(all amounts expressed in US dollars)
TORONTO, May 25, 2022 (GLOBE NEWSWIRE) -- (TSXV: TVC) (OTCQB: TVCCF) Three Valley Copper Corp. ("TVC" or the "Company") today announced its operating and financial results for the three months ended March 31, 2022. The Company is focused on growing copper production from, and further exploration of, its primary asset, Minera Tres Valles SpA ("MTV"). Located in Salamanca, Chile, MTV is 95.1% owned by the Company and MTV's main assets are the Minera Tres Valles mining complex and its 46,000 hectares of exploratory lands. The Company's financial statements and management's discussion and analysis ("MD&A") are available at www.threevalleycopper.com and www.sedar.com.
- The initial construction of the Papomono block caving mine was completed in mid-January 2022. At that time, MTV chose to temporarily halt the start of the block caving operation as MTV's expected cash flows were not sufficient to fully support the ramp-up of Papomono during 2022. Increasing production input costs and the decision to suspend operations at the Don Gabriel open pit mine significantly impacted MTV’s ability to generate the necessary cash flows to fund the planned ramp-up of Papomono. To further preserve liquidity, MTV also temporarily suspended its exploration program and certain sustaining and expansion capital expenditures.
- On March 7, 2022, MTV's senior secured lenders (the "Lenders"), together with the Company, expressed their intention to provide $11 million of super senior secured funds to MTV, the approvals for and terms of which are being finalized. This funding, if approved, was expected to be drawn down in tranches by MTV beginning at the end of March 2022 and is expected to fund MTV into July 2022 providing the Company and the Lenders additional time to negotiate a longer-term solution for MTV, including, inter alia, sourcing additional capital that will be required, bridge loan financing, additional debt financing, forgiveness or conversion of debt, waivers of operating and other covenants, deferrals of or renegotiation of repayment terms and/or renegotiation of the fixed price portion of the offtake agreement (the "Offtake"). If MTV is successful in sourcing additional financing, this will likely cause a material dilution to TVC's ownership interest in MTV, including the possibility that TVC would no longer hold majority control of MTV. If approvals from the respective parties are not obtained and funding not provided, it is expected that MTV will not have sufficient funds to operate past mid-June 2022. This could force a liquidation or sale of MTV that could adversely impact TVC's ability to recover any or all of TVC's investment in MTV. To date, neither approvals nor any of the $11 million has been received by MTV. The Lenders have not provided any certainty of their intentions nor confirmation of any amounts that may be committed. In addition to the $11 million super senior secured funds, the Company estimates that MTV will require at least an additional $10 million of capital during 2022.
- On March 31, 2022, MTV did not pay interest due to the Lenders as required pursuant to the terms of the senior secured prepayment facility (the "Amended Facility"). While the Lenders have not sent a notice of default to MTV they have expressly reserved their rights.
- As a result of the current financial situation of MTV, the interruption in its operations and the non-payment of interests due on March 31, 2022, certain defaults of the Amended Facility have occurred and are continuing, consequently the total outstanding balance of the Amended Facility remains classified as current liabilities. In addition, the amounts owing to the unsecured creditors (the "Unsecured Creditors") of the Judicial Reorganization Agreement ("JRA") are also classified as current liabilities. Also, amounts due to the Unsecured Creditors of the JRA on March 31, 2022 were postponed until June 30, 2022 with the approval of the Creditors' Committee representing the Unsecured Creditors of the JRA.
- MTV completed its planned initial construction and developments for Papomono in mid-January 2022.
- As of the date hereof, MTV has completed eleven drawbells with two drawbells in the final stages of undercutting and preparation, with caving now projected to commence in late June, subject to the funding being in place. Tunnel advance and drawbell development will continue in parallel with production throughout the life of the mine.
