Ascendant
Resources Inc. (TSX: ASND) (OTCQX:
ASDRF; FRA: 2D9) ("Ascendant" or the "Company”) reports first
quarter 2019 results, highlighted by average head grades of 6.7%
zinc equivalent (“ZnEq”) in the first quarter and total contained
metal production of 23.4 million ZnEq pounds; which is already on
track to exceed last year’s production. Operations are well
positioned for further improvement for the balance of 2019 driven
by higher-grades in this year’s mine plan.
President and CEO Chris Buncic stated: “We are
very pleased to have had such a strong start to the year at El
Mochito in terms of production and grade as the mine delivered
higher than anticipated results compared to budget. The benefits of
the new drift to Esperanza has provided for shorter haul distances
to the ore body, from where a large portion of our production is
expected this year, as well it provides significant exploration
upside potential allowing for access to an area of the mine never
accessed before. With this opportunity and our continued success
with dilution control and improved head grades, we are paving the
way for what could be our most successful year yet.”
He continued, “With the silver stream providing
the opportunity to strengthen our balance sheet and metals prices
demonstrating improvement so far in 2019, we remain focused on
long-term profitability driving value creation and growth. The
Company continues to progress project funding for the expansion of
the mine with the expectation to begin construction in the latter
half of the year and is excited with progressing the Lagoa Salgada
exploration program this year.”
A summary of key operational and
financial performance for the first quarter 2019 is provided in the
tables below:
|
|
|
|
Three months ended |
Key Operating Information |
|
|
March 31, |
March 31, |
|
|
|
|
|
2019 |
|
|
2018 |
|
Total Tonnes Mined |
|
tonnes |
|
201,462 |
|
|
187,255 |
|
|
|
|
|
|
|
Total Tonnes Milled |
|
tonnes |
|
192,922 |
|
|
186,955 |
|
|
|
|
|
|
|
Average Head Grades |
|
|
|
|
|
Average Zn grade |
|
% |
|
4.2 |
% |
|
4.2 |
% |
|
Average Pb grade |
|
% |
|
1.8 |
% |
|
1.6 |
% |
|
Average Silver grade |
|
g/t |
|
62 |
|
|
46 |
|
|
ZnEq Head grade |
(1 |
) |
% |
|
6.7 |
% |
|
6.1 |
% |
|
|
|
|
|
|
Average Recoveries |
|
|
|
|
|
Zinc |
|
% |
|
84.2 |
% |
|
89.3 |
% |
|
Lead |
|
% |
|
79.5 |
% |
|
76.7 |
% |
|
Silver |
|
% |
|
79.0 |
% |
|
78.3 |
% |
|
|
|
|
|
|
Contained Metal Production |
|
|
|
|
|
Zinc |
|
000's lbs |
|
15,162 |
|
|
15,301 |
|
|
Lead |
|
000's lbs |
|
5,955 |
|
|
5,125 |
|
|
Silver |
|
ozs |
|
293,287 |
|
|
215,599 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
23,370 |
|
|
21,412 |
|
|
|
|
|
|
|
Payable Production |
|
|
|
|
|
Zinc |
|
|
000's lbs |
|
12,888 |
|
|
13,006 |
|
|
Lead |
|
|
000's lbs |
|
5,657 |
|
|
4,869 |
|
|
Silver |
|
|
ozs |
|
205,301 |
|
|
150,919 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
19,865 |
|
|
18,200 |
|
|
|
|
|
|
|
Payable Metal Sold |
|
|
|
|
|
Zinc |
|
000's lbs |
|
11,776 |
|
|
15,285 |
|
|
Lead |
|
000's lbs |
|
4,890 |
|
|
6,323 |
|
|
Silver |
|
ozs |
|
221,375 |
|
|
169,165 |
|
|
ZnEq |
(1 |
) |
000's lbs |
|
18,241 |
|
|
21,543 |
|
|
|
|
|
|
|
Average Realized Metal Price |
|
|
|
|
|
Zinc |
|
$/lb |
$ |
1.24 |
|
$ |
1.53 |
|
|
Lead |
|
$/lb |
$ |
0.93 |
|
$ |
1.07 |
|
|
Silver |
|
$/oz |
$ |
15.52 |
|
$ |
16.41 |
|
|
|
|
|
|
|
Cash operating cost per ZnEq payable lb sold |
(2 |
) |
$/ZnEq lb |
$ |
0.76 |
|
$ |
0.82 |
|
AISC per ZnEq payable lb sold - El Mochito |
(2 |
) |
$/ZnEq lb |
$ |
1.22 |
|
$ |
1.26 |
|
AISC per ZnEq payable lb sold - Consolidated |
(2 |
) |
$/ZnEq lb |
$ |
1.30 |
|
$ |
1.34 |
|
Direct operating cost per tonne milled (excl.
