PROFITABILITY • GROWTH • OPPORTUNITY
ANNUAL
REPORT
2017
A successful
turnaround
year.
The El Mochito Mine: 70 years
of continuous production.
Ascendant Resources
is a Toronto-based mining company
focused on its 100%-owned El Mochito zinc-lead-silver mine in
north-western Honduras, which has been in production since
1948. After acquiring the mine in December 2016, Ascendant
implemented a rigorous optimization program aimed at restoring
the historic potential of the El Mochito mine. In 2017, the Company
successfully completed the operational turnaround with sustained
production reaching record levels and profitability restored.
The Company remains focused on cost reduction and further
operational improvements to drive robust free cash flow in 2018
and beyond. Ascendant is also focused on expanding and upgrading
known resources through extensive exploration work for near-term
growth. With a significant land package of 11,000 hectares and an
abundance of historical data, there are several regional targets
providing longer term exploration opportunity which could lead
to further resource growth. The Company is also engaged in the
evaluation of producing and development stage mineral resource
opportunities, on an continuing basis.
The Company’s common shares are principally listed on the Toronto
Stock Exchange and are quoted on the the OTCQX Best Market
under the symbols “ASND” and “ASDRF” respectively.
For more information on Ascendant Resources, please visit
our website at www.ascendantresources.com.
TABLE OF CONTENTS
2017 Highlights 3
Message from the Chief Executive Officer 4
El Mochito Operations 5
2018 Guidance 5
Honduras Facts 6
Management’s Discussion and Analysis & Financial Statements 7
Responsible Mining at El Mochito 6
Zinc flotation at the El Mochito mine.
2017:
A successful turnaround
year at El Mochito.
Production:
Tonnes Milled
81%
Direct Operating
Costs
31%
Truck
Availability
20%
Productive
Working Hours
40%
Improved
Ventilation Volumes
23%
Contained Metal
Production
66M lbs
Zinc flotation at the El Mochito mine.
Responsible Mining at El Mochito 6
Management’s Discussion and Analysis & Financial Statements 7
2018 Guidance
EBITDA
Guidance
($US)
$32-40M
ZnEq Production
Guidance
93-109M lbs
Free Cash Flow
Guidance
($US)
$14-20M
Direct Operating Cost
Guidance
($US)
$70-$80/t
El Mochito: A Successful Turnaround Year Complete | Annual Report 3
“In 2017, Ascendant set out on
an ambitious rehabilitation
program aimed at restoring
the El Mochito zinc-lead-silver
mine to profitability and
historical production levels
after recognizing the immense
opportunity. We could not be
more pleased to report on the
successful transformation of the
mine into a safe and efficient
free cash flowing operation. El
Mochito has demonstrated its
ability to manage sustained
higher production rates and
provide a solid foundation for
future growth for the Company.
With a year of strong operational
success behind us, El Mochito
has proven capable to be a
cornerstone asset with great
opportunity for the years to
come. It is difficult to effectively
stress what an incredible
accomplishment we have
achieved this year and it is a
testament to the hard work and
ability of our team.”
MESSAGE FROM THE
CHIEF EXECUTIVE OFFICER
Dear fellow Shareholders and Stakeholders,
Last year was a pivotal year for Ascendant as it represented our first year of operations of the El Mochito
mine. After acquiring the 70-year-old zinc-lead-silver mine in December 2016 (undercapitalized and
underperforming), we set out on an ambitious rehabilitation plan aimed at restoring annual production
levels to those historically achieved and at restoring profitability to generate free cash flow at the mine,
creating a solid foundation for the long-term.
Our strong performance over the course of the year was met with an improving zinc and lead price
environment which certainly helped us achieve our financial goals of exiting the year free cash flow positive.
While we do believe in a continued strong zinc market in the coming years, we remain focused on reducing
our operating costs and maximizing the total value per tonne that we produce.
Operational Turnaround of the El Mochito Mine Complete
2017 was really highlighted by the successful turnaround of the El Mochito mine and the achievement of
significant operational and financial improvement. Over the course of the year, we increased throughput
by 81% to 69,578 tonnes milled in December as compared to 38,521 tonnes in January. We were extremely
pleased to report full year contained metal production of 66.1 million lbs of zinc equivalent metal, a
significant improvement over the previous year. The substantial increase in production rates and improved
operational performance was driven by changes implemented at the mine with respect to personnel,
improved working conditions, supervisor and operating training, health and safety, a general focus on
overall efficiency as well as the commencement of conventional underground mining operations in high-
grade areas. Also contributing to the increase in production was the full replacement and overhaul of the
underground mining fleet which began in the second quarter of 2017. These efforts also provided a ramp
up in profitability as direct operating costs decreased by 31% over the course of the year. Most notable is
our accomplishment of generating sustained positive adjusted EBITDA after only six months of operations,
and exiting 2017 free cash flow positive, ahead of expectations.
