Trevali Reports Second Quarter 2022 Results – QNT Press Release

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VANCOUVER, BC, Aug. 15, 2022 /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 six months ended June 30, 2022. All amounts herein are reported in United States dollars ("US$") unless otherwise specified.

• Zinc payable production of 34.5 million pounds due to the suspension of operations at the Perkoa mine and production challenges at the Caribou mine partially offset by positive performance from Rosh Pinah.
• C1 Cash Cost¹ and AISC¹ of $1.19 and $1.61 per pound, respectively, 12% and 32% increases from the prior quarter due to a combination of factors, including higher direct operating costs from continuing inflationary pressures across the portfolio, lower payable zinc volume contribution from Perkoa and Caribou, and higher than planned sustaining capital.
• Caribou's full-year production and cost guidance has been suspended and the operation is under review, following continued operational performance issues due to low productivity rates and equipment and operator availability, from the mining contractor.
• Perkoa operations remain suspended following the April 16^th flooding event that resulted in eight fatalities and the suspension of mining and milling operations. Costs related to the flooding event for Q2 amount to $15.2 million. Operating cost and production guidance at Perkoa remain suspended.
• A non-cash, after-tax impairment of $23.7 million was recorded on the Perkoa and Caribou operations and near-mine exploration asset at Perkoa.
• Revised full-year guidance for Rosh Pinah for 2022 with production guidance of 62 – 66 million pounds of payable zinc, a C1 Cash Cost¹ of $0.84 – 0.90/lb and AISC¹ of $1.22 – 1.28/ lb.
• Q2 2022 revenues of $52.0 million, a decrease of 44% over the prior quarter, due to the suspension of operations at Perkoa and Caribou operational underperformance.
• Adjusted EBITDA¹ of $9.2 million, a decrease of 78% over the prior quarter, primarily due to the Perkoa mine's suspension of operation on April 16, 2022 and Caribou operational underperformance.
• Net Debt¹ for Q2 2022 decreased from $81.8 million at March 31, 2022, to $59.4 million due to the timing of collection of settlement receivables built up from Q1 2022.
• Updated RP2.0 expansionary capital cost to $121 million with an estimated commissioning date of Q4 2024, assuming financing is in place by the end of Q3 2022 and a full funding decision is made. Guidance on the $20 million Early Works program included in the $121 million, has been suspended and is under review.
• Financing Initiative to fund the RP2.0 expansion project and refinance the existing debt that matures in September of 2022, which had progressed with several capital providers, including Standard Bank, an Export Credit Agency, Glencore, and a metal streaming company, has not sufficiently advanced in a manner that will allow for the refinancing to be completed prior to the maturity of existing Debt Facilities, if at all.
• A Strategic Review process was initiated in Q2, in parallel to the Financing Initiative, to solicit proposals for a broad range of transaction alternatives including a potential investment in Trevali and the potential sale of all or part of the business and assets of Trevali. Following recent developments, there can be no assurance that the Strategic Review process will progress in a fashion that will allow for the culmination of a transaction in a timely manner or sufficient value to refinance the Debt Facilities.
• Based on a review of its available liquidity, the Company anticipates that it will not be in a position to make a mandatory prepayment of approximately $7.5 million on its revolving credit facility when such payment is due on August 17, 2022. The Company remains in discussions with its senior lenders regarding this anticipated breach of the terms and potential default of the Facility.

 

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 the 90%-owned Perkoa mine in Burkina Faso (which mine's operations are currently suspended following a flooding event that occurred April 16, 2022), the 90%-owned Rosh Pinah mine in Namibia and the wholly owned Caribou mine in New Brunswick. In addition, Trevali owns the 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. 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.

 

Intense and unseasonal rainfall on April 16, 2022, near the Perkoa mine created a flash flood that entered the mine property and breached the mine's safety controls, flooding the underground mine, preventing eight workers from evacuating the mine. A summary of the results of Trevali's investigation of the flooding event was previously provided to the Burkina Faso Ministry of Mines and Quarries, and additional information regarding actions taken and external expert analysis was provided to the Ministry. The Company and its management team have worked closely with the Burkinabe authorities throughout the search and recovery efforts at the mine, with daily briefings at the site as well as regular inspections of the operations. In addition, pursuant to applicable Burkina Faso law, an independent investigation into the flood event was initiated by the Public Prosecutor. Trevali and its personnel have been cooperating fully with the investigation which remains ongoing. The bodies of the eight workers were recovered in May and June and returned to their families, except for the two expatriates that still need to be repatriated to their home country. All of us at Trevali grieve their loss.

