(All dollar amounts are in U.S. dollars unless
otherwise specified)
Ascendant Resources Inc. (TSX:ASND) (OTCQX:ASDRF)
(FRA:2D9) ("Ascendant" or the "Company”) is pleased to report solid
first quarter 2018 results from its El Mochito mine with $5.30
million in free cash flow and the Company’s first quarter of
material net income of $5.29 million or earnings per share of
$0.07. Contained metal production for the quarter was 21.4 million
zinc equivalent1 lbs at an average head grade of 6.1%, representing
the Company’s strongest quarter of production since assuming
operation of the mine. These results demonstrate the Company’s
continued delivery of improved efficiency in operations.
President and CEO Chris Buncic stated: “We are
very pleased with the overall performance of the Company during the
first quarter of this year. Our ability to deliver significant cost
reductions over the previous quarter and to generate significant
net income and free cash flow illustrates the true potential of the
El Mochito mine. We will continue to push towards improving
operating margins and sustainable long-term profitability. As we
exit the quarter with a cash balance of over $13 million, free cash
flow generation remains a key focus."
He continued, “Operationally we are pleased with
the increased throughput and higher head grades achieved this
quarter. We look forward to improving these trends and continue to
examine initiatives that will seek to make further structural
improvements to our operational efficiency. We continue to make
excellent progress on our 2018 exploration program and we look
forward to providing an exploration update in the second
quarter.”
____________________________1 This figure was
calculated on a spot metal price basis.
Summary of key operational and financial
performance for the first quarter 2018 is provided in the tables
below:
|
|
|
|
Q1 |
Q4 |
Q1 |
Key Operating Information |
|
|
March 31, |
December 31, |
March 31, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
Total Tonnes Mined |
|
tonnes |
|
187,255 |
|
|
197,303 |
|
|
131,325 |
|
|
|
|
|
|
|
|
Total Tonnes Milled |
|
tonnes |
|
186,955 |
|
|
198,354 |
|
|
131,116 |
|
|
|
|
|
|
|
|
Average Head Grades |
|
|
|
|
|
|
Average
Zn grade |
|
% |
|
4.2 |
% |
|
3.7 |
% |
|
3.4 |
% |
|
Average
Pb grade |
|
% |
|
1.6 |
% |
|
1.4 |
% |
|
1.3 |
% |
|
Average
Silver grade |
|
g/t |
|
46 |
|
|
34 |
|
|
52 |
|
|
ZnEq
Head grade |
(1 |
) |
% |
|
6.1 |
% |
|
5.3 |
% |
|
5.6 |
% |
|
|
|
|
|
|
|
Average Recoveries |
|
|
|
|
|
|
Zinc |
|
% |
|
89.3 |
% |
|
88.5 |
% |
|
89.8 |
% |
|
Lead |
|
% |
|
76.7 |
% |
|
74.6 |
% |
|
76.9 |
% |
|
Silver |
|
% |
|
78.3 |
% |
|
75.0 |
% |
|
78.8 |
% |
|
|
|
|
|
|
|
Contained Metal Production |
|
|
|
|
|
|
Zinc |
|
000's
lbs |
|
15,301 |
|
|
14,133 |
|
|
8,888 |
|
|
Lead |
|
000's
lbs |
|
5,125 |
|
|
4,556 |
|
|
2,957 |
|
|
Silver |
|
ozs |
|
215,599 |
|
|
169,039 |
|
|
173,041 |
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
21,412 |
|
|
19,576 |
|
|
13,672 |
|
|
|
|
|
|
|
|
Payable Production |
|
|
|
|
|
|
Zinc |
|
000's
lbs |
|
13,006 |
|
|
12,013 |
|
|
7,555 |
|
|
Lead |
|
000's
lbs |
|
4,869 |
|
|
4,328 |
|
|
2,809 |
|
|
Silver |
|
ozs |
|
150,919 |
|
|
118,327 |
|
|
121,129 |
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
18,200 |
|
|
16,640 |
|
|
11,621 |
|
|
|
|
|
|
|
|
Payable Metal Sold |
|
|
|
|
|
|
Zinc |
|
000's
lbs |
|
15,285 |
|
|
11,007 |
|
|
4,691 |
|
|
Lead |
|
000's
lbs |
|
6,323 |
|
|
6,191 |
|
|
1,982 |
|
|
Silver |
|
ozs |
|
169,165 |
|
|
162,619 |
|
|
102,706 |
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
21,543 |
|
|
17,599 |
|
|
7,748 |
|
|
|
|
|
|
|
|
Average Realized Metal Price |
|
|
|
|
|
|
Zinc |
|
$/lb |
$1.53 |
|
$1.46 |
|
$1.26 |
|
|
Lead |
|
$/lb |
$1.07 |
|
$1.13 |
|
$1.04 |
|
|
Silver |
|
$/oz |
$16.41 |
|
$16.99 |
|
$18.01 |
|
|
|
|
|
|
|
|
Cash operating cost per ZnEq payable lb
sold |
(2 |
) |
$/ZnEq
lb |
$0.82 |
|
$1.03 |
|
$1.19 |
|
AISC per ZnEq payable lb sold |
(2 |
) |
$/ZnEq
lb |
$1.34 |
|
$1.54 |
|
$1.66 |
|
Direct operating cost per tonne milled (excl.
