- Lower metal prices and provisional
pricing adjustments impact net income
(All dollar amounts are in U.S. dollars unless
otherwise specified)
Ascendant Resources Inc. (TSX: ASND) (OTCQX:
ASDRF; FRA: 2D9) ("Ascendant" or the "Company”) reports third
quarter 2018 results highlighted by contained metal production of
23.9 million zinc equivalent1 lbs at an average head grade of 6.7%,
representing the Company’s strongest quarter of operating
performance at the El Mochito mine in Honduras. Earnings for the
quarter were primarily impacted by persistent low metal prices as
the Company generated revenue of $13.36 million and reported a net
loss of $3.85 million or a loss per share of $0.05.
President and CEO Chris Buncic stated: “We are
extremely pleased to announce yet another record operational
quarter with El Mochito continuing to demonstrate its ability to
maintain higher levels of production and improved zinc equivalent
grades. The Company has made substantial progress over the last 22
months reducing costs and increasing production. The continued
improvements implemented with respect to mining methods and
dilution controls are now providing for meaningful contribution and
we expect this to continue over time.”
______________________________________
1 ZnEq lbs and grades in % represents zinc
metal considered together with the lead and silver expressed in
zinc equivalent terms of zinc using spot metal prices and
production during the period.
He continued, “Metal prices continued to be
severely under pressure this quarter, the lowest since Ascendant
took ownership of the mine, which impacted our profitability due to
lower than anticipated revenues in the quarter and provisional
price adjustments on previous shipments. In our view, these results
do not reflect the dramatic operational improvements made to date.
Despite these difficult external market factors, we continue to
strive to unlock the full potential for El Mochito. The Preliminary
Economic Assessment that we announced in October is focused on the
expansion and optimization of El Mochito and demonstrates our
dedication to deliver long-term profitability at the mine.”
Summary of key operational and financial
performance for the third quarter 2018 is provided in the tables
below:
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
Key Operating
Information |
|
|
September
30, |
September
30, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Total Tonnes
Mined |
|
tonnes |
|
193,590 |
|
|
177,631 |
|
|
570,534 |
|
|
459,984 |
|
|
|
|
|
|
|
|
|
Total Tonnes
Milled |
|
tonnes |
|
191,738 |
|
|
176,035 |
|
|
571,121 |
|
|
457,937 |
|
|
|
|
|
|
|
|
|
Average Head
Grades |
|
|
|
|
|
|
|
Average Zn grade |
|
% |
|
4.5 |
% |
|
3.5 |
% |
|
4.3 |
% |
|
3.4 |
% |
|
Average Pb grade |
|
% |
|
1.7 |
% |
|
1.5 |
% |
|
1.6 |
% |
|
1.4 |
% |
|
Average Silver grade |
|
g/t |
|
45 |
|
|
38 |
|
|
46 |
|
|
46 |
|
|
ZnEq Head grade |
(1 |
) |
% |
|
6.7 |
% |
|
5.4 |
% |
|
6.4 |
% |
|
5.5 |
% |
|
|
|
|
|
|
|
|
Average
Recoveries |
|
|
|
|
|
|
|
Zinc |
|
% |
|
87.8 |
% |
|
88.8 |
% |
|
89.2 |
% |
|
89.1 |
% |
|
Lead |
|
% |
|
78.9 |
% |
|
73.7 |
% |
|
77.9 |
% |
|
74.2 |
% |
|
Silver |
|
% |
|
77.8 |
% |
|
78.0 |
% |
|
78.6 |
% |
|
79.4 |
% |
|
|
|
|
|
|
|
|
Contained Metal
Production |
|
|
|
|
|
|
|
Zinc |
|
000's lbs |
|
16,579 |
|
|
12,100 |
|
|
48,223 |
|
|
30,921 |
|
|
