Glencore sells zinc mines to Trevali for $400m

JOHANNESBURG (miningweekly.com) - Global diversified mining company Glencore has sold its 80% stake in the Rosh Pinah mine, and its 39% interest in the Gergarub project, both in Namibia, as well as its 90% stake in the Perkoa mine, in Burkina Faso, to zinc-focused base metals miner Trevali Mining Corporation for a total consideration of $417.8-million.

Glencore’s sale of its portfolio of zinc assets included a cash payment of $245-million and shares in Canada-based Trevali worth $172.6-million, which has increased Glencore’s share in Trevali from 4.3% to 21.3%.

The sale also included an option to acquire a 100% interest in the Canada-based Heath Steele project, including related exploration properties and assets.

“We are very pleased to finalise our acquisition of the Rosh Pinah and Perkoa zinc mines, which marks a truly transformational event for Trevali shareholders by establishing the company as a multi-asset, top-ten global zinc producer,” stated Trevali president and CEO Dr Mark Cruise.

“These assets complement our successful Santander and Caribou mines and provide significant upside to shareholders in this strengthening macro zinc environment through scale of production, as well as an attractive package of exploration ground,” he added.

All of the deposits remain open for expansion and active resource expansion programmes are in progress. Trevali also welcomed Glencore as a key strategic shareholder, which expands on the strong, proven business relationship they have enjoyed since 2010 at Trevali’s Santander operation.

Glencore's decision to sell the assets was made in the context of its overall investment purposes.

“Glencore will continue to review its investment alternatives from time to time and may determine to increase or decrease its equity ownership in Trevali through the acquisition or sale of additional outstanding common shares or other securities of Trevali, either through open market or privately negotiated transactions, in accordance with applicable securities laws,” the mining major stated on Thursday.

Meanwhile, following completion of the transaction, Trevali’s board of directors has been expanded to eight members, with Glencore having the right to nominate two directors.

Trevali has implemented a succession planning and board renewal process, and Glencore has the right to nominate its independent directors within 90 days following completion of the transaction. Glencore intends to exercise this additional nomination right in accordance with the terms of an investor rights agreement entered into between Glencore and Trevali at the closing of the transaction.

In addition, Trevali used $40-million to repay its 12.5% senior secured notes due on May 30, 2019 in full.

With the closing of the transaction, the Canadian zinc miner has added additional high-quality zinc production to its existing portfolio and has expanded its asset and geographic diversification, taking it to global top-ten zinc producer status with one of the highest zinc leverage ratios, as a percentage of revenue.

Trevali’s transaction with Glencore more than doubles its production from the Caribou and Santander mines to about 410-million payable pounds of yearly zinc output.

ROSH PINAH
The 2 000 t/d Rosh Pinah zinc-lead-silver mine, mill and sulphide flotation plant, located in south-western Namibia, about 600 km south of Windhoek, is 80.08% owned by Trevali and 19.92% owned by Namibian empowerment companies. Zinc production at Rosh Pinah has occurred since 1969; the mine is expected to produce for another 14 years or more.

“Mineralisation remains open for expansion with the exploration potential classified as excellent.”

The mine has proven mineral reserves of 1.611-million tons, with 9.88% zinc, 1.01% lead and 17.2 g/t of silver.

“Preliminary quarter two Rosh Pinah production was 24.8-million pounds (12 400 t) of payable zinc, 3.2-million payable pounds (1 600 t) of lead and 67 997 payable ounces of silver. Recoveries averaged 86% for zinc, 67% for lead and 40% for silver. Mill throughput for the quarter was 164 320 t.”

PERKOA
The 2 000 t/d Perkoa underground zinc mine, mill and sulphide flotation plant, located in the Sanguié province of Burkina Faso, about 120 km west of the capital city of Ouagadougou, is 90% owned by Trevali and 10% owned by the Burkina Faso government.

Perkoa has proven mineral reserves of 1.7-million tonnes and 15.8% zinc. Preliminary second-quarter Perkoa mine production was 46.6-million pounds (23 300 t) of payable zinc with an average recovery of 95% – a record quarter for Perkoa operations. Mill throughput for the quarter was 161 755 t.