CAPEX) |
(2 |
) |
$/tonne |
$72.33 |
|
$80.13 |
|
$98.91 |
|
(1 |
) |
Assumes average spot metal prices for the period. |
(2 |
) |
This is a non-IFRS performance measure. See Non-IFRS
Performance Measures section at the end of this document. |
|
|
|
|
|
|
|
|
|
|
|
Q1 |
Q4 |
Q1 |
Financial |
|
|
March 31, |
December 31, |
March 31, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
|
Total revenue |
|
$000's |
|
28,038 |
|
|
23,934 |
|
|
7,924 |
|
|
Mine operating
expenses |
|
$000's |
|
19,624 |
|
|
20,336 |
|
|
9,707 |
|
|
Income (loss) from
mining operations |
|
$000's |
|
8,414 |
|
|
(49 |
) |
|
(1,783 |
) |
|
Net income (loss) |
|
$000's |
|
5,294 |
|
|
(1,429 |
) |
|
(2,894 |
) |
|
Adjusted EBITDA |
(2 |
) |
$000's |
|
7,945 |
|
|
2,280 |
|
|
(1,690 |
) |
|
Operating cash flow
before movements in working capital |
(2 |
) |
$000's |
|
6,774 |
|
|
578 |
|
|
(2,542 |
) |
|
Operating cash
flow |
|
$000's |
|
11,418 |
|
|
5,825 |
|
|
(8,334 |
) |
|
Cash and cash
equivalents |
|
$000's |
|
13,260 |
|
|
8,041 |
|
|
16,813 |
|
|
Working capital |
|
$000's |
|
13,658 |
|
|
12,506 |
|
|
27,157 |
|
|
Capital
Expenditures |
|
$000's |
|
6,116 |
|
|
5,077 |
|
|
1,606 |
|
(1 |
) |
Assumes average spot metal prices for the period. |
(2 |
) |
This is a non-IFRS performance measure. See Non-IFRS
Performance Measures section at the end of this document. |
|
|
|
|
|
|
|
First Quarter 2018 Operational
Performance
During the first quarter of 2018, Ascendant
produced record contained zinc equivalent metal production of 21.4
million lbs, compared to 19.6 million zinc equivalent lbs in the
fourth quarter of 2017 and 13.7 million zinc equivalent lbs in the
first quarter of 2017. Zinc equivalent lbs for the quarter
comprised of 15.3 million lbs of zinc, 5.1 million lbs of lead and
215,599 ounces of silver.
Zinc equivalent grade for the first quarter
increased to 6.1% using average spot metal pricing for the period.
Zinc grades showed a significant improvement through the quarter
increasing by 14% from 3.7% zinc in the fourth quarter 2017 to 4.2%
zinc in the first quarter 2018. Lead and silver grades similarly
showed an increase of 14% and 30% respectively to 1.6% lead and 46
g/t silver from the fourth quarter of 2017. This was the result of
increased control of dilution and a firm focus on mining less
sub-grade material, as well as the accelerated mining from the
higher-grade Esperanza orebody that occurred as the development of
the first long hole stope was completed. The success at Esperanza
was partially offset by higher than expected internal dilution
experienced in the Nueva Este 23L long hole stope, which has now
been addressed. Recoveries for the quarter averaged 89.3% for zinc,
76.7% for lead and 78.3% for silver.
Milled production for the quarter was 186,955
tonnes, representing a slight decrease of 6% over the fourth
quarter 2017 and a 43% increase over the first quarter 2017. While
the mill did encounter a number of small stoppages due to wet ore
and large rocks impacting the vibrating screen and cone crusher,
overall, throughput rates continue to trend higher as additional
new equipment continues to be introduced and new lower cost, long
hole stopes contribute a greater percentage of production. The
remainder of the new mobile equipment is expected to arrive by
mid-2018, completing the full underground fleet replacement program
that commenced in the second quarter 2017.
First Quarter 2018 Financial
Performance
The Company reports financial results for the
three months ended March 31, 2018 with 21.5 million zinc equivalent
lbs sold in the first quarter 2018 with income from mining
operations of $8.41 million. Average realized metal prices, on a
provisional basis, for the quarter were $1.53 per pound of zinc,
$1.07 per pound of lead and $16.41 per ounce of silver.