Lead |
|
000's lbs |
|
5,552 |
|
|
4,175 |
|
|
15,787 |
|
|
10,349 |
|
|
Silver |
|
ozs |
|
209,622 |
|
|
168,181 |
|
|
654,264 |
|
|
529,467 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
23,919 |
|
|
17,495 |
|
|
68,257 |
|
|
46,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable
Production |
|
|
|
|
|
|
|
Zinc |
0.85 |
|
000's lbs |
|
14,092 |
|
|
10,285 |
|
|
40,990 |
|
|
26,283 |
|
|
Lead |
0.95 |
|
000's lbs |
|
5,274 |
|
|
3,966 |
|
|
14,997 |
|
|
9,832 |
|
|
Silver |
0.7 |
|
ozs |
|
146,735 |
|
|
117,727 |
|
|
457,984 |
|
|
370,627 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
20,331 |
|
|
14,873 |
|
|
58,018 |
|
|
39,564 |
|
|
|
|
|
|
|
|
|
Payable Metal
Sold |
|
|
|
|
|
|
|
Zinc |
|
000's lbs |
|
11,451 |
|
|
10,038 |
|
|
40,791 |
|
|
24,619 |
|
|
Lead |
|
000's lbs |
|
5,581 |
|
|
3,902 |
|
|
17,235 |
|
|
5,884 |
|
|
Silver |
|
ozs |
|
189,010 |
|
|
171,593 |
|
|
539,547 |
|
|
298,361 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
18,563 |
|
|
15,132 |
|
|
60,360 |
|
|
33,126 |
|
|
|
|
|
|
|
|
|
Average Realized Metal
Price |
|
|
|
|
|
|
|
Zinc |
|
$/lb |
$1.13 |
|
$1.43 |
|
$1.36 |
|
$1.25 |
|
|
Lead |
|
$/lb |
$0.92 |
|
$1.06 |
|
$1.03 |
|
$1.01 |
|
|
Silver |
|
$/oz |
$14.46 |
|
$16.91 |
|
$15.72 |
|
$17.81 |
|
|
|
|
|
|
|
|
|
Cash operating cost per
ZnEq payable lb sold |
(2 |
) |
$/ZnEq lb |
$0.72 |
|
$0.85 |
|
$0.77 |
|
$1.07 |
|
AISC per ZnEq payable lb
sold |
(2 |
) |
$/ZnEq lb |
$1.21 |
|
$1.37 |
|
$1.32 |
|
$1.66 |
|
Direct operating cost per
tonne milled (excl. CAPEX) |
(2 |
) |
$/tonne |
$81.66 |
|
$87.86 |
|
$76.91 |
|
$91.72 |
|
(1 |
) |
Assumes average spot metal
prices for the period. |
(2 |
) |
This is a non-IFRS performance
measure, see Non-IFRS Performance Measures section of the
MD&A. |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
Financial |
|
|
September
30, |
September
30, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
Total revenue |
|
$000's |
|
13,359 |
|
|
17,399 |
|
|
64,054 |
|
|
35,265 |
|
|
Mine operating expenses |
|
$000's |
|
14,984 |
|
|
14,340 |
|
|
52,153 |
|
|
38,911 |
|
|
Income (loss) from mining operations |
|
$000's |
|
(1,625 |
) |
|
3,059 |
|
|
11,901 |
|
|
(3,646 |
) |
|
Net income (loss) |
|
$000's |
|
(3,853 |
) |
|
821 |
|
|
6,025 |
|
|
(10,628 |
) |
|
Adjusted EBITDA |
(2 |
) |
$000's |
|
(1,725 |
) |
|
2,424 |
|
|
13,593 |
|
|
(4,781 |
) |
|
Operating cash flow before movements in working capital |
(2 |
) |
$000's |
|
(1,569 |
) |
|
2,087 |
|
|
11,053 |
|
|
(6,422 |
) |
|
Operating cash flow |
|
$000's |
|
(1,366 |
) |
|
(882 |
) |
|
16,546 |
|
|
(12,293 |
) |
|
Cash and cash equivalents |
|
$000's |
|
7,415 |
|
|
6,642 |
|
|
7,415 |
|
|
6,642 |
|
|
Working capital |
|
$000's |
|
757 |
|
|
15,913 |
|
|
757 |
|
|
15,913 |
|
|
Capital Expenditures |
|
$000's |
|
4,205 |
|
|
2,550 |
|
|
18,323 |
|
|
8,368 |
|
(1 |
) |
Assumes average spot metal
prices for the period. |
(2 |
) |
This is a non-IFRS performance
measure, see Non-IFRS Performance Measures section of the
MD&A. |
Third Quarter 2018 Operational
Performance
Restated contained metal production for the
third quarter of 2018 (“Q3/18”) was 16.6 million lbs of zinc
(“Zn”), 5.6 million lbs of lead (“Pb”) and 209 thousand ounces of
silver (“Ag”). Contained zinc equivalent (“ZnEq”) metal production
was 23.9 million lbs using average metal prices for the quarter.