Engaging with Our People and Our Communities
While we strive to continuously improve productivity, our highest priority is always the health and safety
of our people. As the new operators of the El Mochito mine, our focus in 2017 emphasized promoting
and instilling a culture of safety, improving accountability and discipline amongst our workforce while also
improving the operating environment through rigorous new health and safety standards and procedures,
education and awareness training. Significant investment was also made to improve working conditions
with improved ventilation and renewed infrastructure which had added benefit of increasing morale
amongst our workforce.
We remain committed to the community and environment in which our mine operates and affects through
the funding of numerous initiatives. This year marked the 9th consecutive year El Mochito received an award
from the Foundation for Corporate Responsibility in Honduras for its social responsibility efforts, a tradition
we intend to maintain. A critical component of our success is our relationship with the communities in which
we operate, providing the highest standards of environmental sustainability, corporate social responsibility
and ensuring the health and safety of our employees and community.
Looking Ahead: Delivering on Ascendant’s Long-Term Potential
We look forward to building on the successes of 2017 as we focus on further optimizing operations striving
to generate a greater value per tonne produced which will increase profitability and free cash flow for
2018 and the years to come. Our team has a long list of projects we are working through to make the
structural improvements to get us there, and with time and focus, we will be successful. Exploration will
also continue to be a focus for the Company as we believe there is an exceptional opportunity within our
current 11,000-hectare land package as well as in other parts of Honduras. We have 40,000 meters of
drilling planned for this year to build upon what was accomplished in the 2017 exploration program and
subsequent NI 43-101 Reserves and Resources update.
I would like to take this opportunity to convey sincere gratitude to the Board of Directors and all my
colleagues at Ascendant Resources as well as the entire El Mochito workforce in Honduras. Your continued
support, dedication and commitment played a critical role in our accomplishments in 2017 and will
continue to drive the success of the Company going forward. It is our people that will make us successful.
On behalf of the Board of Directors, management, and employees of Ascendant Resources, we would like
to thank our shareholders and stakeholders for their continued support as this opportunity could not be
made possible without you.
Sincerely,
Chris Buncic
President and Chief Executive Officer
El Mochito: A Successful Turnaround Year Complete | Annual Report 4
EL MOCHITO MINE
Zn, Pb, Ag
2017 Operational Summary
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
Contained Metal Production Profile
Cost Profile
$120.00
$110.00
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Zn lbs
Pb lbs
Zn Eq. lbs (Production)
Direct Operating Cost $/t Ore Milled
Contained Zinc Production (lbs)
Contained Lead Production (lbs)
2,000,000
1,500,000
1,000,000
500,000
-
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Overhead view of the head frame and
aboveground operations at the El Mochito mine.
El Mochito Typical Revenue Mix
Zinc 70%
Lead 20%
Silver 10%
El Mochito: A Successful Turnaround Year Complete | Annual Report 5
PUERTO CORTÉS
SAN PEDRO SULA
EL MOCHITO MINE
TEGUCIGALPA
HONDURAS FACTS
BB-
upgraded
from B+
RESPONSIBLE MINING
AT EL MOCHITO
Ascendant Resources continues to make mining responsibly at El Mochito its
top priority as it creates tangible benefits for all our stakeholders, including
our employees, the local communities and the environment in which we
operate.
The El Mochito mine has received the Empresa Socialmente Responsible
(ESR) or the “Socially Responsible Business” award from the Foundation
for Corporate Responsibility in Honduras (FUNDAHRSE) for the last 9
consecutive years as a result of its ongoing and extensive corporate social
responsibility initiatives at the mine site.
Community Initiatives
The El Mochito mine has been in operation near the town of Las Vegas,
Honduras for approximately 70 years. During this time and through various
community investments, El Mochito has contributed to local employment
generation,
improvement and education advancement.
Through the local subsidiary, AMPAC, the El Mochito mine has developed
and manages the potable water supply for most of the residents of the town
of Las Vegas, built the local fire station and also runs vaccination and ‘feed
the elderly’ campaigns throughout the year.
infrastructure
The mine also supports the technical college, Vocational Education Center
El Mochito (CEVEM) by contributing approximately 80% of its total annual
operational costs.
