News . Read On . Three Valley Copper Reports 2022 First Quarter Results and Provides Corporate Update V.TVC | 2 hours ago (all amounts expressed in US dollars) TORONTO, May 25, 2022 (GLOBE NEWSWIRE) -- (TSXV: TVC) (OTCQB: TVCCF) Three Valley Copper Corp. ("TVC" or the "Company") today announced its operating and financial results for the three months ended March 31, 2022. The Company is focused on growing copper production from, and further exploration of, its primary asset, Minera Tres Valles SpA ("MTV"). Located in Salamanca, Chile, MTV is 95.1% owned by the Company and MTV's main assets are the Minera Tres Valles mining complex and its 46,000 hectares of exploratory lands. The Company's financial statements and management's discussion and analysis ("MD&A") are available at www.threevalleycopper.com and www.sedar.com. Highlights Corporate The initial construction of the Papomono block caving mine was completed in mid-January 2022. At that time, MTV chose to temporarily halt the start of the block caving operation as MTV's expected cash flows were not sufficient to fully support the ramp-up of Papomono during 2022. Increasing production input costs and the decision to suspend operations at the Don Gabriel open pit mine significantly impacted MTVs ability to generate the necessary cash flows to fund the planned ramp-up of Papomono. To further preserve liquidity, MTV also temporarily suspended its exploration program and certain sustaining and expansion capital expenditures. On March 7, 2022, MTV's senior secured lenders (the "Lenders"), together with the Company, expressed their intention to provide $11 million of super senior secured funds to MTV, the approvals for and terms of which are being finalized. This funding, if approved, was expected to be drawn down in tranches by MTV beginning at the end of March 2022 and is expected to fund MTV into July 2022 providing the Company and the Lenders additional time to negotiate a longer-term solution for MTV, including, inter alia, sourcing additional capital that will be required, bridge loan financing, additional debt financing, forgiveness or conversion of debt, waivers of operating and other covenants, deferrals of or renegotiation of repayment terms and/or renegotiation of the fixed price portion of the offtake agreement (the "Offtake"). If MTV is successful in sourcing additional financing, this will likely cause a material dilution to TVC's ownership interest in MTV, including the possibility that TVC would no longer hold majority control of MTV. If approvals from the respective parties are not obtained and funding not provided, it is expected that MTV will not have sufficient funds to operate past mid-June 2022. This could force a liquidation or sale of MTV that could adversely impact TVC's ability to recover any or all of TVC's investment in MTV. To date, neither approvals nor any of the $11 million has been received by MTV. The Lenders have not provided any certainty of their intentions nor confirmation of any amounts that may be committed. In addition to the $11 million super senior secured funds, the Company estimates that MTV will require at least an additional $10 million of capital during 2022. On March 31, 2022, MTV did not pay interest due to the Lenders as required pursuant to the terms of the senior secured prepayment facility (the "Amended Facility"). While the Lenders have not sent a notice of default to MTV they have expressly reserved their rights. As a result of the current financial situation of MTV, the interruption in its operations and the non-payment of interests due on March 31, 2022, certain defaults of the Amended Facility have occurred and are continuing, consequently the total outstanding balance of the Amended Facility remains classified as current liabilities. In addition, the amounts owing to the unsecured creditors (the "Unsecured Creditors") of the Judicial Reorganization Agreement ("JRA") are also classified as current liabilities. Also, amounts due to the Unsecured Creditors of the JRA on March 31, 2022 were postponed until June 30, 2022 with the approval of the Creditors' Committee representing the Unsecured Creditors of the JRA. Operations MTV completed its planned initial construction and developments for Papomono in mid-January 2022. As of the date hereof, MTV has completed eleven drawbells with two drawbells in the final stages of undercutting and preparation, with caving now projected to commence in late June, subject to the funding being in place. Tunnel advance and drawbell development will continue in parallel with production throughout the life of the mine. Copper cathode production in the first quarter of 2022 was 2.3 million pounds primarily from the drawdown of inventory on the leach pads and ore supplied by third-party miners. Copper cathode production was negatively impacted by the suspension of operations at the Don Gabriel open pit mine and the temporary delay of the start of Papomono block caving operations. Copper cathode production