Ascendant Resources: Turning around a Honduras Zinc-Lead-Silver Mine

T.ASND, Ascendant Resources, zinc, Honduras, Chris Buncic

Ascendant’s (T.ASND) El Mochito zinc-lead-silver mine is located in northwest Honduras and has been in continuous operations for over 70 years. As Ascendant CEO Chris Buncic puts it, “The El Mochito mine is a turnaround story and we are happy to report that the turnaround is near completion.”

“We purchased the El Mochito mine from Nyrstar,  which was actively divesting all its mining assets in order to concentrate on its smelting operations,” said Buncic.

Ascendant paid half a million dollars and signed a 10-year off take agreement with Nyrstar for the mine. What the company inherited, however, was a mine with operation inefficiencies, maintenance issues and a discouraged workforce.

Chris Buncic explains, “The mine had been deprived of capital for years so we knew there were significant operational issues which we viewed as significant opportunities to improve. We did not need to reinvent the wheel, all we needed to do was to get back to ‘Mining 101’, get back to the basics.

“Following the acquisition, we initiated an optimization plan and we’ve done what we said we were going to do,” said Buncic. “Through various operational improvements and strategic investments, we’ve been able to increase the mine’s throughput year-to-date by 65% going from around 1,200 tpd at the beginning of the year up to over 2,000 tpd in September with plans to exit the year around 2,300-2,400 tpd.”

“We’re on the verge of seeing the El Mochito mine turnaround completed and anticipate being free cash flow positive imminently and into 2018.” said Buncic. “Turnaround mode is the first of three steps in the Ascendant plan. “Turnaround and optimize operations, vastly expand on high-grade resources and then expand capacity at the mine, a well thought out strategy that we believe we can deliver on.”

Part of that strategy was to simplify and streamline labour relations at the mine. “We successfully renegotiated the collective agreement in March. We came in and made the agreement more transparent and relatable for the workers, and now they are aligned with our objectives as well. We made the bonuses easy to understand and our workforce has realized our commitment as they continually see us making new investments in equipment and people.” said Buncic.

“Maintenance was also a key concern. The age of the equipment was a big issue,” said Buncic. “To date, we have received and commissioned three new trucks and two loaders and expect an additional truck and scoop for delivery in both November and December. By mid- 2018 we plan to completely replace the ageing mining fleet of ten trucks and six loaders.” ”

The new investment in equipment led to changes in the operations of the mine. Each change was aimed at improving efficiency and bringing safety practices up to date. Many of the changes brought about cost reductions.

While the mining operations were being modernized, Ascendant was also looking to expand the resource.

“Our Director of Exploration is on site and eager to continue the exploration program underway,” said Buncic. “Also, many of the historical holes that have been drilled are still in paper form. We are in the process of digitalizing these results and reviewing them for any economic viability as well as opportunities to bring additional high-grade material into the mine plan.”

Ascendant is continuing its aggressive drill program. In a press release dated October 3, 2017, Chris Buncic, President and CEO of Ascendant commented: “This second set of drill results from our 2017 drill program are well above current mining grades and highlight the incredible potential for additional high-grade zinc mineralization at our El Mochito property. Part of our theory during our acquisition of El Mochito was that lack of exploration over the course of many years past has created a great opportunity to significantly expand the reserves, resources and grade at the mine, and results like these continue to inspire this confidence.”

“Our efforts to increase the head grade to the mill remain supported by the fact that several of the areas under investigation could be brought into production over the next six to twelve months.  In addition, we are excited by the potential of the higher copper grades found, though further work will be required to assess the economic viability of producing a copper concentrate in addition to our existing zinc, lead and silver production.”

With four drills turning it is reasonable to expect that similar results will be coming from Ascendant over the next few months. Improving the head grade will further increase the efficiency and profitability of the mine and mill.

All of which leads Buncic to anticipate that “This should be a free cash flowing project very soon.”

A possibility which, so far, the market has missed. “Our stock is trading at a market cap a third that of our peers,” said Buncic.

While there are, of course, challenges because El Mochito is an old mine, there are also significant opportunities. The price of zinc has been rising steadily. There are more zinc mines going out of production than there are new mines opening. The price of silver, long depressed, is anticipated to at least hold its own or rise in the next twelve months.

Most importantly, management at Ascendant has turned the El Mochito mining and milling operations around in just under a year. This ability to create a plan and execute that plan suggests that the company will be in a position to take full advantage of stronger metal prices while containing and ultimately reducing the operating costs of its mine. The potential for further increased production and an expanded resource means that Ascendant’s share price should catch up with comparable companies very quickly once free cash flow is achieved.

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