TORONTO (miningweekly.com) – TSX-listed Trevali Mining this week reported the positive results of a preliminary economic assessment (PEA) for its Caribou zinc/lead/silver mine and mill complex, located in the Bathurst Mining Camp of New Brunswick, saying the complex has an after-tax net present value of $106-million at a 5% discount rate.

Vancouver-based Trevali on Monday said that the PEA, prepared by SRK Consulting (Canada), in collaboration with Holland & Holland Consulting and Stantec Consulting, had placed a pre-production capital cost of $36.3-million on the project, giving it an internal rate of return of 56.9%.

Over the project’s expected 6.3-year mine life, its yearly output would average about 93-million pounds of zinc, 32.5-million pounds of lead, 3.1-million pounds of copper, 730 000 oz silver and 1 500 oz of gold.

The PEA expects the operation to produce zinc equivalent at a direct cash cost of $0.46/lb and at a total site operating cost of $74.77/t milled.

Over the life of the operation, the mill would process about 6.15-million tonnes of ore grading 6.11% zinc, 2.49% lead, 0.34% copper, 67.9 g/t silver and 0.86 g/t gold.

The base economic case for the Caribou project used price assumptions of $1/lb zinc, $1/lb lead, $3/lb copper, $21/oz silver and $1 200/oz gold.

Laurentian Bank Securities metals and mining analyst Christopher Chang said that the PEA results were below his expectations, because forecast payable production was below estimates for all metals, particularly by-product precious metals.

"While we believe the company could likely improve its recovery rates with additional metallurgical testwork, we have not assumed this in our model given the challenges the Caribou mine and milling complex had with its previous operator, Bluenote Mining.

"While early days, we believe the paste backfill system appears to be an attractive option given its potential to improve the Caribou mine life while reducing operating costs. In our view, the deferral of the Halfmile deposit was largely expected due to the cost advantages at the Caribou mine. Despite a weaker-than-expected PEA, we continue to recommend shares of Trevali given the company’s significant leverage to zinc," Chang said in a note to clients.

“We welcome this preliminary economic assessment for our Caribou mine with scheduled commissioning of operations in the first half of 2015. These results model a respectable return based on this initial base-case model and we believe that there is excellent potential for additional optimisation given that approximately three-million tonnes of mineralised material is presently not included in the mine plan and the deposit remains open for expansion,” Trevali president and CEO Dr Mark Cruise said.

He added that given the project’s sensitivity and leverage to the zinc price, the positive consensus forecasts for increasing zinc (and lead) prices should have a beneficial effect on the operation’s economics.

Trevali would restart the 3 000 t/d Caribou mill complex and the associated underground deposit, representing the company’s initial strategy for its Bathurst Mining Camp operations.

Longer-term plans, subject to ongoing technical studies, include the potential for a second standalone milling facility to support development of the company’s fully permitted Halfmile mine and the Stratmat deposit, where drilling and baseline permitting programmes are in progress.

Trevali in May of 2012 paid Maple Minerals some $23.8-million in stock for the Caribou milling and mine complex, to speed up its zinc projects in the province.

The Caribou operation would provide about 300 permanent positions and $57-million in direct royalties and tax payments.

Trevali can also haul ore from its 100%-owned Halfmile deposit located 20 km south, while it builds up underground mine infrastructure at Caribou. In 2012, Trevali completed trial production from the Halfmile underground mine.

TSX-listed Trevali in February declared commercial production at its Santander zinc/lead/silver mine, in Peru.