported in 2018 despite high revenues due to a net non-cash impairment charge of $263.0-million. Revenues for 2019 have decreased, despite increased sales volumes that were caused by the year-over-year decline in the price of zinc and higher benchmark smelting and refining charges.

                                 PRODUCTION AND SALES

                                  2019         2018     Q4 2019    Q3 2019    Q4 2018 
Production                                                                           
Ore mined (t)                 3,150,423   2,973,669     790,927    824,935    723,384
Ore milled (t)                3,234,358   3,054,768     822,278    838,543    737,496
Zinc head grade                    8.0%        8.3%        7.8%       7.9%       8.8%
Lead head grade                    1.5%        1.4%        2.0%       1.5%       1.2%
Silver head grade (oz/t)            1.4         1.2         1.3        1.3        1.1 
Zinc recovery                     87.2%       87.0%       88.2%      87.1%      85.9%
Lead recovery                     67.2%       65.1%       69.5%      69.6%      70.3%
Silver recovery                   46.2%       43.9%       47.4%      45.9%      48.5%
Zinc payable (million lb)         417.4       406.9       104.8      106.8      102.7
Lead payable (million lb)          50.3        41.7        13.8       13.6        9.7
Silver payable (million oz)         1.5         1.3         0.4        0.4        0.3
Sales                                                                          
Zinc payable (million lb)         440.1       403.3       110.4      111.1      124.1
Lead payable (million lb)          47.5        39.9        14.8       10.6       10.7
Silver payable (million oz)         1.4         1.2         0.3        0.3        0.3
Cost per unit                                                                  
Operating cost ($/t)                 67          68          67         63         76
C1 cash cost ($/lb)                0.88        0.77        0.86       0.84       0.90
AISC ($/lb)                        1.01        0.96        1.02       0.96       1.15

Quarterly zinc payable production reduced slightly (2 per cent) to 104.8 million pounds compared with Q3, following two consecutive record production quarters in Q2 and Q3, and a 2-per-cent increase from the comparative quarter in 2018. Compared with the comparative quarter of 2018, ore tonnes milled at Rosh Pinah, Perkoa, Santander and Caribou improved sequentially, with overall lower grades as planned due to lower-grade ore milled at all operations except Santander where higher grades are attributed to continued improvement with dilution control and to higher-grade ore access recently developed in accordance with the mine plan.

Zinc payable sales in Q4 2019 were 110.4 million pounds, representing a balanced sales quarter at 25 per cent of annual production. Cost per unit during the quarter increased compared with Q3 2019 due primarily to higher-than-average development metre costs at Caribou, as well as scheduled mill maintenance and implementation of improvements in the grinding and flotation circuits, to improve recoveries and concentrate grades at Santander. During 2019, sales of zinc payable increased due to improved logistics and to the successful sale of inventory backlog achieving a record low balance.

Initiatives across Trevali to improve shipping logistics during 2019 realized benefits with concentrate inventory levels steadily decreasing to the point of effectively just-in-time inventory levels at Dec. 31, 2019. A new zinc concentrate filter press was installed at Rosh Pinah during Q4 2019, which is expected to reduce the volatility of concentrate sales volumes and to reduce stock levels in conjunction with an improved concentrate logistics performance.

The 2019 costs were positively impacted by the decreasing operating cost trend and increased production. There is an overall net decrease in 2019 operating costs over the prior year except for the significantly higher benchmark zinc concentrate smelting and refining charges in 2019 compared with 2018, which had an impact of adding 10 cents per pound (13 per cent of C1 cash cost) to both C1 cash cost and AISC.

Outlook

Commodity markets

The company believes the outlook for the zinc market is supportive of higher prices. In 2019, global consumption of the metal was greater than what the market could supply for a fourth consecutive year. Over the past year, zinc smelters globally have been slow to respond to increasing smelting and refining charges. As a result, refined zinc inventories are currently at levels that have not been experienced since July, 2007, at a time when the zinc price was approximately $1.60 per pound. This deficit to refined zinc inventories occurred despite two years of demand contraction. Despite demand growth of the metal forecast to return in 2020 and 2021 at rates of 1.0 per cent and 1.6 per cent, respectively, the company believes the inventory deficit will continue, counter to what some market participants forecast. The combination of a relatively low zinc price, coupled with higher smelting and refining charges, will lead to a widening inventory deficit resulting in marginal and restarting mining operations curtailing or suspending production much more rapidly, and in higher volume than forecast by the market. This should provide fundamental support for a higher zinc price.