By late July, more than 165 million litres of water and more than 9,000 cubic metres of solids had been removed from the mine. Perkoa is now dewatered to the lowest mine level, Level 710, all damaged equipment has been recovered, and all areas of the mine are fully accessible. A significant amount of mine rehabilitation work is already complete, including re-establishing the electrical and communication systems, ventilation, egress and entrapment infrastructure, backfilling of voids, inspecting the adequacy of ground support after the flooding event and ensuring that there are no underground stability concerns. All permits remain in good standing.

Trevali and various expert consultants have investigated the circumstances of the extreme rainfall event and have reached several conclusions and the Company has committed to actions to prevent the catastrophic outcome of any future potential flood from occurring at Perkoa. While we are unable to prevent an extreme weather event, the result of the investigation allows us to determine some key lessons that can prevent similar catastrophic results in the future, and which may also be applicable across the mining industry:

• Historical climate data used for assumptions: Floods and other extreme weather events are becoming more intense and frequent as our climate warms. Historically, we have been able to predict these extreme events by observing how often they occurred in the past. The frequency and magnitude of past extreme events are no longer a reliable indicator. We need to review and modify our plans, procedures, and designs to ensure they can counter these new risks.
• Design criteria: The flood protection design criteria at Perkoa did not anticipate the intensity, scale, or timing of the rainfall and flooding event. The mining industry and others are making the transition to more robust designs for facilities, especially tailings dams, by performing an analysis of consequences to provide data for the design. It is important to validate the current designs and conduct an analysis of structures and facilities in place, and challenge this against the shifts that climate change has brought.
• Data quality: Historically, many rainfall data collection stations provide only daily returns, leading to potential gaps in understanding of short-term intense rain events. Quality data is needed to understand the potential for weather events of short duration but of greater intensity, like the one that occurred at Perkoa.
• Design and implementation of modern early warning and response time systems: The flooding at the mine was caused by extreme rain falling some distance from the site. To manage this risk, early warning systems on-site that can predict off-site events are needed. Modern detection tools based upstream of all sites and connected to on-site warning systems will improve both situational awareness and emergency response times.

The investigation of the flooding event has resulted in Trevali taking several actions to minimize the impacts of future weather events at Perkoa, and prevent any future flooding of the underground operations, including:       

• Raised the flood protection berm along the existing berm alignment to protect the open pit against flooding for a 1:10,000-year event. The guidance to raise the berm follows expert hydrologic modelling conclusions that indicated that the flooding event occurred following an intense rainfall over a period of approximately 45 minutes, which corresponds with a return period of approximately 300 to 500 years;
• Installed an early warning system that provides updated weather reporting, real-time weather and rain monitoring and real-time stream water level indication with automatic triggers when there is a potential flood risk;
• Improved emergency management plans with the inclusion of predictive triggers such as: predictive alerting and smart IOT sensors that detect changes in water levels and various weather parameters (wind, rain, lightning, pressure) to trigger an evacuation in advance of a significant weather event impacting the site.

The Company is also reviewing its design infrastructure at its other mine sites and will consider implementing similar measures if deemed appropriate. Insurance claims have been filed related to dewatering, rehabilitation, and the replacement of mining, electrical, ventilation, and other equipment damaged from the mine flood. Subject to approval by the Burkina Faso authorities, the Company is undertaking precursory activities to ensure operational readiness. The Ministry of Mines and Quarries is currently reviewing the Perkoa restart plan. Operating cost and production guidance at Perkoa remain suspended.

Although the performance of Rosh Pinah continues to be consistent, the second quarter was challenging at Perkoa and Caribou. The April 16^th flooding event that triggered an evacuation of the Perkoa Mine and the suspension of mining and milling operations, global inflationary impacts and continued challenges in contract miner productivity and equipment and operator availability at Caribou have resulted in lower production results and higher costs.

The Company is experiencing significant cost inflation since initial guidance was provided in January, with the prices of key consumables remaining materially above 2021 levels. Notable examples include explosives, diesel, grinding media, and ocean freight rates.

Operating cost and production guidance at Perkoa remain suspended and Caribou's full year production and cost guidance has been suspended and the operation is under review.

Management of the Company revises Rosh Pinah production and cost guidance. Annual production guidance at Rosh Pinah Mine is now estimated at between 62 – 66 million pounds of payable zinc (US:58); guidance of 16 – 18 million pounds of payable lead remains unchanged; and 168 – 178 thousand ounces of payable silver (US:158). C1 Cash Cost¹ guidance is estimated between $0.84 – $0.90 per pound of zinc (previous: $0.71 – $0.78) and AISC¹ is expected to range between $1.22 – $1.28 per pound of zinc (previous: $1.07 – $1.17).

Revised Consolidated 2022 Production Guidance²

Full story available on Benzinga.com

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