This represents a 37% increase over Q3/17 production of 17.5
million lbs of ZnEq metal and 4% higher than Q2/18 production of
22.9 million lbs of ZnEq metal. This quarter represents a
production record and the seventh quarter of continued strong
operating results at El Mochito by the Company.
Milled throughput for the quarter was 191,738
tonnes, up 9% over 176,035 tonnes milled in Q3/17 and in line with
192,428 milled tonnes in Q2/18. Overall mill recoveries have
remained largely consistent during the last seven months with
limited variance. Zinc mill recovery of 88% was 1% lower than
achieved in Q3/17 and 2% down from 90% in Q2/18 due to higher iron
content found in certain parts of the Esperanza ore body. This was
offset by the lead recovery which was 79%, an increase of 7% and 1%
from Q3/17 and Q2/18 respectively. Silver recovery of 78% was in
line with Q3/17 but 2% lower than Q2/18 and was driven by head
grades.
The milled ZnEq head grade of 6.7% was 24%
higher than the 5.4% achieved in Q3/17 and 6% higher than the 6.3%
ZnEq grade achieved in Q2/18, largely due to improvements made in
planning and operations and by focusing on higher-grade tonnes and
minimizing dilution. Average zinc head grades of 4.5% were 29%
higher than achieved in Q3/17 and 5% higher than the 4.3% achieved
in Q2/18. Lead grades in Q3/18 of 1.7% were 13% higher against the
1.5% achieved in both Q3/17 and Q2/18. However, silver grades in
the quarter were 45 g/t, an increase of 18% from 38 g/t in Q3/17
but down 6% from the 48 g/t average achieved in Q2/18.
El Mochito had strong performance in July and
August with higher mining and throughput rates. September’s
production tonnage performance was impacted by slower drilling and
blasting cycles due to some turnover in supervision and changes to
operating procedures requiring additional training. The impact of
this has since been remedied as production rates gained strong
momentum exiting the month.
With El Mochito demonstrating improved grades,
the Company remains focused on production improvements through
ongoing training of supervisors and staff. The conventional mining
methods implemented early in the year are beginning to provide more
meaningful volumes and will become an important source of
higher-grade ore moving forward. Ore mined from the high-grade
areas of Palmar Dyke and Nueva Este combined with chimney-type ore
from the McKenney, Barbasco and San Juan ore-bodies also positively
contributed to the overall grade for the quarter. The Esperanza
orebody continues to make a significant contribution in the
trackless section of the mine with the Esperanza chimney providing
very good volumes and grades.
Third Quarter 2018 Financial
Performance
The Company reported financial results for the
three months ended September 30, 2018 with 18.6 million zinc
equivalent lbs sold in Q3/18 with a loss from mining operations of
$1.63 million. Average realized metal prices, on a provisional
basis for the quarter were $1.13 per pound of zinc, $0.92 per pound
of lead and $14.46 per ounce of silver.
The Company generated revenues of $13.36 million
in the third quarter as a result of the sale of 11.5 million pounds
of payable zinc in concentrates, and 5.6 million pounds of payable
lead in concentrates. The Company reported a net loss of $3.85
million, or a $0.05 loss per share, compared to a net income of
$0.82 million or $0.01 basic and diluted earnings per share in
Q3/17.
Lower than anticipated total revenues were the
principal cause for the decline in profitability in Q3/18 which was
a direct result of the persistent depressed metals price
environment. Gross revenues for Q3/18 were $17.30 million, however,
provisional price adjustments of $3.94 million during the quarter
lowered overall net revenues as a result of settling final invoices
and repricing outstanding invoices.
Adjusted EBITDA2 totalled negative $1.73
million, following four consecutive quarters of positive adjusted
EBITDA and representing a decrease over third quarter 2017 adjusted
EBITDA of $2.42 million, mainly due to lower net selling prices in
the quarter.
Direct operating costs per tonne milled for
Q3/18 were $81.66, a 7% decrease versus $87.86 in Q3/17 and a 7%
increase against Q2/18 where direct operating costs were $76.61 per
tonne milled. The reductions achieved over Q3/17 are a result of
cost optimization, operational efficiencies and increased
production. During the quarter, underground waste development was
31% lower (47,175 tonnes in Q3 compared to 68,474 tonnes in Q2)
than the prior quarter in an effort to reduce expenditures. Due to
lower waste development, a higher portion of fixed costs were
allocated to direct operating costs instead of being capitalized
resulting in higher direct operating costs versus the previous
quarter of approximately $5 per tonne. In addition, operational
costs were impacted by an increase in the cost of power and
slightly higher conventional mining costs, targeting smaller but
higher-grade ore bodies.