First Quarter 2018 Financial Highlights:
- Net concentrate sales revenue of $28.04 million
- Net income of $5.29 million and earnings per share of
$0.07
- Adjusted EBITDA2 of $7.95 million
- Direct operating cost of $72.33/t and Cash Operating Costs of
$0.82/ZnEq lb
- Operating cash flow before changes in working capital of $6.77
million
- Contained metal production of 21.4 ZnEq lbs, and quarterly
milled tonnes of 186,955
- Quarterly payable zinc equivalent production increased 9% to
18.2 million lbs from Q4 2017 with payable zinc, lead and silver
production of 13.0 million lbs, 4.9 million lbs and 150,919 ozs
produced respectively
The Company reported net income of $5.29 million
or $0.07 earnings per share in the first quarter 2018. This quarter
marks the first with material net income which was a result of the
company achieving its targeted sales schedule of one zinc
concentrate shipment per month and one lead concentrate shipment
per quarter. The Company expects to maintain this schedule
throughout the remainder of 2018.
The Company reported $5.30 million in free cash
flow for the first quarter 2018 and also reported adjusted EBITDA
totalling $7.95 million, representing three consecutive quarters of
positive adjusted EBITDA. This is a significant increase over
fourth quarter 2017 adjusted EBITDA of $2.28 million and first
quarter 2017 adjusted EBITDA of negative $1.69 million.
Direct operating costs per tonne milled for the
first quarter 2018 were $72.33, a 10% decrease versus fourth
quarter 2017 direct operating costs per tonne milled of $80.13 and
a 27% decrease versus first quarter 2017 direct operating costs per
tonne milled of $98.91. These reductions are a result of cost
optimization, operational efficiencies, and increased
production. Cost reduction is an ongoing focus for the Company
and there are currently a number of initiatives being evaluated,
aimed at further improving the Company’s long-term cost
structure.
Cash operating cost per zinc equivalent payable
pound sold was $0.82 and All-In Sustaining Cost (“AISC”) was $1.34
per zinc equivalent payable pound sold for the first quarter.
Capital expenditures were higher than anticipated in the quarter as
El Mochito continued to receive additional new mining equipment and
greater expenditure was required for the ongoing construction of
the tailing dam lift during the dry season and the higher progress
of underground development work that was achieved. With the Company
now in a steady state of production, entering its first full year
of normalized operations, it has adopted the AISC reporting metric
as the Company believes it more fully defines the total costs
associated with producing zinc and provides greater transparency
for stakeholders when assessing operating performance and ability
to generate free cash flow from operations.
____________________________2 Adjusted EBITDA is
a Non-IFRS measure and is calculated by considering the Company's
earnings before interest payments, tax, depreciation and
amortization, share-based payments, adjusted for net foreign
exchange expenses.
Resource Update
On April 10, 2018, the Company announced the
results of an updated Mineral Resource & Reserve Estimate for
its El Mochito mine in Honduras prepared in accordance with
National Instrument 43-101 (“NI 43-101”) and the Canadian Institute
of Mining, Metallurgy and Petroleum (“CIM”) Standards.
The updated Mineral Reserve and Resource
Estimate marks the first compiled since Ascendant acquired the El
Mochito mine in December 2016 and replaces the previous
estimate with the effective date of December 31, 2015,
prepared by Micon as part of the acquisition transaction.
The new estimate shows a material increase in
both Mineral Resources and Reserves against the previous Mineral
Resource and Reserve Estimates dated December 31, 2015,
underscoring the mine’s long history of expanding and upgrading
Mineral Resources.
Highlights include the following:
Proven & Probable Mineral Reserves increase
life of mine beyond seven years (at a rate of 820kt/yr):
Contained zinc increased 193% from 204Mlbs to
597Mlbs Contained lead increased 109% from
100Mlbs to 209Mlbs Contained silver
increased 106% from 3.5Moz to 7.2Moz
Measured & Indicated Mineral Resources
increase 50% to 869Mlbs contained zinc
from 578Mlbs, and 28% to 1,216Mlbs
contained zinc equivalent metal, up from 953Mlbs
Inferred Mineral Resources also increase by 14%
to 739Mlbs contained zinc equivalent metal, up from 648Mlbs.