was slightly less than the fourth quarter of 2021 of 2.5 million pounds. Copper cathodes sales in the first quarter of 2022 were 2.4 million pounds, similar to the fourth quarter of 2021 of 2.3 million pounds. Total capital expenditures for the three months ended March 31, 2022 amounted to $4.0 million of which $3.8 million consisted of Papomono expenditures. Financial Reported quarterly gross loss of $1.4 million on a realized average copper price per pound1 of $4.44 compared to a gross profit of $2.1 million in Q1 2021 on a realized average copper price per pound1 of $3.47. Adjusted EBITDA from continuing operations1 for the quarter was negative $1.5 million compared to positive $0.7 million in Q1 2021. Net loss per share attributable to owners of the Company for the three months ended March 31, 2022 was $0.06 compared to $0.01 in Q1 2021. At March 31, 2022, held consolidated cash and cash equivalents of $9.3 million and consolidated cash and cash equivalents of approximately $5.8 million as at the date hereof, the majority of which is held at the public company, separate from MTV. Going Concern / MTV Liquidation Risk MTV has incurred significant operating losses and negative cash flows from operations in recent years and the Company on a consolidated basis has (i) an accumulated deficit of $295.5 million, and (ii) negative working capital of $69.6 million, as at March 31, 2022. Given the financial position of MTV and the occurrence of events of default, the total outstanding amounts under the Amended Facility and JRA remain classified as current liabilities. MTV will require further financing to meet its financial obligations, sustain its operations and ongoing capital projects in the normal course, and expand its inventory of reserves and resources. MTV will need to raise capital in order to further support its operations including additional sustaining capital requirements to fully support the ramp-up of Papomono during 2022. MTV currently operates in a high-cost environment and additional sources of capital will be required to execute MTV's planned operations. MTV does not have sufficient cash to support its operations beyond mid-June 2022. There is no assurance that additional financing will be available on a timely basis or on terms acceptable to MTV. MTV has suspended mining operations at the Don Gabriel open pit mine and is in negotiations with the Lenders to amend the terms of the existing Amended Facility. There is no assurance that the negotiations will be successful. If MTV is successful in sourcing additional financing, this will likely cause a material dilution to TVC's ownership interest in MTV, including the possibility that TVC would no longer hold majority control of MTV. MTV did not pay the interest due to the Lenders on March 31, 2022, and consequently MTV is in default with the terms of the Amended Facility effective that date. In addition, TVC did not invest the remaining net proceeds of the November 2021 financing (approximately $2.5 million) into MTV pursuant to the terms of the undertaking agreement with the Lenders, and consequently the terms of the undertaking agreement are now no longer binding. The remaining net proceeds of the November 2021 financing intended to support MTV are currently being retained by TVC which may be used in whole, or in part, to further support MTV in the future, subject to the outcome of the negotiations underway with the Lenders. Due to certain ongoing events of default, the Lenders may exercise their security rights and/or remedies pursuant to the terms of the Amended Facility that could force a liquidation or sale of MTV that could adversely impact TVC's ability to recover any or all of TVC's investment in MTV. The public company, TVC, is expected to continue as a going concern even if a liquidation event occurs at MTV. Commenting on the results, Michael Staresinic, President and Chief Executive Officer of TVC stated, "Papomono initiated its first phase of caving operations by beginning the blasting of undercuts. MTV has completed over half of this required first step before formal caving can begin, subject to the receipt of required short-term funding, in the second half of June. Together with the Lenders, we expressed the intention to provide $11 million of super senior secured funds to MTV to support it over the next several months, and while these discussions continue in earnest, the approvals for and terms are not yet finalized. Without this proposed funding, MTV's cash will be exhausted and its operations may not be able to continue past mid-June 2022 which could lead to a liquidation event of MTV. Although all parties are advancing the necessary paperwork to allow for additional funding of MTV, we still do not have certainty of the Lenders' intentions nor confirmation of any amounts that may be committed." "As we have shared previously, a very difficult decision was announced on January 24, 2022 to temporarily suspend operations at the Don Gabriel open pit mine. Our