Cash operating cost per zinc equivalent payable
pound sold was $0.72, a decrease of 5% from the previous quarter of
$0.76 per ZnEq lb. The All-In Sustaining Cost (“AISC”) for Q3/18
was $1.21 per zinc equivalent payable pound sold, representing a
significant improvement of 13% over the previous quarter. In the
first quarter of 2018, the Company announced it had 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.
El Mochito Exploration Activities
During the third quarter, the Company continued
the advancement of its 30,000 metre drill program at El Mochito.
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.
______________________________________
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.
In September 2018, the Company announced results
from 24 diamond drill holes or 4,254 metres. The drilling results
were split between step-out (52%) and in-fill (48%) drill holes,
targeting four ore bodies, namely Porvenir, Santa Elena, Port Royal
Manto and Esperanza (see press release issued on September 10,
2018). Results continue to demonstrate high-grade mineralization
above current mining grades and support management’s goal of
identifying long-term Mineral Resource growth. Additional assay
results are expected in the fourth quarter.
Key Highlights (true/apparent widths)
Include:
Step-out DrillingDDH 10956 – 2.6m at
9.5% ZnEq2, 6.0% Zn, 3.4% Pb and 35.2 g/t Ag (Porvenir)DDH
10987 – 7.0m at 6.1% ZnEq, 3.4% Zn, 2.6% Pb and 30
g/t Ag (Porvenir)DDH 10973 – 2.7m at 7.3% ZnEq,
4.1% Zn, 3.1% Pb and 38.3 g/t Ag (Santa Elena)
Infill DrillingDDH 10996 – 7.1m at 14.0%
ZnEq, 7.4% Zn, 6.2% Pb and 86.5 g/t Ag (Esperanza)DDH
10998 – 13.7m at 10.7% ZnEq, 5.7% Zn, 4.6% Pb and
72.0 g/t Ag (Esperanza)DDH 10999 – 4.8m at 16.4%
ZnEq, 8.2% Zn, 6.6% Pb and 166.5 g/t Ag (Esperanza)DDH
11017 – 16.1m at 9.9% ZnEq, 9.4% Zn, 0.1% Pb and
25.9 g/t Ag (Port Royal Manto)
Note: Please refer to the Company’s press
release dated September 10, 2018 for details on the above results.
ZnEq grades in % represents zinc grade together with the lead and
silver grades (zinc equivalent) in terms of zinc using certain
metal price, payable metal, and processing recoveries assumptions:
Metal prices - Zn$1.21/lb, Pb$1.06/lb, Ag$18.00/oz; processing
recoveries - Zn 88.9%, Pb 74.3%, Ag 77.7%.
Additionally, follow-up work on known “chimney”
type ore bodies with historic grades well above current Mineral
Resource grades is underway in the historical upper levels of the
mine, many of which are still in relatively good condition. There
also remains the possibility of including various unmined blocks,
pillars and remnants that could be categorized into Mineral
Resources if they are confirmed accessible and accordingly
sampled.
Lagoa Salgada Exploration
Project
In August 2018, Ascendant announced it entered
into an agreement, effective June 2018, with TH Crestgate GmbH
(“Crestgate”) to acquire an initial 25% interest in its Portuguese
subsidiary Redcorp - Emprendimentos Mineiros, Lda (“Redcorp”),
which holds an 85% interest in the polymetallic Lagoa Salgada
volcanogenic massive sulphide (“VMS”) Project (“Lagoa” or the
“Project”) located in Portugal, as well as an option to earn up to
an 80% interest in Redcorp upon completion of certain milestones.
(see press release issued on August 1, 2018 for transaction
details).
Lagoa Salgada currently has a resource of 5.84
million tonnes of Indicated Mineral Resources at 8.88% ZnEq and
2.01 million tonnes of Inferred Mineral Resources at 7.82% ZnEq in
the LS-1 Deposit and 2.22 million tonnes at 4.8% ZnEq in the LS-1
Central Deposit, prepared in accordance with NI 43-101. The Project
covers 10,700 hectares with 17 gravimetric targets identified, with
only the LS-1 and LS-1 Central zone having been significantly
tested.
