VANCOUVER (miningweekly.com) – Since acquiring the west-central Honduras-based El Mochito zinc/lead/silver mine about four months ago, Canadian miner Ascendant Resources has leveraged its management team’s experience to immediately turn the operation around, giving it a growth platform generating free cash flow.

Once the crown jewel of Breakwater Resources, Ascendant (Morumbi Resources) acquired the underinvested operation, in December, in an opportunistic deal from Nyrstar for $500 000.

To date, the turnaround strategy has resulted in daily milled tonnes increasing by 17% from 1 482 t/d in January, to 1 733 t/d in March, despite several legacy challenges and setbacks at the mine, including a five-day work disruption, Ascendant president and CEO Chris Buncic tells Mining Weekly Online in an interview.

The company believes that workforce concerns have been resolved and, for the remainder of 2017, management expects and has budgeted for continued operating performance improvements to position the mine for strong free cash flow, he says.

Ascendant plans to gradually increase zinc equivalent (ZnEq) output through the year by ramping up mining operations. The company has provided a guidance for the rest of 2017, expecting a 44% increase in tonnes milled to 189 200 t in the fourth quarter, up from 131 115 t in the March quarter. ZnEq output is similarly expected to rise by 41% from the March quarter to 19.34-million pounds by year-end, for total 2017 output of 65.8-million pounds of ZnEq.

Mine site costs are expected to fall from $90.55/t in the first quarter, to $63/t in the fourth quarter.

“Achieving these anticipated and sustainable higher mining rates is dependent on the staged arrival of additional new and refurbished underground mining equipment,” Buncic notes, adding that the company is expecting the arrival of new mining equipment in the current or third quarter, to add to the mine’s production profile during the latter part of the year.

Some of the production upside, however, will be offset by an expected decrease in metal processing recoveries as the mine moves through an ore zone with high iron content, which has the effect of depressing recoveries. Efforts are being made to improve this potential negative impact through blending strategies. Metal payabilities are in line with industry norms, with 85% for zinc, 95% for lead and 85% for silver (derived from both zinc and lead concentrates), Ascendant advises.

“Despite these challenges, the increased mining activity should see El Mochito exit the year with annualised production rates of just under 80-million pounds of contained ZnEq production, with further improvement expected as the company continues to reposition El Mochito for the future,” Buncic says.

PERFORMANCE IMPROVEMENT
On the back of raising C$19.5-million to fund the mine acquisition, working capital and initial optimisation activities in October 2016, Ascendant has also recently completed a further C$20-million raise, at C$0.85 a unit, to fund short-term working capital needs, fleet enhancements and increased exploration.

The company plans to spend $16-million on capital expenditure (capex) this year, to be used in recapitalising and redeveloping the El Mochito asset.

Included in this capex is the raising of the Soledad tailings dam to its final height ($2.8-million), the recent purchase of new mining equipment ($3-million) and a planned acceleration of exploration expenditures over the course of the year ($2.1-million).

The Soledad tailings dam construction will cause capex to be weighted to the first half of the year, during Honduras’s dry season. Construction will continue in 2018 to ensure sufficient capacity at the Soledad tailings storage facility until 2020, while the new Douglas dam is fully designed, permitted and constructed. Longer-term sustaining capital needs are expected to decline going forward in the range of $10-million to $12-million a year.

Meanwhile, Buncic notes that the largest challenge for Ascendant at El Mochito is to improve the logistics at the more than 70-year-old mine.

He notes that efforts to improve ventilation and thus underground working conditions for people and equipment remain ongoing, with various improvements having been implemented. Several new areas of air losses have also been identified and, as improvements are made, further ventilation improvement is expected over the course of the year.

Work continues to close off unused stopes, correct equipment placement and complete vertical raises to further improve the conditions for workers and equipment, which should ultimately contribute to higher productivity levels.

The company has also implemented ‘hot’ shift changes, which improves the productivity of workers, owing to the long commuting times required to reach the work faces of the old underground operation. The company's optmisation plans are also focused on improving truck cycles, potentially adding 48 t of material moved per truck per day, which, once completed, will result in a further 300 t/d of added capacity.

"With a sustained focus on increases in mine throughput and with the investment in new equipment, we remain confident that we can achieve our production goal of greater than 2 200 t/d at an all-in sustaining cost (AISC) of lower than $1/ZnEq pound by year-end,” Buncic says.

AIMING HIGHER
Ascendant’s optimisation plans are targeting 90-million pounds of ZnEq within 18 months, comprising about 70-million pounds zinc, 20-million pounds lead and 900 000 oz of silver a year of over the life of the mine.

The company projects its revenue breakdown to comprise 67% zinc, 17% lead and 16% silver, based on optimised production and $1/lb zinc, $0.87/lb lead and $19/oz silver. The company is targeting ZnEq cash costs of $0.69/lb, with AISC expected to hit $0.82/lb subject to achieving its cost reduction targets.

The operation has a 2 300 t/d (840 000 t/y) mill and standard flotation concentrator, with expansion to 3 000 t/d possible, subject to resources and underground development.

If historic resources are converted to reserves, the total resources are enough to sustain operations for about 12 years, including 2.5 years of reserves.

A historical mineral resource estimate for El Mochito deposit prepared by Micon International for the company during the acquisition period shows reserves totalling 1.9-million tonnes grading 4.8% zinc, 2.4% lead and 57 g/t silver. Measured and indicated resources stand at 5.4-million tonnes grading 4.9% zinc, 1.7% lead and 45 g/t silver, with inferred resources at 3.9-million tonnes grading 5.1% zinc, 1.4% lead and 35 g/t silver.

Ascendant is also currently in the final stages of negotiations of a new collective bargaining agreement with representatives from the applicable unions. Buncic has been pleased with the cooperative approach taken between the parties to resolve long-standing issues, which the company believes should result in better alignment between workers' and the company's interests going forward.

“I am exceedingly pleased by the level of partnership we are experiencing at the mine with the union members and the local community as we re-establish El Mochito as a profitable business in Honduras,” Buncic says.

The El Mochito concessions cover 11 000 ha over largely under-explored terrain. The company is restarting near mine exploration efforts this year, building on the deposit’s long history of resource replacement, Buncic says.