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The mine purchase from Glencore, which was highlighted in The Gold Report’s March 16 article, moved closer to the July 31 closing date with Trevali Mining Corp.’s (TV:TSX; TV:BVL; TREVF:OTCQX) March 29 announcement of its “C$264,546,000 bought deal financing and amendment to agreement to purchase the producing Rosh Pinah and Perkoa Zinc Mines.” With this latest announcement, Trevali Mining is moving closer to its goal of being a “multi-asset, low cost global zinc producer,” as Dr. Mark Cruise, Trevali’s CEO and president, stated in the company’s March 13 press release.
According to Trevali, “The net proceeds of the Offering will be used to fund a portion of the cash consideration payable to certain subsidiaries of Glencore PLC whereby Trevali will acquire a portfolio of zinc assets from Glencore…” The companies also amended that agreement to adjust the “breakdown of the Cash Consideration and Share Consideration to be paid to Glencore on closing of the Transaction to allow a greater portion of the Consideration to be paid in Common Shares.”
Industry analysts have viewed the acquisition favorably. In a March 30 report, Paradigm Capital analyst Jeff Woolley updated its valuation of Trevali “to reflect our pro-forma view of the company. On a pro-forma basis, we estimate Trevali to be trading at a discount to our peer group of junior and intermediate base metal producers. Trevali remains the best means for investors to gain exposure to the zinc market, in our opinion, and is well positioned for a share price re-rating.”
On the heels of Paradigm Capital’s positive update, on March 31, GMP analyst Ian Parkinson updated that firm’s model to include the purchase agreement with Glencore. Parkinson stated, “The addition of two producing zinc mines will help TV more than double its annual zinc production and make TV the eighth largest zinc producer globally. TV expects annual zinc production to increase by approx. 160%.” He concluded that “investors who are looking for exposure to zinc consider buying shares of Trevali.”
Completing a hat trick of positive reviews, Cormark Securities analyst Stefan Ioannou highlights that acquisitions are only half of Trevali’s success story. In the April 10 report he states, “Exploration drilling at Santander (Peru) and Caribou (New Brunswick) continues to return high grade intersections in proximity to existing underground infrastructure—setting the stage for extended mine life.” He continues by pointing out that the “zinc market outlook is underpinned by a number of recent key mine shutdowns (+10% of supply) and a lack of new significant advanced-stage projects positioned to replace them. As a result, zinc inventories are dwindling. Markets are cyclical—longer-term supply response is inevitable. Hence, timing is key—an attribute many developers don’t have.”
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1) Melissa Farley compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
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