03 kallpasab trevali cobertura inicial

Equity's Fair Value (US$ million)

Share's Fair Value (US$)

Share's market price (US$)

Shares Outstanding (million)

Shares Outstanding - Fully Diluted (million)

Market Capitalization (US$ million)

Fair Value's Appraisal

Negotiation: Main Stock Exchange

Secondary Stock Exchange

Range 52 weeks (US$)

YTD Change

Equity Research - Junior Mining

Alberto Arispe Bazán

Overweight +TREVALI MINING CORP (LSE:TV)

387.42

2.66

1.23

145.62

174.29

116%

Halfmile & Stratmat

LSE (TV)

29.35%

Trevali: A new production story

INVESTMENT RECOMMENDATION:

Santander

Ruttan, Huampar

Others

KALLPA SECURITIES SAB initiates Trevali Mining Corp.’s coverage (Trevali),

recommending to overweight + its shares. We give a US$ 2.66 fair value per share,

which was obtained taking into account only Halfmile & Stratmat mine and

Santander project, which contribute to Trevali’s value in US$ 2.05 and US$ 0.52

respectively. The US$ 2.66 fair value is 116% greater than its US$ 1.23 market

value as of closing of February 1st 2012.

In December 2011, we visited Halfmile & Stratmat when they were still projects in

77%

20%

-

3%

$ 2.05

$ 0.52

-

$ 0.08

Contribution to Fair Value $ 2.66

179.11

TSX (TV)

0.72 - 1.77

Alberto Arispe Bazán

[email protected]

Telephone: 511 627-5225

María Belén Vega

[email protected]

Telephone: 511 627-5220

Chart 1. Contribution to Fair Value -

-

A.

B.

-

Halfmile & Stratmat mine is Trevali's main asset, and its

development contributes in 77% to Trevali's fair value.

Highlights.-

Trevali has two main mining units:

The announcement of Halfmile’s start up of operations ,in January 2012,

proved Management’s skills in taking a project in development stage into a

producing mine. In addition, Santander’s start up of operations in Q3 2012

represents an important short – term catalyst.

In December 2011, we visited Halfmile & Stratmat when they were still projects in

development and construction stage. Weeks later, in January 2012, Trevali

announced the expected start up of operations of Halfmile & Stratmat poly-

metallic mining deposit, located in the well known mining district of Bathurst,

north of New Brunswick, Canada. Currently, Trevali has 2 main assets: Halfmile &

Stratmat, an ongoing mine, and Santander, a project in construction stage whose

start up of operations is estimated in Q3 2012.

Purchasing Trevali represents a leverage on zinc, a metal that we believe will

show an interesting upside in the next years as the supply for this metal

decreases due to the shutdowns of important mines producers of zinc (see

the section – Bets on zinc).

Halfmile & Stratmat – Canada, a poly-metallic underground mine

currently in production @ 2K TPD (tons per day) and willing to expand its

production to 4K TPD, with an estimated annual average production of

177M Lb Zn + 52M Lb Pb + 4.79M Lb Cu + 686K Oz Ag throughout its 14

years of life of mine (LOM).

Santander – Peru, a project in construction stage (fully funded) @ 2K TPD

and willing to expand its production to 4K TPD, with an estimated annual

production of 142M Lb Zn + 36M Lb Pb + 1.1M Oz Ag throughout its 9

years of LOM.

77% 20%

4%

0% 20% 40% 60% 80% 100%

Halfmile & Stratmat Santander OtrosOtros

represents an important short – term catalyst.

Valuation Report Junior Mining - Trevali Mining Corp.

Chart 2. Trevali's estimated production -

-

Table 1. Main projects -

Total R. 2

-

Santander

Ruttan 3

Huampar

Halfmile &

StratmatOngoing Mine

Construction

Exploration

Zn, Pb

Zn, Ag

Cu, Zn

StageProject B Lb ZnEq1

2.23

1.70

4.48

Trevali has total resources (indicated + inferred) of 8.41 B Lb Zn Eq, as shown

in Table 1.

The development of the projects Huampar (poly–metallic) and Ruttan (copper

and zinc), which are not included into this valuation, represent and

interesting catalyst for the fair value. It should be noted that Huampar was an

operating mine during 1956 – 1991, processing a total of 2.5MT @ 1.6 g/t Au,

185 g/t Ag, 3.8% Pb and 5.0% Zn with a production level of 250 TPD, a level

that was increased to 400 – 1000 TPD in the following years.

Currently, Trevali is carrying out a drilling campaign in Santander in order to

determine the size (depth) of the mining site. In accordance with

Management, the results are encouraging and it is expected new resource

estimations in S2 2012.

Trevali has Xstrata (Halfmile & Stratmat) and Glencore (Santander) as

strategic partners for the development of its main developed mining units.

(see the section – Strategic Alliance with Xstrata and Strategic Alliance with

Glencore ). With both mining units together into production, Trevali will

become a medium mining producer with an annual production of 279M Lb Zn

+ 78M Lb Pb + 1.49M Oz Ag, approximately.

