A Sept. 11 research report announced that following a site visit to Trevali Mining Corp.'s (TV:TSX; TV:BVL; TREVF:OTCQX) past-producing Rosh Pinah zinc mine in Namibia, Raymond James raised its "target price to CA$2/share from CA$1.80/share to reflect the longer mine life and higher throughput," wrote analyst Brian MacArthur.
Today, the Rosh Pinah mine could run for about 7.5 years solely on "current reserves of about 5Mt grading 8.8% zinc, 1.45% lead and 20.7 g/t silver" or for roughly 15 years were Measured and Indicated (M&I) and Inferred resources to be incorporated as well, MacArthur explained.
However, he emphasized that "drilling has the potential to add more resources," which "could increase the mine life and/or support higher production. . .future drilling is targeting higher grade zinc, and regionally we expect over 5 Mt could be added."
The opportunity to add resources is ripest in the WF3 zone of Rosh Pinah, he purported, "which has M&I resources of about 6.5 Mt at 8.2% zinc" and "where mining is shifting." MacArthur suggested that "the possibility exists to more than double that at higher grade through drilling expected to begin in 2018."
As for increased throughput, the analyst said, "We believe the mine infrastructure over time could (subject to development) support up to 3 Ktpd (especially if more resources are found in WP3 as we expect)." In comparison, "production has recently been closer to 1.8 Ktpd" and "capacity of the plant is about 2 Ktpd."
MacArthur suggested that increasing production at Rosh Pinah, however, requires "improving plant output," which Trevali plans to address in two phases.
Underway is the phase 1 "flotation upgrade, which should increase concentrate grade and recoveries as well as reduce penalties, for about $8M," detailed MacArthur. Phase 2, to come, is a "milling upgrade, which should allow throughout (even given harder ore) to exceed 2 Ktpd, for about another $7M."
In recapping the possibility for Rosh Pinah, MacArthur noted, "Assuming [Trevali] is successful with the drilling and can convert potential [ounces] at WP3, we believe for another $10–15M, production could be increased to about 3 Ktpd."
In its financial model, Raymond James revised its post-2019E production estimate for the mine "to 2.1 Ktpd but note the potential to go higher longer term," wrote MacArthur.
The research firm has an Outperform rating and updated CA$2 per share price target on Trevali, whose stock is currently trading at around CA$1.40 per share.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Raymond James, Trevali Mining Corp., Company Comment, Sept. 11, 2017
Analyst Compensation: Equity research analysts and associates at Ra ymond James are compensated on a salary and bonus system. Several factors enter into the compensation determination for an analyst, including i) research quality and overall productivity, including success in rating stocks on an absolute basis and relative to the local exchange composite Index and/or a sector index, ii) recognition from institutional investors, iii) support effectiveness to the institutional and retail sales forces and traders, iv) commissionsgenerated in stocks under coverage that are attributable to the analyst’s efforts, v) net revenues of the overall Equity Capital Markets Group, and vi) compensation levels for analysts at competing investment dealers.
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RAYMOND JAMES RELATIONSHIP DISCLOSURES:
Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months.
Trevali Mining Corporation:
--Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to TV.
--Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to TV.
--Raymond James Ltd. has provided investment banking services to TV within the past 12 months.
--Raymond James Ltd -the analyst and/or associate has viewed the material operations of TV.
--Raymond James Ltd-within the last 12 months, TV has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.