Ascendant eyeing low-cost production growth at El Mochito

Ascendant Resources is planning further production growth at its El Mochito zinc-lead-silver mine in Honduras this year after a 38% rise in 2018.

Further growth is expected from a two-year expansion project which will push down all-in sustaining costs to US$0.97/lb zinc equivalent from US$1.28/lb last year, CEO Chris Buncic tells BNamericas in this interview.

Production is forecast at 90-110Mlb zinc equivalent (up to 50,000t) this year, up from 91.4Mlb in 2018, which marked the first full year of normalized operations following the previous ramp-up.

Toronto-based Ascendant acquired the mine from Nyrstar Mining in 2016.

On the exploration front, the company is advancing drilling to better define and expand existing resources, while searching for a high-grade chimney that would be a "game-changer" for the asset, Buncic says.

BNamericas: Can you talk me through your production aims for 2019?

Buncic: We are having a good production year. We were relatively consistent through 2018, ramping up a little bit in the first part of the year.

In 2019 we will be running at the rate we saw in 2H18 and we’re having success with both dilution control and finding some higher grade orebodies to be producing from.

About 40% of ore this year is coming from Esperanza, and we are seeing good performance at the mine as a result.

In other areas, we are looking at conventional production in the upper areas of the old workings, where there was some higher grade material left behind, that we have gone to explore and try to exploit.

The mine plan sees us producing at grades where we were in Q4 at about 7% zinc equivalent. All of this leads us to the guidance put out at the beginning of the year.

BNamericas: What are the next steps with the El Mochito expansion?

Buncic: This is the intermediate project in order to put this mine on the path to profitability over the course of the next couple of years.
When we took over the mine we immediately hit the low-hanging fruit in terms of cost reduction and throughput enhancement, and are now looking at some of the projects that need to get completed, that’s what got rolled up into the PEA.

There’s the sinking of an underground shaft, the settlement tanks and new pumps, and there are the overhaul and expansion of the plant to take it to 2,800t/d.

We have been working with the Overseas Private Investment Corp, a US government agency that provides investment to promote development. We have a term sheet with them. That work continues and we’re hopeful to have that completed around end Q2-Q3 to be able to kick off the expansion.

Construction is about two years. The intention with the debt is that we have it structured so we have a holiday until construction is complete. After that we’ll have costs down below US$1/lb zinc.

In Q4 AISC was US$1.28/lb. It’s a meaningful reduction and based on consensus pricing and future strip, our expectation is this mine will make money in any reasonable zinc price environment of over US$1.10/lb.

There are other initiatives in place to reduce costs between now and then.

The Esperanza drift will have an impact on our direct operating costs, the increase in grade will help reduce our AISC.

Other steps we’re taking include better water management, in doing so reduce the power required for pumping.

BNamericas: How do you find operating in Honduras?

Buncic: We like to be in Honduras. There are risks inherent with many LatAm countries, but we find doing business in Honduras is very possible.

We’re well received by the local community, have got strong rapport with the federal [sic] political machine and are in contact with the environmental and mining authorities, all of which are very supportive as well.

BNamericas: What are your long-term expectations at El Mochito?

Buncic: We have a resource base of about 12 years of mine life and continue to actively explore underground looking to both increase our confidence in the resource as it’s defined, through closer drill spacing and so on, as well as further exploration to grow the resource outwards.

This year we have an increased focus on trying to find the next chimney which would be a game changer for the company.

Looking back to when Breakwater owned this mine and were producing from the San Juan chimney, there were a few years when the mine was producing more than 150Mlb of zinc equivalent at a throughput rate of only 3,000t/d, so if we can find another one of these high-grade chimneys and get that into production from underground that would be a game changer for us.

BNamericas: Are you considering M&As?

Buncic: We have been looking at a lot of interesting opportunities. We are always looking at things that are financeable and accretive. Those are some of our key criteria.
We’re open to it and looking. That’s an active part of our business.
We have been focused on the Americas.

Similarly, we’re looking at zinc and industrial metals, and things that go together with what we already have.