Trevali Mining Corporation

Trevali Mining Corp. (TSX: TV) is a natural resource company engaged in the acquisition, exploration, development and production of mineral properties in Peru and Canada.

Key updates:

• Divestiture in Santander mine: Recently, the company completed the sale of Santander Mine in Peru to Cerro De Pasco Resources Inc. TV received 10 million common shares of Cerro De Pasco and CAD 1 million of cash from the above transaction which are expected for corporate debt reduction and development of the RP2.0 expansion project at Rosh Pinah.

• Decline in net debt: In Q3FY21, the company reported a USD 27 million Q-O-Q reduction of net debt to USD 82 million, supported by the collection of settlement receivables outstanding at Q2FY21. The above is a key positive and indicates improved working capital management.

• Positive cash from operations: In 9MFY21, the company reported a cash from operations of USD 81.606 million, as compared to cash used of USD 28.779 million in pcp. The above was supported by a net income of USD 7.120 million, as compared to a net loss of USD 193.864 million in pcp. The above is an indication of improved operational efficiency.

Risk: Due to volatility in the international commodity prices, the company might witness a slide in the realization price, which subsequently dampen the overall performance of the company.

Q3FY21 Financial Highlights:

• In Q3FY21, the company reported its revenue of USD 79.811 million, surged from USD 50.157 million in pcp, due to primarily to the 28% increase in the zinc price and the 47% decrease in 2021 zinc treatment charge benchmark.
• Gross profit surged to USD 7.645 million, higher than USD 3.288 million in pcp. The above was primarily due to higher revenue, partially offset by higher production and distribution expense.
• The quarter was marked by lower General and administrative costs and a decline in Interest expense.
• Net income jumped to USD 5.752 million from USD 1.122 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Stock Recommendation:

For FY21, the company expects its zinc payable production expected in between 330 to 355 million pounds and its cash cost per unit in between USD 0.80 to USD 0.84 per pound. The stock of TV is available at a discounted EV to Sales relative valuation multiple of 0.5x on NTM basis, as compared to the industry (Basic Material) median of 1.6x. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock at the last traded price of CAD 1.72 on December 31, 2021. 

Technical Summary Analysis

One-Year Technical Price Chart (as on December 31, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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