NEW YORK, July 8, 2021 /PRNewswire/ -- Argus Research, an
independent investment research firm, has launched Equity Report
coverage on Ascendant Resources Inc. (TSX: ASND).
Click here to view Full Argus Equity
Report.
Excerpts & Highlights from the Report as conveyed by Argus
Analyst Steve Silver, follow:
BUSINESS DESCRIPTION:
Based in Toronto, Ascendant Resources is focused on the
exploration and development of the Lagoa Salgada VMS (Volcanogenic
Massive Sulphide) project located on the Iberian Pyrite Belt (IBP)
in Portugal. The IBP represents
the largest concentration of massive sulphide deposits in the
world, spanning sections of Portugal and Spain, and has a long history of large-scale
mineral discovery (producing more than 1.75 billion tons of massive
sulfide ore and 2.5 billion tons of mineralized stockwork over the
past one hundred years).
Ascendant currently holds a 25% interest in the Lagoa Salgada
project through an option position in the Redcorp operating
company, and has an earn-in opportunity to increase its interest in
the project to 80%. The company anticipates increasing its stake to
50% by the end of 2021 and 80% by the end of 2022, this by reaching
certain inground investment and payment thresholds, including the
completion of a new Bankable Feasibility Study (BFS) on the
site.
Historical study on the project site focused on a deposit
located in the North Zone. A PEA completed in 2020 demonstrated
compelling economics and, importantly, scalability for future
resource growth. Due to the small size of the confirmed area, the
economic projections in the PEA -- namely an NPV of $106 million, and capex obligations of
$160 million on a short nine-year
mine life -- were deemed to have an unfavorable risk profile.
Following the initial PEA, the decision was made to enhance
drilling to expand and upgrade the copper-rich resources within the
Central and South Zones (now merged into one South Zone). The move
could provide meaningful expansion to the current resource and
inform a new PEA that includes both regions. Ascendant expects this
new PEA to show a longer mine life and increased throughput rates,
as well as a material increase in the economic potential offered at
Lagoa Salgada. The new PEA is scheduled to be completed by
August 2021.
Upon the publication of the new PEA, Ascendant Resources plans
to initiate a feasibility study and anticipates completion near the
end of 2022. The company also will conduct economic impact studies
on the site. In our view, these initiatives represent key
milestones towards increasing Ascendant's stake in the Lagoa
Salgada project to the 80% threshold.
COMPETITIVE ADVANTAGE:
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. 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.
Copper prices have been volatile over the past few months. They
reached all-time highs in May 2021,
driven by accelerations in manufacturing and industrial output in
China. But they pulled back since
then amid concerns over a Beijing-led crackdown on
speculators.
We view the Lagoa Salgada site's infrastructure as another
competitive advantage for Ascendant. The project is situated along
a section of the Iberian Pyrite Belt in Portugal that is accessible by national
highways and roads. In addition, the site has access to
Portugal's ports, power,
waterways, and dams.
We expect the project to move forward expeditiously, given
strong support of local community and local government. The latter,
Empresa de Desenvolvimento Mineiro, S.A. (EDM), a Portuguese
government-owned company that supports the strategic development of
the country's mining sector, holds a 15% stake in the project. The
project also consists of a single exploration permit for the entire
site.
A key value driver in Ascendant's investment thesis is its
utilization of advanced scientific and geophysics tools, which have
been instrumental in the identification of expanded resource and
the development of the resource to Indicated status (from
Inferred). The company has been able to uncover the presence of
resource that sits under 130 meters of tertial cover, making it
hard for previous explorers on the site to detect. Science work,
through induced polarization and gravity surveys, provided
indication of a high likelihood of metals involvement, which is
currently being confirmed. Further, the resource indicated thus far
has not had many penalties or deleterious elements, with less
arsenic, cadmium or mercury than other nearby mines. That allows
for better concentrates upon recovery.
ANALYST COMMENTARY ̶ EARNINGS (Click
here to view Full Argus Equity Report):
As we see it, Ascendant's earnings are less material to investors
than its progress in developing the resource assets at Lagoa
Salgada and maintaining adequate funding to advance the project.
For the full year 2020, the company reported a net loss of
$3.0 million, or $0.02 per share, excluding the impact of
discontinued operations.
We attribute the current modest C$23
million market capitalization to the early-stage nature of
the Lagoa Salgada project, with less and shallower drilling to date
compared with many of its peers. The market likely is also
discounting company assets until it completes a new PEA and
advances towards a feasibility study. We also believe that
Ascendant's decision to sell its zinc producing mine in
Honduras and return to a more
development-stage status has contributed to an increased risk
profile among investors.
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). 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.
About Ascendant Resources Inc. (TSX:
ASND) www.ascendantresources.com
Ascendant Resources Inc., a mining company, explores for and
develops mineral properties. The company explores for zinc, copper,
lead, tin, silver, gold, and other metals. It holds interest in the
Lagoa Salgada volcanogenic massive sulphide project, which covers
an area of 10,700 hectares located on the Iberian Pyrite Belt in
Portugal. Ascendant Resources Inc.
was incorporated in 2006 and is headquartered in Toronto, Canada.
For more
information re: ASND please contact:
|
|
|
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Mark
Brennan
|
Nicholas
Campbell, CFA
|
CEO, Executive
Chairman, Founder
|
Manager,
Corporate Development
|
Tel:
+1-647-796-0023
|
Tel:
+1-905-630-0148
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mbrennan@ascendantresources.com
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ncampbell@ascendantresources.com
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About Argus Research Corp. Headquartered in NYC,
Argus Research (www.argusresearch.com) is a leading independent
equity research firm (est. 1934) ̶ providing
fundamental and quantitative research coverage on more than 1,600
companies across all 11 sectors of the S&P 500, as well as
macroeconomic and equity market forecasts, thematic research, model
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provides sponsored research solutions for small & mid-cap
companies seeking coverage. Our Institutional Asset
Management, Bank Trust, sell-side advisor and self-directed
investor clients value Argus's proprietary equity research
methodology, analysis and commentary. Argus's Equity Research
& earnings estimates are available on major research / earnings
estimate aggregator platforms, including Bloomberg, Thomson
Reuters, Factset and S&P Global.
For more
information re: Argus Research Services please
contact:
|
|
Darrell
Stone
|
646-747-5438
|
dstone@argusresearch.com
|
Argus Research Co. has received a flat fee from the company
discussed in this report as part of a Sponsored Research agreement
between Argus and the company. No part of Argus Research's
compensation is directly or indirectly related to the content of
this assessment or to other opinions expressed in this report.
Please refer to the full Argus report and the disclaimer for
complete disclosures.
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SOURCE Argus Research