In a March 1 research note, National Bank of Canada analyst Shane Nagle reported that he initiated coverage on Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX) with a Sector Perform rating and a 12-month, per-share target price of CA$1.90. This compares to CA$1.44 per share, where the stock is trading today. He highlighted that Trevali is "nearly a Top 10 zinc producer globally and with US$190M in annual free cash flow at current prices has the ability to build upon its existing portfolio."
Nagle presented these four key reasons to own the company:
1. Trevali has a significant operating portfolio. The 2017 acquisition of Perkoa in Burkina Faso and Rosh Pinah in Namibia and some exploration targets shifted the company, Nagle pointed out, "from a small-cap zinc producer to an emerging global producer with four operations in four separate countries."
2. Trevali has exposure to zinc and a rising zinc price. The latter increased more than 140% from its most recent nadir in early 2016 of $0.66 per pound, explained Nagle. "Being a primary zinc producer, the company shows heightened sensitivity to zinc prices versus its peers."
3. Trevali has free cash flow, which it can use to repay debt and fund exploration, resource expansion and acquisitions. This cash flow comes from the newly acquired mines and from an elevated zinc price. "We believe Trevali is well positioned to eliminate net debt by mid-2018 and focus on delivering its growth mandate through greater near-mine and regional exploration," stated Nagle.
4. Trevali has exploration upside. Focused on expanding the mineral resources near its existing mines to extend their life, the company outlined for 2018 a 60,000 meter (60,000m), US$10 million drill program. It includes 21,000m of drilling at Santander in Peru, 17,000m at Perkoa, 12,000m at Rosh Pinah and 10,000m at Caribou in New Brunswick, Canada. Nagle indicated, "With the company's accelerated growth initiative, including the ongoing near-mine exploration programs at all four of its producing operations, we expect additional resources to lead to mine life extension/expansion opportunities."
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Disclosures from National Bank of Canada Financial Markets, Trevali Mining Corp., Initiating Coverage, Mar. 1, 2018
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Additional Company related disclosures for Trevali Mining Corp.:
National Bank Financial Inc. has acted as an underwriter with respect to this issuer within the past 12 months.
National Bank Financial Inc. has provided investment banking services for Trevali Mining Corp. within the past 12 months. National Bank Financial Inc. or an affiliate has managed or co-managed a public offering of securities with respect to Trevali Mining Corp. within the past 12 months. National Bank Financial Inc. or an affiliate has received compensation for investment banking services from Trevali Mining Corp. within the past 12 months. Trevali Mining Corp. is a client, or was a client, of National Bank Financial Inc. or an affiliate within the past 12 months.
