Trevali Mining's (TREVF) CEO Mark Cruise on Q1 2016 Results - Earnings Call Transcript

| About: Trevali Mining (TREVF)

Trevali Mining Corp. (OTCQX:TREVF) Q1 2016 Earnings Conference Call May 12, 2016 10:30 AM ET

Executives

Steve Stakiw - VP, IR & Corporate Communications

Mark Cruise - President & CEO

Anna Ladd - CFO

Analysts

Stefan Ioannou - Haywood Securities

Joseph Gallucci - Dundee

Operator

Welcome to the Trevali Mining Q1 2016 Financials and Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Steve Stakiw, Vice President of Investor Relations and Corporate Communications.

Steve Stakiw

Thank you, operator. Good morning everyone and welcome to Trevali Mining's Q1 2016 financial results conference call. Trevali's quarterly financial results were issued yesterday and are available both on our website and on SEDAR.

Additionally, a corresponding news release was also issued with our financial results to review the main points of our first quarter specifically the strong ongoing operations and production at our Santander Zinc-Lead-Silver Mine in Peru. Our presenter today is Dr. Mark Cruise, Trevali's President and CEO and accompanying Mark for the question and answer portion of this call is Anna Ladd, Trevali's Chief Financial Officer.

I’ll now turn the call over to Mark Cruise.

Mark Cruise

That’s great. Thank you, Steve and good morning everybody and thank you for joining us and just to reiterate what Steve said there that I'm - you know refer to the website and SEDAR for the financial statements on the MD&A. All financial figures are going to be in Canadian dollars unless otherwise stated. So as you’re aware we released our quarterly results for the three months ending March 31, 2016, reporting an EBITDA of $8 million and posting a net income of $827,000 for the quarter. Santander operations income for the quarter was 4.2 million on concentrate sale revenue up $27 million. Our Santander site cost dropped very significant to $0.28 per pound payable zinc equivalent produced or to turn that into to $32.22 per ton milled which I would like to point out as one of the lowest cost producers in the Central mineral belt of Peru.

Consequently management is pleased to revise our Santander 2016 site cost guidance downwards by approximately 12% from $40 to $43 per ton to $35 to $38 per ton milled on a full year basis. Additional Q1 highlights include record Santander mill throughput of 209,000 tons which resulted in quarterly production of 13.7 million payable pounds of zinc, 6.4 million payable pounds of lead and 221,000 ounces of payable silver. Our provisional realized commodity selling prices for the quarter were U.S. $0.82 per pound for zinc, $0.82 per pound for lead and $15.32 per ounce for silver and under our long term offtake agreement with our partners Glencore.

Santander's Santander mill recoveries remain higher than design at 89% for zinc, 88% for lead and 76% for silver and at the end of the quarter our total cash position was $26.700 million.

Specifically referring to the tables in the news release we're pleased to note materially improved throughput revenue and income in spite of lower realized commodity prices on a year to year basis compared to Q1 2015. Looking closer at the Santander operations, AMS [ph] stated approximately 209,000 tons of mineralized material with average head grades of 3.93% zinc, 1.66% % lead and 1.3 ounces per ton silver was processed through the mill again above designed recoveries. This resulted in the production of 14,840 tons of zinc concentrate averaging 49% zinc and 5469 tons of lead silver concentrate averaging 56% lead and 38.7 ounces per ton silver.

Our anticipated annual metal production from Santander from remains unchanged as the guidance being between 52 million to 55 million pounds of payable zinc and concentrate grading approximately 50% zinc. Between 22 million and 25 million pounds of payable lead, concentrate grating approximately 56% to 58% lead and somewhere between 800,000 and a 1 million ounces of payable silver in those lead concentrates. Sales during the quarter amounted to 13 million pounds of zinc, and 6.3 million pounds of lead and 210,000 ounces of payable silver respectively and to reiterate the revenues that for the quarter were in U.S. dollars, $20 million and again those average realized metal prices were $0.82 for zinc U.S., lead and $15.32 per ounce for silver. And consequently as a result of this we have reduced our cost guidance down to U.S. between $35 and $38 per ton milled.

