Ascendant Resources Inc (TSE:ASND) (OTCMKTS:ASDRF) is sitting on a bankable project in Portugal. The question is how big can it get.
The Toronto-based company is taking an alternate route to most juniors and rebranding itself as a developer instead of a producer.
Up until April 2020, Ascendant operated the El Mochito mine, which produced zinc, lead and silver in Honduras. Leading up to the transaction, the mine had seen continual growth, improving operating metrics, and record production quarter over quarter at the mine, yet it was still missing profitability objectives which would continue without a substantial amount of additional financial investment.
As a consequence of this position and the onset of coronavirus (COVID-19), Ascendant sold the asset for US$1 million and an additional US$100,000 in working capital adjustments, as well as a royalty on zinc sales. It subsequently sold the royalty in October 2020 for US$700,000.
READ: Ascendant Resources seeing strong mineralization across wide intercepts at Lagoa Salgada VMS project in Portugal
What kind of development project warrants the sale of an operating asset? The answer is Lagoa Salgada, a volcanic massive sulphide (VMS) deposit with large copper stockwork resources in the Iberian Pyrite Belt that spans southern Portugal and into Spain. Mined since Roman times, the belt is home to a number of world-class polymetallic mines owned by big names like Lundin Mining, First Quantum, and Trafigura.
Lagoa Salgada itself was once owned by Rio Tinto, but over the years since, its subsequent owners had allowed the project to languish in obscurity. Ascendant, however, saw the potential and struck a deal to acquire a 25% stake in the property, with the option to earn up to 80%. CEO Chris Buncic said the team recognized early on that there had been mistakes made in the geophysics, so they set about reinterpreting the results.
The project, located on the Iberian Pyrite Belt in the country, houses a VMS deposit consisting of three defined zones that contain over 12.8 million tonnes of measured and indicated resources and over 10.3 million tonnes in inferred resources of copper, zinc, lead, silver and gold. In early 2020, Ascendant put out a preliminary economic assessment (PEA) of the project that outlined a profitable operation with an after-tax internal rate of return of 31% and a net present value of US$106 million. This study was prepared at prices lower than current spot prices which would imply more robust economics.
The study, narrow in scope as compared to the overall property size and prospectivity, supports its own small mine. Ascendant is confident, however, that there is much more to be found.
“Lagoa Salgada is a true polymetallic deposit in that it’s evenly spaced – nearly a quarter of the revenues come from zinc, from lead, from silver and gold, with a little bit coming from copper,” Buncic said. “But that’s from the PEA done only on the north zone deposit, also not including the adjacent copper stockwork. Now we’re exploring the South Zone, following up on ore bodies that the geophysical data indicates is there. Ultimately, we believe all of these zones connect and time will tell.”
Bonanza copper grades
The company’s hunch is being confirmed at the drill bit. In early January, Ascendant released results from a seven-hole program at the South Zone that included 25.2 metres (m) grading 2.2% copper equivalent, including 10.5m grading 3.6% copper equivalent. Other intersections revealed 8.4m grading 2.2% copper equivalent and 7.7m grading 2.1% copper equivalent, and 4.2m grading 3.6% copper equivalent. Additional highlights included the bonanza grade intercepts recorded at 1m at 14.2% copper equivalent and 1.4m at 9.9% copper equivalent
Confirmation of high-grade copper across wide intercepts is particularly exciting at a time when the price of the metal is poised to break out. Global investment bank Goldman Sachs recently called for a bull run that could continue well into 2022, and forecasts that the metal is likely to hit US$10,000/tonne for just the second time in history.
Optionality
This gives Lagoa Salgada some incredible optionality. What’s more, last year’s PEA contained metal price assumptions like $1.20/pound zinc, $2.70/lb copper and $1,400/oz gold – far below where commodity prices are currently trading.
“We are have been intersecting copper stockwork material and small intersections massive sulphide material, and we continue to step-out to the south and the east where the geophysics is implying there is a substantial target,” Buncic said, pointing to neighbours on the Iberian Belt that are producing high-grade copper from stockwork economically.
“It wouldn’t surprise me if we’re sitting on something around 70 to 100 million tons, which is around (Lundin’s) Neves Corvo’s amount. We’re sitting in the right area with enough signatures and drill targets to go after that. There’s lots of opportunities to expand on it as we keep drilling. Time and drilling will tell, however.”
Big opportunity
Ascendant is going to keep drilling throughout the current year while working behind the scenes to advance the project through additional geophysics and permitting work. The company also has some work to do in rebranding itself as a developer after the El Mochito sale, which is why its stock is currently trading at around $0.20 on the Toronto Stock Exchange. Despite this, Buncic is confident that the market will soon catch on to Lagoa Salgada’s potential.
“There’s a degree of catch-up here as we go from a producer to an exploration company, a structural change in our shareholder base, but that will go away as we continue delivering exciting copper grades in our drill holes,” Buncic said. “Our job right now is to show everyone how big this project can be.”
Contact Angela at angela@proactiveinvestors.com
Follow her on Twitter @AHarmantas