Ascendant Resources Inc. (ASND) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us today for the Ascendant investor call. With me today, I have Ascendant CEO, Executive Chairman and Founder, Mark Brennan; and along with that, we have newly appointed President, Joao Barros. They have an exciting presentation for you today. And with that, I will pass the mic to Mark, and we'll take it from here.

Good morning, good afternoon, ladies and gentlemen. Thank you very much for joining us for this call on Ascendant Resources. We just wanted to provide people with an update in the activities of the company and the new developments of the company following some recent changes that have taken place -- could you hear me or not?

Sorry, Mike, you were on mute. You're okay now.

Okay. Good morning, good afternoon, ladies and gentlemen. Thank you very much for joining us for this Ascendant Resources call. This will be a call to provide an update on the developments and, in particular, the Lagoa Salgada projects as well as developments within Ascendant Resources themselves. On that note, I'd like to -- and I'm proud to introduce Joao Barros. Joao Barros is the newly announced President of Ascendant Resources. And Joao has been integral to the Lagoa Salgada evolution since the early days in 2008. In 2016, he took on a formal role with regard to developing and exploring on the project prior to Ascendant's arrival. Since our arrival in 2018, Joao has had an instrumental impact and influence on guiding Ascendant as to the direction at Lagoa Salgada. Joao is an engineer with a second specialty in geology. Joao has comes from an esteemed mining family in Portugal. His father is a professor and runs an environmental and permitting group. His brother runs the largest drilling company in Portugal. So he's been brought up on the Iberian Pyrite Belt amongst other areas of Portugal and knows this area and the people there very, very well. Joao has -- his expertise spans greenfield and near-mine exploration, resource delineation, feasibility studies, due diligence investigations, mine development and operations. And Joao has been leading the charge in terms of the drilling operations. And as you can see, subsequent to our PEA that we hope to announce by the end of July, Joao will be moving us in this project into development. Joao has experience bringing projects into development in Portugal and was attributed for bringing Savannah Resources into Portugal, and what is now the largest lithium project in Western Europe. So Joao, a very hearty welcome, and thank you for joining the Ascendant Resources team.

Thank you, Mark. It's my pleasure and my honor.

