Trevali continues to ride zinc wave

Shares in Trevali Mining (TSE: TV)  continue to ride the zinc wave after the company announced expansion of high-grade silver-lead-zinc mineralization and the discovery of a new zone at its Santander zinc mine in Peru.

The Vancouver-based mid-tier producer is up 88% year to date with most of those gains coming over the summer pushing the market value of the company to a shade under $400 million.

In a statement Trevali said its current drill program is to further extend the down-depth expression of the Magistral Central deposit and associated Fatima vein zones, in addition to test for the potential presence of hanging-wall hosted "Oyon" mineralization similar to that discovered at Magistral North early this year.

Zinc is the best performing metal in 2016 with a 55% rise in price from six-year lows struck in January

"In excess of 90% of the holes returned zinc grades, over mineable intervals, materially higher than those in current mining operations where run-of-mine head grades typically range from approximately 4-4.5% Zn. All mineralization remains open for expansion and further underground drilling is in progress," according to Trevali.

Highlights include:

  • 16.6 metres* of 13.8% Zn, 4.6% Pb and 3.2 oz/t Ag &
  • 15.9 metres* of 10.2% Zn and 2.0 oz/t Ag at Magistral Central,
  • 24.2 metres* of 5.6% Zn and 2.9 oz/t Ag at Fatima and
  • 11.4 metres* of 4.4% Zn, 1.7% Pb and 2.7 oz/t Ag at new Central Oyon zone

It's been a busy few months for the company. In July Trevali raised the 2016 zinc output guidance at 100%-owned Santander, in production since early 2014, following record output in the second quarter.

The company expects zinc production of 57 million to 60 million pounds of payable zinc in concentrate grading approximately 50% Zn, up from 52 million to 55 million pounds before. In Q2 the mine located around 200km north east of Lima produced a record 15.2 million pounds zinc, 5.6 million pounds lead and 222,100 ounces of silver.

Second-quarter recoveries averaged 89% for zinc, 87% for lead and 73% for silver, while mill throughput for the quarter was 219,086 mt, surpassing the prior record of 209,188 mt set in Q1.

Santander was developed with Glencore and the Swiss giant acts as contract miner and mill operator. Glencore has a life-of-mine concentrate offtake agreement.

Trevali's 100%-owned Caribou zinc-lead-copper-silver-gold mine in New Brunswick, Canada achieved commercial production earlier in July and is forecast to produce roughly 37 million to 41 million pounds of zinc, 14 million to 15 million pounds lead and 380,000-420,000 ounces of silver through the end of this year.

In  a recent research note Haywood Securities were bullish on the prospects of the company. The Vancouver-based investment dealer said with zinc production from two mines expected to ramp-up to +170 million pounds per year by around 2019, the company "is poised to become a (the) marquee mid-tier pure-play zinc producer in a market facing a significant medium-term supply issue. Hence, we would not be surprised to see the Company garner a premium market valuation on the back of higher zinc pricing."

Zinc is the best performing metal in 2016 with a 55% rise in price from six-year lows struck in January on the back of major mine closures like Lisheen in Ireland and Century in Australia and suspension of some production at Glencore and Nyrstar.