- Copper cathode production in the first quarter of 2022 was 2.3 million pounds primarily from the drawdown of inventory on the leach pads and ore supplied by third-party miners. Copper cathode production was negatively impacted by the suspension of operations at the Don Gabriel open pit mine and the temporary delay of the start of Papomono block caving operations. Copper cathode production was slightly less than the fourth quarter of 2021 of 2.5 million pounds.
- Copper cathodes sales in the first quarter of 2022 were 2.4 million pounds, similar to the fourth quarter of 2021 of 2.3 million pounds.
- Total capital expenditures for the three months ended March 31, 2022 amounted to $4.0 million of which $3.8 million consisted of Papomono expenditures.
- Reported quarterly gross loss of $1.4 million on a realized average copper price per pound1 of $4.44 compared to a gross profit of $2.1 million in Q1 2021 on a realized average copper price per pound1 of $3.47.
- Adjusted EBITDA from continuing operations1 for the quarter was negative $1.5 million compared to positive $0.7 million in Q1 2021.
- Net loss per share attributable to owners of the Company for the three months ended March 31, 2022 was $0.06 compared to $0.01 in Q1 2021.
- At March 31, 2022, held consolidated cash and cash equivalents of $9.3 million and consolidated cash and cash equivalents of approximately $5.8 million as at the date hereof, the majority of which is held at the public company, separate from MTV.
Going Concern / MTV Liquidation Risk
- MTV has incurred significant operating losses and negative cash flows from operations in recent years and the Company on a consolidated basis has (i) an accumulated deficit of $295.5 million, and (ii) negative working capital of $69.6 million, as at March 31, 2022. Given the financial position of MTV and the occurrence of events of default, the total outstanding amounts under the Amended Facility and JRA remain classified as current liabilities. MTV will require further financing to meet its financial obligations, sustain its operations and ongoing capital projects in the normal course, and expand its inventory of reserves and resources.
- MTV will need to raise capital in order to further support its operations including additional sustaining capital requirements to fully support the ramp-up of Papomono during 2022. MTV currently operates in a high-cost environment and additional sources of capital will be required to execute MTV's planned operations. MTV does not have sufficient cash to support its operations beyond mid-June 2022.
- There is no assurance that additional financing will be available on a timely basis or on terms acceptable to MTV. MTV has suspended mining operations at the Don Gabriel open pit mine and is in negotiations with the Lenders to amend the terms of the existing Amended Facility. There is no assurance that the negotiations will be successful. If MTV is successful in sourcing additional financing, this will likely cause a material dilution to TVC's ownership interest in MTV, including the possibility that TVC would no longer hold majority control of MTV. MTV did not pay the interest due to the Lenders on March 31, 2022, and consequently MTV is in default with the terms of the Amended Facility effective that date. In addition, TVC did not invest the remaining net proceeds of the November 2021 financing (approximately $2.5 million) into MTV pursuant to the terms of the undertaking agreement with the Lenders, and consequently the terms of the undertaking agreement are now no longer binding. The remaining net proceeds of the November 2021 financing intended to support MTV are currently being retained by TVC which may be used in whole, or in part, to further support MTV in the future, subject to the outcome of the negotiations underway with the Lenders. Due to certain ongoing events of default, the Lenders may exercise their security rights and/or remedies pursuant to the terms of the Amended Facility that could force a liquidation or sale of MTV that could adversely impact TVC's ability to recover any or all of TVC's investment in MTV. The public company, TVC, is expected to continue as a going concern even if a liquidation event occurs at MTV.
Commenting on the results, Michael Staresinic, President and Chief Executive Officer of TVC stated, "Papomono initiated its first phase of caving operations by beginning the blasting of undercuts. MTV has completed over half of this required first step before formal caving can begin, subject to the receipt of required short-term funding, in the second half of June. Together with the Lenders, we expressed the intention to provide $11 million of super senior secured funds to MTV to support it over the next several months, and while these discussions continue in earnest, the approvals for and terms are not yet finalized. Without this proposed funding, MTV's cash will be exhausted and its operations may not be able to continue past mid-June 2022 which could lead to a liquidation event of MTV. Although all parties are advancing the necessary paperwork to allow for additional funding of MTV, we still do not have certainty of the Lenders' intentions nor confirmation of any amounts that may be committed."
