(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 second
quarter 2018 results with net income of $4.58 million or earnings
per share of $0.06 during the period from its El Mochito mine.
Contained metal production for the quarter was 22.9 million zinc
equivalent1 lbs at an average head grade of 6.3%, representing the
Company’s strongest quarter of production since assuming operation
of the mine. These results also exceeded the previous record set in
Q1/2018 and demonstrate the Company’s continued delivery of
improved efficiency in operations.
President and CEO Chris Buncic stated: “Over the
course of the last eighteen months operating the El Mochito mine,
the Company has delivered on continuous improvements with respect
to mill throughput and grade. This is its sixth consecutive quarter
of metal production increases at El Mochito. The Company’s
commitment to investment in the development of its people and
equipment has resulted in greater efficiencies and better mining
dilution control. Despite a few challenges during the second
quarter, the Company’s ability to respond adeptly, enabled it to
increase both tonnes milled and contained metal production during
the period.
He continued, “Metal prices for zinc, lead and
silver have declined over the course of the last few months,
putting pressure on all producers to achieve targeted financial and
operational objectives. While short-term prices remain under
pressure due to weak market sentiment surrounding lingering global
trade tensions and the potential impact on global demand, we
continue to see the underlying fundamentals as highly supportive
for the zinc market in the medium-term. Fundamentals continue to
indicate significant structural supply deficits for zinc in the
near-term due to global inventory depletion, supporting the
Company’s positive view on prices. Weaker prices in the near- term
are expected to defer new project development needed to bridge the
demand gap. Nevertheless, the Company remains focused on long-term
operational improvements aimed at lowering costs and improving
profitability, to make El Mochito a robust and profitable mine in
any metals price environment.”
____________1 This figure was calculated on a
spot metal price basis.
Summary of key operational and financial
performance for the second quarter 2018 is provided in the tables
below:
|
|
|
|
Three Months Ended |
Six Months Ended |
|
Key Operating Information |
|
|
June 30, |
June 30, |
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
Total Tonnes Mined |
|
tonnes |
|
189,690 |
|
|
151,028 |
|
|
376,944 |
|
|
282,353 |
|
|
|
|
|
|
|
|
|
|
|
Total Tonnes Milled |
|
tonnes |
|
192,428 |
|
|
150,785 |
|
|
379,382 |
|
|
281,902 |
|
|
|
|
|
|
|
|
|
|
|
Average Head Grades |
|
|
|
|
|
|
|
|
Average
Zn grade |
|
% |
|
4.3 |
% |
|
3.4 |
% |
|
4.2 |
% |
|
3.4 |
% |
|
|
Average
Pb grade |
|
% |
|
1.5 |
% |
|
1.3 |
% |
|
1.6 |
% |
|
1.3 |
% |
|
|
Average
Silver grade |
|
g/t |
|
48 |
|
|
49 |
|
|
47 |
|
|
50 |
|
|
|
ZnEq
Head grade |
(1 |
) |
% |
|
6.3 |
% |
|
5.5 |
% |
|
6.2 |
% |
|
5.5 |
% |
|
|
|
|
|
|
|
|
|
|
Average Recoveries |
|
|
|
|
|
|
|
|
Zinc |
|
% |
|
89.7 |
% |
|
88.9 |
% |
|
89.9 |
% |
|
89.3 |
% |
|
|
Lead |
|
% |
|
79.1 |
% |
|
72.3 |
% |
|
77.2 |
% |
|
