FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR THE SECOND QUARTER 2020
- Total Recordable Incident Frequency decreased 33% from the comparative quarter in 2019 with seven less recordable injuries reported. This is a result of improved work planning and execution where health and safety hazards are identified and controls to manage risk implemented prior to commencing work.
- COVID-19 had a negative effect on the zinc price and financial results in Q2 2020.
- Perkoa, Rosh Pinah and Santander are all currently producing at full capacity with comprehensive COVID-19 prevention measures in place.
- Accelerated T90 business improvement program targeting the overall reduction in AISC1 to
$0.90 /lb by 2021, a year earlier than originally planned. Of the original target of $50 million in annualized sustainable efficiencies, the program is forecasting to deliver $43 million of recurring, annualized efficiencies in 2020, of which $30 million has been delivered at the end of Q2 2020. - Undertook immediate one-time cost reductions to achieve an additional
$37 million of savings in 2020 across sustaining and expansionary capital, exploration and operating expenditures. - Secured up to
$45 million additional liquidity under existing credit facility and a new facility from Glencore as well as covenant relief untilDecember 31, 2020 . Revolving credit facility availability increased by$10.0 million ; minimum liquidity covenant of$15.0 million eliminated; new facility from Glencore of up to$20.0 million . - Issued updated guidance for 2020 with production guidance for H2 2020 between 148 – 163 million pounds of payable zinc, C1 Cash Costs1 of
$0.80 –$0.88 /lb and AISC1 of$0.89 –$0.97 /lb. - Zinc payable production of 66 million pounds at a C1 Cash Cost1 of
$0.93 /lb and AISC1 of$1.05 /lb. C1 Cash Cost1 and AISC1 improved from Q1 2020 despite lower production volumes as a result of cost savings implemented under the T90 business improvement program, by-product credits, and Caribou being placed on care and maintenance. - Adjusted EBITDA1 of
($5.7) million for Q2 2020 due to a decline in the zinc price (quarterly average of$0.89 /lb) and reduced sales volumes of 72 million pounds of payable zinc due to lower production as a result of Caribou being placed on care and maintenance, COVID-19 related disruptions to production at Santander as well as lower zinc grades at Perkoa and Rosh Pinah.
1 See “Use of Non-IFRS Financial Performance Measures”.
Ricus Grimbeek, President and CEO stated, “The COVID-19 pandemic continues to have a significant impact on people and the economy around the world. In the second quarter we continued to optimize the business and were able to reduce our costs despite COVID-19 related impacts at Santander and lower overall group production. Thank you to our workforce for continuing to demonstrate your commitment to health and safety and responsibly performing your roles.
We’ve removed
Subsequent to quarter end we were pleased to announce that Trevali has secured additional liquidity of
This news release should be read in conjunction with Trevali’s quarterly consolidated financial statements and management’s discussion and analysis for the three months ended
YTD Q2’20 | YTD Q2’19 | YoY | Q2'20 | Q1'20 | Q2'19 | Q2'20 vs Q1'20 | Q1'20 vs Q2'19 | |||||||||||
Zinc payable production | Mlbs | 164.7 | 205.8 | –20 | % | 65.8 | 99.0 | 105.2 | –34 | % | –37 | % | ||||||
Lead payable production | Mlbs | 15.4 | 22.9 | –33 | % | 4.7 | 10.7 | 11.4 | –56 | % | –59 | % | ||||||
Silver payable production | Moz | 0.4 | 0.7 | –43 | % | 0.1 | 0.3 | 0.3 | –67 | % | –67 | % | ||||||
Revenue | $ | 94,641 | 207,509 | –54 | % | 42,689 | 51,952 | 82,297 | –18 | % | –48 | % | ||||||
Adjusted EBITDA1 | $ | (12,355 | ) | 64,013 | –119 | % | (5,709 | ) | (6,646 | ) | 17,558 | –14 | % | –133 | % | |||
Net loss | $ | (194,986 | ) | (15,447 | ) | 1162 | % | (19,381 | ) | (175,605 | ) | (31,563 | ) | –89 | % | –39 | % | |
Net loss per share | $ | (0.24 | ) | (0.02 | ) | 1100 | % | (0.02 | ) | (0.22 | ) | (0.04 | ) | –91 | % | –50 | % | |
C1 Cash Cost1 | $/lb | 0.95 | 0.90 | 6 | % | 0.93 | 0.96 | 0.86 | –3 | % | 8 | % | ||||||
AISC1 | $/lb | 1.08 | 1.04 | 4 | % | 1.05 | 1.10 | 1.00 | –5 | % | 5 | % | ||||||
Sustaining capital expenditure1 | $ | 19,661 | 24,278 | –19 | % | 7,033 | 12,628 | 13,796 | –44 | % | –49 | % | ||||||
Exploration expenditure | $ | 3,585 | 5,031 | –29 | % | 421 | 3,164 | 2,547 | –87 | % | –83 | % | ||||||
Conversion of tonnes to pounds, 1 tonne = 2,204.62 pounds or lbs.