A summary of the Mineral Reserve Estimate is set
out in Table 1 and the Mineral Resource Estimate can be found in
Table 2 below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 1: El Mochito Mineral Reserve Statement
- Effective 01 January 2018 |
|
|
Category |
Tonnes |
Grade |
Contained Metal |
|
|
|
|
Zn |
Pb |
Ag |
ZnEq. |
Zn |
Pb |
Ag |
ZnEq. |
|
|
|
(kt) |
(%) |
(%) |
(g/t) |
(%) |
Mlbs |
Mlbs |
Moz |
Mlbs |
|
|
Proven Reserves |
787 |
4.7 |
2.0 |
54 |
7.2 |
81 |
35 |
1.4 |
124 |
|
|
Probable Reserves |
5,002 |
4.7 |
1.6 |
36 |
6.5 |
516 |
174 |
5.8 |
717 |
|
|
Proven & Probable Reserves |
5,789 |
4.7 |
1.6 |
38 |
6.6 |
597 |
209 |
7.2 |
841 |
|
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
(1) Mineral Resources are stated inclusive of Mineral
Reserves, Tonnage, grade and contained metal values have been
rounded, totals may vary due to rounding. ZnEq% conversion
factors used were: Pb x 0.8175 and Ag x 0.0149 |
|
|
(2) Price assumptions used were US$1.21/lb Zn,
US$1.06/lb Pb and US$18/troy oz Ag. Processing recoveries used were
88.9% Zn, 74.3% Pb, and 77.7% Ag |
|
|
(3) A cut-off of 4.76% ZnEq was used to
estimate Mineral Reserves which includes factors for metal
recovery, operating & sustaining costs, royalties,
concentrate treatment charges, payables, penalties and
transportation/selling costs. Average modifying factors for Mineral
Reserves included internal dilution 1.2%, external dilution
14.3% and mining recovery 90.8%. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 2: El Mochito Mineral Resource Statement
- Effective 01 January 2018 |
|
|
Category |
Tonnes |
Grade |
Contained Metal |
|
|
|
|
Zn |
Pb |
Ag |
ZnEq. |
Zn |
Pb |
Ag |
ZnEq. |
|
|
|
(kt) |
(%) |
(%) |
(g/t) |
(%) |
Mlbs |
Mlbs |
Moz |
Mlbs |
|
|
Measured Resources |
1,100 |
5.5 |
2.0 |
65 |
8.2 |
134 |
48 |
2.3 |
198 |
|
|
Indicated Resources |
6,452 |
5.2 |
1.7 |
41 |
7.2 |
735 |
241 |
8.4 |
1,019 |
|
|
Measured & Indicated
Resources |
7,553 |
5.2 |
1.7 |
44 |
7.3 |
869 |
289 |
10.7 |
1,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inferred Resources |
4,972 |
5.1 |
1.4 |
33 |
6.7 |
556 |
156 |
5.4 |
739 |
|
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
(1) Mineral Resources are stated inclusive of Mineral
Reserves, Tonnage, grade and contained metal values have been
rounded, totals may vary due to rounding. |
|
|
(2) Price assumptions used were US$1.21/lb Zn,
US$1.06/lb Pb and US$18/troy oz Ag. Zinc equivalent metal grade
(ZnEq. %) was calculated as follows: |
|
|
Zn% +(Pb % x 0.82) +(Ag g/t x 0.0149) =
ZnEq% and is based on 88.9% Zn recovery, 74.3% Pb recovery
and 77.7% Ag recovery. |
|
|
(3) A cut-off of 3.1% ZnEq. was used to
estimate Mineral Resources and is based on fourth quarter
2017 marginal direct operating costs. |
|
|
(4) Results of an interpolated bulk density deposit
model have been applied, and contributing 5ft downhole assay
composites were capped at 38% Zn, 36% Pb and 2000g/t Ag. |
|
|
(5) Mineral Resources that are not Mineral Reserves do
not have demonstrated economic viability. |
|
|
(6) The Inferred Mineral Resource in this estimate has
a lower level of confidence than that applied to an Indicated
Mineral Resource and must not be converted to a Mineral
Reserve. It is reasonably expected that the majority of the
Inferred Mineral Resource could be upgraded to an Indicated Mineral
Resource with continued exploration. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The new Technical Report is being prepared in
accordance with National Instrument 43-101 (“NI 43-101”) and the
CIM Standards by Mercator Geological Services Limited, with
contributions made by P&E Mining Consultants Inc. with
reference to the Mineral Reserve Estimate, mining and metallurgical
engineering sections. This Technical Report will be filed on
www.sedar.com on or before the 25th May 2018.
Mineral Reserve Estimate
The P&E Mining Consultants Inc. Mineral
Reserve Estimate (Table 1) review strategy was based on a review
and check for reasonableness of the percent zinc equivalent
(“ZnEq%”) cut-off value. Subsequently, the internal dilution,
external dilution, and mine extraction (mining recovery) was
scrutinized for each of the four mining methods employed to ensure
they fell within acceptable limits for Mineral Reserve Estimate
reporting. In addition, the remaining Mineral Resource Estimate not
converted to a Mineral Reserve Estimate was reviewed to ensure it
balanced with the mine extraction data. The Mineral Reserve
Estimate reviews were summarized into overall dilution and mine
extraction percentile for a reasonable value comparison analysis.
The average values are as follows: Internal Dilution = 1.2%,
External Dilution = 14.3% and Mine Extraction = 90.8%.
