Ascendant Resources’ Zinc Production Up, Profits Down

Canadian zinc miner Ascendant Resources (TSX:ASND) has revealed the bite of the low value of the base metal in its September quarterly report.

While Ascendant’s flagship El Mochito mine in Honduras yielded a record production of 23.9 million zinc equivalent pounds, posting a 37 percent increase year-on-year, the company recorded a net loss of US$3.85 million.

The company said that low metal prices could not be overcome by improvements in productivity such as higher grades of zinc and a 9 percent increase in ore milled.

President and CEO of Ascendant, Chris Buncic, said that metal prices were “severely under pressure this quarter, the lowest since Ascendant took ownership of the mine.”

Zinc has been hit the hardest of all the base metals during the trade war ructions that have depressed commodities, though with a supply crunch on the way, its value may peak in the near future.

During the quarter, zinc hit a low of US$2,285 a tonne in mid-September, 2018’s low (so far) and as Buncic noted, the lowest zinc price since December 2016 when Ascendant took ownership of El Mochito — though not by much. In December 2016, zinc was valued between US$2,821 and US$2,539 a tonne.

It hit a high of over US$3,600 a tonne in Q1 2018.

The low prices, said Buncic, “impacted our profitability due to lower than anticipated revenues in the quarter and provisional price adjustments on previous shipments.”

He remained optimistic though, saying that the results don’t do work done at the mine justice.

“Despite these difficult external market factors, we continue to strive to unlock the full potential for El Mochito. The preliminary economic assessment that we announced in October is focused on the expansion and optimization of El Mochito and demonstrates our dedication to deliver long-term profitability at the mine.”

As noted, production numbers for El Mochito were at record levels in Q3, with 16.5 million pounds of zinc, 5.5 million pounds of lead and 209,622 ounces of silver mined.

Year-on-year, the numbers were up from 12.1 million pounds of zinc, 4.2 million pounds of lead and 168,181 ounces of silver in Q3 2017.

The report credited an increase in grades with the improvement, coupled with higher mining and throughput rates.

“With El Mochito demonstrating improved grades, the company remains focused on production improvements through ongoing training of supervisors and staff,” said the report.

Looking at the financial numbers, “the company generated revenues of US$13.36 million in the third quarter as a result of the sale of 11.5 million pounds of payable zinc in concentrates, and 5.6 million pounds of payable lead in concentrates. The company reported a net loss of US$3.85 million, or a US$0.05 loss per share, compared to a net income of US$0.82 million or US$0.01 basic and diluted earnings per share in Q3/17.”

On the TSX, the company’s value was down on Thursday (November 8), falling to C$0.61, representing a 10.29 percent fall in value.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.