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Trevali Releases Third Quarter 2020 Results; Achieves 13% Decrease to C1 Cash Costs and AISC
VANCOUVER, BC, Nov. 4, 2020 /CNW/ - Trevali Mining Corporation ("Trevali" or the "Company") (TSX: TV) (BVL: TV) (OTCQX: TREVF) (Frankfurt: 4TI) today released financial and operating results for the three and nine months ended September 30, 2020. The Company reported quarterly production of 74 million pounds of zinc at an all-in sustaining cost1 ("AISC") of $.91 per pound. Adjusted EBITDA1 and net income for the quarter was $11.2 million and $1.1 million respectively, both primarily due to business improvement initiatives and the increase in the zinc price.
FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR THE THIRD QUARTER 2020
(Compared to second quarter 2020, unless otherwise noted)
Excellent safety performance with 20% reduction to the Total Recordable Injury Frequency rate year to date when compared to the same period in 2019.
Perkoa, Rosh Pinah and Santander are all producing at full capacity. Santander restarted operations on July 15, 2020.
13% increase to zinc payable production and 13% decrease to costs. Achieved zinc payable production of 74 million pounds at a C1 Cash Cost1 of $0.81/lb and AISC1 of $0.91/lb.
$17.1millionof operatingcashflowsbeforechangesinworkingcapital,duetothe implementation of T90 initiatives and the recovery in commodity prices with all operations contributing positively.
Adjusted EBITDA1 of $11.2 million, an increase of $16.9M over Q2 due to an increase in the zinc price (quarterly average of $1.06/lb) despite reduced sales volumes due to timing of shipments.
Revenues increased by 17% contributing to positive earnings for the quarter, together with a reduction in operating costs, in particular freight rates.
Issued positive Pre-Feasibility Study ("PFS") for the RP2.0 Expansion project in August.
Increases production capacity at Rosh Pinah by 86% and significantly reduces operating costs.
Initiated a hedging program covering approximately 50% of zinc production (72.5Mlbs) over the period October 2020 to March 2021 through a combination of forward swaps and put options.
Net Debt1 of $129.9 million as at September 30, 2020 reduced by $10.8 million as at October 31, 2020, a result of the collection of receivables largely related to sales from Q3.
Updated 2020 guidance confirmed. Zinc production for H2 2020 between 148 – 163 million
pounds of payable zinc, C1 Cash Cost1 of $0.80 – $0.88/lb and AISC1 of $0.89 – $0.97/lb.
Ricus Grimbeek, President and CEO stated, "The team delivered a strong turnaround quarter across the portfolio. Perkoa and Rosh Pinah produced at full capacity while Santander had a successful restart of operations in July. I am proud of everyone for working safely and achieving our planned operational targets while implementing an additional $11 million of T90 business improvement initiatives. This brings the program total to $41 million to date and we are closing in on our targeted AISC1 of $0.90 per pound having achieved $0.91 this quarter.
The price of zinc also had a significant turnaround, ending Q3 up 17%, and continuing to climb due to a tightening zinc market. While we expect to see further gains in the zinc price, we took the opportunity to put in place a hedging program and designed it to protect the business against a potential downside movement while allowing for significant exposure to the upside.
With the third quarter behind us and with tailwinds in the form of a higher zinc price we expect the positive momentum to continue. We are on track to deliver our revised 2020 guidance and are projecting compliance to our financial covenants over the coming quarters once they are reinstated at the end of Q4."
This news release should be read in conjunction with Trevali's quarterly consolidated financial statements and management's discussion and analysis for the three months ended September 30th, 2020, which is available on Trevali's website and on SEDAR. Certain financial information is reported herein using non-IFRS measures; see Non-IFRS Financial Performance Measures below and in Trevali's accompanying Q3 2020 Management's Discussion and Analysis.