1. For the calculation of zinc equivalent pounds (Lb Zn Eq), used

Development Ag,Au,Zn -

Metals

0

2

4

6

8

10

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016

Zinc Lead SilverM Lb Zn, Pb M Oz Ag

-

3. Ruttan is mainly a copper and zinc project.

Source: Trevali

1. For the calculation of zinc equivalent pounds (Lb Zn Eq), used

prices were US$ 20, US$ 2.50 and US$ 0.8 for an ounce of silver, a

pound of copper and a pound of zinc respectively.

2. Total resources include indicated and inferred resources. Advances in Santander.- In February 1st 2012, Trevali published Santander’s

update, which announced that infrastructure construction is on track and will

be completed in Q1 2012. In addition, the permit for the mine’s construction

will be ready by late February and the Environmental Impact Assessment (EIA)

will be completed before Q1 2012. Finally, it was mentioned that the

underground mine’s construction will start in April 2012 and that the

processing plant has a 40% progress.

www.kallpasab.com Trevali Mining Corp.


Chart 3. Trevali's portfolio diversification Project portfolio.-

i.

ii.

iii.

Mine currently in production

Location: Province of New Brunswick, Canada

Metals: Zinc, lead, copper and silver

Operator: Kria Resources (100% owned by Trevali)

Source: Trevali

Chart 4. Bathurst Mining Camp - Strategic location i. Halfmile Lake Central (312.1 ha),

ii. Halfmile Lake South (485.3 ha); and,

iii. Halfmile Lake North (307.1 ha).

Halfmile & Stratmat, a mine currently in production

Huampar and Ruttan, projects in exploration and

1. Halfmile Mine

Trevali, unlike other mining companies, has a geographically diversified portfolio.

Trevali’s project portfolio is composed by the following units:

Description.- Halfmile mine is a poly–metallic (zinc, lead, copper and silver)

deposit Volcanic Massive Sulphide (VMS) type, located in the mining district of

Bathurst Mining Camp (BMC), New Brunswick – Canada. The mining deposit

covers 1,104.8 hectares(ha.) and it is divided into 3 mineralized zones:

Santander, a project in construction stage (start up of operations –

Source: Trevali

Table 3. Resource estimation

Resource estimations - Halfmile

Technical Report NI 43-101 - Wardrop (2009)

Halfmile @ 5% Zn Eq Cut-Off

Classification MT Ag (g/t) B Lb ZnEq1

Indicated 6.2

Inferred 6.1

Previous explorations and resource estimations.- Exploration activities

(geophysical studies, ground - soil electromagnetic studies and diamond drillings)

were carried out between 1950 and 2001 by predecessor companies such as Texas

Gulf, Noranda and Falconbridge.

iii. Halfmile Lake North (307.1 ha).

ii) Inferred resources of 6.1 MT @ 6.69% Zn, 1.83% Pb, 0.14% Cu and

20.51 g/t Ag for a total of 1.30 B Lb Zn Eq.

i. Indicated resources of 6.2 MT @ 8.13% Zn, 2.58% Pb, 0.22% Cu and

30.78 g/t Ag for a total of 1.73 B Lb Zn Eq.

1.73

1.30

30.8

20.5

1. For the calculation of zinc equivalent pounds (Lb Zn Eq),

used prices were US$ 20, US$ 2.50 and US$ 0.8 for an ounce

of silver, a pound of copper and a pound of zinc respectively.

Excellent location.- BMC district has 45 VMS deposits with high zinc-lead grades

and it is home of the mines Brunswick # 12, Brunswick # 6, Caribou, Wedge, Heath

Steele, among others. It should be noted that the mine is located 60 km southwest

of the city of Bathurst, 40 km from Brunswick # 12 mine – an important zinc

producer that belongs to Xstrata Public Ltd. (Xstrata) – , and 20 km west of Heath

Steele mine. The project benefits itself from belonging to this well known mining

district due to qualified manpower, developed infrastructure (water and energy)

and quick access to the mine with asphalted roads in good conditions.

Acquisition of Kria Resources (Kria).- In 2008, Kria Resources (Kria), Trevali’s

subsidiary, signed an agreement with Xstrata for the acquisition of Halfmile &

Stratmat’s mining rights. In accordance with the agreement Xstrata received i) a

US$ 18 million payment; and ii) Trevali’s common shares valued in approximately

C$ 7 million.

In February 2009, Kria published a resource estimations report in compliance with

Canadian classification standards NI 43 – 101, prepared by Tetra Tech Wardrop

(Wardrop). The study showed a cut – off grade of 5% Zn Eq:

Zn %

8.1

6.7

Source: Trevali, Wardrop (2009) 20.51 g/t Ag for a total of 1.30 B Lb Zn Eq.



Chart 5. Visit to Halfmile Mine - Dec 2011

Source: Kallpa Securities SAB

Chart 6. Brunswick #12 - Facilities

Halfmile, a mine currently into production.- In January 2012, Trevali announced

Halfmile's start up of operations. The mine operates at a level of 2K TPD with an

annual estimated production of 177M Lb Zn + 52M Lb Pb + 4.79M Lb Cu + 686K Oz

Ag at an average cost (cash cost) of US$/MT 55.25. In addition, Trevali announced

its plan to increase the production level to 4K TPD in 2014 when incorporating

Stratmine as Halfmile’s satellite mine.