74.4 |
% |
|
|
Silver |
|
% |
|
79.4 |
% |
|
79.3 |
% |
|
79.0 |
% |
|
79.1 |
% |
|
|
|
|
|
|
|
|
|
|
Contained Metal Production |
|
|
|
|
|
|
|
|
Zinc |
|
000's
lbs |
|
16,343 |
|
|
9,933 |
|
|
31,644 |
|
|
18,821 |
|
|
|
Lead |
|
000's
lbs |
|
5,109 |
|
|
3,216 |
|
|
10,235 |
|
|
6,174 |
|
|
|
Silver |
|
ozs |
|
229,043 |
|
|
188,245 |
|
|
444,642 |
|
|
361,286 |
|
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
22,926 |
|
|
15,377 |
|
|
44,338 |
|
|
29,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable Production |
|
|
|
|
|
|
|
|
Zinc |
|
|
000's
lbs |
|
13,892 |
|
|
8,443 |
|
|
26,898 |
|
|
15,998 |
|
|
|
Lead |
|
|
000's
lbs |
|
4,854 |
|
|
3,056 |
|
|
9,723 |
|
|
5,865 |
|
|
|
Silver |
|
|
ozs |
|
160,330 |
|
|
131,771 |
|
|
311,249 |
|
|
252,900 |
|
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
19,487 |
|
|
13,071 |
|
|
37,687 |
|
|
24,692 |
|
|
|
|
|
|
|
|
|
|
|
Payable Metal Sold |
|
|
|
|
|
|
|
|
Zinc |
|
000's
lbs |
|
14,054 |
|
|
9,890 |
|
|
29,340 |
|
|
14,581 |
|
|
|
Lead |
|
000's
lbs |
|
5,331 |
|
|
- |
|
|
11,654 |
|
|
1,982 |
|
|
|
Silver |
|
ozs |
|
181,372 |
|
|
24,062 |
|
|
350,537 |
|
|
126,768 |
|
|
|
ZnEq |
(1 |
) |
000's
lbs |
|
20,253 |
|
|
10,246 |
|
|
41,796 |
|
|
17,993 |
|
|
|
|
|
|
|
|
|
|
|
Average Realized Metal Price |
|
|
|
|
|
|
|
|
Zinc |
|
$/lb |
$1.35 |
|
$1.25 |
|
$1.44 |
|
$1.25 |
|
|
|
Lead |
|
$/lb |
$1.09 |
|
$0.98 |
|
$1.08 |
|
$1.01 |
|
|
|
Silver |
|
$/oz |
$16.39 |
|
$16.41 |
|
$16.40 |
|
$17.81 |
|
|
|
|
|
|
|
|
|
|
|
Cash operating cost per ZnEq payable lb
sold |
(2 |
) |
$/ZnEq
lb |
$0.76 |
|
$1.30 |
|
$0.79 |
|
$1.25 |
|
|
AISC per ZnEq payable lb sold |
(2 |
) |
$/ZnEq
lb |
$1.39 |
|
$2.08 |
|
$1.36 |
|
$1.90 |
|
|
Direct operating cost per tonne milled (excl.
CAPEX) |
(2 |
) |
$/tonne |
$76.61 |
|
$89.97 |
|
$74.50 |
|
$94.13 |
|
|
(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 |
Six Months Ended |
|
Financial |
|
|
June 30, |
June 30, |
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
Total revenue |
|
$000's |
|
22,657 |
|
|
9,942 |
|
|
50,695 |
|
|
17,866 |
|
|
|
Mine operating
expenses |
|
$000's |
|
17,545 |
|
|
14,864 |
|
|
37,169 |
|
|
24,571 |
|
|
|
Income (loss) from
mining operations |
|
$000's |
|
5,112 |
|
|
(4,922 |
) |
|
13,526 |
|
|
(6,705 |
) |
|
|
Net income (loss) |
|
$000's |
|
4,582 |
|
|
(8,553 |
) |
|
9,876 |
|
|
(11,449 |
) |
|
|
Adjusted EBITDA |
(2 |
) |
$000's |
|
7,379 |
|
|
(5,514 |
) |
|
15,318 |
|
|
(7,205 |
) |
|
|
Operating cash flow
before movements in working capital |
(2 |
) |
$000's |
|
5,853 |
|
|
(5,959 |
) |
|
12,622 |
|
|
(8,510 |
) |
|
|
Operating cash
flow |
|
$000's |
|
6,494 |
|
|
(3,076 |
) |
|
17,913 |
|
|
(11,412 |
) |
|
|
Cash and cash
equivalents |
|
$000's |
|
11,322 |
|
|
9,702 |
|
|
11,322 |
|
|
9,702 |
|
|
|
Working capital |
|
$000's |
|
8,961 |
|
|
16,874 |
|
|
8,961 |
|
|
16,874 |
|
|
|
Capital
Expenditures |
|
$000's |
|
8,002 |
|
|
4,212 |
|
|
14,118 |
|
|
5,818 |
|
|
(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. |
|
|
|
|
|
|
|
|
|
|
Second Quarter 2018 Operational
Performance
Contained metal production for the second
quarter 2018 (“Q2/18”) was 16.3 million lbs of zinc (“Zn”), 5.1
million lbs of lead (“Pb”) and 229,043 ounces of silver (“Ag”).