YTD YTD Q3'20 Q3'19
Mlbs 238.8 312.6 Mlbs 21.5 36.5 Moz 0.6 1.1
$ 144,798 294,644
YoY Q3'20 –24 % 74.1 –41 % 6.1 –45 % 0.1 –51 % 50,157
Q3'20 vs Q3'19 Q2'20
106.8 13% 13.6% 30% 0.4% 0% 87,135 17% -(5,709) -22,487 296% -(19,381) -(16,131) 106% (0.02) (0.02) 100% 0.93 0.84 -13% 1.05 0.96 -13% 7,033 11,975 -5% 421 2,576 -66%
Q3'20 vs Q3'19
-31% -55% -75% -42% -50% 107% 100%
-4%
-5% -44% -94%
Zinc payable production Lead payable production Silver payable production Revenue
Q2'20 65.8 4.7 0.1 42,689
Adjusted EBITDA1
Net (loss) income
(Loss) Income per share
C1 Cash Cost1
AISC1 $/lb Sustaining capital expenditure1 $ Exploration expenditure $
$ -(1,141)
$ -(193,864) -(31,578) –514 % 1,122 $ -(0.24) (0.04) –500 % 0.00
86,500
–101 % 11,214
$/lb 0.91 0.88 3 % 0.81 1.03 1.01 2 % 0.91
26,326 36,253 –27 % 6,665 3,728 7,607 –51 % 143
Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs
BUSINESS OVERVIEW
Trevali is a global base-metals mining company, headquartered in Vancouver, Canada. The bulk of the Company's revenue is generated from base-metals mining at its three operational assets: the 90%-owned Perkoa Mine in Burkina Faso, the 90%-owned Rosh Pinah mine in Namibia, and the wholly owned Santander mine in Peru. In addition, Trevali owns the Caribou mine, Halfmile and Stratmat properties and the Restigouche deposit in New Brunswick, Canada, and the past producing Ruttan mine in northern Manitoba, Canada. The Caribou mine was placed on care and maintenance on March 26, 2020. Trevali also owns an effective 44% interest in the Gergarub project in Namibia, as well as an option to acquire a 100% interest in the Heath Steele deposit located in New Brunswick, Canada. The shares of the Company are listed on the TSX (symbol TV), the OTCQX (symbol TREVF), the Lima Stock Exchange (symbol TV), and the Frankfurt Exchange (symbol 4TI). For further details on Trevali, readers are referred to the Company's website (www.trevali.com) and to Canadian regulatory filings on SEDAR at www.sedar.com.
T90 PROGRAM
In November 2019, Trevali launched the T90 business improvement program which originally targeted a reduction in AISC1 to $0.90 per payable pound of zinc by the beginning of 2022 through
achieving annual sustainable efficiencies of $50 million. In response to market conditions as a result of the COVID-19 pandemic, the scope of cost benefits under the T90 business improvement program have been accelerated and expanded.
During Q3 2020, the Company continued on its path to transform the business through the implementation and acceleration of the T90 program and additional one-time cost reduction initiatives. The result supports the acceleration of the T90 business improvement program to reach an AISC1 of $0.90 per pound by the beginning of 2021, a full year earlier than originally planned. As of the date of this MD&A, the program is forecast to deliver $43 million of recurring annualized efficiencies in 2020, of which $41 million has already been delivered.
Improvements delivered by the T90 program during Q3 2020 reduced AISC1 by approximately $0.08 per pound and increased revenues and Adjusted EBITDA1 by approximately $0.9 million and $6.8 million, respectively.