CAPEX) |
(2 |
) |
$/tonne |
$ |
80.53 |
|
$ |
72.33 |
|
(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 |
Financial |
|
|
March 31, |
March 31, |
|
|
|
|
|
2019 |
|
|
2018 |
|
|
Total revenue |
|
$000's |
|
17,784 |
|
|
28,038 |
|
|
Mine operating expenses |
|
$000's |
|
16,529 |
|
|
19,624 |
|
|
Income (loss) from mining
operations |
|
$000's |
|
1,255 |
|
|
8,414 |
|
|
Net income (loss) |
|
$000's |
|
(2,410 |
) |
|
5,294 |
|
|
Adjusted EBITDA |
(2 |
) |
$000's |
|
1,446 |
|
|
7,945 |
|
|
Operating cash flow before
movements in working capital |
(2 |
) |
$000's |
|
8,041 |
|
|
6,769 |
|
|
Operating cash flow |
|
$000's |
|
8,223 |
|
|
11,418 |
|
|
Cash and cash equivalents |
|
$000's |
|
11,813 |
|
|
13,260 |
|
|
Working capital |
|
$000's |
|
(5,023 |
) |
|
13,658 |
|
|
Capital
Expenditures |
|
$000's |
|
4,020 |
|
|
6,116 |
|
(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. |
|
|
|
|
First Quarter 2019 Operational Performance
During the first quarter 2019, (“Q1/19”)
contained ZnEq metal production was 23.4 million lbs, a 9% increase
over first quarter 2018 (“Q1/18”) production of 21.4 million lbs,
and a slight improvement over fourth quarter 2018 (“Q4/18”)
contained metal production of 23.2 million lbs. This increase is
attributable to higher lead and silver grades realized over the
year as well as the slight increase in throughput over the previous
quarter.
Milled production for Q1/19 was 192,922 tonnes,
representing a 3% increase over Q1/18 of 186,955 tonnes and a 4%
increase over 184,913 tonnes milled in Q4/18, reflecting the
overall shorter haul achieved from mining areas closer to the
crusher as well as the benefits of the newly completed production
ramp which provides for more direct and efficient access from
Esperanza to the underground primary crusher.
The average head grade of 6.7% ZnEq for Q1/19
represents an increase of 10% over a Q1/18 average grade of 6.1%
ZnEq as the Company continues to mine average Resource grades.
While Q1/19 grades were 4% lower than the 7.0% ZnEq average grade
in Q4/18 as a result of mine sequencing, zinc equivalent grade
remained above expectations based on the current mine plan, with
strong improvement expected to be made as the year progresses.
Zinc processing recoveries of 84.2% in Q1/19 was
6% lower than those of Q1/18 due to the continued challenges of
treating metallurgically complex ore at Esperanza. This was offset
by the higher mill throughput and higher lead and silver head
grades, which in turn resulted in a 4% increase in lead and a 1%
increase in silver recovery at 79.5% and 79.0% respectively. Zinc
recoveries were in line with Q4/18, while lead and silver
recoveries were up 2% and 3% respectively as a result of steps made
to improve reagent conditioning for the lead float.
Heading into 2019, the Company anticipated
reduced metal production in the first half of the year, with
stronger performance in the second half of the year driven by
higher grades, solely as a function of mine sequencing. First
quarter results have nevertheless exceeded expectations and the
mine remains well positioned to deliver strong performance in
2019.