YTD Q2’19 and Q2’19 revenues have been restated to reflect the Company’s change in accounting policy as disclosed in the
T90 PROGRAM
In
During Q2 2020, the Company took decisive action and continued to transform the business through the implementation and acceleration of the T90 business improvement program and additional one-time cost reduction initiatives. The result is an acceleration of the T90 business improvement program to reach an AISC1 of
Improvements delivered by the T90 program during Q2 2020 reduced AISC1 by approximately
1 See “Use of Non-IFRS Financial Performance Measures”.
2020 COST REDUCTIONS
In addition to the recurring initiatives being pursued through the T90 business improvement program, Trevali has undertaken immediate one-time cost reductions in 2020 of
FINANCIAL POSITION AND STRATEGIC REVIEW PROCESS
On
The Company entered into a second lien secured facility agreement (“Glencore Facility”) with Glencore Canada Corporation”, an affiliate of the Company’s largest shareholder, Glencore plc (“Glencore”) up to a maximum of
Advances under the Glencore Facility will be applicable to deliveries of zinc concentrate between
Advances under the Glencore Loan will be applicable to monthly deliveries of zinc concentrate between
See press release “Trevali Enters into Amended and Restated Credit Agreement with Existing Lenders and Secures Facility with Glencore” issued on
The Company continues to advance the strategic review process with its financial advisors to explore financing alternatives to reduce debt and enhance shareholder value.
2019 SUSTAINABILITY REPORT
The second annual sustainability report was published on
1 See “Use of Non-IFRS Financial Performance Measures”.
2020 GUIDANCE & OUTLOOK
With enhanced safety measures in place at Trevali’s operations to mitigate the impacts of COVID-19, each of Perkoa, Rosh Pinah and Santander are operating at full capacity. Operations at Caribou were placed on care and maintenance on
All previously issued 2020 annual guidance was suspended on
H2 2020 Payable Production and Cost Guidance
Zinc Production (Million pounds) | Lead Production (Million pounds) | Silver Production (Thousand ounces) | C1 Cash Cost1 ($/lb) | AISC1 ($/lb) | |
Perkoa | 78 – 83 | n/a | n/a | 0.83 – 0.89 | 0.92 – 0.99 |
Rosh Pinah | 41 – 46 | 6 – 7 | 164 – 174 | 0.69 – 0.75 | 0.82 – 0.88 |
Santander | 29 – 34 | 2 – 3 | 136 – 146 | 0.87 – 1.03 | 0.93 – 1.03 |
H2 2020 Guidance Total | 148 – 163 | 8 – 10 | 300 – 320 | 0.80 – 0.88 | 0.89 – 0.97 |
FY 2020 Guidance | 290 – 320 | 17 – 21 | 626 – 646 | 0.82 – 0.91 | 0.92 – 1.02 |
The above guidance excludes Caribou’s operations which was placed on care and maintenance on
The Company expects C1 Cash Costs1 and AISC1 to begin H2 2020 at the higher end of the guided range and trend lower by the end of Q4 2020 as initiatives from the T90 Program continue to be implemented and their benefits are realized. Payable zinc production is expected to be moderately higher in Q4 2020 relative to Q3 2020, while payable lead and silver production is expected to be higher in Q3 2020 as compared to Q4 2020.
2020 C1 Cash Costs1 and AISC1 guidance reflect the annual benchmark terms of zinc concentrate treatment charges of
H2 2020 Capital Expenditure Guidance
H2 2020 Guidance | FY 2020 Guidance | ||
Sustaining Capital | |||
Perkoa | $m | 6 | 11 |
Rosh Pinah | $m | 5 | 13 |
Santander | $m | 1 | 6 |
Total | $m | 12 | 30 |
$m | 2 | 6 | |
$m | 1 | 4 | |
Total | $m | 15 | 40 |
The above guidance excludes Caribou’s operations which was placed on care and maintenance on
Sustaining capital expenditures for H2 2020 reflect the planned expansion of the tailings storage facility at Perkoa and underground capital development at Perkoa and Rosh Pinah. At Santander there is limited sustaining capital planned for the remainder of 2020.
Exploration capital expenditures will be focused on the recommencement of drilling on the T3 deposit at Perkoa.
Trevali expects to publish the Rosh Pinah 2.0
1 See “Use of Non-IFRS Financial Performance Measures”.
Market Outlook
The short-term outlook for the zinc market has changed significantly during the first half of 2020. At the start of the year and prior to COVID-19 being declared a pandemic, it was expected that the concentrate market would be in surplus over the coming years with demand for refined metal growing slightly in 2020 and refined stocks remaining below historic levels, lending support to zinc prices.