For mineral processing within the first two years of operations, Kria will use

Brunswick # 12’s processing plant (see the section – Strategic alliance with

Xstrata), recently after an agreement was accorded between both parties in

January 2012. However, Trevali is analyzing the possibility of acquiring a mineral

processing plant in order to reduce its costs and to operate at the desired level of

Wardrop elaborated a Preliminary Economic Assessment (PEA), published in

October 2010, in regard with the development of an underground mine and the

production of zinc, lead and bulk concentrates in Halfmile. The study

demonstrated that the project had an internal rate of return (IRR) of 16.24% and a

net present value (NPV) of C$ 139 million at a discount rate of 8%. In addition, it

estimated a necessary capital investment of C$ 324 million and income before

taxes of US$ 587 million throughout an estimated 20 years of LOM. Finally, the

study indicated the potential in developing Halfmile & Stratmat project which will

generate an IRR of approximately 22%.

i.

ii.


Xstrata's Brunswick # 12 facilities, located 40 km from

Halfmile. In Brunswick #12's plant will take place the

processing of Halfmile's minerals for the production of

concentrates.

processing plant in order to reduce its costs and to operate at the desired level of

production.

For the development of operations in Halfmile, Trevali has Xstrata as an strategic

partner. The agreement’s most notable terms are:

Toll Mining (Mining Lease) - In December 2011, Xstrata and Trevali signed

a 20 year agreement for the provision of the services of grinding,

processing and production of concentrates (zinc, lead, copper and bulk)

for Halfmile’s minerals and the subsequent treatment of mining waste in

Brunswick # 12’s processing plant. The plant has a processing capacity of

10K TPD and it is expected that it will end its operations (shutdown) in

2014 – 2015. With both units Halfmile & Stratmat, Trevali’s operations

will reach a level of production of 4K TPD, lesser than Brunswick # 12’s

10K TPD.

Off-Take – Trevali ensured Xstrata the sale of 100% of the concentrates

produced by Brunswick # 12’s processing plant as long as the Toll Mining

agreement is in place.

Strategic Alliance with Xstrata.-



Chart 7. Stratmat - Exploration Camp

Project/Halfmile’s satellite mine

Location: Province of New Brunswick, Canada

Metals: Zinc, lead, copper and silver

Operator: Kria Resources (100% owned by Trevali)


Chart 8. Halfmile underground mine - Entrance


Description.- Stratmat, Halfmile’s satellite mine, is a mining VMSdeposit type,

which is divided into 3 zones: a) Boundary Deposit, b) S – 1 Deposit, and c) Main

Zone. As Halfmile, it is located in the well known mining disctrict of BMC, Canada.

It should be noted that it is located approximately 45 km southeast of Bathurst, 55

km northeast of the city of Miramichi and only 15 km of Halfmile mine. The mining

site covers 828.6 ha.

Previous explorations and resource estimation.- The mine was explored by

Xstrata and predecessor companies (Cominco and Noranda) since the 60’s.

Particularly during the 80’s and 90’s, intensive exploration activities were carried

out when Heath Steele mine was still in operations. Of the three mining deposits,

only Boundary Deposit has been exploited; however, S-1 Deposit represents the

highest mineral exploitation potential of the entire project.

2. Stratmat

In February 2009, Trevali published a resource estimation report in Stratmat, in

compliance with Canadian classification standards NI 43 – 101, prepared by

Wardrop. The report showed a cut – off grade of 5% Zn Eq: Inferred resources for

5.52 MT @ 6.11% Zn, 2.59% Pb, 0.4% Cu and 54.21 g/t Ag for a total of 1.45B Lb Zn

Table 3. Resource estimations

Resource estimations - Stratmat

Technical Report NI 43 - 101 - Wardrop (2009)

Santander @ 3% Zn Eq Cut-Off

Class MT Zn % Pb (%) B Lb ZnEq1

Inferred

Construction & production stage

Source: Trevali, Wardrop (2009) Location: Province of Huaral, Department of Lima, Peru

Metals: Zinc, silver and lead

Operator: Trevali Peru S.A.C.

Chart 9. Santander Camp - Overview

Source: Trevali

Description.- Santander project, currently in construction stage, is a poly-metallic

mining deposit of Carbonate Replacement Deposit (CRD) type. The mining site is

developed over 4,455 ha. located in the province of Huaral 215 km northeast of

Lima – Peru, at an average altitude of 4,200 meters above sea level. Santander has

5 mining deposits: i) Magistral Norte, ii) Magistral Central, iii) Magistral Sur, iv)

Puajanca Sur and v) Santander Pipe. It should be noted that Santander has good

accessibility and qualified infrastructure (concentration & processing plants and

Tingo hydroelectric power plant) for its expected start up of operations in Q3

2012.