Health, Safety and Environmental Stewardship
We believe our workforce and their well being are imperative to the
success and sustainability of the El Mochito operation. The continuous
commitment to our workforce is reaffirmed through the development of
our employees in the areas of workplace and educational advancement
and a strong commitment to the improvement of ongoing health and safety
initiatives. Providing a safe working environment for our employees means
a continuous push on driving change and promoting a safety-first culture
within our community. Ascendant has placed an increased emphasis on
worker safety training, proactive leadership oversight and has made key
personnel changes to the Health and Safety department to promote the
programs. The Company carries an extensive reforestation and revegetation
program that includes the management of 400 hectares of forest biosphere
on the mine property and of potable water. Much of the remaining surface
tenure includes timber and coffee plantations which are regularly cleaned,
fertilized and managed for pest control.
For more information on Ascendant’s responsibile mining initiatives, please
visit our website at www.ascendantresources.com/responsiblity.
Paola Rosales, CSR Coordinator at the
El Mochito mine.
AMPAC has been awarded 9 years
in a row for the recognition for being
a socially responsible company
by the Fundacion Hondurena de
Resonsabilidad Social Empresaria.
El Mochito: A Successful Turnaround Year Complete | Annual Report 6
Stable democratic constitution with most recent election of current President in 2017 for another 4-year term and is focused on security, corruption and business investment. Decentralized federal government; municipalities have autonomy.The largest exports in Honduras are mainly apparel items, coffee and bananas. El Mochito represented ~3% of exports in 2014*.Solid infrastructure; 2 hour drive from international airport (San Pedro ~1.5M pop.). Paved road to site and reliable power source. Standard & Poor’s raised Honduras’ credit rating in July 2017 from B+ to BB-, and changed the country’s outlook from stable to positive.*Percentage calculated as total revenues from El Mochito as a percentage of Honduras’ total GDP for 2014.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2017 AND FIVE MONTH PERIOD ENDED
DECEMBER 31, 2016
(Expressed in US dollars)
2017
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
INTRODUCTION
The following Management’s Discussion & Analysis (“MD&A”) dated March 21, 2018 is a review of the
operations, current financial position and outlook for Ascendant Resources Inc. (the “Company” or
“Ascendant”) and should be read in conjunction with the Company’s Consolidated Financial
Statements for the year ended December 31, 2017 and five month period ended December 31, 2016,
and related notes thereto. The Consolidated Financial Statements are prepared in accordance with
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations
Committee (“IFRIC”). This MD&A was reviewed and approved by the Company’s Audit Committee and
Board of Directors on March 21, 2018. Additional information relating to the Company, including the
Company’s Annual Information Form, is available on SEDAR at www.sedar.com. The Company uses
non-IFRS performance measures in the MD&A which do not have any standardized meaning
prescribed by IFRS and therefore may not be directly comparable to similar measures presented by
other issuers. The Company provides a reconciliation later in this MD&A between non-IFRS
performance measures and the most closely comparable IFRS performance measures.
COMPANY OVERVIEW & BACKGROUND
Ascendant Resources Inc. is a mining company focused on its producing El Mochito zinc, lead and
silver mine (the "El Mochito mine" or “El Mochito”) in west-central Honduras near the town of Las
Vegas, approximately 88 km southwest of the city of San Pedro Sula on a well paved road and 220 km
northwest of Tegucigalpa, the capital of Honduras. The El Mochito mine has been in almost continuous
production since 1948. The Company is also engaged in the evaluation of producing and advanced
development stage mineral resource opportunities on an ongoing basis.
The Company acquired 100% of the El Mochito mine on December 20, 2016 when the Company
acquired 100% of the shares of American Pacific Honduras SA de CV (“AMPAC”), the owner of the El
Mochito mine from Nyrstar International B.V. (“Nyrstar”). Breakwater Resources Ltd. ("Breakwater")
acquired AMPAC in 1990 and Nyrstar, in turn, acquired Breakwater in 2011.
The company's common shares trade on the Toronto Stock Exchange, OTCQX® Best Market and
Frankfurt Exchange under the symbols ASND, ASDRF and 2D9, respectively.