The rapid rise of the COVID-19 pandemic in
While global smelting production was materially impacted in the first quarter of 2020, production capacity largely recovered to pre-COVID-19 levels early in the second quarter while mining operations were slower to restart. It was not until the end of June that the majority of mining operations that were suspended to control the spread of COVID-19 had restarted or were in the process of restarting. The risk of flare ups of COVID-19 and the re-imposition of controls and government restrictions on mining operations remain. As a result, the concentrate market surplus that was forecast at the beginning of 2020 for the full year is now forecast to be a deficit. This has led to reduced spot zinc concentrate treatment charges relative to the annual benchmark reported in March at
During Q2 2020, the London Metals Exchange (“LME”) zinc price recovered from its four year low of
At the end of Q2 2020, total global exchange inventories reduced by 14,000 tonnes to 220,000 tonnes or an estimated 6 days of global consumption, compared to Q1 2020. This inventory level is well below historical averages of 18 days of global consumption and is also supportive of higher zinc prices.
Q2 2020 Financial and Operational Results Conference Call and Webcast Details
The Company will host a conference call and presentation webcast at
Conference call dial-in details:
Date:
Toll-free (
International: +1 (647) 788-4919
Webcast: http://www.gowebcasting.com/10776
1 See “Use of Non-IFRS Financial Performance Measures”.
ABOUT TREVALI
Trevali is a global base-metals mining company, headquartered in
The shares of Trevali are listed on the TSX (symbol TV), the OTCQX (symbol TREVF), the
Investor Relations Contact:
Email: bcreaney@trevali.com
Phone: +1 (778) 655-6070
Cautionary Note Regarding Forward–Looking Information and Statements
This news release contains “forward–looking information” within the meaning of Canadian securities legislation and “forward–looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, “forward–looking statements”). Forward–looking statements are based on the beliefs, expectations and opinions of management of the Company as of the date the statements are published, and the Company assumes no obligation to update any forward–looking statement, except as required by law.
Forward–looking statements relate to future events or future performance and reflect management’s expectations or beliefs regarding future events including the impacts of the ongoing and evolving COVID–19 pandemic, including but not limited to the effects of COVID–19 on the Company’s liquidity position, ability to continue as a going concern as described herein, financial condition, and results of operations. Forward-looking statement also include statements with respect to the intended use of proceeds from the Revolving Credit Facility and the Glencore Facility, financial guidance for the fiscal year 2020, expectations and timing regarding the T90 business improvement program, the Company’s growth strategies, expected annual savings from capital projects, anticipated effects of commodity prices on revenues, estimation of mineral reserves and mineral resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production and capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims, future anticipated property acquisitions, the content, cost, timing and results of future exploration programs and life of mine expectancies. The potential effects of COVID–19 on the Company’s business are unknown at this time, including the Company’s ability to manage restrictions and other challenges in the jurisdictions in which it operates and continue to safely operate and, in due course, return to normal operating status. The impact of COVID–19 is dependent on many factors outside the Company’s control, including measures taken by public health and government authorities, global economic uncertainties and outlook due to the pandemic, and evolving restrictions relating to mining activities and to travel and transport of goods in certain jurisdictions where the Company operates. In certain cases, forward–looking statements can be identified by the use of words such as “plans”, “expects”, “outlook”, “guidance”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. By their very nature, forward–looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward–looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of zinc, lead, silver and other minerals and the anticipated sensitivity of our financial performance to such prices; possible variations in ore reserves, grade or recoveries; dependence on key personnel; potential conflicts of interest involving our directors and officers; labour pool constraints; labour disputes; availability of infrastructure required for the development of mining projects; delays or inability to obtain governmental and regulatory approvals for mining operations or financing or in the completion of development or construction activities; counterparty risks; increased operating and capital costs; foreign currency exchange rate fluctuations; operating in foreign jurisdictions with risk of changes to governmental regulation; compliance with governmental regulations; compliance with environmental laws and regulations; land reclamation and mine closure obligations; challenges to title or ownership interest of our mineral properties; maintaining ongoing social license to operate; impact of climatic conditions on the Company’s mining operations; risks relating to epidemics or pandemics such as COVID–19 including the impact of COVID–19 on our business, financial condition and results of operations; corruption and bribery; limitations inherent in our insurance coverage; compliance with financial covenants; our ability to raise capital; competition in the mining industry; our ability to integrate new acquisitions into our operations; cybersecurity threats; litigation; and other risks of the mining industry including, without limitation, other risks and uncertainties that are more fully described in the “Risks and Uncertainties” section of the corresponding Q2 2020 MD&A and the “Risk Factors” section of our most recently filed Annual Information Form. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward–looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Trevali provides no assurance that forward–looking statements will prove to be accurate, as actual results and future events may differ from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward–looking statements.
Non-IFRS Financial Performance Measures
The items marked with a “1” are non-IFRS measures and readers should refer to “Use of Non-IFRS Financial Performance Measures” in the Company’s Management’s Discussion and Analysis for the three and six months ended
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