We must emphasize that the works currently conducted by Trevali in Santander

correspond to new mining deposits, but not to the extension of the old mine. Of

the latter, Trevali will only reprocess mining tailings still containing zinc grades that

are attractive and economic for the production of concentrates.

3. Santander project

1.45




5.52 MT @ 6.11% Zn, 2.59% Pb, 0.4% Cu and 54.21 g/t Ag for a total of 1.45B Lb Zn

Eq. In late October 2011, Trevali announced an in-fill drilling campaign, which

consists in approximately 5K meters of diamantine drillings in order to improve the

resource category from inferred to indicated. Trevali’s operating plan points out to

run both units Halfmile & Stratmat together in order to increase the production

level from 2K TPD to 4K TPD.

5.5 6.11 2.59

are attractive and economic for the production of concentrates.



Chart 10. Operations in Santander

Source: Trevali


Resource estimation - Santander

Technical report NI 43-101 - Golder (2010)

Santander @ 3% Zn Eq Cut-Off

Class MT Zn % Ag (g/t) B Lb ZnEq1

Indicated 5.9 3.9

Inferred 4.8 5.1

i) Indicated resources of 5.9 MT @ 3.86 Zn, 1.35% Pb, 0.08% Cu and 44

g/t Ag for a total of 0.9B Lb Zn Eq.

Acquisition of Santander’s concessions.- In December 2007, Trevali, through its

subsidiary Trevali Peru S.A.C., signed an agreement with Minerales Santanter

S.A.C. for the acquisition of exploitation rights for a period of 50 years.

Sequentially, Trevali started up exploration activities that confirmed the deposit’s

exploration potential, which is still opened for future extensions.

In 2010, Trevali published a technical report of resource estimation in compliance

with Canadian classification standards NI 43 – 101, prepared by Golder Associates.

The study showed a cut – off grade of 3% Zn Eq:

0.9

0.7 21.0




Previous explorations and resource estimations.- Santander is an old mine and

zinc producer. The discovery of lead-zinc mineralization in the mining deposit

occurred in early 1900, then sporadic exploration programs were conducted until

1958 when St. Joe Lead Corp. started operations. The production continued until

1992, when the mine closed down due to the fall in the international prices of

metals. It should be noted that during its years of operations (1958 – 1992), the

mining exploitation was open – pit as well as an underground mine with an

average level of production of 1K TPD and an estimated total production of 8 MT

@ 1.3B Lb Zn, 0.5B Lb Pb and 5M Oz Ag.44.0

Source: Trevali and Golder Associates (2010)

Chart 11. Glencore - Rosaura processing plant

i.

ii.

Source: Trevali

Chart 12. Santander - Tingo hydroelectric power plant

Source: Trevali

ii) Inferred resources of 4.8 MT @ 5.08% Zn, 0.44% Pb, 0.07% Cu and 21


Lease-Milling plant: Trevali agreed with Glencore to purchase in advance

100% of the processing plant @ 2K TPD for the production of Zn, Pb & Ag

and Cu & Ag concentrates. Thus, Trevali will pay approximately US$ 15

million in the rate of 6.00 US$/MT processed, and subject to the start up

of operations in Santander.

Off-Take Agreement: Trevali assured Glencore the sale of 100% of the

concentrates produced in the processing plant throughout the LOM at

market prices.

Strategic Alliance with Glencore.- For the development of operations in

Santander, Trevali has Glencore as its strategic partner. The most notable terms in

the two agreements signed are:


Tingo hydroelectric power plant – Santander.- Tingo hydroelectric power plant,

located 17 km southeast of Santander is operated by Trevali Renewable Energy,

Trevali’s subsidiary. The power plant provides energy since 1958 and it is expected

that the power plant will provide Santander mine with economic and reliable

power. Currently, Trevali is developing an extension of the power plant’s capacity

from 1.6 MW to approximately 10 MW. It is estimated that Santander will require

energy for approximately 4 – 5 MW, so Trevali plans to sell power surpluses to

third parties in order to generate potential cash flows. The effect of a potential

income from energy sales to third parties has not been included into this valuation

report.



Chart 13. Huampar Camp

Exploration stage

Location: Perú

Metals: Gold, silver and zinc

Operator: Trevali Peru S.A.C.

Source: Trevali

4. Huampar

i) To construct a Smelting plant.

ii) To carry out Huampar’s mineral processing at Santander’s facilities,

given the proximity of both projects (80 km)

Description.- Huampar mining project includes a poly – metallic deposit (gold,

silver and zinc) located in the southern zone of the poly – metallic belt of central

Peru, 80 km northeast of Lima and 80 km south of Santander mine. The mining site

is developed over 43 mining concessions covering a total of 1,450 ha.

