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Ascendant Resources (TSX:ASND) is a new and emerging zinc producer focused on bringing the El Mochito mine in Honduras back to its historical production rates, and growing shareholder value through higher productivity, lower costs and renewed exploration. The Toronto-based company acquired the El Mochito mine from lead-zinc producer Nyrstar in late December 2016.
The underground lead-zinc-silver mine has been in operation in various forms since 1948, however, due to underinvestment it is not currently running at its nameplate mill capacity of 2,300 tonnes per day (tpd). Through a series of operational efficiencies and enhanced capital investment program, Ascendant Resources plans to boost production to nameplate capacity and beyond while also cutting costs. Further expansion to 3,000 tpd is possible for a modest investment subject to defining sufficient resources.
In April 2017, the company announced a 17% increase in the mine’s daily mill output since it’s acquisition in December 2016: from 1,482 daily milled tonnes (tpd) to in January 2017 to 1,733 tpd in March.
In 2017, a capital expenditure of US$16 million is anticipated. Ascendant plans to decrease costs by increasing operational efficiencies by: improving haulage logistics via additional haul trucks and maximizing ore tonnes per trip; more proactive fleet maintenance; reducing unproductive time through better planning and communications; accelerating underground development; and instilling an improved safety culture.
The management team and board of directors at Ascendant Resources have a proven track record of success in Latin America. Board Chairman Mark Brennan was the former CEO of Sierra Metals, which has two active mines in Mexico and one in Peru. Brennan also served as chief executive of Largo Resources, which has an advanced vanadium project in Brazil. Director Kurt Menchen, the former President of Operations at Largo, has over three decades of experience managing mining projects, including 20 years as General Manager at the Jacobina gold mine in Brazil. Chief Operating Officer Neil Ringdahl is the former COO of Orvana Minerals, which operates the Don Mario gold-silver-copper mine in Bolivia.
Ascendant is one of the few investment opportunities with exposure to primary zinc production.
Zinc prices are pushing higher as supply continues to tighten alongside annual demand growth. Lending further support to prices in the long-term, zinc supply deficits are expected to remain for several more years. Recent mine closures coupled with few large projects on the horizon have analysts calling for a period of structural deficits in the market. Falling mine production could allow the metal rally to continue for many months, reported Investing News Network. The International Lead and Zinc Study group expects a decrease in zinc production by 5.9 percent to 13.20 million tonnes in 2017.
Ascendant Resources is one of the few publicly-traded zinc producers well-positioned to take advantage of this positive price environment.
- Producing asset: The El Mochito mine has been in operation for over 70 years.
- Production expansion: Implementing operational efficiencies to increase mill throughput to 2,200 tpd by early 2018.
- Potential to further expand production by increasing mill capacity to 3,000 tpd with modest capital investment of around $5 million.
- Attractive economics: Initial goal to return the mine to a minimum 90 million pounds per annum ZnEq production, at all-in-sustaining costs (AISC) of $0.82 per zinc-equivalent pound.
- Exploration potential: Plans to increase the mine life from its current 12 years through the drilling of extensions to existing ore zones and targeted numerous historical but underexplored zinc targets.
- 33,200 m drill program underway aiming to convert Inferred to M&I (18,200 m) and explore high-grade chimney targets (15,000 m).
- Healthy treasury: With a recent financing, the company currently has about $16.8 million in its coffers, enough to deliver on its near-term strategy.
- Institutional buy-in: CQS, a London-based natural resources hedge fund, and Vancouver-based Vertex One Asset Management, each own 13.2 percent of the shares; MM Asset Management Inc 10.4 percent; management and directors roughly 17 percent.
- Pipeline potential: Long-term goal is to build on the success of El Mochito to deliver a pipeline of properties for development
Key Project: El Mochito Mine, Honduras
The El Mochito zinc-lead-silver mine in northwest Honduras is near the town of Las Vegas, about 88 kilometers southwest of San Pedro Sula and 220 kilometers from the capital city of Tegucigalpa. The mine has operated almost continuously for the last 70 years, starting in 1948. The underground mine includes a flotation concentrator that produces zinc and lead concentrates, which are trucked daily to Puerto Cortés, just north of San Pedro Sula, for storage and shipment.
