Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX) announced on Feb. 1 that it is becoming an owner-operator at its Caribou zinc and is investing in a new mining fleet at the mine. The company stated that it "has committed to an approximately Cdn$20-million investment through a new partnership with Sandvik Mining to supply and maintain a full fleet of mining equipment for Caribou Mine operations. Trevali will operate and manage all aspects of the underground mining operation and Sandvik will be responsible and accountable for the maintenance of the fleet."
Dr. Mark Cruise, Trevali's President and CEO stated, "Trevali's new investment demonstrates our ongoing commitment to the future of the Caribou Mine and operations in the Bathurst region of New Brunswick," adding that "The efficiencies realized through this initiative. . .form a pathway for the Company's long-term, multi-cycle vision for the Bathurst Mining Camp."
Analyst Joseph Gallucci of Dundee Capital Partners stated in a Feb. 1 research report that "moving to an owner-operator model is a positive move for TV. . .investing in their own fleet and moving away from contract mining should lead to cost savings at the mining operation." He also stated that replacing the current mining equipment "with new machinery and improved technology should lead to better operational efficiencies as well."
Gallucci noted that with "Caribou online and cash flow positive, we believe TV is in an excellent position to capture strong zinc fundamentals. Our view is that a majority of zinc development plays will not be in production to catch the cycle, either due to permitting or funding obstacles (or both)." He names Trevali as a top pick on TV's zinc leverage "based on current production as well as short-term organic growth."
BMO Capital Markets initiated coverage on Trevali on Feb. 1, rating the company as an "Outperform." Analyst Alex Terentiew wrote, "Over the past seven years, Trevali has worked to put its Santander (H2/13) and Caribou (2015) mines into production, maintaining its objective of remaining a zinc-focused miner, providing investors with exposure to a rise in zinc prices that it expected to materialize. . .it was not until the H2/16 that zinc prices notably began to improve, positioning current shareholders to participate in a significant rise in cash flow. We believe Trevali is just starting its operating and financial turnaround and investors will be rewarded by accumulating shares in the company."
Terentiew noted that Trevali intends to update resource estimates for both of its mines in Q1/17, "incorporating exploration results and actual operating experience to its estimates, and may declare reserves, which we would view as a positive catalyst."
He added that "with zinc accounting for ~70% of the company's sales, it is the leader in zinc exposure among its covered peers." As the price of zinc improved, "mining operations aligned with the zinc price, and cash flow began to improve. We expect significant and rapid improvement in Trevali's balance sheet over the remainder of 2017, with Trevali turning net cash positive in Q3/17," Terentiew concluded.
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1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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Disclosures from Dundee Capital Partners, Trevali Mining Corp., Feb. 1, 2017
Dundee Capital Partners has written procedures designed to identify and manage potential conflicts of interest that arise in connection with its research and other businesses. The compensation of each Research Analyst/Associate involved in the Trevali Mining Corp. preparation of this research report is based competitively upon several criteria, including performance assessment criteria, the quality of research and the value of the services they provide to clients of DCP. The Research Analyst compensation pool includes revenues from several sources, including sales, trading and investment banking. Research analysts and associates do not receive compensation based upon revenues from specific investment banking transactions.
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Disclosures from BMO Capital Markets, Trevali Mining, Feb. 1, 2017
I, Alex Terentiew, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
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