Ascendant eyes lower costs as El Mochito turnaround advances

Monday, January 22, 2018

Ascendant Resources is one of the few companies with producing mines in Honduras.

The company has ramped-up production at its El Mochito zinc-silver-lead mine since acquiring the asset from Nyrstar in late 2016.

The mine turned cash-flow positive in Q4, in part due to the ramp-up, with throughput up about 80% since the acquisition.

Despite a period of chaos following the November general election, Honduras has so far proved a stable jurisdiction for the company, with positive relations with the local and national government and communities, CEO Chris Buncic tells BNamericas.

Looking to the future, the company plans to pursue exploration opportunities at El Mochito and acquire a string of other assets.

BNamericas: Why El Mochito?

Buncic: We looked at all of Nyrstar's 10 mines. We decided to focus on the producing ones and ultimately decided that El Mochito had a lot of upside.

There were a lot of operational issues that we knew we could go in and fix.

BNamericas: How has the ramp-up gone?

Buncic: In January 2016, after we took possession of the mine, it was producing at about 1,250t/d throughput. Relative to prior production, that was quite low. Now we are up around 2,400t/d, so up more than 80%. In 2018 not only will we have this increased throughput rate but also higher grade material coming to the mill.

We started by taking a look at where the bottlenecks were, as there is lots of capacity in the mill and hoist. The problem was getting ore from the face to the bottom of the shaft.

We started by timing the truck drivers. It was taking some of them more than an hour when it should have taken 40 minutes, and that increased scrutiny on them in a very short interval helped to increase throughput.

There were three, eight-hour shifts in a day. The operator had to sign in, take the lift to bottom of the mine, which takes 20 minutes, and then another 25 minutes to get to the face.

So we were losing about 2.5 hours of an 8-hour shift on transit time and lunch. We went to four 8-hour shifts and had them overlap. That bought productive hours up to 22 from 15 in a day. We saw the benefit in March, when throughput got up to about 54,000t from 38,000t in January.

We discovered then that we were having equipment issues. The fleet was about eight years old on average and we saw a dip in production in April-June as we rectified those problems.

In March we ordered new equipment, three new trucks two new scoops, and saw the benefit of that in June-August. In September we made the decision to replace the whole fleet, by July 2018, when we will have increased availability, the spares requirement will be less and manpower to maintain it should also be less.

All of these things are going to come into play as we look to lower our operating costs in 2018.

BNamericas: What are your longer term plans at El Mochito?

Buncic: It sits on an 11,000ha package, so there's a lot of exploration opportunity both underground and regionally around the mine. We are looking at some projects to additionally lower costs. Those are being evaluated now.

El Mochito was originally an open pit silver mine. A starter pit in silver is not out of the question.

BNamericas: What about M&A?

Buncic: As well as organic growth, we are also looking at other opportunities in Honduras. Certainly the market expects us to continue down our base metals and silver path.

My preference is to find additional producing assets. We are scouring the field but to say what's next would be difficult. Instead I would like to say that 3-4 years from now I would like Ascendant to be a company with several operating mines, with an advanced stage and an early stage exploration project.

We will try and create a company that has got a pipeline of producing and development assets.

BNamericas: How do you view Honduras as a mining jurisdiction?

Buncic: There are very few operating mines in Honduras. It has a mining law, a mining authority and an environmental authority. It does not have a lot of mining. I think the government is trying to change that.

We have great relationships with the government and regulatory bodies. Because mining is not as developed as in Chile or Peru we have a stronger voice. From a fiscal perspective it is not unlike other Latin American countries. We are happy to operate in Honduras.

BNamericas: Has security been an issue?

Buncic: Not really. The mine has been open for 70 years with uninterrupted production. The recent political turmoil hasn't really caused us to limit anything.

It's business as usual again. Now that the elections are behind us we have more confidence for 2018.

BNamericas: What is your view on zinc prices going forward?

Buncic: Zinc inventories haven't been drawn down over the past few years as they had been expected to be, as additional supply entered the market. We were watching that firmly expecting zinc to have its day. Now we are here. Going forward I think we are looking at strong prices in 2018 and even stronger in 2019.

Then we will start to see some of the additional supply come back on. We will have to reassess after 2019 where prices are going, but I think we have got at least 3-4 years of strong, stable pricing. We know zinc will eventually come back down as supply and demand come back into balance, so that's why we are focusing on costs and maximizing our contribution margin.

The next few years are going to be fantastic on a cash flow basis.

About Chris Buncic

Chris Buncic played a key role in the founding of Ascendant Resources and its acquisition of the El Mochito mine from Nyrstar in 2016.

He has previously served in senior management roles at several Canadian corporations in the technology and resources sectors.

About the company

Ascendant Resources is focused on restoring the historic potential of the El Mochito zinc-silver-lead mine in Honduras.