"As we have shared previously, a very difficult decision was announced on January 24, 2022 to temporarily suspend operations at the Don Gabriel open pit mine. Our results reflect this as ore production decreased significantly. We continued to process ore from third-party miners and draw down inventory producing 1,042 tonnes of copper cathode in the first quarter. We reported a net loss of $0.06 per share attributable to owners of the Company. Assuming successful capital support for the execution of Papomono's planned ramp-up, MTV's operations are expected to improve during 2022 as additional drawpoints become accessible for the mining of Papomono's high-grade, low-cost ore."
"This is a difficult time for MTV and the Company, and the risk is very real that the Company may lose its entire investment in MTV or be materially diluted. The public company, TVC, is expected to continue as a going concern even if a liquidation event occurs at MTV. Even with the adversity that we have faced recently, we remain focused on supporting MTV in achieving a successful ramp-up of the Papomono block caving operations. This was always our focus and now that we are here, we believe that it is in all stakeholders' best interests to ensure that there is capital support for MTV."
Operational Results Summary
|Three months ended|
|Operating information||Mar. 31, 2022||Mar. 31, 2021|
|Copper (MTV Operations)|
|Total ore mined (thousands of tonnes)||30||179|
|Grade of ore mined (% Cu)||0.66||%||0.57||%|
|Total waste mined (thousands of tonnes)||78||269|
|Ore Processed (thousands of tonnes)||110||223|
|Cu Production (tonnes)||1,042||900|
|Cu Production (thousands of pounds)||2,297||1,985|
|Change in inventory ($000s)||$||(1,061||)||$||6.034|
|Cash cost of copper produced1(USD per pound)||$||4.72||$||2.28|
|Realized copper price1(USD per pound)||$||4.44||$||3.47|
- Ore mined of 16,076 tonnes at a grade of 0.50% from the Don Gabriel open pit mine representing 54% of ore mined.
- Majority of ore processed from third-party small miners.
- Produced 2.3 million pounds of 99.99% pure copper cathodes at a cash cost per pound produced1 of $4.72.
- Sold 2.4 million pounds of copper cathodes at an average realized copper price per pound1 of $4.44.
- High unit costs expected throughout 2022 as the Company expects to operate below capacity until Papomono's ramp-up is complete.
Construction and Development of Papomono Masivo
- Initial construction completed mid-January 2022.
- Blasting of undercuts commenced early March 2022 with expected completion before the end of June 2022.
- In January 2022, the Company temporarily suspended its exploration program but remains part of the longer-term plan for MTV.
- Significant strategic land package of over 46,000 hectares.
- With more than 100 copper outcrop occurrences and 70 artisanal mining sites with geological characteristics similar to that of the Papomono and Don Gabriel orebodies, together with near-term infill drilling opportunities, the Company believes there is significant exploration potential.
- MTV continued its vaccination campaign and at March 31, 2022, 99.5% of MTV's employees were fully vaccinated, 85% had received a booster shot and contractors maintained a vaccination rate of more than 90%.
- The Company continues its preventative, mitigating and containment measures to actively minimize the spread of COVID-19.