Economic mineralization occurs as both manto and chimney style deposits in Lower Cretaceous limestones. The material is mined from eight orebodies – Nacional, Santo Niño, Lower San Juan, Salva Vida, Yojoa, La Leona, Imperial and Canoe – and treated in a central processing plant.
2015 Historical Reserves and Resource Estimate
The latest mineral resource estimate for El Mochito was published by Nyrstar, the mine’s previous owner, in 2015 and is reproduced below.. The most recent NI 43-101 report was filed by Breakwater Resources in 2010. Based upon current mining rates total resources are sufficient for around 12 years of operations.
Ascendant plans to complete a NI 43-101 compliant Reserve and Resource Report for 2017 or 2018.
New Exploration Targets
According to Ascendant Resources, the El Mochito mine has a long history of new ore resources being discovered along prominent mineralized trends, suggesting the current geological model should serve as a guide for finding new resources and expanding the life of mine. In addition to near-the-mine targets, El Mochito also holds six concessions that have not undergone significant exploration.
Ascendant has commenced its 2017 underground exploration program targeted to upgrade and expand the overall resources at its El Mochito mine. Drilling has commenced and Management is currently planning for an exploration program consisting of 33,200 meters of drilling at an anticipated cost of US$3 million by the end of 2017. The program will consist of approximately 18,200 meters of definition drilling, targeted at converting a portion of the Inferred resources into Measured and Indicated resource categories.
An additional 15,000 meters of greenfield exploration is targeted to add new resources with a focus on high-grade chimney material by defining the continuation of known chimneys. The program is planned to focus on seven key areas that have the potential to be brought into the mine plan in the next 3-24 months: Esperanza, Victoria, Santa Elena, Deep North, Deep East, Port Royal and Palmar. Each of these areas have the potential to host new, high-grade resources and have been selected based on the limited development required to access them.
Based on historical work, the El Mochito exploration team estimates there is potential to add another 2 million tonnes of new, higher grade, resources from the short term exploration targets which could quickly move into the mine plan.
2017 Operational Guidance
Chris Buncic – President, CEO and Director
Chris Buncic has held a number of senior management positions, including at James Bay Resources, Delshen Therapeutics Corp. and BreqWater Inc. He has also been an institutional equity research analyst at Mackie Research Capital and Cormark Securities.
Cliff Hale-Sanders – Executive Vice President
Cliff Hale-Sanders is a capital markets veteran, having spent 20 years in the industry working as a base metals and bulk commodities research analyst at RBC Capital Markets, TD Securities, CIBC World Markets and Cormark Securities. He has visited and reviewed numerous mining operations.
Rohan Hazelton – Chief Financial Officer
A CPA with 15 years of mining experience, Rohan Hazelton was Vice President, Strategy for Goldcorp, where he held a number of roles including Vice President Finance, Chief Financial Officer of Mexican Operations and Corporate Controller. He holds two degrees from Harvard University.
Neil Ringdahl – Chief Operating Officer
COO Neil Ringdahl has 23+ years’ experience as a senior mining executive, including COO of Orvana Minerals, a gold and copper producer with mines in Spain and Bolivia, where he oversaw operations and exploration initiatives.
Mark Brennan – Executive Chairman
In 2005 Mark Brennan joined Largo Resources where as President and CEO he facilitated the acquisition of its flagship Maracas vanadium project in Brazil. He helped advance the project through a maiden resource, a definitive feasibility study and successfully completed a $300 million financing in 2012. Brennan is the former President and CEO of Sierra Metals, which has two operating mines in Mexico and one in Peru.
Kurt Menchen – Director
Kurt Menchen has close to 40 years’ operating and managing mining projects, including 20+ years as GM at the Jacobina gold mine in Bahia State, Brazil. There, Menchen successfully operated the project for three companies, including Anglo American and Yamana Gold, through low gold price environments. He was also involved with Anglo American’s Vaal Reefs underground gold mine in South Africa and De Beers Goldfields in Angola.
Stephen Shefsky – Director
Stephen Shefsky has served in management and directorship roles for a number of mining and oil and gas companies, including James Bay Resources and Castle Resources. He was also the founder of Silver Bear Resources and founder/President and CEO of Verena Minerals, now Belo Sun Mining.
Robert Campbell – Director
Robert Campbell has 40+ years’ experience in mining and exploration, particularly in Canada, the United States and Latin America. He is currently the VP, Exploration at Largo Resources.