First Quarter 2019 Financial
Performance
In Q1/19, the Company generated revenues of
$17.78 million as a result of the sale of 18.2 million pounds of
ZnEq metal, comprised of 11.8 million pounds of payable zinc in
concentrates, 4.9 million pounds of payable lead in concentrates
and 221,375 ounces of payable silver in concentrates. Average
realized metal prices were $1.24 per pound zinc, $0.93 per pound
lead and $15.52 per ounce silver. Revenues in Q1/19 were down 37%
over Q1/18 as a result of lower average metal prices and down 18%
over Q4/18 due to timing of sales as demonstrated in a Q/Q
concentrate inventory increase. Revenues were also negatively
impacted during the quarter due to the finalization of 2019 zinc
concentrate benchmark treatment charges. Given that a portion of
the Q1/19 sales were made under the prior year 2018 benchmark
terms, the impact of increased benchmark treatment charges will be
more fully reflected in Q2/19.
Net loss and basic and diluted loss per share in
Q1/19 were $2.41 million and $0.03 respectively, compared to net
income and basic and diluted earnings per share $5.29 million and
$0.07 in Q1/18, and $3.02 million and $0.04 respectively in Q4/18.
Income from mining operations in Q1/19 was $1.26 million.
Adjusted EBITDA for Q1/19 was $1.45 million,
compared to adjusted EBITDA of $7.95 million in Q1/18 and negative
adjusted EBITDA in Q4/18 of $0.12 million. Operating cash flow for
Q1/19 was $8.22 million, compared to $11.42 million in Q1/18 due to
lower average metal prices and timing of sales. Operating cash flow
for Q1/19 includes $7.50 million inflows due to the silver stream
arrangement.
Direct operating costs per tonne milled for
Q1/19 at El Mochito were $80.53, an 11% increase vs Q1/18 direct
operating costs per tonne milled of $72.33, and a 6% decrease vs
Q4/18 direct operating costs per tonne milled of $85.38. The
increase over Q1/18 is a result of an increase in national power
rates imposed since September 2018 as well as an increase in labour
costs due to a 6% wage increase in compliance with the collective
bargaining agreement the Company has with the unionized workforce
at the mine that took place in October 2018. The Company is
actively evaluating alternatives to reduce power costs over the
long-term. Also contributing to the higher overall operating costs
per tonne throughout 2018 was the increased proportion of
conventional mining required to mine higher-grade chimney ore, and
which instead has the impact of increasing revenues per tonne and
reducing operating cost per payable pound of metal produced. The
cost reduction over the prior quarter can be attributed to this as
well as a decrease in haulage distances in general during the
quarter due to sequencing of mining closer to the crusher.
Additionally, haulage distances from the Esperanza orebody in
particular will now be materially shorter (37%) due to the new
“bypass” access ramp to the crusher being completed in February
2019, providing for shorter and direct access to this area.
Cash operating cost per ZnEq payable pound sold
for Q1/19 was $0.76, representing a decrease of 7% from $0.82 in
Q1/18 and a decrease of 8% from $0.83 in Q4/18. The All-In
Sustaining Cost (”AISC”) for Q1/19 was $1.30 per ZnEq payable pound
sold, representing a 3% decrease from Q1/18 of $1.34 and an
increase of 2% over the previous quarter of $1.28.
El Mochito Exploration &
Expansion
Exploration at El Mochito throughout 2019 will
continue with infill drilling for the goal of upgrading Inferred
Mineral Resources and further extending the mine life and
exploration drilling to explore untested areas with the purpose of
discovering the next large, high-grade chimney.
The new development ramp to Esperanza provides
an attractive exploration opportunity for the Company as it allows
for access to an area of the mine that has never been tested
before. The Company is currently conducting geophysical survey
testing throughout this tunnel looking for anomalies that could
help find the next large, high-grade chimney.
Additional exploration development is
concurrently taking place in the old upper levels of the mine,
which has the potential to increase resource tonnage at very
high-grades, mostly derived from remnant pillars and undeveloped
“chimney” type ore zones. Ascendant has started rehabilitating
these pillars where possible with the expectation of near-term
mining of the areas.