The Lagoa Salgada Project is located within the
north-western section of the prolific Iberian Pyrite Belt in
Portugal, approximately 80 km southeast of Lisbon and is accessible
by national highways and roads. The Project is comprised of a
single exploration permit covering an area of approximately 10,700
hectares. The Project represents an early-stage, potentially
high-grade, polymetallic zinc-lead-copper exploration opportunity
in a low risk, established and prolific jurisdiction.
The Iberian Pyrite Belt (IBP) is host to some of
the world’s largest VMS deposits and mines such as Neves-Corvo
(Lundin Mining Corporation), Aguas Tenidas (Trafigura Mining Group)
and Aljustrel (private), and represents the largest concentration
of massive sulphide deposits in the world, forming an arch through
Portugal and Spain about 240 km long and 35 km wide and has
produced more than 300 million tonnes of massive sulfide ore over
the past hundred years.
Ascendant views Lagoa as immediately accretive
to the Company’s ZnEq metal exposure and offers the potential to be
a high-grade, polymetallic zinc-lead-copper exploration opportunity
in a low risk, established and prolific jurisdiction. Ascendant has
embarked upon an exploration program aimed at significantly
accelerating exploration efforts on the project with the
expectation of significantly expanding the known Mineral Resources
at Lagoa.
Lagoa Salgada Exploration
Activities
In the third quarter 2018 Ascendant commenced
its exploration program at the Lagoa Salgada Project. The
exploration program includes 22 diamond drill holes with a total of
7,750 metres divided over three primary areas; the Main Zone, the
Stockwork Zone and the new Central Zone. The drill program is
expected to rapidly expand the known deposits and is targeted to be
completed by the end of the current year.
In addition to drilling, the exploration program
includes downhole geophysics, relogging and assaying of historical
drilling in the area and a complete structural reinterpretation of
the 10,700 hectare property in the context of the overall regional
geology. Given the structural controls seen at similar deposits
within the IPB, the latter will aid in the development of the
exploration program over the entire land package where other
geotechnical anomalies exist.
On October 15, 2018, the Company released
results for the first drill hole, LS_MS_07, at Lagoa Salgada.
Highlights from this hole include:
- LS_MS_07 represents the first step out hole of the new drill
program, approximately 30 metres to the east of the Main Zone
- Intersected 107.93 metres of high-grade mineralization grading
10.25% ZnEq4, approximately 30 metres longer than anticipated by
previous intercepts
- Significant intercepts include:
- 10.7m gossan cap at 1.73g/t Au and 143.08g/t Ag (7.64% ZnEq)
- Includes 5.79m higher grade at 3.19g/t Au and 264.29g/t Ag
(13.43% ZnEq)
- 59.2m massive sulphide zone at 0.33% Cu, 4.49% Pb, 4.89% Zn,
1.09g/t Au and 98.21g/t Ag (13.89% ZnEq)
- Including 13.9m high-grade lead zone at 0.68% Cu, 6.69% Pb,
4.44% Zn, 1.55g/t Au and 150.24g/t Ag (18.25% ZnEq) and
- Second 22.3m high-grade lead zone at 0.21% Cu, 5.73% Pb, 7.43%
Zn, 1.28g/t Au and 101.67g/t Ag (17.73% ZnEq) and
- 16.5m high-grade zinc zone at 0.2% Cu, 6.35% Pb, 8.07% Zn,
1.58g/t Au and 112.20g/t Ag (19.65% ZnEq)
- New zone of high-grade chalcopyrite rich stringer
mineralization of 9.9 metres grading 3.19% Cu or 10.22% ZnEq
intersected at depth post fault zone, supporting view of the fault
displacement of the ore zone
- Including 3.3m grading 8.22% Cu or 24.68% ZnEq.
- Intersection of second massive sulphide zone of 7.6m grading
0.44% Cu, 0.89% Pb, 2.58% Zn, 0.29g/t Au and 44.4g/t Ag (5.72%
ZnEq), demonstrating additional massive sulphide at depth and west
of a known fault
Drilling continues at the Project with
additional results expected in the fourth quarter 2018.
______________________________________
3 Reported intersections represent the
adjusted Apparent Width of the ore body as opposed to intersected
core lengths
4 ZnEq or Zinc Equivalent metal grade in
this document includes copper, lead, gold and silver expressed in
zinc equivalent terms, was calculated as follows: ZnEq. % = ((Zn
Grade*25.35)+(Pb Grade*23.15)+(Cu Grade * 67.24)+(Au
Grade*40.19)+(Ag Grade*0.62))/25.35 using metal prices of
US$1.15/lb Zn, US$1.05/lb Pb, $3.05/lb Cu, US$19.40/oz Ag, and
1,250/oz Au, without applying metallurgical recoveries.
