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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Disclosures from Paradigm Capital, Research Note, March 30, 2017
Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the past 12 months.
Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months.
The analyst (and associate) certify that the views expressed in this report accurately reflect their personal views about the subject securities or issuers. No part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations expressed in this research report.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is determined by revenues generated directly or indirectly from various departments including Investment Banking, based on a system that includes the following criteria: reports generated, timeliness, performance of recommendations, knowledge of industry, quality of research and investment guidance and client feedback. Analysts are not directly compensated for specific Investment Banking transactions.
PCI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. PCI may act as financial advisor and/or underwriter for certain of the corporations mentioned herein and may receive remuneration for same.
GMP, Trevali Mining Corp., March 31, 2017
GMP has, within the previous 12 months, provided paid investment banking services or acted as underwriter to the issuer.
The analyst has viewed the operations of this issuer and the issuer paid all or a portion of the travel expenses associated with the analyst’s site visit to its operations.
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GMP Analysts are compensated competitively based on several criteria. The Analyst compensation pool is comprised of several revenue sources, including secondary trading commissions, new issue commissions, investment banking fees, and directed payments from institutional clients. GMP prohibits any director, officer or employee of GMP from holding any office in publicly traded companies or any office in non-affiliated private companies in the financial services industry.
Cormark Securities, Trevali Mining Corp., March 29, 2017
We, Stefan Ioannou and Yakun Liu, hereby certify that the views expressed in this research report accurately reflect our personal views about the subject company(ies) and its (their) securities. We also certify that we have not been, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
Cormark disclosure statement for Trevali is found here.