Trevali Mining Corp

Good day, everyone, and welcome to the Trevally Mining Corporation fourth quarter and full year 2021 financials and earnings conference call and webcast. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during that time, please press star 1 on your telephone keypad. You may press star 1 at any time during the call to enter the queue. I would like to remind everyone that the conference call is being recorded. I would now like to turn the call over to Brendan Craney, Trevely's Chief Financial Officer. You may begin, sir.

Thank you, Valerie. Good day, everyone, and thanks for taking the time to join the call this morning. Before we get started, I would like to direct your attention to our forward-looking language on slide two. Our discussion today will contain forward-looking information about the company's future performance. Although forward-looking statements are based on what management believes to be reasonable assumptions, actual results may turn out to be different to these forward-looking statements. For a complete discussion of the risks, uncertainties and factors which may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to our latest MD&A filed on CDAR for the period ended December 31st, 2021. I'd also like to mention that this conference call is being recorded and a replay webcast will be available one hour after today's call. In conjunction with this conference call, there is an accompanying PDF presentation available in the events section and the corporate presentation section of Trevally's website under the investors tab. The link to our live webcast is also on Trevally's website under events. Moving to slide three, our main presenters today are Rikas Grimbeak, Trevally's president and CEO, and he will be accompanied by Derek Dupree, Trevally's chief technical officer, an interim chief operating officer, and myself as Trevally's chief financial officer. Rikas, over to you.

Thank you, Brendan. Starting on slide four. Our safety records saw a decrease in total recordable injuries in Q4 versus Q3. Importantly, significant incidents continued to decline in 2021 with a 30% reduction year over year. The trends are shown in the top right-hand graph on slide four. We achieved payable production of £316 million in 2021 at a C1 cash cost of 91 cents per pound, and all in sustaining costs of $1.05 per pound. Unfortunately, these were below guidance and production and cost as shown in the table on the bottom right of the slide. We will discuss some of the reasons for the shortfall in upcoming slides. We restarted Caribou in the first quarter of last year with a two-year production plan. At the time, we elected to enter into a fixed price arrangement at $1.25 per pound of zinc in order to protect the cost structure while studying the potential to extend the mine life. The zinc price averaged $1.36 per pound in 2021 versus $1.03 per pound in 2020, and thus contributed to the $343.7 million in revenue for the year. The 47% decline in benchmark treatment charges in 2021 versus 2020 was also a key benefit for us last year. We reported a full year 2021 adjusted EBITDA of $102.3 million and operating cash flow of almost $91 million. The strong cash flows contributed to the $27 million reduction in net debt for the year, which at year end stands at $78 million. We were quite active on the asset optimization front in 2021. We ended the year by consolidating our shares and completing the divestiture of our Santander mine in December. The highlight over was the publication of our RP 2.0 feasibility study in August. This was followed by the initiation of a financing effort that is still underway. More on this shortly. Turning to slide 5, we are confirming our 2022 production and cost guidance. We expect to produce between 247 and 280 million pounds of zinc on a consolidated basis at an all-in sustaining cost of between $1.03 and $1.13 per pound of zinc. As we have seen in Q4, with the zinc price averaging at $1.53 per pound, the current spot price is now approximately $1.65 per pound, and this has important implications for our ability to generate cash flow. The two charts on the right hand of this slide and show what the consolidated margin could potentially look like at $1.55, $1.65 and $1.75 per pound of zinc. The top chart shows how the consolidated margin rises from the $79 million to $117 million with each 10 cent per pound increase from the basis of $1.55 per pound. We have taken a midpoint of zinc production guidance and used the midpoint of our ASIC guidance and adjusted for the 22.5 million in expensory capital we guided to, and the fact that of the 263 million pounds of payable zinc production, there are 74 million pounds of caribou that is fixed at $1.25 in 2022. In this calculation, we have excluded exploration expenditures, corporate costs, tax, and financing costs. But the idea is to provide one a sense of the leverage we have to an improved zinc price environment. The lower chart converts the margin in the above chart to a consolidated per share amount. That is $0.80 per share at $1.55 per pound zinc and $1.18 per share at $1.75 zinc price. The leverage is clear. A 13% increase in zinc price from a base of $1.55 per pound translates to a 48% increase in consolidated margin per share. Turning to slide 6, operations update. At Ras Pena, production picked up from Q1 levels with a strong Q4 finish of £21.1 million. The high ASIC in Q4 2021 of $1.06 was impacted by a delayed leg concentrate shipment which was produced in the fourth quarter but sold in January due to the unavailability of ships. We will discuss the early works program on the RP 2.0 project in detail later on the call, but as announced in January, we have a $20 million expansionary capital program, which is expected to be funded from internal cash flows. As part of the RP 2.0 project, and to reduce our carbon footprint at site, our solar project license has been granted as well. As a cover, we achieved production of 155 million pounds of zinc for 2021. This was impacted by a negative production adjustment, which we will provide details on in an upcoming slide. In the meantime, the bar chart at the bottom left of the slide shows the progression of production and cost through the year and a clear impact of the negative production adjustment and a jump of ASIC to $1.36 per pound in the fourth quarter. Placing the adjustment aside, we did have some success at Pocoa. We did produce 3% more zinc in 2021 compared to 2020. The extraction of the ground pillar commenced during Q4 2021 with the first step successfully mined from the open pit as part of a plan to mine the remaining proven and profitable mineral reserves. While the company is doing work to evaluate the cost structure of the operation in the current zinc price environment and further exploration work at T3, it is not currently anticipated that there will be a material conversion of the existing measured and indicated mineral resource to mineral reserve in 2022. On the exploration front, EM surveys continue and targets will be drill tested in late Q1 2022. At Caribou, production volumes were negatively impacted in Q4, down to 10.2 million pounds of production at an already outstanding cost of $1.44 per pound. Production continued to be impacted in Q4 due to the temporary closure of production area in the third quarter caused by localised ground conditions where historically ground activity and failures were not encountered. We have completed a third party ground control assessment, which confirms that this is not a pervasive stability issue and developed a bypass to increase mining flexibility. Reduction issues aside, we are advising studies for a conventional mine life extension beyond 2022, in parallel with investigating the potential to apply FL Schmidt's rapid oxidative leach technology at Caribou. The PEA is underway for the roll technology. In early December, we completed the divestiture of Santander on a strong footing. With only two months of production for the quarter, payable zinc volumes of 9.1 million pounds exceeded Q3 levels of 8.2 million pounds. And at a lower ASIC of $3 per pound versus Q3, this success was driven by the change out of our mining contract in mid-year. Now over to Derek.