FINANCIAL AND OPERATIONAL SUMMARY YTD YTD
Q3'20 Q3'20 vs vs
Q3'19 Q2'20 Q3'19
Production
Ore mined
Ore milled
Zinc head grade Lead head grade Silver head grade Zinc recovery Lead recovery Silver recovery Zinc payable Lead payable Silver payable Cost per unit C1 Cash Cost1 AISC1
t t
(ozs/t)
Q3'20 Q3'19 YoY 1,832,860 2,359,496 –22 %
1,815,931 2,412,079 –25 % 8.1% 8.1% 0 % 1.2% 1.4% –14 % 1.0 1.4 –29 %
88.0% 86.8% 1 % 72.5% 66.4% 9 % 48.8% 45.8% 7 %
Q3'20 Q2'20
558,044 513,462 532,033 504,144
8.5% 7.9% 1.1% 0.0% 0.9 0.8
88.3% 88.5% 77.3% 75.9% 49.9% 54.6%
74.1 65.8 6.1 4.7 0.1 0.1
0.81 0.93 0.91 1.05
824,935 9 % 838,543 6 % 7.9% 8 % 1.5% 100 % 1.3 13 % 87.1% 0 % 69.6% 2 % 45.9% –9 % 106.8 13 % 13.6 30 % 0.4 0 %
0.84 –13 % 0.96 –13 %
–32 % –37 % 8 % –27 % –31 % 1 % 11 % 9 % –31 % –55 % –75 %
–4 % –5 %
Mlbs 238.8 312.6 –24 % Mlbs 21.5 36.5 –41 % Moz 0.6 1.1 –45 %
$/lb 0.91 0.88 3 % $/lb 1.03 1.01 2 %
Consolidated quarterly production increased by 13% in Q3 2020 to 74.1 million pounds of payable zinc as compared to 65.8 million pounds in Q2 2020 primarily due to the lower zinc head grades in Q2 2020 at Perkoa as lower grade stopes were mined in accordance with the mine plan. Zinc payable production reduced by 31% compared to Q3 2019 as Caribou's operations were on care and maintenance during 2020.
C1 Cash Cost1 of $0.81 per pound in Q3 2020 as compared to $0.93 per pound in Q2 2020 benefited from the cost savings and efficiencies of the T90 program, a reduction in freight rates and an increase in zinc payable production described above. These benefits have been offset by a reduction in by-product credits as there were no lead concentrate sales at Rosh Pinah as per
plan. Similar to C1 Cash Cost1, AISC1 has decreased by the same 13% when compared to Q2 2020 while the impact of the increase in capital expenditures was fully offset by the increase in production.
Revenues
Zinc payable sales Average zinc LMEprice EBITDA1
Adjusted EBITDA1
Net (loss) income (Loss) Income per share
basic and diluted
YTD YTD
Q3'20 Q3'19 YoY
$ 144,798 294,644 -51% Mlbs 228.7 329.6 -31% $/lb 0.97 1.18 -18%
$ (163,832) 52,176 -414%
Q3'20
50,157 65.3 1.06 15,368 11,214
1,122 0.00
Q2'20
42,689 72.3 0.89
(4,312) (5,709)
(19,381) (0.02)
Q3'19 87,135 111.1 1.06 12,945 22,487
(16,131) (0.02)
Q3'20 Q3'20 vs vs Q2'20 Q3'19
17% -42% -10% -41% 19% 0% -456% 19% -296% -50%
-106% -107% -100% -100%
(1,141) (193,864)
(0.24)
86,500 -101% (31,578) -514%
(0.04) -500%
Adjusted (loss) earnings
per share1 $ (0.04) 0.00 100% 0.00 (0.03) (0.01) 100% 100%
The increase in revenues in Q3 2020 to $50.2 million is attributable to the 19% increase in zinc price as compared to Q2 2020 as well as the decrease in freight rates, which is partially offset by the decrease in sales volumes as a direct result of the timing of shipments.
Adjusted EBITDA1 of $11.2 million improved from negative $5.7 million in Q2 2020 due to the increase in revenues discussed above and operating cost savings realizing the benefits of the T90 program. The $4.2 million difference between EBITDA1 and Adjusted EBITDA1 during Q3 2020 is primarily due to the positive settlement mark-to-market adjustment of $9.9 million, partially offset by other expense items which consist primarily of a non-cash loss on extinguishment of debt as a result of the Company renegotiating its revolving credit facility (the "Facility").
Market Outlook
The short-term outlook for the zinc market continues to be volatile as 2020 advances. At the start of the year and prior to COVID-19 being declared a pandemic, it was expected that the concentrate market would be in surplus over the coming years with demand for refined metal growing slightly in 2020 and refined stocks remaining below historic levels, lending support to zinc prices. Since the outbreak of COVID-19 the concentrate market is forecast to be in deficit for the full year 2020.
