Trevali confirms arrest of Perkoa managers; receives creditor protection

Ailing zinc miner Trevali Mining (TSX: TV; US-OTC: TREVF) reported receiving an initial order from the Supreme Court of British Columbia under the Companies’ Creditors Arrangement Act (CCAA) on Friday, granting creditor protection. Production at two of its three assets remains suspended amid a lower price, higher-cost environment.

Also on Friday, Burkina Faso news sources reported that two Trevali managers were arrested in the country due to the tragic flooding at the Perkoa zinc mine that trapped and killed eight miners underground.

Burkinabe authorities have also filed charges relating to this matter against the company’s in-country subsidiary and the mine operator.

Mining and milling at Trevali’s 90%-owned Perkoa mine have been suspended since the accident in April.

It is unclear what charges the Trevali employees face.

The Northern Miner has reached out to Trevali for comment but had not received a response by press time.

Creditor protection

Because of receiving creditor protection under the CCAA, the company expects its stock to be delisted from trading on public exchanges in due course.

Having reviewed its cash position, scheduled debts, and forecast revenue and expenses, Trevali lodged its application to the B.C. Supreme Court for creditor protection on Friday.

At the time, Trevali said it would continue to fund itself during the CCAA proceedings through cash on hand and cash flow generated at the Rosh Pinah base metals mine in Namibia.

BMO Capital Markets mining analyst Rene Cartier pointed out in a note to clients that at Rosh Pinah, however, the early works program was under review, and the expansion project had been suspended. “As such, RP2.0 has some option value, should a financing solution emerge,” said the analyst.

Trevali has now also formally suspended production at the Caribou mine in New Brunswick following a review of the operation.

“In our view, this does not come as much of a surprise following local media reports. That said, we expect additional costs will be incurred in support of the care and maintenance activities at the site,” noted Cartier.

No timeline for a potential restart has been defined. The analyst pointed out that Trevali had entered a hedging arrangement on Caribou comprising fixed-pricing from April 2021 to December 2022, covering 115 million lb. of payable zinc priced at US$1.25 per lb. As of the second quarter results, Trevali had run up a deficit of 24.8 million lb of zinc metal due under the contract. “Accordingly, this would need to be settled with future production, or financially with the counterparty,” Cartier noted.

Meanwhile, Trevali also confirmed it did not make the mandatory prepayment of about US$7.5 million on the senior credit facility due last week, with the missed payment deemed an event of default. The company said it was working with its senior lenders regarding the default.

Trevali said it would consider all potential transaction and restructuring options.

The incident occurred on April 16, when heavy rains resulted in a flash flood that entered the mine property and breached the mine’s safety controls, flooding the underground mine and resulting in the deaths of eight workers.