Zinc equivalent (“ZnEq”) metal production was 22.9 million lbs
using average realized metal prices for the quarter. This
represents a 49% increase over second quarter 2017 (“Q2/17”)
production of 15.4 million ZnEq lbs, a 7% increase over the first
quarter 2018 (“Q1/18”) of 21.4 million ZnEq lbs, and the sixth
consecutive quarter of metal production growth.
Milled production for the second quarter 2018
was 192,428 tonnes, representing a 28% increase against Q2/17 and a
3% increase against Q1/18. June’s performance was mildly impacted
by four days of lost production caused by issues experienced with
the shaft loading pocket, a failure of a main bearing on the
primary screen in the plant, which both have been remedied, and
inclement weather which resulted in short interruptions to power to
the mine. Throughput rates and grades continue to improve quarter
over quarter as the Company sees the benefits of the new truck
fleet and remains focused on mining dilution control.
During Q2/18, recoveries averaged 89.7% for
zinc, 79.1% for lead and 79.4% for silver which have been
relatively stable over the six quarters the Company has owned and
operated the mine. Average head grades were 4.3% zinc, 1.5% lead
and 48 grams per tonne silver. Zinc equivalent head grade was 6.3%
using average metal pricing for the period, a 15% increase over
Q2/17 and a 3% increase over Q1/18. Contributions from the
high-grade Imperial, Barbasco, Port Royal and San Juan “chimney”
ore-bodies had a positive impact on grade for the quarter combined
with better mining dilution controls in the mantos areas.
Second Quarter 2018 Financial
Performance
The Company reports financial results for the
three months ended June 30, 2018 with 20.3 million zinc equivalent
lbs sold in Q2/18 with income from mining operations of $5.11
million. Average realized metal prices, on a provisional basis, for
the quarter were $1.35 per pound of zinc, $1.09 per pound of lead
and $16.39 per ounce of silver.
Second Quarter 2018 Financial Highlights:
- Net concentrate sales revenue of $22.66 million
- Net income of $4.58 million and earnings per share of
$0.06
- Adjusted EBITDA2 of $7.38 million
- Operating cash flow before changes in working capital of $5.85
million
- Contained metal production of 22.9 million ZnEq lbs, and
quarterly milled tonnes of 192,428
- Direct operating cost of $76.61/t and Cash Operating Costs of
$0.76/ZnEq lb
- Quarterly payable zinc equivalent production increased 7% to
19.5 million lbs from Q1/18 with payable zinc, lead and silver
production of 13.9 million lbs, 4.9 million lbs and 160,330 ozs
produced respectively
The Company reported net income of $4.58
million, or $0.06 earnings per share, in the second quarter 2018.
Adjusted EBITDA totalled $7.38 million, representing four
consecutive quarters of positive adjusted EBITDA. This is a
significant increase over second quarter 2017 adjusted EBITDA of
negative $5.51 million and a slight decrease over first quarter
2018 of $7.95 million due to lower net selling prices realized in
the quarter. The Company’s cash balance was US$11.3 million at June
30, 2018.
Direct operating costs per tonne milled for
Q2/18 were $76.61, a 15% decrease versus $89.97 in Q2/17, a 6%
increase against Q1/18 where the direct operating cost was $72.33
per tonne milled, but with an overall decrease of 3% year to date.
These reductions are a result of cost optimization, operational
efficiencies, and increased production achieved, however the cost
increase against the first quarter was due to a 6% increase in the
cost of power and slightly higher conventional mining costs which
target smaller, higher grade ore bodies. Cost reduction on a
per-pound payable metal produced basis is an ongoing focus for the
Company. There are additional initiatives in place, aimed at
further improving the Company’s cost structure.
Cash operating cost per zinc equivalent payable
pound sold was $0.76 and All-In Sustaining Cost (“AISC”) was $1.39
per zinc equivalent payable pound sold for the first quarter.
Capital expenditures are expected to decline in the second half of
the year as payments for the new fleet are almost complete as well
as reduced spending on the tailings dam raise that was completed in
the first half of 2018. Last quarter the Company announced it
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.