On February 6, 2019, the Company announced the
receipt of a non-binding term sheet for a project loan of $35
million to finance the expansion of the El Mochito mine. The
financing has a proposed 7-year term and covers the total financing
requirements for the expansion program including mine development
expansion, a new underground shaft, underground water pumping
upgrades and mill upgrades. The term sheet is non-binding and bears
no legal obligation by any of the parties until definitive
agreements have been made. The loan is subject to the completion of
due diligence, additional documentation, internal approvals and
certain other conditions.
The Company remains actively engaged in
progressing the project funding for the expansion of El Mochito.
The Preliminary Economic Assessment for the expansion of the mine
demonstrates the Company’s dedication and focus on delivering
long-term profitability and the ability to operate at an average
all-in sustaining cost of $0.97 per ZnEq payable pound, well below
current prices and long-term metal price assumptions.
Lagoa Salgada Project
On February 13, 2019 the Company announced an
updated Mineral Resource Estimate for the Lagoa Salgada project,
demonstrating material growth in both deposits (North Zone (massive
sulphide) and South Zone (stockwork)) doubling the total tonnes of
the previous Mineral Resource Estimate following a modest 7,077
metre, 20-hole drill program conducted in the second half of
2018.
In addition to the drilling, the Company carried
out significant geophysical work on the project with a gravity
survey of the entire land package and Induced Polarization (“IP”)
focused on the LS West region encompassing the known deposits. This
work demonstrated both known zones coincide with an IP
chargeability anomaly with a strike length of 1.6 km currently
delineated by less than 50 holes.
As a result of the success of the 2018 program,
the Company announced and commenced its Phase II exploration
program at the Lagoa Salgada project, just subsequent to the
quarter. The program will include an IP survey, a soil gas survey
over the northern gravity anomaly and 37 diamond drill holes
totaling 15,175 metres. Diamond drilling will consist of both
step-out and infill drilling focused on the two known deposits, the
North and South, located in the LS West region of the property.
Both zones are located within the 1.6 km long IP anomaly,
identified above, suggesting both deposits remain open along strike
and at depth.
The execution and timing of the program will be
monitored based upon ongoing results and overall market conditions.
The initial focus will be to expand tonnage and bring resources
into the Measured & Indicated category at the North Zone.
The updated Mineral Resource Estimate for the
Lagoa Salgada project is set out in the tables below:
Lagoa Salgada Total Mineral Resource
Estimate
|
MineralizedZones |
|
Average Grade |
Category |
Tonnes |
ZnEq |
Cu |
Zn |
Pb |
Sn |
Ag |
Au |
|
kt |
% |
% |
% |
% |
% |
g/t |
g/t |
Measured |
All |
1,761 |
11.02 |
0.38 |
3.09 |
3.19 |
0.15 |
62.41 |
0.84 |
Indicated |
All |
6,082 |
7.61 |
0.50 |
2.09 |
1.84 |
0.09 |
48.61 |
0.40 |
M +
I |
All |
7,843 |
8.38 |