results reflect this as ore production decreased significantly. We continued to process ore from third-party miners and draw down inventory producing 1,042 tonnes of copper cathode in the first quarter. We reported a net loss of $0.06 per share attributable to owners of the Company. Assuming successful capital support for the execution of Papomono's planned ramp-up, MTV's operations are expected to improve during 2022 as additional drawpoints become accessible for the mining of Papomono's high-grade, low-cost ore." "This is a difficult time for MTV and the Company, and the risk is very real that the Company may lose its entire investment in MTV or be materially diluted. The public company, TVC, is expected to continue as a going concern even if a liquidation event occurs at MTV. Even with the adversity that we have faced recently, we remain focused on supporting MTV in achieving a successful ramp-up of the Papomono block caving operations. This was always our focus and now that we are here, we believe that it is in all stakeholders' best interests to ensure that there is capital support for MTV." Operational Results Summary Three months ended Operating information Mar. 31, 2022 Mar. 31, 2021 Copper (MTV Operations) Total ore mined (thousands of tonnes) 30 179 Grade of ore mined (% Cu) 0.66 % 0.57 % Total waste mined (thousands of tonnes) 78 269 Ore Processed (thousands of tonnes) 110 223 Cu Production (tonnes) 1,042 900 Cu Production (thousands of pounds) 2,297 1,985 Change in inventory ($000s) $ (1,061 ) $ 6.034 Cash cost of copper produced1(USD per pound) $ 4.72 $ 2.28 Realized copper price1(USD per pound) $ 4.44 $ 3.47 Ore Production Ore mined of 16,076 tonnes at a grade of 0.50% from the Don Gabriel open pit mine representing 54% of ore mined. Majority of ore processed from third-party small miners. Produced 2.3 million pounds of 99.99% pure copper cathodes at a cash cost per pound produced1 of $4.72. Sold 2.4 million pounds of copper cathodes at an average realized copper price per pound1 of $4.44. High unit costs expected throughout 2022 as the Company expects to operate below capacity until Papomono's ramp-up is complete. Construction and Development of Papomono Masivo Initial construction completed mid-January 2022. Blasting of undercuts commenced early March 2022 with expected completion before the end of June 2022. Exploration In January 2022, the Company temporarily suspended its exploration program but remains part of the longer-term plan for MTV. Significant strategic land package of over 46,000 hectares. With more than 100 copper outcrop occurrences and 70 artisanal mining sites with geological characteristics similar to that of the Papomono and Don Gabriel orebodies, together with near-term infill drilling opportunities, the Company believes there is significant exploration potential. COVID-19 MTV continued its vaccination campaign and at March 31, 2022, 99.5% of MTV's employees were fully vaccinated, 85% had received a booster shot and contractors maintained a vaccination rate of more than 90%. The Company continues its preventative, mitigating and containment measures to actively minimize the spread of COVID-19. Financial Results Summary Three months ended Financial information (in thousands) Mar. 31, 2022 Mar. 31, 2021 Revenue $ 10,878 $ 7,000 Gross loss (profit) $ 1,431 $ (2,141 ) Net loss for the period $ 7,223 $ 655 Net loss per share attributable to owners of the Company $ 0.06 $ 0.01 EBITDA from continuing operations1 $ (3,988 ) $ 2,792 Adjusted EBITDA from continuing operations1 $ (1,526 ) $ 700 Write-down (reversals) of inventory $ 701 $ (1,738 ) Cash (used in) provided by operating activities before working capital changes $ (1,212 ) $ 709 Cash Position, Working Capital and Net Debt Consolidated cash and cash equivalents decreased to $9.3 million at March 31, 2022 from $13.7 million at December 31, 2021 mainly due to $2.4 million used in operating activities, $3.6 million of disbursed capital expenditures mainly related to the construction and development of Papomono, and partially offset by $1.4 million in proceeds from a portfolio investment. The Company has a consolidated working capital deficit1 of $69.6 million at March 31, 2022. The working capital deficit includes all amounts due to the Lenders and Unsecured Creditors as current liabilities. Cash position as at the date hereof is approximately $5.8 million with the majority of the cash held directly by TVC which is separate from MTV. The Company is substantially leveraged. The Company's net debt1 at March 31, 2022 was $68.6 million. The Company's debt position continued to increase as it capitalized interest and did not make scheduled interest payments on March 31, 2022. Health and Safety For the three months ended March 31, 2022, there was one Lost-Time Incident. The Company and MTV devote considerable time and effort to ensure that workers and contractors return safely to their families after each shift. Safety statistics are monitored and