Ascendant Resources Inc. (TSX: ASND) ("Ascendant"
or the "Company") announced on Friday that it has entered into a
share purchase agreement (the "Agreement") with Kirungu Corporation
("Kirungu"), a Panamanian company, to sell all of the issued and
outstanding shares of the Company's wholly-owned Honduran
subsidiary American Pacific Honduras S.A. de C.V ("AMPAC") which
owns 100% of the producing El Mochito zinc, lead and silver mine
(the "El Mochito mine" or "El Mochito") in west-central Honduras
(the “Transaction”). Neil Ringdahl, who has been Ascendant’s Chief
Operating Officer since March 2017 and is an officer of Kirungu,
will resign from Ascendant effective at the close of the
Transaction in order to continue to oversee and manage the
operations of El Mochito.
Since its acquisition in late 2016, Ascendant
has dedicated significant capital and resources to the operations
at El Mochito. The mine has seen continual growth and record
production quarter over quarter. Irrespective of the strong
operating turnaround, the mine has not met the Company’s
profitability objectives and continues to require additional
financial investment. The sale will substantially reduce or
eliminate the Company’s direct AMPAC expenses, liabilities and
obligations, and provide an immediate strengthening of the
Company’s financial position. This will allow Ascendant to focus on
its highly attractive, high-grade Lagoa Salgada VMS project (the
"Lagoa Salgada project") located on the prolific Iberian Pyrite
Belt in Portugal.
Transaction Overview
Pursuant to the Agreement, Ascendant will
receive cash consideration of US$1.0 million and an additional
US$100,000 in working capital adjustments, as well as a royalty on
zinc sales from the El Mochito mine. Pursuant to the royalty
between the closing date of the Transaction and December 31, 2029,
Ascendant will receive US$0.0125 on every payable pound of zinc
sold by AMPAC at a price greater than US$1.15/lb.
The COVID-19 pandemic and accompanying zinc
commodity price weakness has resulted in significant challenges for
Ascendant to continue funding the operations of El Mochito. In
connection with the purchase of AMPAC, Kirungu will assume all of
Ascendant’s material liabilities with respect to AMPAC, the value
of which is approximately US$20-25 million. Closing is subject to a
number of conditions, including the final approval of the Toronto
Stock Exchange (“TSX”). Post-closing, the parties will seek the
receipt of approval from the Honduran anti-trust authorities.
Rationale for the Transaction and Ascendant
Strategy
Ascendant believes the Transaction brings a
number of key benefits to the Company’s shareholders,
including:
- Improved financial position. The Transaction
will reduce the Company’s operating budget and significantly
improve its financial strength. Ascendant will be able to redirect
resources to focus on the advancement of the highly prospective
Lagoa Salgada project.
- Reduction in valuation discount. Management
believes the Company’s valuation is highly discounted. A focus on
Portugal should allow management to focus on this tremendous
opportunity in a superior jurisdiction for mining.
- Optimization program delays avoided. Progress
on financing of the optimization and expansion program at El
Mochito has continued to advance throughout 2020. Once achieved,
the Company would still be exposed to the current higher-cost
operation until construction can be completed and cost reductions
realized, which is anticipated to be two years from
commencement.
- Retained exposure: The sales royalty will
allow Ascendant to retain upside exposure to El Mochito including
future higher zinc prices and the completion of expansion and
optimization projects that are expected to be undertaken and funded
by the new owners.
Mark Brennan, Executive Chairman of the Company,
commented: “We are very proud of the operational success we have
achieved at El Mochito since Ascendant’s acquisition of the mine in
December 2016. The team has done a superb job of rehabilitating the
mine, providing twelve consecutive quarters of metal production
growth. Unfortunately, the delayed funding of the optimization and
expansion program and the recent impact of the Covid-19 virus on
global metals pricing have worked in opposition to our
profitability objectives. Thus, management along with the Board of
Directors believe the divestiture of the mine is in the best
interest of our shareholders. We are pleased to have reached an
agreement with Kirungu, and to maintain the sales royalty. On
behalf of Ascendant, I would like to thank the team at El Mochito
for their tremendous contributions and wish them continued success
operating the mine.”