Updated Mineral Resources and Mineral
Reserves Declared in Q2/18
The Company filed an updated NI 43-101 Mineral Resource and
Mineral Reserve Estimate and Technical Report for the El Mochito
Mine in the second quarter (see press releases on May 28, 2018),
highlighting the following:
Proven & Probable Mineral Reserves increase
life of mine beyond seven years (at a rate of 820kt/yr):
Contained zinc increased 193% from 204 M lbs to 597 M
lbs Contained lead increased 109% from 100
M lbs to 209 M lbs Contained silver
increased 106% from 3.5 M oz to 7.2 M oz
Measured & Indicated Mineral Resources
increase 50% to 869 M lbs contained zinc
from 578 M lbs, and 28% to 1,216 M lbs
contained zinc equivalent metal, up from 953 M lbs
Inferred Mineral Resources also increase by 14%
to 739M lbs contained zinc equivalent metal, up from 648 M lbs.
____________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.
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 |
785 |
4.7 |
2.1 |
54 |
7.2 |
81 |
35 |
1.4 |
124 |
|
Probable Reserves |
4,946 |
4.7 |
1.6 |
36 |
6.6 |
516 |
174 |
5.8 |
717 |
|
Proven & Probable Reserves |
5,731 |
4.7 |
1.7 |
39 |
6.7 |
597 |
209 |
7.2 |
841 |
|
Notes: |
|
|
|
|
|
|
|
|
|
|
(1) |
Metal price assumptions used were US$1.21/lb Zn,
US$1.06/lb Pb and US$18/oz Ag |
|
(2) |
Zinc equivalent metal grade (ZnEq %) was calculated as
follows Zn% +(Pb % x 0.8175) +(Ag g/t x 0.0149) = ZnEq% and is
based on 88.9% Zn, 74.3% Pb and 77.7% Ag metallurgical
recoveries. |
|
(3) |
A cut-off value of 4.76% ZnEq was used to estimate the
Mineral Reserve which considered metal price assumptions, metal
recoveries, refining charges, concentrate mass pulls, operating
costs, royalties, concentrate treatment charges, payables,
penalties and transportation/selling costs. |
|
(4) |
Mineral Resources are stated inclusive of Mineral
Reserves, tonnages, grades and contained metal values have been
rounded, totals may vary due to rounding. |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Technical Report was 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 and
was filed on SEDAR.
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 = 1.3%,
External Dilution = 14.3% and Mine Extraction = 90.9%.
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 Mineral 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). Mineral Resource categorization was applied using discrete
solid models developed from contributing drill hole and assay
composite parameters.
Exploration Activities
During the second quarter, the Company continued
the advancement of its 40,000 metre 2018 drill program underground
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.
In June 2018, the Company announced results from
40 diamond drill holes or 12,015 metres. The drilling results were
split between step-out (66%) and in-fill (34%) drill holes,
targeting four ore bodies, namely Porvenir, Santa Elena, Port Royal
Manto and Esperanza. (see press release issued on June 14, 2018)
Results continue to demonstrate high-grade mineralization above
current mining grades and support managements goal of identifying
long-term Mineral Resource growth. As of the end of July 20,495
meters of the program had been completed with the next set of
results expected during Q3.
Additionally, the Company is reviewing and
prioritizing near-mine targets within the existing concessions
including the anomalies named Manzanal, Soledad, Caliche and
Nispero. Management has also identified a number of high-grade
targets, which have not been properly explored at the El Mochito
mine itself. Follow-up work on known “chimney” type ore bodies with
historic grades well above current Mineral Reserve and Mineral
Resource grade is underway in the historical upper levels of the
mine, many of which is 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 June 2018, Ascendant entered into an
agreement 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 expose and offers the potential to be
potentially high-grade, polymetallic zinc-lead-copper exploration
opportunity in a low risk, established and prolific jurisdiction.
Ascendant is finalizing an exploration program aimed at
significantly accelerating exploration efforts on the project with
the expectation of significantly expanding the known Mineral
Resources at Lagoa.
Outlook & Growth
The rapid decline in prices for zinc, lead and silver during the
past few months has placed immense pressure on all producers,
including Ascendant, to achieve targeted objectives for the current
year. As such, the Company has revised its expected operational and
financial objectives for the balance of the year. Please see
Revised 2018 Operational Guidance section below.
In conjunction with the completion of the NI
43-101 Technical Report for El Mochito, outlining a mine life of
more than seven years as described above, Ascendant has engaged
third party technical and engineering firms to assist with the
further review of the El Mochito mine.