Outlook & Growth
Ascendant is very pleased to have delivered
consistent production growth at El Mochito since acquiring the mine
in December 2016. The Company has been successful at increasing
contained metal production and throughput reaching record levels in
2018 and improving the grade profile through better dilution
controls in the mine. With record metal production levels achieved
in Q3/18, operations had strong momentum entering the fourth
quarter.
The Company has also been successful in reducing
direct operating costs over the course of the year. Direct
operating costs in third quarter 2018 were higher than anticipated
due to an increase in the cost of power and a higher allocation of
fixed costs expensed as direct operating costs instead of being
capitalized due to lower waste development. With improvements
already being realized in the fourth quarter 2018, the Company
expects to be well within 2018 operational guidance for the year.
Due to recent and further anticipated volatility in metal prices,
the Company believes prior guidance as it relates to financial
metrics, which had been based on higher prices for H2 2018, are no
longer reliable.
2018 Operational Guidance:
Guidance |
Contained Metals in
Concentrate |
Zinc equivalent metal4 |
85 – 95 million lbs |
Zinc |
60 – 66 million lbs |
Lead |
18 – 22 million lbs |
Silver |
800,000 – 950,000 ozs |
|
|
Direct Operating Costs |
$70 – $80 / tonne |
Capital Expenditure |
$24 – $27 million |
|
|
4 Figures are based on the
following metal price assumptions for the second half of 2018
$1.20/lb zinc, $0.95/lb lead and $16/oz silver. |
Throughout the third quarter 2018, metal prices
weakened as pressure from global trade tensions intensified. While
it is the Company’s view that fundamentals remain little changed
and continue to strongly support structural supply deficits for the
next few years due to a continued depletion in global inventories
for base metals, the Company also understands it must remain
dedicated to further advancing cost reductions to generate robust
profitability and free cash flow generation in any reasonable
metals price environment. As such, in November 2017, the Company
began working on multiple long-term initiatives aimed at reducing
costs and improving productivity and, in October 2018, announced
the results of a Preliminary Economic Assessment (“PEA”) for the
expansion and optimization of operations at El Mochito. For further
details, please refer to the Company’s press release dated October
22, 2018.
Highlights of the Preliminary Economic
Assessment for the Expansion Project include:
- 27% increase in processed tonnes to 2,800 per day
(approximately 1 million tonnes per annum)
- 26% increased average annual contained ZnEq1 production to 126
million lbs per year
- 22% reduction in average direct operating costs
- 18% reduction in average mine AISC to $0.96/lb payable ZnEq
produced
- $83M project NPV8% incrementally added to El Mochito cash
flow
- 57% project IRR after taxes and royalties
- $32.8 million project capex funded through non-dilutive
financing
- 2-year project construction and commissioning period
The PEA outlines a substantial Internal Rate of
Return (“IRR”) with a payback period of just under two years. The
PEA further presents a robust and compelling opportunity for the
Company to position El Mochito as a long-term profitable operation.
The PEA assumes a mine life of 10 years inclusive of Inferred
Mineral Resources excluding any additional Mineral Resources added
from the current 30,000 metre exploration program. The Expansion
Project mine plan is based upon the Company’s current Mineral
Resource Estimate recently released in a National Instrument 43-101
Technical Report in May 2018.
The PEA is focused on decreasing haulage
distances through the installation of a new 442 metre subvertical
rock-only shaft, which will significantly shorten underground
haulage distances, increase hoisting capacity, ventilation and
trucking capacity, while decreasing the need for additional mining
equipment. The shaft will allow the Company to more easily access
the eastern portion of the mine going forward as the majority of
Mineral Resource growth identified this year extends eastward in
the Santa Elena, Nueva Este, Porvenir, Palmar and Victoria zones.
These zones remain open to the east and with the exploration
success the Company has achieved with its 2018 exploration program,
the expectation is that the mine will continue to grow to the east.
In addition to this, the PEA envisions an upgrade to the
underground pumping and water management system, reducing overhead
costs by changing and reducing the number of pumps, rationalizing
pumping columns and installing an effective water clarification
system to pump clean water. The PEA also includes an upgrade to the
crushing circuit, process plant, and tailings handling capacity to
meet the increased production from the mine. In total, production
nameplate capacity is planned to increase to 2,800 tonnes milled
per day.
