Trevali Mining Unable To Make Debt Payments Due Tomorrow, Cuts Guidance At Caribou Mine

Trevali Mining (TSX: TV) appears to be in a world of hurt following a series of unfortunate events occurring at its mine sites. The firm reported its second quarter financial results this morning, which were highlighted by the fact that the company does not currently have the means to make required payments on its debt due tomorrow.

Production for the quarter came in at 34.5 million pounds of zinc, a decline of 44.6% from production seen in the first quarter. The decline is a result of the ongoing suspension of operations at its Perkoa Mine due to a flooding event that resulted in eight deaths, as well as poor performance at the firms Caribou mine.

In terms of costing for the quarter, cash costs came in at $1.19 while all-in sustaining costs amounted to $1.61 per pound, with the latter climbing 32% on a sequential basis. Zinc comparatively had an average LME price during the period of $1.78 per pound.

Operations at Perkoa currently remain suspended, and have been since April 16 following the flooding event. The event thus far has cost the firm $15.2 million. Guidance for production and costs at Caribou meanwhile have also now been suspended, with the operation as a whole under review as a result of poor performance, which is blamed on low productivity rates and equipment and operator availability from the mining contractor. Combined, the struggles at the two mines resulted in an impairment of $23.7 million on the firms assets during the quarter.

Revenues overall came in at $52.0 million for the quarter due to these operational issues, versus $93.1 million in the first quarter, a decline of 44.1%. Overall, this lead to a net loss of $62.2 million for the quarter, and adjusted EBITDA of $9.2 million.

And that’s not even the worst aspect of the results.

In terms of its balance sheet, the company is currently struggling to source additional financing, presumably as a result of the poor performance of both the Perkoa and Caribou mines. With a planned expansion at the firms Rosh Pinah mine, referred to as RP2.0, the company is in need of extensive capital. Presently, climbing costs have lead to the expansion to cost an estimated $121 million, with the company still looking to source the final funds needed to proceed with the expansion ahead of a final decision that is expected to be made in Q3.

More significantly however, the company has debt coming due in September that they have been unable to source funding for to cover. The debt, which consists of a $111.9 million credit facility for which $23.0 million remains undrawn, as well as a $13.0 million facility with Glencore, amounts to $97.2 million in debt which is due next month – and for which they currently have no means to pay. What’s more, a $7.5 million required prepayment due tomorrow is not expected to be paid by the company, putting it in default with its lenders – thereby making it even more difficult to obtain future financing.

As of June 30, the company reported cash of $41.7 million, with total current assets of $105.1 million. Total liabilities meanwhile sits at $146.5 million.

Looking forward, outside of an ongoing strategic review, the company has provided guidance just for the Rosh Pinah mine, after dropping guidance for Caribou and Perkoa. Trevali expects the mine to produce between 62 and 66 million pounds of zinc, between 16 and 18 million pounds of lead, and between 168 and 178 thousand ounces of silver. Cash cost guidance meanwhile has climbed to $0.84 and $0.90 per pound of zinc, and AISC is expected to come in between $1.22 and $1.28 per pound of zinc.

Trevali Mining last traded at $0.225 on the TSX, down 51.1% on the day.

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Information for this analysis was found via Sedar and Trevali Mining Corp. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.