The Gold Report - Thu, Jul 27, 2017

A Zinc Discovery Plus Two Buy Recommendations Equal a Solid Week for One Miner

With multiple mines at different stages, and results exceeding expectations, this miner is in the sights of analysts.

trevali zinc

Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX) announced the latest results from its Health Steele project in Canada. According to the July 25 press release, the company "drill tested the E-zone at Heath Steele, an advanced-stage, near-surface target with a historic, non-National Instrument 43-101-compliant resource."

  • Highlights include: 30.7 metres at 7.56% Zn, 2.34% Pb, 0.29% Cu, 72.00 g/t Ag and 0.48 g/t Au;

  • including: 10.0 metres at 15.32% Zn, 4.50% Pb, 0.07% Cu, 90.45 g/t Ag and 0.22 g/t Au; and

  • 22.3 metres at 7.86% Zn, 2.63% Pb, 0.32% Cu, 82.46 g/t Ag and 0.82 g/t Au

The Heath Steel project was acquired as part of a "definitive agreement" between Glencore International Plc (GLEN:LSE; GLNCY:OTC) and Trevali. Heath has a long history of extractions between 1957 and 1999, which include zinc, lead, copper, silver and gold.

Trevali also recently announced preliminary Q2/17 production results, including results from the Rosh Pinah mine in Namibia and Perkoa mine in Burkina Faso that are being acquired from Glencore.

In a July 24 report, analyst Jacques Wortman with Eight Capital commented that Trevali had a "mixed quarter, but generally better than expected." He highlights Trevali's "Q2 production results of 18.88 mm payable Zn-eq lbs, approximately 2% higher than our estimate of 116.88mm payable lbs. Two of the four mines (Perkoa, Santander) exceeded expectations by a good margin." He pointed out, however, that Santander had exceeded Q2 results after "guidance for zinc production was adjusted lower as heavy rainfall encountered in Q2 necessitated mine rescheduling." Regarding Santander, Wortman stated, "We are not overly concerned regarding TV lowering Santander's zinc production guidance for this year, as it represents a partial deferral of mining in the higher grade Magistral North and Oyon zones to later this year and into 2018." Perkoa, Wortman noted, had its "best operating quarter to date."

Wortman concluded with a Buy recommendation and a target price of $1.85, stating, "Our target price is based on an equal-weighting between our net asset value (NAV, 8% discount rate) and a 5.0x target multiple to our 2018 EBITDA estimate. Our 5.0x target multiple reflects the discount that zinc stocks typically trade at relative to copper stocks (6.0x - 7.0x target multiples)."

Pierre Vaillencourt with Haywood Securities, in a July 21 report, rated Trevali a Buy, highlighting that although the Santander mine was behind in zinc production, due to heavy rains, Trevali "is on target to reach its objectives for the year." He concluded that with the Perkoa and Rosh Pina mines, recently purchased from Glencore, Trevali is the "largest pure-play zinc producer in the world" and Haywood's target price of $2.00 is based on "a multiple of 4.3xEV/2018E Operating Cash Flow, and is supported by a NAV of C$1.08."

Trevali is currently trading at around $1.32 per share.

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, securities 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.
2) The following companies mentioned in this article are sponsors of Streetwise Reports: Trevali Mining Corp. Streetwise Reports does not accept stock in exchange for its services. Click below for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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