Stefan Ioannou interview exerptshttps://www.marketoracle.co.uk/Article49290.html
TMR: What are your near-term and long-term prices for zinc and nickel?
SI: Our formal zinc price for 2015 is $1.10/lb, which is a notable move up from where it is right now, at just below $1/lb. The zinc market is an interesting space. Current inventories are still quite high, but they're being drawn down rather quickly. We have seen and are in the process of seeing large zinc mines shut down.
Over the last two years or so we've lost about 12% of world production and the advanced-stage projects slated to replace those mines are quite few—not enough to replace what we're losing. We are anticipating a move in the zinc price, probably later this year. Then in 2016 and 2017 we could see zinc prices really run, as in 2007, when zinc rose to $2/lb. Any company with zinc in its name or zinc in its business plan stands to do well. Looking further ahead we anticipate higher pricing will prompt more production, in turn moderating the market. Hence, we continue to use a long-term zinc price of $1.15/lb.
SI: In the copper space there are well over 100 names. The zinc space is much smaller—you could literally count the good projects on one hand. That shapes up nicely for the anticipated run in the zinc price later this year and into 2016. When you look at the list of producers, excluding the top-tier names like Teck Resources Ltd. (TCK:TSX; TCK:NYSE, Buy, $22.50 TP), Glencore International Plc (GLEN:LSE) and Nyrstar NV (NYR:BSE), the only game in town is really Trevali Mining Corp. (TV:TSX; TV:BVL; TREVF:OTCQX; Under Review). Trevali is already in production at an established mine in Peru called Santander. It started production at the beginning of 2014 and costs remain low. Santander is currently producing about 50 million pounds (50 Mlb) of zinc a year and an ongoing expansion should boost capacity to over 80 Mlb by 2017.
TMR: But Trevali won't have to wait until 2017 to boost production.
SI: That's right. The second chapter to the story, which is really the focus in 2015, is a mine start up at a project in New Brunswick called Caribou. It was previously owned and operated by Blue Note Mining Inc. Trevali has refurbished the mine and is getting ready to produce more than 90 Mlb zinc annually. In time, Trevali will produce on the order of 190 Mlb zinc annually from both Santander and Caribou. Again, with the zinc price hopefully running within the next year or two, this company should be well positioned to catch that wave.
TMR: How does Trevali's management stack up with similar-sized companies in the base metals space?
SI: Early on, Trevali's management worked closely with Glencore's management at Santander. From an operating point of view, Trevali has had a lot of input and help from experienced operators. That's been huge. CEO Mark Cruise is also a very good geologist. Ongoing underground exploration work at Santander led to the discovery of two new zones, Rosa and Fatima. Those are high-grade zones close to existing infrastructure. In fact, some of the high-grade ore from Rosa is already being built into the current mine plan. That's an example of quickly turning expertise into value.
TMR: Mining in New Brunswick has a long history, but it's also been a high-cost endeavor for a number of operators. How are costs shaping up at Caribou?
SI: We had previously anticipated it was going to cost about $0.70/lb to produce zinc at Caribou and at US$0.80/lb zinc the project's economics get tight. However, this cost profile stands to benefit from a currently weak Canadian dollar. Regardless, if we see the run in zinc prices that we're hoping for, Trevali is not going to have any problems.