Thank you. The -- so I'm going to run through the presentation. Here, we have the standard forward-looking statements. Basically, I'm going to provide you a perspective of exactly what -- how Ascendant and management of Ascendant are viewing the potential future for Lagoa Salgada and Ascendant itself. Basically, looking at Lagoa Salgada. Lagoa Salgada sits at the very northern edge of the Iberian Pyrite Belt. One of the distinctive features, which is very different from other projects, this project is buried under about 130 meters of tertiary cover. That is why we haven't seen this project exploited or developed earlier. Most of these other projects were discovered at surface and then largely have gone underground. But just to give you a summary, our view here, our management thesis and what we're trying to develop here is what we believe will be one of the largest and most robust projects on the Iberian Pyrite Belt. To date, we -- Ascendant has been involved in the project since mid-2018. At that time, the deposit had just under 8 million or 9 million ounces -- tonnes. And with very limited drilling, with 16,000 meters of drilling, have taken that 8 million or 9 million tonnes up to just under 30 million tonnes to date. So from that perspective, we've seen tremendous growth. This is a discovery project. We are still in discovery phase even though we are looking at a parallel path in development. And it's the management thesis that this project has the capability to be somewhere north of 100 million tonnes in the near term. So I just want you to bear that in mind when you look at the competitive mines in the region, Lundin's Neves-Corvo, Aguas Teñidas by MATSA, Las Cruces by First Quantum. We believe we have a really strong project here that will grow in the near term. Basically, currently, we have a -- we auctioned into the project. We have a 25% interest in Lagoa Salgada directly, and we are looking to expand to that 50% by the end of this year. That will require $2 million of payments and a maximum of $3 million into the project. We're still working our interest in terms of -- into that $3 million number. But our expectation and our hope is that we will be able to get to that 50% mark by the end of the year. On top of that, if we deliver a feasibility study plus $2.5 million, we will increase our interest in the property to 80%. And the objective that we would have within Ascendant is to complete that if not by the end of next year, then early in 2022. With regard to the project, again, we have 2 main zones, we have a North Zone and a South Zone. And our perspective there is that we see these -- one is a high-grade VMS deposit. Below that, we have a -- and to the south is a copper stockwork. This is extremely similar and analogous to what we're seeing at the gold standard on the environment here in Pyrite Belt, which is the Aguas Teñidas and Magdalena mine. And the reality -- and that's owned by Trafigura and Mubadala. So what we see is a very high-grade VMS deposit that conceptually can go to 50 million tonnes with a copper stockwork zone to the south that our hope is we can get that conceptually to 150 million tonnes. And I'll talk to you a bit about that in a moment. But that, again, the size, the nature of the combined VMS and copper stockwork make for really robust economics in the processing and the production of polymetallics. We currently have a resource just under 27 million tonnes. We have completed a drill program just shy of 1,500 meters. Our expectation there is that we should be able to be just shy or around that 30 million tonne mark when we announce a resource by the end of May. We will follow up our previous PEA. And basically, I'll talk to you about that in a moment, but we expect a much more robust PEA coming into the equation where we include not only the North Zone, which is what the previous PEA was predicated on, but also in combination with the South Zone. We are also conducting metallurgical test work to date, and we're using grinding solutions out of London as well as -- the U.K. as well as -- we have a consultant, [ Mr. Carlo Perez ], who is an expert in the Iberian Pyrite Belt in metallurgy, who has designed our metallurgical tests. And we expect to see very positive results coming out between mid and late June. This just shows you the growth that we've seen in the resources. What's extraordinary here is the rate -- is the yield that we've seen on drilling. From taking this resource to just under 9.5 million tonnes, we've increased with only 16,000 meters of drilling, we've been able to take this to just shy of 27 million tonnes. This is a tremendous, tremendous yield. It highlights the fact that we are still in the discovery phase. And I know that many competitors that we have on the Iberian Pyrite Belt today are growing their resources and talking about growing their resources aggressively. I believe that the yield that we show and the very early stage that which we're at, which is again highlighted by this slide, it shows that we're still at the very shallow depths of our deposits and of the capability to move further on the Iberian Pyrite Belt. I mentioned earlier, we have 130 meters of tertiary cover. We don't see that as any major impediment to mining. But at the same point, what it will do is it will extend by 130 meters. Our hope is it will extend the depth of the deposit by that 130 meters that we see. And so if you look at all the other projects on the belt, particularly Neves-Corvo, they're down to 1.2 kilometers. So we still have another 1,000 meters to go to approach their kind of depth in terms of mineralization. We've also had a tremendous yield on drilling. And if you look at us on a comparative basis to what's been seen at Trafigura and Mubadala's MATSA prospect or mine and Lundin's Neves-Corvo, this is not because necessarily we're the smartest guys in the room. We're yielding 700 -- just under 