Three Valley Copper (TSXV:TVC) is reviewing its development strategy, business plan, market valuation, and capital structure in a bid to deliver enhanced shareholder value and maximize production and cash flows. 

The company’s 91.1% owned Minera Tres Valles property near Salamanca, Region de Coquimbo, Chile will be the focus of the evaluation, during which the company will consider mergers, strategic partnerships, acquisitions or disposition, restructuring or refinancing of its long-term debt, and any other options available to Three Valley to maximize shareholder value. 

To complete the review, PI Financial has been retained. While the process does not guarantee a transaction or investment, the company looks to be aiming for the best strategies for maximizing results at its Papomono Masivo deposit. Papomono Masivo (PPM) has become a priority for Three Valley and the company is aiming to hit an increased production profile at Minera Tres Valles by ramping up production there.

Although the exploration program will be temporarily scaled back during the strategic review process, the review may reveal optimal paths forward for its exploration efforts to maximize drill programs. The review process will evaluate any and all alternative avenues for maximizing value, and the exploration program is a key pillar of shareholder value at Three Valley Copper. 

Accelerating Investment, Revising 2022 Outlook and Guidance

PPM is a critical catalyst for Minera Tres Valles, and the successful development of this deposit continues to be a priority. For this reason, management has reviewed the preliminary development and mining plans at PPM and has decided to increase capital expenditures in 2022 instead of deferring some of those into the latter years of the mine life. This decision was made after a thorough review and concluded with a forecast from Three Valley that additional capital of approximately US$10 million in 2022 will be needed to achieve the recently announced production guidance. This decision will keep the program on track and keep the project on track for its timeline.

Don Gabriel

The Don Gabriel mine has experienced a lower head grade than initially forecasted, and as such, Three Valley Copper put a number of remedial measures in place in the third quarter. The delay between the implementation of those measures and the improved results may take a number of months to appear, due to the workflow of a heap leach operation. Initially, Three Valley had anticipated that copper production at Don Gabriel along with the recent drawdown of the remaining US$6 million of senior debt in September would support those operations and the ongoing PPM project. With production lower than expected and the Don Gabriel mine being the company’s primary source of ore to produce copper cathodes for 2021, Three Valley’s tight liquidity position has been amplified. Several factors are contributing to the liquidity crunch, including the company’s mostly fixed operating cost base, increased capital demands due to the PPM deposit 2022 development, and scheduled debt repayments due to begin March 2022. 

A Path Forward

As such, Three Valley has announced that it does not expect to generate sufficient cash from operations to fully fund 2021 operations, planned investment activities, plus debt service obligations in March 2022 and the increased sustaining capital expenditures next year for PPM. To secure funding, Three Valley has initiated discussions with senior secured lenders and the company’s offtake provider. 

This may allow the company to make changes to the existing loan agreement, inter alia, bridge loan financing, waivers of operating covenants, deferrals of or renegotiation of repayment terms, and/or renegotiation of the fixed-price portion of the offtake agreement. In the event of a successful strategic review and/or negotiations with the company’s senior secured lenders, Three Valley Copper will have the liquidity necessary to execute the planned production expansion at Minera Tres Valles. 

Three Valley Copper (TSXV:TVC) stock was up 6% to CA$0.53 yesterday.

The Company’s revised preliminary operating outlook1 for 2022 at MTV is as follows:

In the absence of a successful strategic review event and/or renegotiations with its senior secured lenders which will require financial liquidity solutions for MTV before the end of 2021, additional material changes to the Company’s revised preliminary outlook above will then be required.

1. Preliminary guidance is based on certain estimates and assumptions, including but not limited to, mineral reserve estimates, grade and continuity of interpreted geological formations, metallurgical performance and foreign exchange rates. Please refer to the amended and restated technical report prepared by Wood Independent Mining Consultants, Inc., in respect of the Minera Tres Valles Copper Project (the “Technical Report”) dated May 27, 2021 and to the Company’s SEDAR filings for complete risk factors related to the Company and MTV.
2. Cash Cost is a non-IFRS measure – Cash costs of production include all costs absorbed into inventory less non-cash items such as depreciation. Cash costs per pound produced are calculated by dividing the aggregate of the applicable costs by copper pounds produced.
3. Planned capital expenditures (“CAPEX”) for 2022 are focused primarily on open pit expansion, plant CAPEX and sustaining CAPEX of PPM for the inclined block-caving mining project. It is expected that by early 2022, the underground operation at PPM will begin production and the resulting production growth is expected to lower per unit operating costs in 2022 and 2023 as the results of this CAPEX are realized.

Source: Three Valley Copper

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.