Mineral Resource Estimate
The Mineral Resource Estimate, as set out in
Table 2, was prepared by Mercator Geological Services Limited. The
effective date of this Mineral Resource Estimate is January 1,
2018, and it is based on 26 contiguous areas of “manto” and/or
“chimney” style skarn mineralization defined by 2,176 diamond drill
holes up to December 31st, 2017. 3D solid models of skarn
mineralization reflecting a minimum grade of 3% ZnEq. were depleted
for previously mined areas to constrain resource volumes.
GEOVIA Surpac® 6.8.1 software was used to assign block grades for
zinc (%), lead (%), silver (g/t) and density (g/cm3) for Measured,
Indicated and Inferred Mineral Resources using inverse distance
squared (ID2) interpolation methodology and capped 5 foot down hole
assay composites. Up to four interpolation passes were applied
using progressively increasing ellipsoid ranges to cover the range
of 3D solid model sizes present. Block size is 10 feet (x) by 10
feet (y) by 10 feet (z) with two levels of sub-blocking allowed to
a minimum block size of 2.5 feet (x) by 2.5 feet (y) by 2.5 feet
(z). Resource categorization was applied using discrete solid
models developed from contributing drill hole and assay composite
parameters.
Exploration Activities
During the first quarter 2018, the Company
commenced its planned 40,000-meter 2018 drill program. This
program is focused equally on definition drilling for the purpose
of resource conversion to further enhance the new resource base
supporting a long operating life and exploration drilling to define
additional material near mine and regional exploration targets.
2018 exploration initiatives will include a soil
geochem survey of the entire El Mochito concession, the review and
prioritization of near-mine targets (Manzanal, Big Fuzzy, Porvenir,
Caliche) as well as other concessions within Honduras.
Specifically, at El Mochito, follow up work on known “chimney” type
ore bodies with historic grades in excess of 17% zinc equivalent is
underway. With an abundance of historical data available, the
Company will also seek to review historical, previously mined areas
in the upper levels of the mine which still contain a number of
high-grade targets.
Conference Call
A conference call will be held tomorrow, May 10,
2018, at 10:00am EDT to discuss first quarter 2018 operational and
financial results.
Conference Call Details:Date of
Call: Thursday, May 10, 2018Time of Call: 10:00am EDTConference ID:
9029578Dial-In Numbers:North American Toll-Free:
1-833-696-8362International: 1-612-979-9908
A recorded playback of the conference call will
be available until June 10, 2018 and can be accessed on the
Company’s website at www.ascendantresources.com within the
Investors section.
The information provided within this release
should be read in conjunction with Ascendant’s unaudited condensed
consolidated interim financial statements and management's
discussion and analysis for the three months ended March 31, 2018,
which are available on Ascendant’s website and on SEDAR. As at
January 1, 2017, the Company has changed its presentation currency
to the U.S. dollar (US). All financial figures are in US dollars
unless otherwise stated.
Technical Disclosure/Qualified
Person
All technical information contained herein has
been reviewed and approved by Patrick Toth, P.Geo and director of
exploration of the Company. Mr. Toth is a "qualified person" within
the meaning of NI 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”).
About Ascendant Resources
Inc.
Ascendant is a Toronto-based mining company
focused on its 100%-owned El Mochito zinc-lead-silver mine in
north-western Honduras, which has been in production since 1948.
After acquiring the mine in December 2016, Ascendant implemented a
rigorous optimization program aimed at restoring the historic
potential of the El Mochito mine. In 2017, the Company successfully
completed the operational turnaround with sustained production
reaching record levels and profitability restored. The Company
remains focused on cost reduction and further operational
improvements to drive robust free cash flow in 2018 and beyond.
Ascendant is also focused on expanding and upgrading known
resources through extensive exploration work for near-term growth.
With a significant land package of 11,000 hectares and an abundance
of historical data there are several regional targets providing
longer term exploration upside which could lead to further resource
growth. The Company is also engaged in the evaluation of producing
and development stage mineral resource opportunities, on an ongoing
basis. The Company's common shares are principally listed on the
Toronto Stock Exchange under the symbol "ASND". For more
information on Ascendant Resources, please visit our website
at www.ascendantresources.com.
Neither the Toronto Stock Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX) accepts responsibility for the adequacy or
accuracy of this release. For further information please
contact:Katherine PrydeDirector, Communications & Investor
RelationsTel: 888-723-7413 info@ascendantresources.com
Cautionary Notes to US
Investors
The information concerning the Company’s mineral
properties has been prepared in accordance with National Instrument
43-101 (“NI-43-101”) adopted by the Canadian Securities
Administrators. In accordance with NI-43-101, the terms
“mineral reserves”, “proven mineral reserve”, “probable mineral
reserve”, “mineral resource”, “measured mineral resource”,
“indicated mineral resource” and “inferred mineral resource” are
defined in the Canadian Institute of Mining, Metallurgy and
Petroleum (the “CIM”) Definition Standards for Mineral Resources
and Mineral Reserves adopted by the CIM Council on May 10,
2014. While the terms “mineral resource”, “measured mineral
resource”, “indicated mineral resource” and “inferred mineral
resource” are recognized and required by NI 43-101, the U.S.