700 tonnes per meter drilled. And that is highly -- that is highly because of the fact that we are still a discovery deposit. And I think people have to continue to look, even though we'll run a parallel path for development, in our management's mind, we are still looking very strongly to expand the resources here. Not only do we anticipate and believe that we have a lot of material and a lot more tonnage to come. But at the same point, the value of our rock is very good, only -- second only to what we see at MATSA in their higher-grade areas. So the robustness of this project will be outstanding. When we did our PEA for the North Zone, basically, the cost was just under $50 a tonne. So margins were very, very high, and this was done at a price -- a pricing, which is far more modest than where we are today. If we add the South Zone into our mining equation, which we'll do with the new PEA, our expectation is that we'll bring that cost down from just under $50 closer to just over $40 because processing of the copper stockwork will be far more efficient than processing the VMS in the North. What's been very interesting has been the tremendous correlation and benefit that's being brought to the equation through geophysics. Many times, geophysics has proven to be unhelpful in exploration for delineating good drill targets, et cetera. And quite candidly, in my past history, I've been somewhat skeptical because I have not had success. But I'll tell you that with regard to Lagoa Salgada, geophysics work through IP and gravity surveys have really delineated these very significant and reliable ore bodies for us. And what we've found is that we've led the programs -- the drilling programs have -- since Ascendant took over, have been led by geophysics work. And so the correlation that we've had to work from the geophysics, whether it be the IP or the gravity surveys to the drilling, has been very strong. And this is what gives us that very strong confidence that we'll see a lot more tonnage here. And if you can see what's deemed here as the LS West Zone, this contains, over a span of 1.7 kilometers or so, this contains the North Zone, a Central Zone and the South Zone. And they're separated by probably about 300 to 400 meters, the North and the South. So it's actually in quite close proximity. And if you look at the below -- looking at the IP anomalies and gravity highs, you'll see this is the area that we have the North Zone and the South Zone, where we're targeting this 100 volumetric potential. And I'll use volumetric potential. Obviously, this is our thesis right now. We may not attain that 50 million tonnes in the North and 150 million tonnes in the South. But I think we have a long way to go. As I mentioned, currently, we're running about 12.5 million tonnes on a global resource here. And our hope is that we'll be somewhere in the region of about 15 million tonnes here shortly. And then with respect to the Central Zone, it runs about just shy of 2 million tonnes. So when we talk about this very significant resource, we're talking only in this area. And basically, if you look at the -- to the east of this box in this area, you'll see that we have this northern area, this eastern area that still look very, very prospective. And that's not -- that doesn't also encompass other areas that we see on the property that we have. So from that perspective, we do believe, and management are very much convinced, that this is going to be very significant in terms of size, but also because of the nature, which is very, very similar to what is seen at Aguas Teñidas. The combination of the copper stockwork and the VMS, which we blended, we see just tremendous, tremendous economics here. So we're very excited by the prospectivity for the company. Here, it just shows you the depiction, which I think is where we see in the green is the resource, be it inferred or in the measured indicated category. And then in the South -- sorry, in the red, we see this as the potential. And so what we see is open to the east -- sorry, open of the west, open to the south. And then as we move down to the South Zone, which again has had very limited drilling to date, we see just a tremendous expansion potential, not only to the west, to the south. But we also, in our latest drilling, encountered some fissure material that suggest there may be another VMS to the east. So at the early stages, we -- I'd just highlight, we're at the very early stages. The yield on drilling has been superlative. Again, I'd like to say that that's because we're very, very smart, but I'd also suggest that the reality is that it's because there's lots of mineralization here. And so from that perspective, we just see lots and lots of growth as we move forward. As I mentioned, on a regional basis, we have numerous other anomalies that both had very strong chargeability and gravity indications. And so from that perspective, we see greater potential as we move forward. We did produce a PEA in 2019. This PEA basically was predicated only on the North Zone. And so 100% of our production for this PEA was coming from the North Zone. The differential that we're expecting with the new PEA is that we're looking to add the South Zone. Now based on that, we see a larger production. Our thesis is that we believe we should see production increase from potentially 1 million tonnes up to 1.5 million tonnes. We see a mine life that expands by probably another 6 years to take us close to 15 million -- 15 years, excuse me. And we ironically also expect that we'll see a modest reduction in CapEx, and largely as a consequence of the stockwork in the south having much easier processing capabilities that basically will reduce our overall CapEx. So from that perspective, we also see -- because of that blended material, we see that average annual cost coming down from just shy of $50 to just north of $40. And so as a consequence, we