The Company is currently in advanced
negotiations with numerous international, local and multilateral
financial institutions to secure non-dilutive financing required
for the Expansion Project. The Company has received considerable
interest from potential financing partners to fund the capital
program. Management is confident it will be able to provide an
update on the status of the financing in the fourth quarter of this
year and anticipates project development will commence in Q1
2019.
The Company is well advanced on its 2018
exploration program at El Mochito. To date, results for 26,679
metres have been released, split between 63% step-out and 27%
in-fill drill holes, which continue to deliver higher-grade
results. The drilling program is aimed at upgrading current mineral
resources as well as extending the operating life of El Mochito.
Additional results from the drilling completed to date are still
expected in Q4/18. The Company is also focusing exploration work on
regional targets on El Mochito’s 10,000-hectare land package. El
Mochito is an example of a high-temperature carbonate replacement
deposit and despite the long history of operations the source of
the deposit has not yet been identified indicating significant
exploration potential and warranting follow up on the numerous
identified targets within the land package.
Conference Call
A conference call will be held tomorrow,
November 8, 2018, at 10:00am EST to discuss third quarter 2018
operational and financial results.
Conference Call Details:Date of
Call: Thursday, November 8, 2018Time of Call: 10:00am ESTConference
ID: 2598904Dial-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 December 9, 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 September 30,
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 flagship 100%-owned producing El Mochito zinc, lead
and silver mine in west-central Honduras, which has been in
production since 1948. After acquiring the mine in December 2016,
Ascendant spent 2017 implementing a rigorous and successful
optimization program restoring the historic potential of El Mochito
delivering record levels of production with profitability restored.
The Company now remains focused on cost reduction and further
operational improvements to drive robust profitability in 2018 and
beyond. Expanding and upgrading El Mochito’s significant Mineral
Reserves and Resources through exploration work for near-mine
growth is an ongoing focus for the Company. With a significant land
package of 11,000 hectares in Honduras and an abundance of
historical data, there are several regional targets providing
longer term exploration upside which could lead to further resource
growth.
Ascendant also holds an interest in the
high-grade polymetallic Lagoa Salgada VMS Project located in the
prolific Iberian Pyrite Belt in Portugal. The Company is engaged in
exploration of the Project with the goal of expanding already
substantial defined Mineral Resources and testing additional known
targets. The Company’s acquisition of its interest in the Lagoa
Salgada Project offers a low-cost entry point to a potentially
significant exploration and development opportunity. The Company
holds an additional option to increase their interest in the
Project upon completion of certain milestones.
Ascendant Resources is engaged in the ongoing
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: 888-723-7413info@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 lower level of confidence
that 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. 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
classification. Likewise, you are cautioned not to assume that all
or any part of a Measured or Indicated Mineral Resource will ever
be upgraded to 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, expansion and
optimization and the ability to finance such programs, exploration
and capital expenditures, the results of exploration campaigns,
robust adjusted EBITDA, expectation of expanding the known Mineral
Resources at Lagoa Salgada, the Company’s guidance, 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,
expansion and optimization activities, the success of the Company’s
exploration activities, exploration and capital expenditures,
maintain robust adjusted EBITDA and free cash flow in 2018, the