Securities Exchange Commission (“SEC”) does not recognize
them. The reader is cautioned that, except for that portion
of mineral resources classified as mineral reserves, mineral
resources do not have demonstrated economic value. Inferred
mineral resources have a high degree of uncertainty as to their
existence and as to whether they can be economically or legally
mined. It cannot be assumed that all or any part of any
inferred mineral resource will ever be upgraded to a higher
category. Therefore, the reader is cautioned not to assume
that all or any part of an inferred mineral resource exists, that
it can be economically or legally mined, or that it will ever be
upgraded to a higher category. Likewise, you are cautioned
not to assume that all or any part of a measured or indicated
mineral resource will ever be upgraded into mineral reserves.
Readers should be aware that the Company’s
financial statements (and information derived therefrom) have been
prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting
Standards Board and are subject to Canadian auditing and auditor
independence standards. IFRS differs in some respects from United
States generally accepted accounting principles and thus the
Company’s financial statements (and information derived therefrom)
may not be comparable to those of United States companies.
Forward Looking
Information
This news release contains "forward-looking statements" and
"forward-looking information" (collectively, "forward-looking
information") within the meaning of applicable Canadian securities
legislation. All information contained in this news release, other
than statements of current and historical fact, is forward-looking
information. Often, but not always, forward-looking information can
be identified by the use of words such as "plans", "expects",
"budget", "guidance", "scheduled", "estimates", "forecasts",
"strategy", "target", "intends", "objective", "goal",
"understands", "anticipates" and "believes" (and variations of
these or similar words) and statements that certain actions, events
or results "may", "could", "would", "should", "might" "occur" or
"be achieved" or "will be taken" (and variations of these or
similar expressions). Forward-looking information is also
identifiable in statements of currently occurring matters which may
continue in the future, such as "providing the Company with", "is
currently", "allows/allowing for", "will advance" or "continues to"
or other statements that may be stated in the present tense with
future implications. All of the forward-looking information in this
news release is qualified by this cautionary note.
Forward-looking information in this news release
includes, but is not limited to, statements regarding the
consistency of processing recovery levels, improvements of grades
in 2018, deployment of new mining equipment, increase in contained
metal production, maintenance of production rates, increase of mill
feed grades, reduction of costs, monthly shipments of concentrate,
the ability to fully fund planned development, exploration and
capital expenditures, robust adjusted EBITDA and free cash flow
generation in 2018 and the undertaking of various long-term
optimization programs. Forward-looking information is not, and
cannot be, a guarantee of future results or events. Forward-looking
information is based on, among other things, opinions, assumptions,
estimates and analyses that, while considered reasonable by
Ascendant at the date the forward-looking information is provided,
inherently are subject to significant risks, uncertainties,
contingencies and other factors that may cause actual results and
events to be materially different from those expressed or implied
by the forward-looking information. The material factors or
assumptions that Ascendant identified and were applied by Ascendant
in drawing conclusions or making forecasts or projections set out
in the forward-looking information include, but are not limited to,
the ability of the Company to maintain the consistency of
processing recovery levels, to improve grades in 2018, to deploy
new mining equipment, increase contained metal production, maintain
production rates, increase mill feed grades, reduce costs, make
monthly shipments of concentrate, fully fund planned development,
exploration and capital expenditures, maintain robust adjusted
EBITDA and free cash flow in 2018 and undertake various long-term
optimization programs and other events that may affect Ascendant's
ability to develop its project; and no significant and continuing
adverse changes in general economic conditions or conditions in the
financial markets.
The risks, uncertainties, contingencies and
other factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking information
may include, but are not limited to, risks generally associated
with the mining industry, such as economic factors (including
future commodity prices, currency fluctuations, energy prices and
general cost escalation), uncertainties related to the development
and operation of Ascendant's projects, dependence on key personnel
and employee and union relations, risks related to political or
social unrest or change, rights and title claims, operational risks
and hazards, including unanticipated environmental, industrial and
geological events and developments and the inability to insure
against all risks, failure of plant, equipment, processes,
transportation and other infrastructure to operate as anticipated,
compliance with government and environmental regulations, including
permitting requirements and anti-bribery legislation, volatile
financial markets that may affect Ascendant's ability to obtain
additional financing on acceptable terms, the failure to obtain
required approvals or clearances from government authorities on a
timely basis, uncertainties related to the geology, continuity,
grade and estimates of mineral reserves and resources, and the
potential for variations in grade and recovery rates, uncertain
costs of reclamation activities, tax refunds, hedging transactions,
as well as the risks discussed in Ascendant's most recent Annual
Information Form on file with the Canadian provincial securities
regulatory authorities and available at www.sedar.com.