believe that the NPV and the project IRR should scale up substantially from these levels. And again, this PEA will follow our metallurgical testing results that come out in June and should be delivered by the end of July. We just completed 3 holes with respect to our latest drill program. We drilled a couple of holes in the South. What's been very welcoming and surprising to a certain extent, is that by adding 50 meters of extension, we have the capability to bring in a couple of million tonnes. And the yield on that is tremendous. The reason we can do that is obviously the density of the material that's available to us. But in my previous -- in our previous experiences, for example, with El Mochito for us to add 2 million tonnes or 3 million tonnes, that would cost us $2 million to $3 million. We're targeting here $0.5 million. Likewise, when I was running a company called Sierra Metals, we had the Yauricocha Mine in Peru. To add 2 million to 3 million tonnes would cost us $3 million to $5 million. So again, I just want to highlight the fact that this is robust. It's in a tremendous jurisdiction where basically we have all the infrastructure we need. We've got the strong support of the local community. And from that -- and we're also very close to market, which is a tremendous advantage to have as well. So all the characteristics for this project are strong. I mentioned earlier with regard to Aguas Teñidas, the reason we talk about this project, firstly, is that it looks like a direct analog on the resources that we see right now. And obviously, in the mining business, you're always working off of hypotheses. And our hypothesis now is that very strong correlation between the North and South Zone, the VMS and the copper stockwork is in play. But just to give you some idea, the Aguas Teñidas project to date, to the best of our knowledge, runs at around 30 million tonnes, 20 million tonnes of reserves and 10 million tonnes of inferred. It's owned, as I say, by Trafigura and Mubadala. This is the gold standard project in the Iberian Pyrite Belt. It's a project that everybody likes to look at emulating. And if you look at the kind of depiction on the resource, this is what I talk -- I speak to when I talk about the differential to other areas and how we are so similar. If you look at the top, that green area is basically what -- we've over-lined our VMS deposit called -- in the North Zone with their Mass 1 deposit. And obviously, we have some considerably larger size here. The Mass Central Zone, we haven't depicted. But again, our expectation is that we should see the same kind of quantum or the same type of scalability over time with our central -- with our -- with the Mass 2 Central Zone at Aguas Teñidas. And again, what's really important here is not so much the size. It's not necessarily about the -- about having the stockwork and the VMS. But having those combined is just a tremendous -- is a tremendous advantage that, again, I believe has -- gives us with the possible theory that the Lagoa Salgada has the ability to replace or to be the new gold standard on the Iberian Pyrite Belt. And I'm throwing out a few plausibility s and conceivable notions, but when one's at the exploration stage and the discovery stage, which we are, this is what the science -- this is what the data is telling us. Now this data can get cut off at any time. I admit that. But at the same point, everything that we've done is pushing in that direction. And this is a thesis that we've had for the last 2 to 3 years. I'll just talk a little bit on a comparative basis. If I look at some of the companies out there that I think are most directly equivalent to ourselves, I have included Foran Mining. Foran has done a tremendous job in terms of lately with new copper prices driving this project forward. It's probably a very good indicator of the kind of types of projects that are available in North America. And we believe that, again, our metrics are not totally dissimilar from what we see at Foran. Now they are more advanced to us. But if one looks at the differential in terms of valuation, this is the valuation metric that we are striving for. Pan Global, they are on the Spanish side of the Iberian Pyrite Belt. To date, they have not disclosed a resource. They have some interesting geography. But at the same point, I look at them with a market cap of $70 million. And I find that somewhat -- somewhat -- somewhat inconceivable when I look at what we have, and we're sitting with a market cap of $20 million. Dore Copper, a Quebec-based company. Moving along their project very well. A good team, good guys. But again, I look at the valuation parameters compared to Ascendant, and I'm a little surprised. Likewise, within Merida, this is a zinc, a pure zinc play. It's a zinc asset with very good grade tonnage, not dissimilar to our tonnage. But again, look at the valuation parameters here. So I think that what we will be doing at Ascendant over the course of the next -- over the course of the next 6 months is really trying to show people and deliver science that will provide people with greater confidence in what we're doing and what we're -- our thesis is and how we're getting to achieve our thesis. So subsequent to the PEA that we will publish in July, our target there is to go straight to a feasibility study. We've already started the process of the environmental impact study. And we'll look to bring this to production with the resources that we have to date. But there will be a parallel process. We will continue to drill and really, to hopefully prove our thesis that this really is a world-class project that has a capability of being a gold standard on the belt. That's all the comments that I have for now with regard to Lagoa and Ascendant. Joao and I would be very, very happy to address any questions that people may have. But Nick, if you can maybe open the floor for questions or...

