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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