Management has announced that the next project in line to start up operations is

Huampar. For this purpose, Management has outlined 2 possible scenarios:

Acquisition of Huampar’s concession.- In 2011, Trevali signed a Memorandum of

Understanding (MOU) with Nueva Condor Inc. (NCI) with a validity of 4 years and

according a purchase option for 100% of the mine’s rights. In accordance with the

agreed terms, NCI will receive: i) a US$ 50 thousand payment when signing theagreed terms, NCI will receive: i) a US$ 50 thousand payment when signing the

agreement, ii) one million Trevali’s shares when executing the purchase option, iii)

3% Net Smelter revenue (NSR) per year; and iv) US$ 100 thousand per year.

Previous explorations and resource estimations.- Huampar is an old mine. The

exploitation of several poly – metallic veins (Finlandia, Condor Pasa, etc.) were

carried out between 1956 and 1991 when lack of energy forced the mine’s

shutdown. During this period the mine processed a total of 2.5 MT @ 1.6 g/t Au,

185 g/t Ag, 3.8% Pb and 5.0% Zn at a production level of 250 TPD. The mine

continued its operations sporadically between 1997 and 2000 at a production level

of 400 TPD and advanced feasibility studies increased its production to 800 – 1000

TPD. The mine operations ceased in 2000 due to a lack of development and to the

low prices of commodities. It should be noted that the mine’s existing

infrastructure is well maintained and it includes a mining camp for 600 people.

In November 2011, Trevali announced that all the mine’s levels are characterized

on having excellent mineralized bodies and that the mineralization intensity of

base and precious metals suggests the existence of an excellent exploration

potential. Currently, Trevali has decided to prioritize the drilling objectives as part

of a program of expansion and confirmation of future resources.



Chart 14. Ruttan, Manitoba - Canada

Construction stage

Location: Province of Manitoba, Canada

Metals: Copper, zinc

Operator: Kria Resources

Source: Trevali


Resource estimation - Ruttan

Technical Report NI 43-101 - Wardrop (2008)

Ruttan @ 1% Cu Eq Cut-Off

Class MT Cu % Zn % B Lb ZnEq1

Inferred 20

Source: Trevali and Wardrop (2008)

5. Ruttan




2.23 1.471.17

Description.- Ruttan project is a mining deposit of the type VMS with a copper –

zinc exploitation potential. The mining site is located approximately 21 km from

Leaf Rapids village, in the northeast of the province of Manitoba, Canada and it

covers a total of 1,994 ha. Ruttan mine was discovered in 1968 and it was

operated between 1973 and 2002 by Sherritt Gordon Mines Ltd. (1973 – 1987) and

by Hudson Bay Mining and Smelting Ltd. (1988 – 2002). It is estimated that during

this period (1973 – 2002) the total production was 55 MT @ 1.23% Cu and 1.41%

Zn.

Acquisition of Ruttan.- Trevali has the option of acquiring 100% of Ruttan for 4%

NSR. In addition, Trevali can acquire 2% NSR for US$ 3.5 million.

Resource estimation.- In 2008, Trevali published the technical report for Ruttan in

compliance with Canadian classification standars NI 43 – 101, prepared by

Wardrop. The report showed a cut – off grade of 1% Cu Eq: inferred resources for

19.75 MT @ 1.47% Zn and 1.17% Cu for a total of 2.23B Lb Zn Eq.19.75 MT @ 1.47% Zn and 1.17% Cu for a total of 2.23B Lb Zn Eq.



The Operations in Halfmile underground mine started in January 2012 with a production level of 2K TPD, which will increase

to 4K TPD when incorporating Stratmat’s resources into the mining plan. The first two years’ mineral processing, 1.28 MT,

will be carried out throughout Xtrata’s Brunswick # 12 plant (see – Strategic Alliance with Xstrata ). However, with the

increase in the mining level and after Brunswick # 12’s shutdown, in order to process the remaining 14.18 MT, we assume

the acquisition of one of the adjacent processing plants for the production of concentrates, plants such as Heath Steel and

Caribou among others. The model’s main assumptions are described below.

Trevali’s fair value is obtained using resource estimation in compliance with Canadian requirements NI 43 – 101 and data provided

by Management. As previously mentioned, of Trevali’s mining units only Halfmile & Stratmat and Santander are subject to be valued

using the proposed methodologies. Thus, the equity value is composed only by i) Halfmile & Stratmat’s Discounted Cash Flow (DCF)

valuation, ii) Santander’s DCF valuation, and; iii) In Situ valuation of those resources from Halfmile & Stratmat as well as from

Santander that are not included in the mining plan (and valued as In Situ resources).

i. Halfmile & Stratmat’s valuation

We value Halfmile & Stratmat’s total resources using the DCF methodology as well as the In Situ methodology. Thus, from a total of

17.87 MT of existing resources, we value:

A. 15.47 MT @ 7.57% Zn, 2.35% Pb, 0.22% Cu y 40 g/t Ag for a total of 4.11B Lb Zn Eq , included in the Mining Plan (DCF).