0.47 |
2.31 |
2.15 |
0.10 |
51.71 |
0.50 |
Inferred |
All |
12,823 |
6.37 |
0.36 |
1.68 |
1.63 |
0.04 |
38.62 |
0.61 |
North Deposit Mineral Resource
Estimate
|
|
|
Average Grade |
Category |
Mineralized |
Tonnes |
ZnEq |
Cu |
Zn |
Pb |
Sn |
Ag |
Au |
|
Zones |
kt |
% |
% |
% |
% |
% |
g/t |
g/t |
Measured |
GO |
177 |
11.65 |
0.15 |
0.65 |
4.12 |
0.40 |
54.14 |
1.55 |
MS |
1,584 |
10.95 |
0.40 |
3.36 |
3.09 |
0.12 |
63.33 |
0.76 |
Total |
1,761 |
11.02 |
0.38 |
3.09 |
3.19 |
0.15 |
62.41 |
0.84 |
Indicated |
GO |
451 |
7.86 |
0.13 |
0.52 |
3.07 |
0.30 |
35.10 |
0.67 |
MS |
3,842 |
8.81 |
0.51 |
2.37 |
2.12 |
0.10 |
61.51 |
0.52 |
Total |
4,293 |
8.71 |
0.47 |
2.18 |
2.22 |
0.12 |
58.73 |
0.54 |
M +
I |
GO |
628 |
8.93 |
0.14 |
0.56 |
3.37 |
0.33 |
40.47 |
0.92 |
MS |
5,426 |
9.43 |
0.48 |
2.66 |
2.40 |
0.11 |
62.04 |
0.59 |
Total |
6,054 |
9.38 |
0.44 |
2.44 |
2.50 |
0.13 |
59.80 |
0.63 |
Inferred |
GO |
1,546 |
7.03 |
0.10 |
0.43 |
3.69 |
0.14 |
32.44 |
0.67 |
MS |
5,911 |
7.78 |
0.36 |
2.31 |
1.96 |
0.05 |
57.08 |
0.58 |
SW |
390 |
3.68 |
0.39 |
1.42 |
0.42 |
0.03 |
19.14 |
0.09 |
Total |
7,847 |
7.43 |
0.31 |
1.90 |
2.22 |
0.07 |
50.34 |
0.58 |
Central Deposit Mineral Resource
Estimate
|
|
|
Average Grade |
Category |
Mineralized |
Tonnes |
ZnEq |
Cu |
Zn |
Pb |
Sn |
Ag |
Au |
|
Zone |
kt |
% |
% |
% |
% |
% |
g/t |
g/t |
Inferred |
Total |
1,078 |
5.41 |
0.11 |
0.17 |
0.06 |
0.00 |
12.15 |
2.89 |
South Deposit Mineral Resource
Estimate
|
|
|
Average Grade |
Category |
Mineralized |
Tonnes |
ZnEq |
Cu |
Zn |
Pb |
Sn |
Ag |
Au |
|
Zones |
kt |
% |
% |
% |
% |
% |
g/t |
g/t |
Indicated |
SW2 |
1,789 |
4.99 |
0.58 |
1.88 |
0.95 |
0.00 |
24.33 |
0.07 |
Inferred |
SW2 |
3,899 |
4.50 |
0.52 |
1.65 |
0.89 |
0.00 |
22.36 |
0.06 |
Notes to tables:(1) Mineralized Zones,
GO=Gossan, MS=Massive Sulphide, SW=Stringer, SW2=Stockwork(2)
Cut-off: Zn-Eq ≥ 3.00%(3) Zn-Eq =
[Zn%]+([Cu%]*2.652)+([Pb%]*0.913)+([Au g/t]*1.585)+([Ag
g/t]*0.025)+([Sn%]*7.565)(4) Densities: GO = 3.11, MS = 4.85, SW =
2.91, SW2 = 2.91(5) The Mineral Resource content for Lagoa Salgada
was completed and approved by Charlie Murahwi, M.Sc., P.Geo., Pr.
Sci. Nat., FAusIMM, Senior Geologist, Micon International Ltd.
Additional Corporate
Highlights
On March 28, 2019, the Company announced it had
entered into a silver purchase and sale agreement with Maverix
Metals Inc. (“Maverix”) to support the Company’s working capital
position and provide financial stability in a non-dilutive manner.
Immediately subsequent to the signed agreement, Maverix provided
the upfront payment of $7.5 million dollars to Ascendant for the
right to purchase 22.5% of the life of mine payable silver
production from the company’s El Mochito mine in Honduras effective
January 1, 2019.
In addition to the initial payment, the Company
is entitled to an ongoing payment of 25% of the value of the
corresponding portion of payable silver priced at the lesser of the
average silver price during the preceding month or the price of
silver at the time of delivery. The agreement also includes a
step-down option whereby the stream percentage will be reduced from
22.5% down to 20% upon certain production milestones being met.