Additionally, Chris Buncic, President and CEO of
Ascendant, stated: "Today’s announcement provides immediate relief
to our working capital position. The sale of El Mochito provides a
modest cash injection but most importantly results in a substantial
improvement in the Company’s balance sheet. This also provides
Ascendant with the opportunity to focus on the advancement and
development of our highly prospective Lagoa Salgada project. We
believe Lagoa Salgada will be a great driver of future value and
growth for the Company based on the continued resource growth and
economic potential the project has demonstrated to date. We look
forward to planned exploration work this year at Lagoa Salgada,
seeking to expand the resource base and advance the project towards
feasibility stage.”
Approval Process
Though Mr. Ringdahl will resign from Ascendant
concurrent with the closing of the Transaction, his position as
Chief Operating Officer during key portions of the negotiations led
the Board of Directors of Ascendant to take certain steps to ensure
an independent process. The Board of Directors struck a special
committee of two independent directors, being Mr. Stephen Shefsky
and Ms. Petra Decher (the "Special Committee") to assess, review
and consider the terms of the Transaction and to make
recommendations to the Board.
PricewaterhouseCoopers LLP ("PwC") was engaged
by the Special Committee to prepare a formal valuation report
pursuant to MI61-101 (as defined below) as well as a fairness
opinion (the "Formal Valuation and Fairness Opinion”/the
“Opinions"). The Formal Valuation and Fairness Opinion were
prepared for the sole use of the Special Committee and are subject
to certain limitations and assumptions. The Opinions were prepared
as at December 31, 2019 and updated to March 27, 2020 (the
“Valuation Date”). PwC has opined that the Transaction is fair,
from a financial point of view, to the Ascendant non-offeror
shareholders as at the Valuation Date. The Formal Valuation and
Fairness Opinion are one factor, among others, considered by the
Special Committee in making its recommendation to the Board of the
Company to approve the Transaction.
Terms of the Agreement and Other Required
Approvals
The Transaction will be implemented by way of a
share transfer in accordance with terms of the Agreement. Ascendant
anticipates the Transaction closing on or about April 27, 2020,
subject to the satisfaction of all closing conditions and the
receipt of all required approvals.
On closing, Ascendant will execute assignment
and assumption agreements, transferring certain obligations to
Kirungu. Pursuant to such assignment and assumption agreements,
Kirungu will assume all liabilities and obligations of Ascendant in
connection with AMPAC and its material contracts.
Closing of the Transaction is conditional upon,
among other things:
- the approval of the TSX;
- the entry into of satisfactory documentation giving effect to
the marginal zinc sales royalty and the assignment and assumption
arrangements described above; and
- other customary closing conditions for a transaction of this
nature.
The approval of the TSX noted above is
predicated on the receipt by Ascendant of an exemption from Part V
of the TSX Company Manual that would otherwise require
disinterested shareholder approval for the Transaction by virtue of
the relationship of Ascendant to Kirungu through Mr. Ringdahl and
the value of the AMPAC Shares exceeding 10% of the Company’s market
capitalization.
The Company has obtained a waiver from the TSX
under section 604(e) of the TSX Company Manual from the requirement
to obtain shareholder approval for the Transaction. The Company’s
Board of Directors, who are all free from any interest in the
Transaction, have authorized such application as they determined
that the Company is in financial hardship, the Transaction is
designed to improve the Company’s financial situation, and the
terms of the Transaction are reasonable for the Company in the
circumstances.
Though the Transaction is expected to close on
or about April 27, 2020, completion of the transfer of legal title
to the AMPAC shares to Kirungu is not expected to occur until the
expiry of the period of review of the transaction by antitrust
approvals from the Comisión para la Defensa y Promoción de la
Competencia of Honduras, or the receipt of their earlier formal
approval or waiver. Upon receipt of the antitrust approval, or
expiry of the applicable review period, legal title to the AMPAC
shares will be deemed to have occurred retroactive to the closing
date.
As a consequence of relying on the financial
hardship exemption, the TSX has informed the Company that it will
place the Company under review for continued listing, which is
standard practice when a listed issuer seeks to rely on this
exemption.
Additionally, given that at the time the
Transaction was agreed to, Mr, Ringdahl was an officer of the
Company and an officer of Kirungu, the Transaction may be
considered a “related party transaction” for the purposes of
Multilateral Instrument 61-101 – Protection of Minority Security
Holders in Special Transactions of the Canadian Securities
Administrators (“MI 61-101”). The Company is relying on an
exemption from the minority shareholder approval requirements
available under section 5.7(e) of MI 61-101 as the Company is in
financial hardship, the Transaction is designed to improve the
Company’s financial situation, and the terms of the Transaction are
reasonable for the Company in the circumstances, all of which has
been determined in good faith by the Company’s board and
independent directors.