Financial Results Summary
|Three months ended|
|Financial information (in thousands)||Mar. 31, 2022||Mar. 31, 2021|
|Gross loss (profit)||$||1,431||$||(2,141||)|
|Net loss for the period||$||7,223||$||655|
|Net loss per share attributable to owners of the Company||$||0.06||$||0.01|
|EBITDA from continuing operations1||$||(3,988||)||$||2,792|
|Adjusted EBITDA from continuing operations1||$||(1,526||)||$||700|
|Write-down (reversals) of inventory||$||701||$||(1,738||)|
|Cash (used in) provided by operating activities before working capital changes||$||(1,212||)||$||709|
Cash Position, Working Capital and Net Debt
Consolidated cash and cash equivalents decreased to $9.3 million at March 31, 2022 from $13.7 million at December 31, 2021 mainly due to $2.4 million used in operating activities, $3.6 million of disbursed capital expenditures mainly related to the construction and development of Papomono, and partially offset by $1.4 million in proceeds from a portfolio investment.
The Company has a consolidated working capital deficit1 of $69.6 million at March 31, 2022. The working capital deficit includes all amounts due to the Lenders and Unsecured Creditors as current liabilities. Cash position as at the date hereof is approximately $5.8 million with the majority of the cash held directly by TVC which is separate from MTV.
The Company is substantially leveraged. The Company's net debt1 at March 31, 2022 was $68.6 million. The Company's debt position continued to increase as it capitalized interest and did not make scheduled interest payments on March 31, 2022.
Health and Safety
For the three months ended March 31, 2022, there was one Lost-Time Incident. The Company and MTV devote considerable time and effort to ensure that workers and contractors return safely to their families after each shift. Safety statistics are monitored and compared to the country and peer averages, and MTV pro-actively engages in education and assessment to achieve a goal of zero lost-time incidents.
As previously disclosed, the Company is involved in an arbitration proceeding with the Minority Shareholder of MTV. The arbitration proceeding is continuing and no further material developments have occurred. The Company remains confident in its position and is monitoring the arbitration proceeding and its process closely.
The scientific and technical content contained in this news release is taken from the technical report (the "Technical Report") entitled “Minera Tres Valles Copper Project, Salamanca, Coquimbo Region, Chile NI 43-101 Technical Report” prepared by Dr Antonio Luraschi, RM CMC, Manager of Metallurgic Development and Senior Financial Analyst, Wood, Mr Alfonso Ovalle, RM CMC, Mining Engineer, Wood, Mr Michael G. Hester, FAusIMM, Vice President and Principal Mining Engineer, Independent Mining Consultants, Inc., Mr Enrique Quiroga, RM CMC, Mining Engineer, Q&Q Ltda, Mr Gabriel Vera, RM CMC, Metallurgical Process Consultant, GVMetallurgy, and Mr Sergio Alvarado, RM CMC, Consultant Geologist, General Manager and Partner, Geoinvestment Sergio Alvarado Casas E.I.R.L. all of whom were independent qualified persons as defined by NI 43-101 at the time the Technical Report was prepared. The Technical Report was filed by TVC on SEDAR (www.sedar.com) on December 14, 2018 and subsequently amended and restated on May 27, 2021. Readers are encouraged to read the Technical Report in its entirety.
About Three Valley Copper Corp.
TVC, headquartered in Toronto, Ontario, Canada is focused on growing copper production from, and further exploration of, its primary asset, Minera Tres Valles SpA. Located in Salamanca, Chile, MTV is 95.1% owned by the Company and MTV's main assets are the Minera Tres Valles mining complex and its 46,000 hectares of exploratory lands. For more information about TVC, please visit www.threevalleycopper.com.
Non-IFRS Performance Measures
"Cash costs", "EBITDA", "Adjusted EBITDA", "Realized copper price", "Working Capital", "Working Capital Deficiency", and "Net Debt" are non-IFRS performance measures. These non-IFRS performance measures do not have a standardized meaning prescribed by IFRS. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. The Company believes that these measures are commonly used by certain investors, in conjunction with conventional IFRS measures, to enhance their understanding of the Company’s performance. For further information and a detailed reconciliation of each non-IFRS measure used in this press release to the most directly comparable IFRS measure, please refer to the Company’s MD&A and accompanying TVC financial statements filed on SEDAR at www.sedar.com and the Reconciliation of Non-IFRS Performance Measures section in this press release.