Also as you're aware during the quarter we did release some exploration results from our new and latest exploration drilling at Santander where we continue to chase the [indiscernible] trial north zone deeper and also are drilling out in emergent zone the Oyon zone and certainly we hope to have additional assay results for those that out in the next coming weeks. So going forward what to expect from Santander we'll continue at steady state 2000 tons per day nameplate production. Although just to note that site is exceeding throughput by approximately 15% to 20% on a daily basis so approximately 2400 tons per day for Q2 is what we're anticipating through the mill at this point in time.

As mentioned you know we're particularly excited about 2016 exploration program and we look forward to the next batch of assays results coming out in the coming weeks and we are extremely confident the problem of the team to the far and expanding nearly discovered zones and just to reiterate all zones that we're actively mining at Santander so all three [indiscernible] trial zones, the Rosa, the Fatima and the newly emergent Oyon zones do all remain open for expansion.

So in summary Santander continues building upon strong operational gains and efficiencies captured in the latter half of 2015 and exploration also continues to deliver.

Moving on to Caribou, in our monthly commissioning updates and really the progress highlights are follows. The average mill throughput rate remained steady at approximately 2640 tons per day during April. Head grades are modestly higher than plant and zinc recoveries continue to trend higher at 74%. This result in the production of 5832 tons of zinc concentrate and 2634 tons of lead silver concentrate which again is purchased under long term agreements with our partner Glencore.

Our signals varied during the various monthly updates on calls, The Caribou metallurgical team continues with the implementation of our metallurgical performance plan. From where we’re today the main focus is on increasing zinc recoveries to the entitlement ranges as that line in the PEA and various news releases them related to the same. Specifically during April to focus on decreasing the primary grind size, improved zinc-cell mixing and retention times and with the various modifications to be implemented during scheduled maintenance periods as far as possible.

Achievements during April which I want to know are ongoing include improved air vortex finders on three of the five cyclones, and really what this results is pushing more material to the mills for grinding. This has so far resulted in feed size reduction on those three cyclones from 36-41 microns down towards the 22 microns range and just note that the optimal target grind is approximately 30 microns.

The team finished the Zinc bank splitter box improvements and residence time in the zinc banks at this point is effectively balanced. They have started on Zinc Cleaner density trials and they are ongoing. Have another initiatives that they are bringing in was that smaller basically balls for the mills and now we’re getting a steady supply of three quarter inch charge media on site and they are currently converting the charge of Ball Mill 1 to the same, and again this should also be an interim [ph] process and also help with that reducing that primary grind down to the optimum target levels.

Of particular interest was the plant-scale mineralogical reports which indicated a very high degree of liberated sphalerite approximately 90% volume zinc with very little locked or theoretically unrecoverable material. And again this provides further strong to very strong support for our anticipate zinc recovery entitlement ranges. On the lead side a very little liberated material reported to the tails again highlighting good to excellent performance of the lead circuit today and really is directly result of those IsaMills doing their job and just to note that we’re getting those recoveries with IsaMills versus three so we do have some redundancy built into that circuit.

The initial water chemistry test work which is ongoing and certainly indicate that zinc recoveries have been adversely affected by calcium content in the plant process water, that is, high calcium content in subdued zinc recoveries. And the team has adjusted the plant reagent mix accordingly and we got basically on the base of that upto almost 81% zinc recovery to produce a 51% zinc concentrate which is very encouraging.

At this point in time the team is focusing on optimum reagent addition points to make sure that calcium precipitates where we want it to do and that will be ongoing during May but it should be at this point in time a very fast and cost effective fix.

Ongoing optimization initiatives that will be ongoing during the quarter and as you're aware we still have some SAG mill modifications. We have some new designs lifters and shell liners which are either on site in case of lifters and the shell liner fabrication is in progress and we will start changing them out from late May onwards. And we continue to work at the IsaMill redundancy test work just to optimize the lead side and really then the final big thing is test work and implementation of some pumping and piping infrastructure recommendations and made by a Glencore's Australian pumping experts and certainly we hope to start those upgrades in June, July that will certainly also help stabilize the circuit and then also provide we believe additional upside on the recoveries as we get better control on the fine grind.