Upon the satisfaction of additional conditions,
a mechanism exists to increase the value of the stream with an
additional upfront payment of $7.5 million for the right to
purchase a combined total of 40% of the life of mine payable silver
production from El Mochito under similar commercial terms. In this
case, the stream percentage will be reduced to 30% once Maverix has
purchased a cumulative total of 3,000,000 ounces of silver.
2019 Guidance and Outlook
Ascendant is very pleased to have commenced 2019
with a strong operational first quarter, highlighted by
improvements across the board. Results exceeded Company
expectations as the current mine plan anticipated slightly reduced
metal production in the first half of the year and building towards
a strong second half of the year. Grade was higher than planned for
the quarter with further improvements expected as higher-grades are
expected to be the anticipated driver behind additional production
growth in 2019. Guidance assumes a 10% mean increase in grade from
2018 production levels.
The Company’s 2019 production guidance, as
announced on February 20, 2019, is provided in the table below:
Contained Metals in Concentrate |
Zinc equivalent metal |
90 – 110
million lbs |
Zinc |
65 – 75
million lbs |
Lead |
21 – 26
million lbs |
Silver |
850,000 –
1,200,000 ozs |
Direct Operating Costs |
$70 – $80
/ tonne |
Capital Expenditure |
$15 – $20
million |
Conference Call Details
A conference call will be held tomorrow, May 9,
2019, at 10:00am EDT to discuss first quarter 2019 operational and
financial results.
Dial-in Details:Date of Call:
Thursday, May 9, 2019Time of Call: 10:00am EDTConference ID:
1092554Dial-In Numbers:North American Toll-Free:
1-833-696-8362International: 1-612-979-9908
A recorded playback of the conference call will
be available from May 10, 2019 until June 10, 2019 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, 2019
and 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
The scientific and technical information
contained in this press release has been reviewed and approved by
Robert A. Campbell, M.Sc., P.Geo., Director and Vice President,
Exploration for Ascendant Resources Ltd., whom 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 Resources is a Toronto-based mining
company focused on its 100%-owned producing El Mochito zinc, lead
and silver mine in west-central Honduras and its high-grade
polymetallic Lagoa Salgada VMS Project located in the prolific
Iberian Pyrite Belt in Portugal.
After acquiring the El Mochito mine in December
2016, Ascendant spent 2017 and 2018 implementing a rigorous and
successful optimization program restoring the historic potential of
El Mochito, a mine in production since 1948, to deliver record
levels of production with profitability restored. The Company now
remains focused on further cost reduction and operational
improvements to drive profitability in 2019 and beyond. With a
significant land package of approximately 11,000 hectares in
Honduras and an abundance of historical data, there are several
near-mine and regional targets providing longer term exploration
upside which could lead to further Mineral Resource growth.
Ascendant 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 the
already-substantial Mineral Resource Estimate of over 20 million
tonnes and testing additional known targets as defined by the 2018
exploration program. 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 its 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 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 2019, guidance, 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, the ability to successfully
close its financing initiatives, exploration and capital
expenditures at El Mochito and Lagoa Salgada, robust adjusted
EBITDA and free cash flow generation and the undertaking of various
long-term optimization programs including but not limited to the
expansion program at El Mochito. 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
2019, to achieve guidance, increase contained metal production,
maintain production rates, increase mill feed grades, reduce costs,
make monthly shipments of concentrate, fully fund planned
development, successfully closing on its financing initiatives,
exploration and capital expenditures, maintain robust adjusted
EBITDA and free cash flow and undertake various long-term
optimization programs including but not limited to the expansion
program at El Mochito 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 achieve guidance, 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:
|
|
|
|
Three months ended |
Adjusted EBITDA |
|
|
March 31, |
|
March 31, |
|
|
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
Net
income (loss) |
|
$000's |
(2,410 |
) |
5,294 |
|
|
|
|
|
|
|
Adjusted
for: |
|
|
|
|
|
Advances to joint venture |
|
$000's |
189 |
|
- |
|
|
Depletion and depreciation |
|
$000's |
1,610 |
|
884 |
|
|
Interest income/expense |
|
$000's |
397 |
|
37 |
|
|
Accretion expense on rehabilitation liabilities |
|
$000's |
67 |
|
207 |
|
|
Charge on termination obligations |
|
$000's |
1,119 |
|
421 |
|
|
Share-based payments |
|
$000's |
133 |
|
352 |
|
|
Foreign currency exchange gain/loss |
|
$000's |
70 |
|
(96 |
) |
|
Income taxes |
|
$000's |
271 |
|
846 |
|
Adjusted EBITDA |
|
$000's |
1,446 |
|
7,945 |
|
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 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.