Reconciliation of Non-IFRS Performance Measures
The Company uses certain performance measures in its analysis. These performance measures have no standardized meaning prescribed by IFRS. For additional details please refer to the Company's discussion of non-IFRS performance measures in the Company's MD&A for the three months ended March 31, 2022 which is available on SEDAR at www.sedar.com.
Cash costs per pound produced can be reconciled as follows:
|Three months ended|
|Mar. 31, 2022||Mar. 31, 2021|
|Cost of Sales||$||12,309||$||4,859|
|Non-site inventory reversal||—||1,435|
|Net change in copper cathodes inventory||(790||)||(454||)|
|C1 Cash costs of production||10,849||4,519|
|Pounds of copper produced (thousands)||2,298||1,985|
|Cash cost of copper produced (USD per pound)||$||4.72||$||2.28|
EBITDA and Adjusted EBITDA can be reconciled as follows:
|Three months ended|
|Mar. 31, 2022||Mar. 31, 2021|
|Net loss from continuing operations||$||7,223||$||655|
|EBITDA from continuing operations||(3,988||)||2,792|
|Write-down (reversal) of inventory||701||(1,738||)|
|Gain on portfolio investments||—||(107||)|
|Unrealized foreign exchange loss (gain)||1,744||(439||)|
|Loss on modification of debt||—||164|
|Adjusted EBITDA from continuing operations||$||(1,526||)||$||700|
Realized copper price per pound can be reconciled as follows:
|Three months ended|
|Mar. 31, 2022||Mar. 31, 2021|
|Revenue from copper cathodes||$||10,878||$||6,942|
|Pounds of copper sold (thousands)||2,449||1,998|
|Average realized copper price (USD per pound)||$||4.44||$||3.47|
Working capital (deficit) can be reconciled as follows:
|Mar. 31, 2022||Dec. 31, 2021|
|Cash and cash equivalents||$||9,254||$||13,656|
|Trade and other receivables||1,251||1,705|
|Prepaids and other current assets||1,480||1,528|
|Working capital deficit1||$||(69,597||)||$||(59,113||)|
Net debt can be reconciled as follows:
|Mar. 31, 2022||Dec. 31, 2021|
|Current portion of loans and borrowings||$||77,687||$||74,251|
|Loans and borrowings||215||218|
|Less: cash and cash equivalents||(9,254||)||(13,656||)|
Cautionary Statement Regarding Forward-Looking Information
Certain statements in this news release, contain forward-looking information (collectively referred to herein as the "Forward-Looking Statements") within the meaning of applicable Canadian securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify Forward-Looking Statements. In particular, but without limiting the foregoing, this news release contains Forward-Looking Statements pertaining to: ongoing and possible future events of default and the possibility of the liquidation or sale of MTV or materially diluted holdings in MTV; expressed intentions of the Company and the Lenders to provide additional capital to fund MTV; expectations regarding negotiations with the Lenders; future outcomes and expectations related to MTV's ongoing operations; the possibility of the Company expanding its inventory of reserves and resources; expectations regarding the costs and timing of Papomono's ramp-up, including timing of the start of formal caving operations; impacts of COVID-19 and the Company’s and MTV’s precautions to manage and mitigate same; future block caving efforts and the expected benefits therefrom and timing thereof; expectations for the future of Don Gabriel; expectations regarding exploration, the cost, timing and success of such initiatives; and MTV's labour and health and safety initiatives and expectations.