The rapid rise of the COVID-19 pandemic in Asia resulted in extended shutdowns of smelters and Chinese mine production. As Q1 2020 progressed, Chinese smelting production and economic activity increased from lows reached in February, while mine production curtailments resulting from measures to combat the spread of COVID-19 in Europe and the Americas accelerated and reached an estimated peak in April of 25% of global mine production.
While global smelting production was materially impacted in the first quarter of 2020, production capacity largely recovered to pre-COVID-19 levels early in the second quarter while mining operations were slower to restart. It was not until the end of June that the majority of mining operations that were suspended to control the spread of COVID-19 were in the process of restarting, however, flare-ups of COVID-19 at individual mines are ongoing and continue to put strain on the concentrate supply chain. This has led to a significant reduction in spot zinc concentrate treatment charges which have remained significantly below the annual benchmark reported in March at $300 per tonne. Trevali's concentrate off-take agreements reference the annual benchmark treatment charges. In September, the average imported zinc spot treatment charge for the month was reported to be $115 per tonne and is an important indicator as annual benchmark negotiations begin for 2021.
During Q3 2020, the London Metals Exchange ("LME") zinc price averaged $1.06 per pound for the quarter, continuing its recovery from its year low of $0.82 per pound reached back in March. The continued disruption to mine production should continue to provide fundamental support for zinc prices in the midterm as management believes demand will outweigh supply as global economic activity accelerates.
At the end of Q3 2020, total global exchange inventories increased by 61,000 tonnes to 281,000 tonnes or an estimated 7 days of global consumption, compared to Q2 2020. This inventory level is well below historical averages of 18 days of global consumption and is also supportive of higher zinc prices.
CORPORATE DEVELOPMENTS
In Q2 2020 and on July 31, 2020, the Company obtained waivers under the terms of its Facility to August 31, 2020. On August 6, 2020, further amendments to the Facility and a new credit facility with Glencore Canada Corporation, an affiliate of the Company's largest shareholder, Glencore plc
(collectively "Glencore") were announced. See "Liquidity and Capital Resources".
On August 25, 2020, the Company announced a positive PFS for Rosh Pinah Mine Expansion ("RP2.0") which would increase production capacity at Rosh Pinah by 86% and significantly reduce operating costs.
On August 28, 2020, the Company announced that Matthew Quinlan was departing as Trevali's Interim Chief Financial Officer ("CFO") and Brendan Creaney, the then Vice President of Investor Relations, had been appointed Interim CFO. The Company has engaged a search firm and the process to retain a permanent CFO is progressing.
On September 4, 2020, the Company announced the appointments of Nick Popovic and Aline Cote to the board of directors of the Company, replacing Chris Eskdale and Dan Myerson as Glencore nominees.
On October 9, 2020, the Company filed a preliminary short form base shelf prospectus related to the sale of up to C$100.0 million in aggregate, in one or more series or issuances of: common shares, debt securities, subscription receipts, share purchase contracts, warrants or units.
Q3 2020 Financial and Operational Results Conference Call and Webcast Details
The Company will host a conference call and presentation webcast at 1:00PM Eastern Time on Thursday, November 5, 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: Thursday, November 5, 2020 at 01:00PM Eastern Time Toll-free (North America): +1 (877) 291-4570
International: +1 (647) 788-4919
Webcast: http://www.gowebcasting.com/10951
ABOUT TREVALI
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 three operational assets: the 90%- owned Perkoa Mine in Burkina Faso, the 90%-owned Rosh Pinah Mine in Namibia, and the wholly- owned Santander Mine in Peru. In addition, Trevali owns the Caribou Mine, Halfmile and Stratmat Properties and the Restigouche Deposit in New Brunswick, Canada, and the past-producing Ruttan Mine in northern Manitoba, Canada. Trevali also owns an effective 44%-interest in the Gergarub Project in Namibia, as well as an option to acquire a 100% interest in the Heath Steele deposit located in New Brunswick, Canada.
The shares of Trevali are listed on the TSX (symbol TV), the OTCQX (symbol TREVF), the Lima Stock Exchange (symbol TV), and the Frankfurt Exchange (symbol 4TI). For further details on Trevali, readers are referred to the Company's website (www.trevali.com) and to Canadian regulatory filings on SEDAR at www.sedar.com.
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