The following table provides a reconciliation of
direct operating costs to cost of sales, as reported in the
Company’s consolidated statement of income (loss) for the year
ended December 31, 2017:
|
|
|
|
Three months ended |
Direct operating cost per tonne milled |
|
|
March 31, |
March 31, |
|
|
|
|
|
2019 |
|
|
2018 |
|
|
Mine operating expenses (from
consolidated income statement) |
|
$000's |
|
16,529 |
|
|
19,624 |
|
|
Add: Termination Liability
Payments |
|
$000's |
|
10 |
|
|
228 |
|
|
Deduct (Add): Variation in
Finished Inventory |
|
$000's |
|
1,589 |
|
|
(4,178 |
) |
|
Deduct:
Depreciation in production |
|
$000's |
|
(1,583 |
) |
|
(878 |
) |
Total cash costs (including royalties) |
|
$000's |
|
16,545 |
|
|
14,796 |
|
|
Deduct:
Government taxes and royalties |
|
$000's |
|
(1,009 |
) |
|
(1,274 |
) |
Direct operating costs |
|
$000's |
|
15,536 |
|
|
13,522 |
|
|
Tonnes
Milled |
|
tonnes |
|
192,922 |
|
|
186,955 |
|
Direct operating cost per tonne milled |
|
$/tonne |
$ |
80.53 |
|
$ |
72.33 |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
AISC
per ZnEq payable pound sold |
|
|
March 31, |
March 31, |
|
|
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
ZnEq payable
pounds sold |
|
000's lbs |
|
18,241 |
|
|
21,543 |
|
|
|
|
|
|
|
Cash
Operating Costs Reconciliation |
|
|
|
|
|
Direct operating costs |
|
$000's |
|
15,536 |
|
|
13,522 |
|
|
Add (deduct): Variation in Finished Inventory |
|
$000's |
|
(1,589 |
) |
|
4,178 |
|
Cash
operating costs |
|
$000's |
|
13,947 |
|
|
17,700 |
|
Cash operating cost per ZnEq payable pound
sold |
|
$/ZnEq lb |
$ |
0.76 |
|
$ |
0.82 |
|
|
|
|
|
|
|
All-in Sustaining Costs (AISC) Reconciliation |
|
|
|
|
|
Total cash operating costs |
|
$000's |
|
13,947 |
|
|
17,700 |
|
|
Add: Government taxes and royalties |
|
$000's |
|
1,009 |
|
|
1,274 |
|
|
Add: TC & RCs |
|
$000's |
|
3,497 |
|
|
3,720 |
|
|
Add: G&A, excluding depreciation and amortization |
|
$000's |
|
1,412 |
|
|
1,718 |
|
|
Add: Accretion expense on rehabilitation liabilities |
|
$000's |
|
67 |
|
|
207 |
|
|
Add: Sustaining capital expenditure |
|
$000's |
|
3,778 |
|
|
4,185 |
|
Total All-in sustaining costs - Consolidated |
|
$000's |
|
23,710 |
|
|
28,804 |
|
|
Deduct: G&A, excluding depreciation and amortization |
|
$000's |
|
(1,412 |
) |
|
(1,718 |
) |
Total All-in sustaining costs - El Mochito |
|
$000's |
|
22,298 |
|
|
27,086 |
|
AISC per ZnEq payable pound sold -
Consolidated |
|
$/ZnEq lb |
$ |
1.30 |
|
$ |
1.34 |
|
AISC per ZnEq payable pound sold - El
Mochito |
|
|
$/ZnEq lb |
$ |
1.22 |
|
$ |
1.26 |
|
|
|
|
|
|
|
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.
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.
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