The focus of the analysis has been on increasing
production and sustainably lowering operating and capital costs
primarily through strategic improvements to the underground
infrastructure, plant upgrades and water & tailings management
systems. Management is confident that the optimization plans have
the potential to deliver strong EBITDA and robust free cash flow at
consensus long-term metal prices.
Revised 2018 Operational
Guidance
Management is very pleased to have recorded six
consecutive quarters of production growth at El Mochito while
continuing to reduce costs dramatically over the same period.
Following completion of the NI 43-101 Mineral Reserves and Mineral
Resources Report and the associated mine plan in May 2018, the
Company has been focused on strategically increasing development
rates in the mine to accelerate access into higher-grade portions
of the mine. This is expected to increase the average feed grade to
the mill for the coming years.
The accelerated development program has
increased our operational capital expenditure requirements for the
2018 fiscal year. Direct operating costs remain unchanged at this
time as the Company has been successful at decreasing unit costs
year to date with further improvements expected through the
remainder of the year.
Commodity price weakness has also impacted the
Company’s financial objectives which have been revised as a
consequence as well.
Please see our revised Guidance for 2018 in the
chart below:
Guidance |
Previous1 |
Revised2 |
Contained Metals in Concentrate |
|
Zinc
equivalent metal |
93 –
109 million lbs |
85 –
95 million lbs |
Zinc |
65 –
73 million lbs |
60 –
66 million lbs |
Lead |
24 –
28 million lbs |
18 –
22 million lbs |
Silver |
900,000 – 1,200,000 ozs |
800,000 – 950,000 ozs |
|
|
|
Direct
Operating Costs |
$70 –
$80 / tonne |
$70 –
$80 / tonne |
Capital
Expenditure |
$16 –
$18 million |
$24 –
$27 million |
|
|
|
Financial
Metrics |
|
|
Adjusted EBITDA |
$32 –
$40 million |
$23 –
$28 million |
Free Cash Flow |
$14 –
$20 million |
$2 –
$5 million |
1 Previous figures are based on the following
metal price assumptions for full year 2018; $1.50/lb zinc, $1.10/lb
lead and $18/oz silver.2 Revised 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.
Management is optimistic that the current
depressed pricing for zinc is unlikely to be sustained, however we
are providing our revised guidance using spot pricing of $1.20/lb
Zn, $0.95/lb Pb and $16/oz Ag. A $0.10/lb improvement in zinc
pricing would add over $3 million to EBITDA and Free Cash Flow for
the balance of the year.
Management expects to exit the year with a
strong cash position of approximately $10-12 million following all
expenditures on programs at El Mochito and Lagoa Salgada.
Conference Call
A conference call will be held tomorrow, August
9, 2018, at 10:00am EDT to discuss second quarter 2018 operational
and financial results.
Conference Call Details:Date of
Call: Thursday, August 9, 2018Time of Call: 10:00am EDTConference
ID: 3172066Dial-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 September 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 June 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 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 Mineral
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 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, exploration and
capital expenditures, 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, 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 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 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 |
Six Months Ended |
|
Adjusted EBITDA |
|
|
June 30, |
June 30, |
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$000's |
|
4,582 |
|
|
(8,553 |
) |
|
9,876 |
|
|
(11,449 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted for: |