Should one or more risk, uncertainty,
contingency, or other factor materialize, or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking information.
Accordingly, the reader should not place undue reliance on
forward-looking information. Ascendant does not assume any
obligation to update or revise any forward-looking information
after the date of this news release or to explain any material
difference between subsequent actual events and any forward-looking
information, except as required by applicable law.
Non-IFRS Performance
Measures
The non-IFRS performance measures presented do
not have any standardized meaning prescribed by IFRS and are
therefore unlikely to be directly comparable to similar measures
presented by other issuers.
Non-IFRS reconciliation of adjusted EBITDA
EBITDA is a non-IFRS measure that represents an
indication of the Company’s continuing capacity to generate
earnings from operations before taking into account management’s
financing decisions and costs of consuming capital assets, and
management’s estimate of their useful life. EBITDA comprises
revenue less operating expenses before interest expense (income),
property, plant and equipment amortization and depletion, and
income taxes. Adjusted EBITDA has been included in this document.
Under IFRS, entities must reflect in compensation expense the cost
of share-based payments. In the Company’s circumstances,
share-based payments involve a significant accrual of amounts that
will not be settled in cash but are settled by the issuance of
shares in exchange for cash. EBITDA and Adjusted EBITDA do not have
any standardized meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. EBITDA and Adjusted
EBITDA exclude the impact of cash costs of financing activities and
taxes, and the effects of changes in operating working capital
balances, and therefore are not necessarily indicative of operating
profit or cash flow from operations as determined under IFRS. Other
companies may calculate EBITDA and Adjusted EBITDA differently. As
such, the Company has made an entity specific adjustment to EBITDA
for these expenses. The Company has also made an entity-specific
adjustment to the foreign currency exchange (gain)/loss.
The following table provides a reconciliation of
net income (loss) to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
Q1 |
Q4 |
Q1 |
Adjusted EBITDA |
|
|
March 31, |
December
31, |
March 31, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$000's |
|
5,294 |
|
|
(1,429 |
) |
|
(2,894 |
) |
|
|
|
$000's |
|
|
|
Adjusted for: |
|
$000's |
|
|
|
|
Depletion and depreciation |
|
$000's |
|
884 |
|
|
1,298 |
|
|
654 |
|
|
Interest
income/expense |
|
$000's |
|
37 |
|
|
53 |
|
|
50 |
|
|
Accretion expense on rehabilitation liabilities |
|
$000's |
|
207 |
|
|
(250 |
) |
|
178 |
|
|
Financing charge on termination obligations |
|
$000's |
|
421 |
|
|
803 |
|
|
65 |
|
|
Share-based payments |
|
$000's |
|
352 |
|
|
368 |
|
|
- |
|
|
Foreign
currency exchange gain/loss |
|
$000's |
|
(96 |
) |
|
279 |
|
|
257 |
|
|
Income
taxes |
|
$000's |
|
846 |
|
|
1,158 |
|
|
- |
|
Adjusted EBITDA |
|
$000's |
|
7,945 |
|
|
2,280 |
|
|
(1,690 |
) |
|
|
|
|
|
|
|
Direct operating cost per tonne milled
The Company uses the non-IFRS measure of direct
operating cost per tonne milled to manage and evaluate operating
performance. The Company believes that, in addition to conventional
measures prepared in accordance with IFRS, certain investors use
this information to evaluate the Company’s performance and ability
to generate cash flows. Accordingly, it is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with IFRS. The Company considers cost of sales per tonne milled to
be the most comparable IFRS measure to direct operating cost per
tonne milled and has included calculations of this metric in the
reconciliations within the applicable tables to follow.
Direct operating cost per tonne milled includes
mine direct operating production costs such as mining, processing,
administration, indirect charges such as surface maintenance and
camp expenses, and inventory sales adjustments but does not
include, smelting, refining and freight costs, royalties,
depreciation, depletion, amortization, reclamation, and capital
costs.
Cash operating costs
Cash operating costs is a financial performance
measure with no standard meaning under IFRS. Ascendant reports
total production cash costs on a sales basis. The Company believes
that, in addition to conventional measures prepared in accordance
with IFRS, such as sales, certain investors use this information to
evaluate the Company’s performance and ability to generate
operating earnings and cash flow from its mining operations.
Management uses this metric as an important tool to monitor
operating cost performance.
Total production cash costs include production
costs, such as mining, processing charges divided by ZnEq payable
pounds sold to arrive at total cash operating costs per ZnEq
payable pound sold. The measure also includes other mine related
costs incurred such as variation in inventory. Production costs are
exclusive of depreciation. Other companies may calculate this
measure differently.