B. 2.40MT @ 6.11% Zn, 2.59% Pb, 0.40% Cu y 54.21 g/t Ag for a total of 0.63B Lb Zn Eq , as resources (In Situ).

A. Halfmile & Stratmat’s valuation (DCF) - US$ 290 million

Trevali – Valuation

290.01

49.00%

85.00%

177.47

52.05

686.71

4.79

55.25

255.00

15.47

7.57%

2.35%

40.00

0.80

2K TPD

4K TPD

90.00%

85.00%

Halfmile & Stratmat

Operator

Start up of operations

Life of mine (LOM)

Average Zn grade

Average Pb grade

Annual average Pb prodution (M Lb)

Halfmile & Stratmat's Valuation (US$ million)

Production level - Toll Milling

Plant capacity

Average Ag grade (g/t)

Mineral - Mining plan (MT)

Average Pb recovery

Average Ag recovery

Total CAPEX 1/

(US$ million)

Annual average Ag prodution (K Oz)

Zinc price - Long term (US$/Lb)

Average Zn recovery

Underground Mine

Trevali - Kria

Q1 - 2012

14 years

Zn, Pb-Ag, Cu-Ag

Table 6. Halfmile & Stratmat mine: Main assumptions

Cash Cost (US$ / MT)

Annual average Zn prodution (M Lb)

Average Cu recovery

Annual average Cu prodution (M Lb)

Concentrates

Lead price - Long term (US$/Lb)

Copper price - Long term (US$/Lb)

Silver price - Long term (US$/Oz)

0.80

2.50

20.00


290.01Halfmile & Stratmat's Valuation (US$ million)

1/ It includes the acquisition of a processing plant @ 4K TPD.



Table 7. Sample of mining companies and zinc producers

Main project

Aquila Resources Inc. Back Forty USA

Baja Mining Corp. Boleo Project Mexico

Canada Zinc Metals Corp. Akia Canada

Canadian Zinc Corp. Prairie Creek Canada

Capstone Mining Corp. Cozamin Mexico

Lithic Resources Inc. Crypto Project USA

Lundin Mining Corp. Nerve Corgo Portugal 3.63

(US$ million)

43.58

307.32

72.04

96.23

1298.65

3.61

2946.08

Market Cap. 1

Of Halfmile & Stratmat’s total resources, 17.87 MT, our assumptions include only 15.47 MT within the mining plan.

Therefore, 2.40 MT remnant resources are valued In Situ. For the In Situ valuation, it is necessary to determine the zinc

equivalent resources to be valued. Thus, we value 0.63B Lb Zn Eq (corresponding to 2.96 MT in resources In Situ).

Company Location

Resources

(B Lb Zn Eq)

3.00 1.45

Investors constantly value a company determining the price of its shares in secondary markets. Thus, to obtain the value

that market assigns to zinc junior mining companies, we obtain the market capitalization of a sample of companies

comparable to Trevali taking into account the metals they produce, the size of their resources and even their projects’

development status. This sample is detailed in table 7.

1.33

1.46

1.28

5.63

0.18

23.05

81.15

B. Halfmile & Stratmat’s valuation (In Situ) – US$ 9 million

2.00

23.12

4.95

7.52

Market Cap. /Lb Zn

Eq (US$ cents)

Lundin Mining Corp. Nerve Corgo Portugal

Selwyn Resources Corp. Selwyn Project Canada

Zazu Metals Corp. Lik Project USA

Zincore Metals Inc. Yanque Peru

1. Prices as of closing of February 1st. 2012.

Source: Kallpa SAB, Bloomberg and companies

We value Santander’s total resources using the DCF methodology as well as the In Situ methodology. Thus, of a total of 12.32 MT of

existing resources, we value:

Finally, we value Halfmile & Stratmat’s remnant resources, 0.63B Lb Zn @ 1.78 CAD$/Lb for a total of US$ 9.01 million. It should

be noted that we include an additional discount of 20% to the value of the In Situ resources. With that discount the In Situ value

is 1.4 US$/Lb.

B. 9.22 MT @ 4.31% Zn, 1.02% Pb, 0.08% Cu and 35.61 g/t Ag, for a total of 1.39B Lb Zn Eq , incorporated in the Mining Plan

– Underground mine (DCF)

A. 1.66 MT @ 2.74% Zn, for a total of 0.1B Lb Zn Eq , incorporated in the Mining Plan - Tailings (DCF)

C. 1.44 MT @ 4.31% Zn, 1.02% Pb, 0.08% Cu and 35.61 g/t Ag, for a total of 0.22B Lb Zn Eq , as resources (In Situ)

3.63

0.12

0.74

2.02

1.78

5.63

0.12

7.06

1.99

2946.08

69.67

52.43

40.16

Average

Maximum

Minimum

81.15

56.06

ii. Santander’s valuation



A.

1.7

9.0

Operator


Life of mine (LOM)

Concentrates

Average Zn grade

Production level

Santander mine operations will be developed in two stages: i) reprocessing the old mining tailings (1.66 MT); and ii)

underground mine: extraction and production of concentrates (zinc, lead, etc. - 9.22 MT). Glencore, the project’s operator,

will start up operations in Santander in Q2 2011 with an average level of 2K TPD that will increase to 4K TPD in 2015 (see -

Strategic Alliance with Glencore). We assume that Trevali repays Glencore 100% of the advance sale in regard with the

acquisition of the concentrate plant for US$ 15 milion in 2015 and that Trevali carries out a US$ 15 million additional

investment in order to increase the production level from 2K TPD to 4K TPD.