The Agreement will be available under
Ascendant's profile at www.sedar.com. A material change report in
respect of the Transaction is expected to be filed less than 21
days before the expected closing date, which the Company believes
is reasonable in the circumstances in order to facilitate an
expeditious closing and quicker improvement in the Company’s
balance sheet.
About Ascendant Resources
Inc.
Ascendant is a Toronto-based mining company
focused on its 100%-owned producing El Mochito zinc, lead and
silver mine in Honduras and its high-grade Lagoa Salgada VMS
project located in the prolific Iberian Pyrite Belt in Portugal
After acquiring the El Mochito mine in December
2016, Ascendant spent two years implementing a rigorous and
successful optimization program restoring the historic potential of
El Mochito, a mine in production since 1948. With steady state
production achieved, the Company remains focused on further cost
reduction and operational improvements to drive profitability.
The Company is engaged in exploration and the
advancement of the Lagoa Salgada project with the goal of building
upon the defined Mineral Resources and robust results of the maiden
Preliminary Economic Assessment completed in January 2020 and
advancing the project towards construction. Ascendant holds a
21.25% interest in the Lagoa Salgada project through its 25%
position in Redcorp - Empreendimentos Mineiros, Lda, (“Redcorp”)
and has an earn-in opportunity to increase its interest in the
project to 80%. Mineral & Financial Investments Limited owns
the additional 75% of Redcorp. The remaining 15% of the project is
held by Empresa de Desenvolvimento Mineiro, S.A. (EDM), a
Portuguese Government owned company supporting the strategic
development of the country’s mining sector. The Company’s interest
in the Lagoa Salgada project offers a low-cost entry to a
potentially significant exploration and development opportunity,
already demonstrating its mineable scale.
Ascendant Resources is also engaged in the
ongoing evaluation of producing and development stage mineral
resource opportunities. The Corporation'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
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 its ability
to file its fourth quarter/annual financial statements for the year
ended December 31, 2019, its associated filings and the Company’s
Annual Information Form, and its ability to preserve capital under
the market conditions triggered by the COVID-19 pandemic.
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 file
its fourth quarter/annual financial statements for the year ended
December 31, 2019, its associated filings and the Company’s Annual
Information Form and to preserve capital under the market
conditions triggered by the COVID-19 pandemic.
The risks, uncertainties, contingencies and
other factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking information
may include, but are not limited to, risks generally associated
with the mining industry, such as economic factors (including
future commodity prices, currency fluctuations, energy prices and
general cost escalation), uncertainties related to the development
and operation of Ascendant's projects, dependence on key personnel
and employee and union relations, risks related to political or
social unrest or change, rights and title claims, operational risks
and hazards, including unanticipated environmental, industrial and
geological events and developments and the inability to insure
against all risks, failure of plant, equipment, processes,
transportation and other infrastructure to operate as anticipated,
compliance with government and environmental regulations, including
permitting requirements and anti-bribery legislation, volatile
financial markets that may affect Ascendant's ability to obtain
additional financing on acceptable terms, the failure to obtain
required approvals or clearances from government authorities on a
timely basis, uncertainties related to the geology, continuity,
grade and estimates of mineral reserves and resources, and the
potential for variations in grade and recovery rates, uncertain
costs of reclamation activities, tax refunds, hedging transactions,
as well as the risks discussed in Ascendant's most recent Annual
Information Form on file with the Canadian provincial securities
regulatory authorities and available at www.sedar.com.
Should one or more risk, uncertainty,
contingency, or other factor materialize, or should any factor or
assumption prove incorrect, actual results could vary materially
from those expressed or implied in the forward-looking information.
Accordingly, the reader should not place undue reliance on
forward-looking information. Ascendant does not assume any
obligation to update or revise any forward-looking information
after the date of this news release or to explain any material
difference between subsequent actual events and any forward-looking
information, except as required by applicable law.
Ascendant Resources (TSX:ASND.WT)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Ascendant Resources (TSX:ASND.WT)
Historical Stock Chart
Von Jul 2023 bis Jul 2024