Santa comes early to Santander as Trevali reports exploration success

VANCOUVER (miningweekly.com) – Zinc-focused miner Trevali Mining on Thursday reported assay results from eight new drill holes at its Santander mine, in Peru, showing clear evidence that the Magistral Central and Magistral North zones merge at depth.

The Vancouver-based company said exploration results show that the deposits form a 600-m-plus zone of massive sulphide mineralisation, with many of the latest drill holes intersecting zinc grades materially higher than what Santander is currently mining, especially from the recently discovered Oyon zone.

All mineralisation remains open for expansion.

“Our 2016 exploration program has been particularly successful in so far as it has unequivocally demonstrated that the Magistral zones have now merged at depth, forming what is essentially a plus-600-metre-long zone of semi-contiguous, massive sulphide mineralization comprised of multiple stacked replacement horizons and host units. This coupled with increasing zinc grades, typically only seen in the larger end members of the deposit class, sets a very solid foundation for future resource expansion programs particularly given constructive macro-zinc fundamentals,” stated president and CEO Dr Mark Cruise.

Highlights of the high-grade intercepts from underground drilling include hole MC-182-16, which returned an intercept of 3.2 m at 7.51% zinc, 1.13% lead and 0.96 oz/t silver and 5.5 m grading 6.6% zinc, 0.72% lead and 0.97 oz/t silver; hole MC-186-16, which intercepted 3.35 m grading 12.44% zinc, 1.16% lead and 1.78 oz/t silver; hole MC-187-16, which returned 3.4 m at 11.46% zinc, 9.91% lead and 14.81 oz/t silver; and hole MC-188-16, which returned 2.55 m at 9.93% zinc, 10.67% lead and 5.67 oz/t silver.

EXPANSION POTENTIAL
Dundee Capital Markets analyst Joseph Gallucci believes the new results are supportive of a mill expansion at Santander.

“The results from the 2016 exploration programme have the potential to add significant tonnage to the Santander mine plan, which would be supportive of a mill expansion to 4 000 t/d, from 2 000 t/d,” the analyst said in a note to clients.

Santander is currently producing about 52-million pounds of payable zinc a year, with a potential expansion believed to be able to double output, making Santander almost as large as Trevali’s Caribou mine, in New Brunswick.

“We conservatively model a 4 000 t/d expansion taking place in 2019, with a capex of $25-million spread over 2017 to 2018. If the positive drill results continue (which we believe they will) and the zinc market remains strong, we believe there is potential to accelerate this expansion,” Gallucci stated.

Meanwhile, Trevali has optionality to reconfigure the current mill for the expansion, but beyond the addition of some extra components, which the current mill already has the capacity for, there is not much work needed to implement the expansion, the analyst said.

Trevali is expected to make a decision on whether or not to pursue the expansion in 2017.

“We remain of the belief that there is a true expansion opportunity in the near term. We believe Trevali is in an excellent position to capture strong zinc fundamentals.

“Our view is that a majority of zinc development plays will not be in production to catch the cycle, either due to permitting or funding obstacles (or both). Our ‘top pick’ view on Trevali’s zinc leverage is based on current production as well as short term organic growth,” Dundee stated.