Santander

Mining tailings

A. Santander’s valuation (DCF) – US$ 73.2 million

Table 8. Santander - Main assumptions

Average Zn recovery


Glencore

Q3 - 2012

Zn

2.74%

70.00%

35.55

Underground mine

2.5 years

Mineral - Mining Tailing Plan (MT)

1.5K TPD

Annual average Zn production (M Lb)

9.0

B.

Cash Cost 1/

(US$ / MT)

Total CAPEX 2/

(US$ M)

Santander's Valuation (US$

1/ Cash cost includes the payment of 6.00 US$/MT processed in regard with the US$ 15 million payment for the acquisition of the

concentrate plant.

2/ Capex includes the costs of the processing plant's capacity expansion from 2K TPD to 4 TPD for US$ 15 million.

34.0

48.40

73.2

2K TPD

4K TPD

82%

74%

58%

143.0

36.1

1,168

Average Zn grade

Average Pb grade

Average Ag grade (g/t)

Average Zn recovery

Average Pb recovery

Average Ag recovery

35.6

Q3 - 2012

Glencore

Zn, Pb-Ag

Santander Mine

Operator


Life of mine (LOM)

Concentrates

Underground Mine

9 years

9.2

3.90%

1.02%


Annual average Zn production (M Lb)

Annual average Pb production (M Lb)

Annual average Ag production (K Oz)

Production level (2012 - 2014)

Production level (from 2015 onward)

Underground Mine

Mineral - Mining plan (MT)



Many analysts bet on zinc in the next years after expecting that zinc supply will have a strong contraction. Approximately 15% of the

zinc supply would disappear as a consequence of the shutdowns of the most important zinc mines such as Century (Minmetals),

Brunswick (Xstrata), Lisheen (Vedanta), among others, mines that would cease to operate from 2014. This will cause that, between

2012 and 2015, approximately 1.29 MT of zinc will be withdrawn from the market, which will generate a deceleration in the

production of this metal with an estimated increase of only 6% in 2012 and 3% in 2013. While the contraction of the zinc offer will

not be notorious in 2012 due to a lesser demand generated by the financial crisis in Eurozone; from 2013, the market will start to

discount the lesser production in a higher metal price. We are bullish with zinc. We believe that this will be an important catalyst for

Trevali, which will have two mines into production in 2013: Halfmile & Stratmat and Santander.

Bets on zinc.-

Of Santander’s total resources, 12.32 MT, our assumptions include only 10.88 MT within the mining plan. Therefore, the

1.44 MT remnant resources are valued In Situ. For the In Situ valuation, it is necessary to determine the zinc equivalent

resources to be valued. Thus, we value 0.22B Lb Zn Eq (corresponding to 1.44 MT of resources In Situ).

Using the methodology previously proposed, we value 0.22B Lb Zn Eq @ 1.78 CAD$/Lb for a total of US$ 3.14 million. In

addition and as previously mentioned, we are conservative and include a 20% discount on the price of a pound of zinc In

Situ.

B. Santander’s valuation (In Situ) – US$ 3.14 million



Production Project's development stages

A. Halfmile & Stratmat

Lead (M Lb)

Copper (M Lb)

Silver (K Oz)

B. Santander

Zinc (M Lb)

Lead (M Lb)

Silver (K Oz)

Halfmile & Stratmat - Model Santander - Model

Income Income

Cost of sales Cost of sales

Gross profit Gross profit

Operative expenses Operative expenses

EBITDA EBITDA

Depreciation Depreciation

EBIT EBIT

Resource estimation - Halfmile Resource estimation - Santander

Technical Report NI 43-101, Wardrop (2009) Technical Report NI 43-101, Golder (2010)

2012 2013 2014 2015

Santander @ 3% Zn Eq Cut-Off B Lb B Lb Halfmile @ 5% Zn Eq Cut-Off

2.6 2.6 5.2 5.2

397.8 397.8 795.6 795.6

128.0 128.0 105.1 178.6

96.1 96.1 192.3 192.3

28.2 28.2 56.4 56.4

2012 2013 2014

Zinc (M Lb)

21.4 21.4 21.4 45.1

692.8 692.8 692.8 1,458.6

2012 2013 2014

99.80 102.88 207.60

-35.36 -35.36 -59.09

64.44 67.52 148.51

15.74

-2.90 -2.90 -2.90

61.54 64.62 145.61

-41.50 -42.50 -43.50

20.04 22.12 102.11

53.55 55.33 49.68

-24.96 -24.96 -20.64

28.59 30.36 29.04

-2.20 -2.20 -2.20

26.39 28.16 26.84

-11.00 -11.38 -11.10

15.39 16.79

Halfmile Santander

Ruttan, Huampar

Pre-

Feasibility

Drilling

Deposit

Discovery

Scoping

Study

EISStart-upConstruc

tion

Production

Feasibility

MT Zn % Pb % MT Zn % Pb %

Indicated 1.7 Indicated 0.9

Inferred 1.3 Inferred 0.7

Valuation Components TV - US$ Million Valuation Components TV

Mine/Project Method. Value Disc V. D/ Disc.