Although TVC believes that the Forward-Looking Statements are reasonable, they are not guarantees of future results, performance or achievements. A number of factors or assumptions have been used to develop the Forward-Looking Statements, including: the possibility that the Lenders and the Company are able to negotiate additional funding for MTV to continue its operations, there being no additional significant disruptions affecting the development and operation of MTV; the availability of certain consumables (including water) and services and the prices for power and other key supplies being approximately consistent with assumptions in the Technical Report; labour and materials costs being approximately consistent with assumptions in the Technical Report; fixed operating costs being approximately consistent with assumptions in the Technical Report; permitting and arrangements with stakeholders being consistent with current expectations as outlined in the Technical Report; certain tax rates, including the allocation of certain tax attributes, being applicable to MTV; the availability of financing for the Company's and MTV’s planned operations and development activities; assumptions made in mineral resource and mineral reserve estimates and the financial analysis based on these estimates, including (as applicable), but not limited to, geological interpretation, grades, commodity price assumptions, metallurgical performance, extraction and mining recovery rates, hydrological and hydrogeological assumptions, capital and operating cost estimates, and general marketing, political, business and economic conditions, the continued availability of quality management, critical accounting estimates, existing water supply will continue, supplemental water availability will continue, the geopolitical risk of Chile will remain stable, including risks related to labour disputes, the construction and expansion of mining operations including the Papomono Masivo incline block caving underground mining project, as well as the timing thereof and production therefrom; expected timelines for repayment of indebtedness of MTV; the Company's access to capital in order to fund the exercise of the call option; and the ability of the Company to continue as a going concern.
Actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements should assumptions underlying the Forward-Looking Statements prove incorrect or should one or more risks or other factors materialize, including: (i) possible variations in grade or recovery rates; (ii) copper price fluctuations and uncertainties; (iii) delays in obtaining governmental approvals or financing; (iv) risks associated with the mining industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to mineral reserves, production, costs and expenses; and labour, health, safety and environmental risks) and risks associated with the other portfolio companies' industries in general; (v) performance of the counterparty to the ENAMI Contract; (vi) risks associated with investments in emerging markets; (vii) general economic, market and business conditions; (viii) market volatility that would affect the ability to enter or exit investments; (ix) failure to secure additional financing for MTV or the Company in the future on acceptable terms to the Company, if at all; (x) commodity price and foreign exchange fluctuations and uncertainties; (xi) risks associated with catastrophic events, manmade disasters, terrorist attacks, wars and other conflicts, or an outbreak of a public health pandemic or other public health crises, including COVID-19; (xii) being inconsistent those risks disclosed under the heading "Financial Risk Management" in TVC’s Management’s Discussion and Analysis for the period ended December 31, 2021; (xiii) being inconsistent with current expectations including, without limitation, the impact of any political tensions and uncertainty in Chile, or actions taken by any local or national government, including but not limited to amendments to mining laws and regulatory actions; (xiv) the impact and probability of operational, geological and environmental risks at MTV being inconsistent with current expectations (xiv) outcomes and potential benefits of the strategic review process; differing from expectations; (xvi) the failure of negotiations with the Lenders to restructure the Company's debt under the Amended Facility; and (xvii) unfavourable results related to arbitration with the Company's minority shareholder. The Forward-Looking Statements speak only as of the date hereof, unless otherwise specifically noted, and TVC does not assume any obligation to publicly update any Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable Canadian securities laws.
Cautionary Note to United States Investors Concerning Estimates of measured, indicated and inferred mineral resources
Disclosure regarding the Company's mineral properties, including with respect to mineral reserve and mineral resource estimates included in this news release, was prepared in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the Securities and Exchange Commission (the “SEC”) generally applicable to U.S. companies. Accordingly, information contained in this news release is not comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure requirements.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
For further information:
President and Chief Executive Officer
T: (416) 943-7107
Renmark Financial Communications Inc.
Joshua Lavers: firstname.lastname@example.org
T: (416) 644-2020 or (212) 812-7680
Source: Three Valley Copper Corp.
1 These are non-IFRS performance measures. Please refer to the "Non-IFRS Performance Measures" section of the Company's MD&A for the three months ended March 31, 2022 and the Reconciliation of Non-IFRS Performance Measures section at the end of this press release.