Trevali faces operation challenges, shares down 52%

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Trevali Mining Corp. (TV-TSX, TREVF-OTCQX, 4T1-Frankfurt, TV-LMA) shares lost over 50% of their value Tuesday after the company reported lower-than-expected zinc production in the second quarter of 2022 due to operational challenges at mines in West African and Canada.

The company said operations at its Perkoa zinc mine in Burkina Faso remain suspended following the tragic April 16, 2022, flooding event that resulted in eight fatalities and the halting of mining and milling operations.

The company also said full-year production and cost guidance at the Caribou mine in New Brunswick 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.

As a result, the company reported payable zinc production of 34.5 million pounds in the second quarter. That was below the Scotiabank estimate of 38 million pounds.

The company said operational challenges at Perkoa and Caribou were partially offset by the positive performance of the Rosh Pinah zinc-lead-silver mine in Namibia.

However, second quarter cash costs (US$1.19 per pound) and all-in-sustaining-costs (US$1.61 per pound) were up 12% and 32% respectively from the previous quarter due to a combination of factors, including higher direct operating costs from continuing inflation pressures across the portfolio, lower payable zinc volumes from Perkoa and Caribou and higher than planned sustaining capital

On Tuesday, the shares were down 52% or 24 cents to 22 cents on active volume of 2.9 million. The shares are currently trading in a 52-week range.

Trevali has said intense and unseasonal rainfall back in April, 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 and preventing eight workers from evacuating.

On Tuesday, the company said de-watering at Perkoa is now complete and the rehabilitation of equipment and infrastructure continues. However, the company has given no indication as to when production will restart. Costs related to the flooding event for the second quarter amounted to $15.2 million.

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 the payment is due on August 17, 2022. The company said it remains in discussion with its senior lenders regarding this anticipated breach of the terms and potential default of the facility.

Trevali is a Vancouver-based mining company. The bulk of its revenue has previously been generated from base metals mining at the 90%-owned Perkoa Mine, the 90%-owned Rosh Pinah Mine, and the wholly-owned Caribou zinc-lead-silver mine in New Brunswick. Trevali also owns the Halfmile and Stratmat properties as well as the Restigouche deposit in New Brunswick. The portfolion includes the Ruttan mine in northern Manitoba. As well, Trevali owns an effective 44% interest in the Gergarub project in Namibia.

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