Operations review

Consolidated revenues

In addition to the company's operating results, financial performance is directly affected by several factors, including metals prices, foreign exchange rates and input costs, including energy prices. The average LME metal prices are included in the attached table; the Q4 2019 average zinc price increased slightly (2 per cent) compared with the previous quarter and remains volatile.

                             REVENUES AND SALES QUANTITIES
                    (in thousands of U.S. dollars, except as indicated)

                                     2019        2018       Q4 2019     Q3 2019     Q4 2018
Revenues                                                             
Zinc revenue                    $ 497,160   $ 526,177     $ 117,406   $ 116,771   $ 145,594
Lead and silver revenue            70,339      62,309        21,278      17,198      14,709
Smelting and refining costs      (181,389)   (124,139)      (47,218)    (46,834)    (38,540)
Net revenue                       386,110     464,347        91,466      87,135     121,763
Average zinc London Metal
Exchange (LME) price ($/lb)          1.16        1.33          1.08        1.06        1.19
Average lead LME price ($/lb)        0.91        1.02          0.92        0.92        0.89
Average silver 
London Bullion Market 
Association (LBMA) price ($/oz)     16.20       15.71         17.33       17.02       14.55
Sales quantities                                                                   
Payable zinc (million lb)           440.1       403.3         110.4       111.1       124.1
Payable lead (million lb)            47.5        39.9          14.8        10.6        10.7
Payable silver (million oz)           1.4         1.2           0.3         0.3         0.3

Revenue amounts and comparative quarter amounts have been restated to reflect the 
company's change in accounting policy.

All Trevali's zinc and lead concentrate sales contracts provide final pricing in a future month based primarily on quoted LME monthly average zinc and lead prices. The company recognizes revenues at the time of shipment based on estimated final pricing, with mark-to-market adjustments made each subsequent period until final pricing on the date of settlement. Concentrate smelting and refining charges and freight, included within smelting and refining cost, are negotiated at market-related rates.

Zinc sales volumes and zinc price both remained stable compared with the prior quarter, however, the net revenue decreases over Q4 2018 are due to lower sales volumes and zinc price. Benchmark smelting and refining rates have increased at an amount equating to an additional 10 cents per pound, with 2019 revenues before smelting and refining costs slightly below the prior year with the increase in volumes unable to offset the decrease in price.

                        SETTLEMENT MARK-TO-MARKET
                                                                  Zinc    Lead
 
Spot three-month future price as at Sept. 30, 2019 ($/lb)         1.05    0.95
Provisionally priced metal -- Sept. 30, 2019 (million lb)        151.5     3.5
Average three-month future price for September, 2019 ($/lb)       1.05    0.94
Average Q4 LME price ($/lb)                                       1.08    0.92
Provisionally priced metal -- Dec. 31, 2019 (million lb)         147.4     5.9
Average three-month future price for December, 2019 ($/lb)        1.03    0.87
Spot three-month future price as at Dec. 31, 2019 ($/lb)          1.04    0.88

Management estimates that each five-cent change in the zinc price per pound realized from the Dec. 31, 2019, provisional price recorded of $1.03 per pound would result in approximately $7.0-million on 2019 settlement mark-to-market and EBITDA.

The negative $300,000 settlement mark-to-market for Q4 2019 primarily reflects the decrease in the estimated final zinc pricing at Dec. 31, 2019, from $1.05 per pound to $1.03 per pound, compared with the average zinc prices during Q3 and Q4 2019 of $1.06 and $1.08 per pound, respectively. This is also impacted by the quantity of provisionally priced metal at various stages during the quarter and the timing of sales weighted toward the end of the quarter, with 56 per cent of Q4 sales occurring during the month of December.

A fixed zinc pricing arrangement was entered into in November, 2019, for 70 per cent of the zinc concentrate produced at Caribou and Santander and for a six-month period covering December, 2019, to May, 2020, at a price of $1.10 per pound. Management made a strategic decision to fix the zinc price at the two higher-cost operations when the opportunity arose with the temporary strengthening of the zinc price in November. This will reduce the quantity of provisionally priced metal in future quarters and reduce the impact of the settlement mark-to-market adjustments. As a result of the fixed pricing arrangement that covered December, 2019, net income for Q4 2019 was $700,000 higher.

Trevali is a global base metals mining company, headquartered in Vancouver, Canada. The bulk of Trevali's revenue is generated from base metals mining at its four operational assets. Trevali also owns an effective 44-per-cent interest in the Gergarub project in Namibia as well as an option to acquire a 100-per-cent interest in the Heath Steele deposit located in New Brunswick, Canada.

We seek Safe Harbor.

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