compared to the country and peer averages, and MTV pro-actively engages in education and assessment to achieve a goal of zero lost-time incidents. Ongoing Arbitration As previously disclosed, the Company is involved in an arbitration proceeding with the Minority Shareholder of MTV. The arbitration proceeding is continuing and no further material developments have occurred. The Company remains confident in its position and is monitoring the arbitration proceeding and its process closely. Qualified Persons The scientific and technical content contained in this news release is taken from the technical report (the "Technical Report") entitled Minera Tres Valles Copper Project, Salamanca, Coquimbo Region, Chile NI 43-101 Technical Report prepared by Dr Antonio Luraschi, RM CMC, Manager of Metallurgic Development and Senior Financial Analyst, Wood, Mr Alfonso Ovalle, RM CMC, Mining Engineer, Wood, Mr Michael G. Hester, FAusIMM, Vice President and Principal Mining Engineer, Independent Mining Consultants, Inc., Mr Enrique Quiroga, RM CMC, Mining Engineer, Q&Q Ltda, Mr Gabriel Vera, RM CMC, Metallurgical Process Consultant, GVMetallurgy, and Mr Sergio Alvarado, RM CMC, Consultant Geologist, General Manager and Partner, Geoinvestment Sergio Alvarado Casas E.I.R.L. all of whom were independent qualified persons as defined by NI 43-101 at the time the Technical Report was prepared. The Technical Report was filed by TVC on SEDAR (www.sedar.com) on December 14, 2018 and subsequently amended and restated on May 27, 2021. Readers are encouraged to read the Technical Report in its entirety. About Three Valley Copper Corp. TVC, headquartered in Toronto, Ontario, Canada is focused on growing copper production from, and further exploration of, its primary asset, Minera Tres Valles SpA. Located in Salamanca, Chile, MTV is 95.1% owned by the Company and MTV's main assets are the Minera Tres Valles mining complex and its 46,000 hectares of exploratory lands. For more information about TVC, please visit www.threevalleycopper.com. Non-IFRS Performance Measures "Cash costs", "EBITDA", "Adjusted EBITDA", "Realized copper price", "Working Capital", "Working Capital Deficiency", and "Net Debt" are non-IFRS performance measures. These non-IFRS performance measures do not have a standardized meaning prescribed by IFRS. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding of the Companys performance. For further information and a detailed reconciliation of each non-IFRS measure used in this press release to the most directly comparable IFRS measure, please refer to the Companys MD&A and accompanying TVC financial statements filed on SEDAR at www.sedar.com and the Reconciliation of Non-IFRS Performance Measures section in this press release. Reconciliation of Non-IFRS Performance Measures The Company uses certain performance measures in its analysis. These performance measures have no standardized meaning prescribed by IFRS. For additional details please refer to the Company's discussion of non-IFRS performance measures in the Company's MD&A for the three months ended March 31, 2022 which is available on SEDAR at www.sedar.com. Cash costs per pound produced can be reconciled as follows: Three months ended Mar. 31, 2022 Mar. 31, 2021 Cost of Sales $ 12,309 $ 4,859 Depreciation (535 ) (1,235 ) Non-site inventory reversal 1,435 Net change in copper cathodes inventory (790 ) (454 ) Transportation costs (135 ) (86 ) C1 Cash costs of production 10,849 4,519 Pounds of copper produced (thousands) 2,298 1,985 Cash cost of copper produced (USD per pound) $ 4.72 $ 2.28 EBITDA and Adjusted EBITDA can be reconciled as follows: Three months ended Mar. 31, 2022 Mar. 31, 2021 Net loss from continuing operations $ 7,223 $ 655 Add: Finance expense 2,700 2,212 Depreciation 535 1,235 EBITDA from continuing operations (3,988 ) 2,792 Write-down (reversal) of inventory 701 (1,738 ) Gain on portfolio investments (107 ) Unrealized foreign exchange loss (gain) 1,744 (439 ) Stock-based compensation 17 28 Loss on modification of debt 164 Adjusted EBITDA from continuing operations $ (1,526 ) $ 700 Realized copper price per pound can be reconciled as follows: Three months ended Mar. 31, 2022 Mar. 31, 2021 Revenue from copper cathodes $ 10,878 $ 6,942 Pounds of copper sold (thousands) 2,449 1,998 Average realized copper price (USD per pound) $ 4.44 $ 3.47 Working capital (deficit) can be reconciled as follows: As at Mar. 31, 2022 Dec. 31, 2021 Cash and cash equivalents $ 9,254 $ 13,656 Restricted cash 471 556 Trade and other receivables 1,251 1,705 Inventories 15,678 16,739 Prepaids and other current assets 1,480 1,528 Portfolio investments 763 2,101 Current assets 28,897 36,285 Current liabilities 98,494 95,398 Working capital deficit1 $ (69,597 ) $ (59,113 ) Net debt can be reconciled as follows: As at Mar. 31, 2022 Dec. 31, 2021 Current portion of loans and borrowings $ 77,687 $ 74,251 Loans and borrowings 215 218 Less: cash and cash equivalents (9,254 ) (13,656 ) Net debt $ 68,648 $ 60,813