A. Halfmile & Stratmat DCF

B. Halfmile & Stratmat In Situ

C. Santander DCF

C. Santander In Situ

C. Cash -

Debt Fair Value

Equity Equity's Value - US$ Million

Cash position Shares Outstanding - Million

Share's Fair Value - US$

Market Price - US$

Potential Upside - %

Main Shareholders Board and Management

290.01

11.34

73.21

3.92

Santander @ 3% Zn Eq Cut-Off B Lb

Zn EqAg g/t

6.3 8.1 2.6 30.8

6.1 6.7 1.8 20.6

B Lb

Zn Eq

Halfmile @ 5% Zn Eq Cut-Off

Capital structure

Shares Outstanding - Million

Shares Fully Diluted - Million

Options Outstanding - Million

1x

1x

0.8 x

0.8 x

3.00

35.00

15.00

145.62

28.67

3.14

12.00

290.01

9.07

44.0

4.9 5.1 0.4 21.0

387.42

145.62

2.66

1.23

116%

Geology

Finance

Position

President & CEO

Chairman

CFO

Director

Director

Director

Name

Mark Cruise

Tony Holler

Anna Ladd

Mike Hoffman

Anton Drescher

Charles Melbye

Background

Finance

Mining

Finance

Mining

174.29

5.9 3.9 1.4

Ag g/t

73.21

US$ million

10% 4%

50%

36%

Directorio &

Gerencia

Xstrata Canadá

Fondos/Insitucion

es

Otros

Board &

Management

Xstrata-Canada

Institutionals/

Funds

Others

0,772 0,1971

0,0387

0% 20% 40% 60% 80% 100%

Halfmile & Stratmat Santander OtrosOthers

Mining

Mining

Paul Keller

Dayle Rusk

Director

Operations VP

Explorations VP

Paul Klipfel GeologyOtrosOthers



Appendix: Disclaimer

Analyst’s certification

This document is for informative purposes only. Under no circumstances it should be used / be considered as an offer of sale or an application of

purchase of shares or any other securities mentioned in this document. The information herein has been obtained from sources which are believed

to be reliable, but Kallpa Securities SAB does not guarantee the trustfulness or accuracy of the content of this report, or the future market values of

shares or other securities mentioned in this document. The views and opinions expressed in this document constitute our opinion at the time of this

The analyst that prepared this report hereby certifies that: i) the opinions and views expressed in this valuation report, in regard with the issuer and

the company’s overview, reflected his/her personal opinion and ii) No part of his/her salary compensation was, is or will be related directly or

indirectly to the recommendations expressed in this report.

The economic compensations of the analyst who prepared this report are based in several factors, including but not limited to Kallpa Securities

SAB’s profitability and the profits generated by its different areas, including investment banking. In addition, the analyst does not receive any kind

of economic compensation from the companies he/she covers.

This valuation report was prepared by Kallpa Securities SAB’s employees that maintain the position of Senior Analyst. Persons involved in the

elaboration of this report are authorized to maintain shares.

The analyst who prepared this report has recently visited the project’s facilities.

Share prices in this report are based on market prices as of closing of the day prior to the publication of this report, unless it is strictly stated.

General statement

Definition of qualification ranges

shares or other securities mentioned in this document. The views and opinions expressed in this document constitute our opinion at the time of this

report and are subject to change without any notice. Kallpa Securities SAB does not guarantee analysis updates before any change in the

circumstances of the market. The products referred in this document may not be available for purchase in some countries.

Underweight - < - 40% > + 40% Overweight +

Underweight -20% a -40% +20% a +40% Overweight

Neutral -20% a 0% +20% a 0% Neutral

The fundamental value calculated by Kallpa SAB is based in one or more valuation methodologies commonly used by financial analysts, including

but not limited to discounted cash flows, In Situ valuations or any other applicable methodology. It should be noted that the publication of a

fundamental value does not imply any guarantee that the value will be achieved.

The range assigned to each company covered by the analyst in these reports is based on the analysis/monitoring Kallpa Securities SAB has been

developing for the company. In some cases, the analyst can express his/her short-term points of view to traders, vendors and some Kallpa Securities

SAB’s clients but this point of view may differ in time by market volatility and other factors.

Kallpa Securities SAB has 5 qualification ranges: Overweight +, Overweight, Maintaining, Underweight and Underweight - . The analyst will assign

the coverage one of these ranges.

Kallpa Securities SAB does not maintain Trevali’s shares within its portfolio.

Kallpa Securities SAB is sponsor of the company at Lima Stock Exchange’s Venture Capital and receives an economic compensation for the

performing of that function. In addition, Kallpa Securities SAB has actively participated in the company's private placements in the last two years.

Kallpa Securities SAB has reasonably designed policies to prevent or to control the exchange of non-public information used by areas such Research

and Investment, Stock Market, among others.



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