We do have some new instrumentation to go on place that's largely in place now pretty minor but that will be ongoing just to add more optimization [ph] and more tracking of the mill. So that's really where we are in the mill. Underground production during the month was approximately 2000 tons per day at a 6% zinc, 3% lead and 2.7 ounces per ton silver. Certainly with the mill recovery specifically zinc with our calcium fix now approaching target entitlement ranges and we are refocusing on the underground operations and certainly the plan and the aim is to ramp production to 2500 to 2700 ton per day range during this quarter. Ongoing underground optimization includes mobilization with additional scoop to improve fleet support and efficiencies and that’s schedule to arrive on site later this month in May. And we're also working on decreasing the feed waste and average hole distances from approximately 2.3 kilometers down to sub2 kilometers and going forward and we have just done some restructuring of technical supervision just to make sure that the mining has seven days support on site as well. That's pretty much where we are at this point in time. I'd like to thank you all and we're now happy to host any questions and answer them to the best of our ability if possible. So Operator, I will hand it back to you at this point in time.

Question-and-Answer Session

Operator

[Operator Instructions]. The first question is from Stefan Ioannou from Haywood Securities. Please go ahead.

Stefan Ioannou

I just had a question on the Caribou side of things, just you mentioned you know 10,000 meters of drilling that’s going to go on there, will that be really just focused on sort of tightening up mining blocks or will there be some exploration there too that we could potentially see some upside on the step out type of drilling sort of thing there?

Mark Cruise

Certainly I would say it will be ongoing throughout the year, in the first half of the year it is mainly to support near term mining and so really it's to get better control on the fringes of the currently defined deposits. and for the mining teams. So that’s in progress at the moment. And we have actually which I didn't - we have fully devoted the mine at this point in time. So I hope towards the latter part of the year we will start actually more converting some of the inferred tons, obviously the higher confidence category and start hopefully layering them into the mine plan on a go forward basis.

And so like I said first half of the year mainly mining support and then transitioning towards the second half of the year into more resource conversion and ultimately resource growth. So we'll see how we go during the year and we will continue to give updates as we move forward.

Stefan Ioannou

And then the MD&A it sort of sounds like you've done the half mile Stratmat pier [indiscernible] you're just getting going now on the PA stuff, and should we still sort of expect to see that PA document sort of towards the end of the year then?

Mark Cruise

Absolutely yes. It was on the site last week, we kick off meetings with SRK [ph] on the half mile Stratmat pier and so certainly the aim is to know that report will be out in H2 of this year.

Stefan Ioannou

Okay. Do you’ve like a rough budget, how much it's going to cost you to get sort of that stage in the project having the report done?

Mark Cruise

Yes I would say approximately $300,000 to $350,000, most of the work has been done, we did a lot of drilling last year, so it's just actually catching up the models to bring in that drilling and all the latest information.

Operator

The following question is from Joseph Gallucci from Dundee. Please go ahead.

Joseph Gallucci

A quick question, one on Santander and one on Caribou, Santander first. The zinc treatment charges you mentioned in your MD&A they haven't been reflected obviously in this quarter. Your new guidance for cost does that take into effect sort of the lower zinc charge - treatment charges for the rest of the year? And can we expect I guess a bit of a true up in Q2 to cover for the Q1 treatment charges on that?

Anna Ladd

So the cost guidance is just a slight production cost, so these treatment charges are below the line. They have not been reflected in Q1 so there is going to be true up in Q2.

Joseph Gallucci

Okay. And then just on you’re the Caribou, when you talk about the recovery being at 80.9% with the reagent mix, what is that number? Is it a weekly average or daily? Can you just give a bit of color on sort of what the 80.9 sort of means?

Mark Cruise

Yes I mean that’s just after several days kind of early May when the guy started adding soda ash into the system. So really like I said and stated I mean the idea is you know where is the best point to add that soda ash because obviously it is having an effect with the other reagents in the system and so that's really what they're working on. So that will be you know kind of really early May kind of some of the early May recoveries.

Operator

Thank you. There no further questions registered at this time. I would now like to turn the meeting back over to Mr. Stakiw.

Steve Stakiw

Thank you, Operator. Once again thank you everyone for dialing in and participating in our conference call this morning. As usual if anyone has any follow up questions please don't hesitate to ring or email us. Thanks again and have a great day.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!