The following table provides a reconciliation of direct
operating costs and all-in sustaining costs to cost of sales, as
reported in the Company’s consolidated statement of income (loss)
for the three months ended March 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
Q1 |
Q4 |
Q1 |
Direct operating cost per tonne
milled |
|
|
March 31, |
December
31, |
March 31, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
|
Production expenses
(from consolidated income statement) |
|
$000's |
|
19,624 |
|
|
20,336 |
|
|
9,707 |
|
|
Add: Termination
Liability Payments |
|
$000's |
|
228 |
|
|
14 |
|
|
563 |
|
|
Deduct (Add): Variation
in Finished Inventory |
|
$000's |
|
(4,178 |
) |
|
(2,158 |
) |
|
3,733 |
|
|
Deduct:
Depreciation in production |
|
$000's |
|
(878 |
) |
|
(1,290 |
) |
|
(653 |
) |
Total cash costs (including
royalties) |
|
$000's |
|
14,796 |
|
|
16,902 |
|
|
13,350 |
|
|
Deduct:
Government taxes and royalties |
|
$000's |
|
(1,274 |
) |
|
(1,009 |
) |
|
(381 |
) |
Direct operating costs |
|
$000's |
|
13,522 |
|
|
15,893 |
|
|
12,969 |
|
|
Tonnes Milled |
|
tonnes |
|
186,955 |
|
|
198,354 |
|
|
131,116 |
|
Direct operating cost per tonne
milled |
|
$/tonne |
$72.33 |
|
$80.13 |
|
$98.91 |
|
|
|
|
|
|
|
|
|
|
|
|
Q1 |
Q4 |
Q1 |
AISC per ZnEq payable pound sold |
|
|
March 31, |
December 31, |
March 31, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2017 |
|
|
|
|
|
|
|
|
ZnEq payable pounds sold |
|
000's
lbs |
|
21,543 |
|
|
17,599 |
|
|
7,748 |
|
|
|
|
|
|
|
|
Cash Operating Costs
Reconciliation |
|
|
|
|
|
|
Direct
operating costs |
|
$000's |
|
13,522 |
|
|
15,893 |
|
|
12,969 |
|
|
Add (deduct): Variation in Finished Inventory |
|
$000's |
|
4,178 |
|
|
2,158 |
|
|
(3,733 |
) |
Cash operating costs |
|
|
|
17,700 |
|
|
18,051 |
|
|
9,236 |
|
Cash operating cost per ZnEq payable pound
sold |
|
$/ZnEq lb |
$0.82 |
|
$1.03 |
|
$1.19 |
|
|
|
|
|
|
|
|
All-in Sustaining Costs (AISC)
Reconciliation |
|
|
|
|
|
|
Total
cash operating costs |
|
$000's |
|
17,700 |
|
|
18,051 |
|
|
9,236 |
|
|
Add:
Government taxes and royalties |
|
$000's |
|
1,274 |
|
|
1,009 |
|
|
381 |
|
|
Add: TC
& RCs |
|
$000's |
|
3,720 |
|
|
3,629 |
|
|
1,484 |
|
|
Add:
G&A, excluding depreciation and amortization |
|
$000's |
|
1,718 |
|
|
2,727 |
|
|
567 |
|
|
Add:
Accretion expense on rehabilitation liabilities |
|
$000's |
|
207 |
|
|
(250 |
) |
|
178 |
|
|
Add: Sustaining capital expenditure |
|
$000's |
|
4,185 |
|
|
1,994 |
|
|
1,027 |
|
Total All-in sustaining costs |
|
$000's |
|
28,804 |
|
|
27,160 |
|
|
12,873 |
|
AISC per ZnEq payable pound sold |
|
$/ZnEq lb |
$1.34 |
|
$1.54 |
|
$1.66 |
|
|
|
Additional non-IFRS measures
The Company uses other financial measures, the
presentation of which is not meant to be a substitute for other
subtotals or totals presented in accordance with IFRS, but rather
should be evaluated in conjunction with such IFRS measures. The
following other financial measures are used:
- Operating cash flows before movements in working capital -
excludes the movement from period-to-period in working capital
items including trade and other receivables, prepaid expenses,
deposits, inventories, trade and other payables and the effects of
foreign exchange rates on these items.
The terms described above do not have a
standardized meaning prescribed by IFRS, and therefore the
Company’s definitions are unlikely to be comparable to similar
measures presented by other companies. The Company’s management
believes that their presentation provides useful information to
investors because cash flows generated from operations before
changes in working capital excludes the movement in working capital
items. This, in management’s view, provides useful information of
the Company’s cash flows from operations and are considered to be
meaningful in evaluating the Company’s past financial performance
or its future prospects. The most comparable IFRS measure is cash
flows from operating activities.
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