|
|
|
|
|
|
|
|
Depletion and depreciation |
|
$000's |
|
1,105 |
|
|
699 |
|
|
1,983 |
|
|
1,352 |
|
|
|
Interest
income/expense |
|
$000's |
|
335 |
|
|
87 |
|
|
372 |
|
|
137 |
|
|
|
Accretion expense on rehabilitation liabilities |
|
$000's |
|
203 |
|
|
237 |
|
|
410 |
|
|
416 |
|
|
|
Financing charge on termination obligations |
|
$000's |
|
414 |
|
|
377 |
|
|
835 |
|
|
442 |
|
|
|
Share-based payments |
|
$000's |
|
352 |
|
|
1,117 |
|
|
704 |
|
|
1,118 |
|
|
|
Foreign
currency exchange gain/loss |
|
$000's |
|
34 |
|
|
522 |
|
|
(62 |
) |
|
779 |
|
|
|
Income
taxes |
|
$000's |
|
354 |
|
|
- |
|
|
1,200 |
|
|
- |
|
|
Adjusted EBITDA |
|
$000's |
|
7,379 |
|
|
(5,514 |
) |
|
15,318 |
|
|
(7,205 |
) |
|
|
|
|
|
|
|
|
|
|
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 June 30, 2018 and 2017:
|
|
|
|
Three Months Ended |
Six Months Ended |
|
Direct operating cost per tonne
milled |
|
|
June 30, |
June 30, |
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
Production expenses
(from consolidated income statement) |
|
$000's |
|
17,545 |
|
|
14,864 |
|
|
37,169 |
|
|
24,571 |
|
|
|
Add: Termination
Liability Payments |
|
$000's |
|
250 |
|
|
(369 |
) |
|
478 |
|
|
194 |
|
|
|
Deduct (Add): Variation
in Finished Inventory |
|
$000's |
|
(624 |
) |
|
256 |
|
|
(4,802 |
) |
|
3,989 |
|
|
|
Deduct:
Depreciation in production |
|
$000's |
|
(1,105 |
) |
|
(699 |
) |
|
(1,983 |
) |
|
(1,352 |
) |
|
Total cash costs (including
royalties) |
|
$000's |
|
16,066 |
|
|
14,052 |
|
|
30,862 |
|
|
27,402 |
|
|
|
Deduct:
Government taxes and royalties |
|
$000's |
|
(1,324 |
) |
|
(486 |
) |
|
(2,598 |
) |
|
(867 |
) |
|
Direct operating costs |
|
$000's |
|
14,742 |
|
|
13,566 |
|
|
28,264 |
|
|
26,535 |
|
|
|
Tonnes Milled |
|
tonnes |
|
192,428 |
|
|
150,785 |
|
|
379,382 |
|
|
281,902 |
|
|
Direct operating cost per tonne
milled |
|
$/tonne |
$76.61 |
|
$89.97 |
|
$74.50 |
|
$94.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Six Months Ended |
|
AISC per ZnEq payable pound sold |
|
|
June 30, |
June 30, |
|
|
|
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
ZnEq payable pounds sold |
|
000's
lbs |
|
20,253 |
|
|
10,246 |
|
|
41,796 |
|
|
17,993 |
|
|
|
|
|
|
|
|
|
|
|
Cash Operating Costs
Reconciliation |
|
|
|
|
|
|
|
|
Direct
operating costs |
|
$000's |
|
14,742 |
|
|
13,566 |
|
|
28,264 |
|
|
26,535 |
|
|
|
Add (deduct): Variation in Finished Inventory |
|
$000's |
|
624 |
|
|
(256 |
) |
|
4,802 |
|
|
(3,989 |
) |
|
Cash operating costs |
|
|
|
15,366 |
|
|
13,310 |
|
|
33,066 |
|
|
22,546 |
|
|
Cash operating cost per ZnEq payable pound
sold |
|
$/ZnEq lb |
$0.76 |
|
$1.30 |
|
$0.79 |
|
$1.25 |
|
|
|
|
|
|
|
|
|
|
|
All-in Sustaining Costs (AISC)
Reconciliation |
|
|
|
|
|
|
|
|
Total
cash operating costs |
|
$000's |
|
15,366 |
|
|
13,310 |
|
|
33,066 |
|
|
22,546 |
|
|
|
Add:
Government taxes and royalties |
|
$000's |
|
1,324 |
|
|
486 |
|
|
2,598 |
|
|
867 |
|
|
|
Add: TC
& RCs |
|
$000's |
|
3,331 |
|
|
2,324 |
|
|
7,051 |
|
|
3,808 |
|
|
|
Add:
G&A, excluding depreciation and amortization |
|
$000's |
|
1,672 |
|
|
2,452 |
|
|
3,384 |
|
|
3,019 |
|
|
|
Add:
Accretion expense on rehabilitation liabilities |
|
$000's |
|
203 |
|
|
237 |
|
|
410 |
|
|
416 |
|
|
|
Add: Sustaining capital expenditure |
|
$000's |
|
6,245 |
|
|
2,543 |
|
|
10,430 |
|
|
3,570 |
|
|
Total All-in sustaining costs |
|
$000's |
|
28,141 |
|
|
21,352 |
|
|
56,939 |
|
|
34,226 |
|
|
AISC per ZnEq payable pound sold |
|
$/ZnEq lb |
$1.39 |
|
$2.08 |
|
$1.36 |
|
$1.90 |
|
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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.
Ascendant Resources (TSX:ASND.WT)
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Von Jul 2024 bis Jul 2024
Ascendant Resources (TSX:ASND.WT)
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Von Jul 2023 bis Jul 2024