Europe-focused junior Ascendant Resources Inc (TSE:ASND) is well-positioned to capitalize on higher copper prices, research firm Argus Research wrote as it initiated coverage on the Canadian company.
Ascendant’s main focus is the Lagoa Salgada VMS (Volcanogenic Massive Sulphide) project in the Iberian Pyrite Belt (IBP) in Portugal, which holds amongst the largest concentration of massive sulphide deposits in the world,
Toronto-based Ascendant currently holds a 25% interest in Lagoa Salgada and has the opportunity to increase its interest in the project to 80%.
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Argus did not assign a price target or rating on the stock, which is currently trading around C$0.24.
“In our view, Ascendant Resources is well-positioned to capitalize on an upward trajectory for copper prices, which we attribute to increased demand and declining inventory,” noted Argus in the report.
“Given its superior conductivity, copper demand has expanded for use in producing electric vehicles and other "green economy" initiatives. Inventories of copper recently reached a 15-year low, and pricing is expected to reflect these demand dynamics.”
Analysts cited Lagoa Salgada’s infrastructure as one of the project’s main competitive advantages, noting its location along the IBP is accessible by numerous roads and connected to Portugal’s power sources. The firm also highlighted Ascendant’s use of advanced technology to help expand the resource and move it into the higher-confidence Indicated category.
Ascendant put out a preliminary economic assessment on a small portion of the property that determined a net present value of $106 million and capital expenditures of $160 million for a nine-year mine life. Following publication, the company decided to drill the more copper-rich zones to the south in a bid to expand not only the resource but add years to the mine life. Ascendant hopes to have the new PEA completed by the end of summer 2021.
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Argus wrote that investors are likely discounting the company until it puts out a new PEA, contributing to its fairly modest C$23 million market capitalization.
“We expect the results of the new PEA, which the company anticipates publishing in August 2021, to show more-robust economic benefits as compared with the initial PEA in 2020 (which suggested a solid internal rate of return and positive after-tax net present value, but carrying too much risk compared with its capex requirements and a relatively short mine life),” Argus wrote.
“We expect the new PEA to project a higher after-tax NPV, a higher internal rate of return, lower capex requirements, and a mine life of at least 15 years. Combined with the potential for expansion across the site over time, we expect such results to re-establish Ascendant Resources' valuation and begin to close the gap between its market capitalization and that of its peers.”
Contact Angela at angela@proactiveinvestors.com
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