[Operator Instructions] Our first question here from [ Barry ].

It's a drilling project centrally located in Europe. The question is, will we be looking at bringing in partners sometime when you've got your PEA and feasibility study in place?

We've been looking at a large variety of alternatives in order to how do we best develop the project. We would certainly consider joint venture partners. We would certainly consider financial partners. We believe, to get this project -- to get our ownership in this project, to get a feasibility completed, basically, it would cost us USD 10 million. And we feel very comfortable that we'll be able to raise that capital. And we feel very comfortable that we have the capability to complete feasibility on the basis of the team we have in place, subject to, obviously, some build. But in terms of the -- those options are open. We are, again, looking at all different forms of strategies moving forward. But just to highlight, we are very confident, if necessary, to take this forward ourselves. I guess if there are no further questions, I'd like to thank everybody for joining us on this call -- sorry, 2 more, Nick?

Yes, Mark, we're getting along. We'll start here with Marcus.

I was just curious about the current program in regards to drilling at Lagoa Salgada and sort of connecting the North and South zones. What do you guys see there by way of geophysics and the potential between the 2 zones?

Joao?

Yes. So as Mark mentioned, we have been guiding our drilling programs on the geophysics. We have been proving that the low resistivity defines very well the shape of the ore body. And as we move north on our drilling, we are intersecting high-grade polymetallic ore -- stockwork. We are just expecting from the -- the same result from the last 3 holes. But from what we have seen in the call, the drill hole that was just done on the north end of the South resource could be one of the best drill holes ever drilled in the South sector, the LS_ST_26 drill hole. And it shows that the orebody is dipping north so we will connect into the Central Zone. And we believe that with further drilling, we will prove that we will connect to the north on the stringer that is below the massive sulphide. And it will improve our prospect that we have the same geological characteristics and type of rocks as MATSA because below our massive sulphides, we have already indications of a high-grade copper stockwork identifying one -- several drill holes that if you allow me, Mark, I will...

Please.

I will show. Everyone can see my screen?

Yes.

See, below the massive sulphides in the North, we have intersected already a high-grade copper stockwork. You can see the grades of the stockwork of the copper here and the intervals. So everything indicates that we have the same features as MATSA in the Magdalena and Aguas Teñidas. Okay? And as soon as we go underground, as MATSA did in the past, mining the massive sulphides, it will be much more easy for us to delineate this copper stockwork below the massive sulphides. Okay?

Thank you, Joao.

We have another question here from [ Barry ].

Nick, you're showing the...

Yes. A few years ago, so a question about the rare earth elements, what possibly may be in the area. Is there any more possibilities in your exploration finding more?

Finding more rare earths?

Yes, rare earths, indium?

We had some indium in the massive sulphides. There are some couple of scientifical studies that the university did with our samples from our massive sulphides. But we haven't paid too much attention to that. But yes, there is a possibility for indium and selenium in our asset so far.

And will it be at extractable amount? Or would you need to find a lot more? As in when you start processing stockwork, will you be looking at putting in the process to extract that if you find anymore?

Just not in our industrial facilities in the future in Lagoa Salgada. But on a smelter, yes, they can recover the indium and the selenium, yes.

Another question here from Kath -- sorry, [ Keith ].

Sorry, I missed the beginning of the presentation. I can truly understand why the emphasis is very much on copper in this report. My understanding also is that initially it was looked on as a zinc play.

Maybe I'll address that, Joao. I think it was largely -- if you look at the resource that we have in the North -- the North VMS is very much zinc and lead driven, zinc and lead and precious metals. We have no copper in the North of any consequence, aside from the copper stockwork that's below the actual -- the pod that we described here. So initially, when the initial drilling and previous drilling to Ascendant being involved, we had -- we've done very, very little work on the -- very little drilling on the South Zone. So by default, the North Zone was very much highlighted as a zinc play. Looking at the North Zone, the zinc equivalent there is about 9.6 -- about 9.6%. So that was really more a consequence of our understanding of the project. And frankly, how the project has been driven prior to Ascendant getting involved. Joao, do you want to add to that?

I think all of the other operating mines in the belt started by being a lead-zinc project. But we know that in the Pyrite Belt, the massive sulphides beneath or lateral, they have always a stockwork. And historical drilled holes in the South reveal that we would have the potential to have a large copper stockwork resource, and we have been focusing our efforts in developing the South resource, and we have been very successful on the ratio per tonne -- the ratio of tonnes per meter of drilling, and it continues to be open to our scan.

Did that address your question? [Operator Instructions] Okay. Well, thank you all very, very much. Joao, thank you very much for joining us on your maiden call. But ladies and gentlemen, I'd like to thank you all very much for taking the time. I hope, and I think it's probably quite evident, we are very excited by the prospects for Lagoa Salgada. We remain committed to the point where we thought it was a much more strategic move to let go of our production at El Mochito, even though it put us into the category of being a developer. We felt that, for ourselves, that the shorter-term consequences would be certainly better by the longer-term consequences as we progress with Lagoa Salgada. So we remain very excited. We hope that our excitement is somewhat tempered by realistic expectations. And over time, we hope to be able to prove to the market our thesis. So on that basis, thank you all very much. We're available. If anybody has any additional questions, please contact us directly. Have a very nice afternoon. Thank you very much.

Thank you very much.