ability to expand known Mineral Resources at Lagoa Salgada, the
ability to achieve guidance and undertake various long-term
optimization programs and the ability to obtain the necessary
funding, 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
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 Mineral Resources, and the
potential for variations in grade and recovery rates, uncertain
costs of reclamation activities, tax refunds, hedging transactions,
the inability of the Company to meet its guidance, 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:
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
Adjusted
EBITDA |
|
|
September
30, |
September
30, |
|
|
|
|
2018 |
|
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$000's |
(3,853 |
) |
821 |
|
6,025 |
(10,628 |
) |
|
|
|
|
|
|
|
|
Adjusted for: |
|
|
|
|
|
|
|
Depletion and depreciation |
|
$000's |
1,276 |
|
690 |
|
3,259 |
2,042 |
|
|
Interest income/expense |
|
$000's |
401 |
|
83 |
|
773 |
220 |
|
|
Accretion expense on rehabilitation liabilities |
|
$000's |
233 |
|
317 |
|
643 |
733 |
|
|
Financing charge on termination obligations |
|
$000's |
411 |
|
226 |
|
1,246 |
668 |
|
|
Share-based payments |
|
$000's |
165 |
|
301 |
|
869 |
1,419 |
|
|
Foreign currency exchange gain/loss |
|
$000's |
126 |
|
(14 |
) |
64 |
765 |
|
|
Income taxes |
|
$000's |
(484 |
) |
- |
|
716 |
- |
|
Adjusted
EBITDA |
|
$000's |
(1,725 |
) |
2,424 |
|
13,595 |
(4,781 |
) |
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 September 30, 2018 and 2017:
|
|
|
|
Three Months Ended |
Nine Months Ended |
Direct operating cost per tonne
milled |
|
|
September 30, |
September 30, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
Production expenses
(from consolidated income statement) |
|
$000's |
|
14,984 |
|
|
14,340 |
|
|
52,153 |
|
|
38,911 |
|
|
Add: Termination
Liability Payments |
|
$000's |
|
198 |
|
|
77 |
|
|
676 |
|
|
271 |
|
|
Deduct (Add): Variation
in Finished Inventory |
|
$000's |
|
2,290 |
|
|
2,639 |
|
|
(2,512 |
) |
|
6,628 |
|
|
Deduct:
Depreciation in production |
|
$000's |
|
(1,276 |
) |
|
(676 |
) |
|
(3,259 |
) |
|
(2,028 |
) |
Total cash costs (including
royalties) |
|
$000's |
|
16,196 |
|
|
16,380 |
|
|
47,058 |
|
|
43,782 |
|
|
Deduct:
Government taxes and royalties |
|
$000's |
|
(538 |
) |
|
(912 |
) |
|
(3,135 |
) |
|
(1,779 |
) |
Direct operating costs |
|
$000's |
|
15,658 |
|
|
15,468 |
|
|
43,923 |
|
|
42,003 |
|
|
Tonnes
Milled |
|
tonnes |
|
191,738 |
|
|
176,035 |
|
|
571,121 |
|
|
457,937 |
|
Direct operating cost per tonne
milled |
|
$/tonne |
$81.66 |
|
$87.86 |
|
$76.91 |
|
$91.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Nine Months Ended |
AISC per ZnEq payable pound sold |
|
|
September 30, |
September 30, |
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
ZnEq payable pounds sold |
|
000's
lbs |
|
18,563 |
|
|
15,132 |
|
|
60,360 |
|
|
33,126 |
|
|
|
|
|
|
|
|
|
Cash Operating Costs
Reconciliation |
|
|
|
|
|
|
|
Direct operating
costs |
|
$000's |
|
15,658 |
|
|
15,468 |
|
|
43,922 |
|
|
42,003 |
|
|
Add
(deduct): Variation in Finished Inventory |
|
$000's |
|
(2,290 |
) |
|
(2,639 |
) |
|
2,512 |
|
|
(6,628 |
) |
Cash operating costs |
|
$000's |
|
13,368 |
|
|
12,829 |
|
|
46,434 |
|
|
35,375 |
|
Cash operating cost per ZnEq payable pound
sold |
|
$/ZnEq lb |
$0.72 |
|
$0.85 |
|
$0.77 |
|
$1.07 |
|
|
|
|
|
|
|
|
|
All-in Sustaining Costs (AISC)
Reconciliation |
|
|
|
|
|
|
|
Total cash operating
costs |
|
$000's |
|
13,368 |
|
|
12,829 |
|
|
46,434 |
|
|
35,375 |
|
|
Add: Government taxes
and royalties |
|
$000's |
|
538 |
|
|
912 |
|
|
3,136 |
|
|
1,779 |
|
|
Add: TC & RCs |
|
$000's |
|
3,427 |
|
|
3,128 |
|
|
10,478 |
|
|
6,936 |
|
|
Add: G&A, excluding
depreciation and amortization |
|
$000's |
|
1,262 |
|
|
1,656 |
|
|
4,646 |
|
|
4,675 |
|
|
Add: Accretion expense
on rehabilitation liabilities |
|
$000's |
|
233 |
|
|
317 |
|
|
643 |
|
|
733 |
|
|
Add:
Sustaining capital expenditure |
|
$000's |
|
3,688 |
|
|
1,943 |
|
|
14,118 |
|
|
5,513 |
|
Total All-in sustaining costs |
|
$000's |
|
22,516 |
|
|
20,785 |
|
|
79,455 |
|
|
55,011 |
|
AISC per ZnEq payable pound sold |
|
$/ZnEq lb |
$1.21 |
|
$1.37 |
|
$1.32 |
|
$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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