COMPARATIVE INFORMATION
Change in Year-End Reporting Period
With the change in the Company’s year-end reporting period from a July 31 to a December 31 fiscal
year-end in 2016 as explained in note 2 of the Consolidated Financial Statements, prior period
comparative information has been selected such that the quarters being compared most closely
match the new financial quarter being reported. The following abbreviations may be used to describe
the comparative periods under review throughout this MD&A.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 2
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Abbreviation Period
Abbreviation Period
Q4/17
Q3/17
Q2/17
Q1/17
October 1, 2017 - December 31, 2017
Q2/SY16
November 1, 2016 - December 31, 2017
July 1, 2017 - September 30, 2017
Q1/SY16
August 1, 2016 - October 31, 2016
April 1, 2017 - June 30, 2017
January 1, 2017 - March 31, 2017
Q4/16
Q3/16
May 1, 2016 - July 31, 2016
February 1, 2016 - April 30, 2016
The Company’s reporting currency is the U.S. dollar and all amounts in this MD&A are expressed in
U.S. dollars (“$”) unless otherwise noted. References to “Cdn$” mean Canadian Dollars.
Change in Presentation Currency
The Company changed its presentation currency from the CAD to USD on December 31, 2016 to
better reflect the Company’s business activities. In making this change in presentation currency to
USD, the Company followed the guidance in IAS 21 The Effects of Changes in Foreign Exchange Rates
and have applied the change retrospectively as if the USD had always been the Company’s
presentation currency, as follows:
Assets and liabilities have been translated into the USD at the rate of exchange prevailing at
the respective reporting dates;
The statements of operations and comprehensive loss were translated at the average
exchange rates for the respective reporting periods, or at the exchange rates prevailing at
the applicable transaction date;
Equity transactions have been translated at the exchange rate prevailing at the date of the
transactions; and
Exchange differences arising on translation were recorded
in accumulated other
comprehensive loss in shareholders’ equity.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 3
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
2017 – HIGHLIGHTS FOR THE YEAR
Three months ended December 31, 2017
Contained metal production for the fourth quarter was 14.13 million lbs of zinc (“Zn”), 4.56 million
lbs of lead (“Pb”) and 169,039 ounces of silver (“Ag”). Zinc equivalent (“ZnEq”) metal production was
19.58 million lbs during Q4/17 using average metal pricing for the period; 12% higher than the
third quarter of 2017 (Q3/17) and 43% higher than the first quarter of 2017 (Q1/17) at the
Company’s El Mochito mine in Honduras.
Milled production for the fourth quarter was 198,354 tonnes, representing a 13% increase against
Q3/17 and a 51% increase against Q1/17. October saw a substantial increase in milling rates which
was a result of the introduction of new mining equipment and the start of conventional
underground mining operations in narrow but high-grade areas. Milled production for the month
of December was 69,578 tonnes, representing the strongest month of production achieved at the
El Mochito mine since 2013 and an overall increase in production of 81% since January 2017. This
is a direct result of an improved operating environment and the arrival and deployment of
additional new underground mining.
During the fourth quarter, recoveries averaged 88.5% for zinc, 74.6% for lead and 75.0% for silver.
Average head grades were 3.65% zinc, 1.40% lead and 35.2 grams per tonne (g/t) silver. Zinc
Equivalent head grade was 5.31% using average metal pricing for the period. Zinc recovery was
stronger than expected, while head grades remained relatively flat compared to Q3/17. Ore
grades in 2018 are expected to improve from reduced dilution measures and also the exploitation
of smaller but higher-grade ore zones. Trial production from these higher-grade conventional
sections began in late October 2017.
The Company received two additional trucks and two additional scoops in the fourth quarter with
the remaining underground equipment that has been ordered expected to arrive in stages
throughout 2018. The addition of the new equipment, with higher availability rates, and continued
progress in various other productivity improvement initiatives already underway are expected to
support further operational improvements.
Adjusted EBITDA for the fourth quarter ending December 31, 2017 (“Q4/17”) totalled $2.28 million
representing six consecutive months of positive adjusted EBITDA and overall improved financial
performance. During Q4/17 the Company remained focused on profitability and reported its first
quarter of free cash flow of $0.75 million, with December representing the second highest record
of monthly production achieved at El Mochito in its 70 years of operations.
Direct operating costs per tonne milled for Q4/17 at El Mochito were $80.13, an 9% decrease vs
Q3/17 Direct operating costs per tonne milled of $87.86 and a 19% decrease vs Q1/17 Cash Costs
per Tonne Milled of $98.91. These reductions are a result of cost optimization, operational
efficiencies, and increased production achieved throughout the year. Cost reduction is an ongoing
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 4
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
focus for the Company and with many initiatives in place, the Company expects to see further
reductions in 2018.
Year Ended December 31, 2017
Fiscal 2017 represented the first full year of operation of the El Mochito mine by the Ascendant
management team since its acquisition in December of 2016. During the year, significant progress
was made improving the overall operations as well as the operational and financial performance
of the mine. This is evidenced by an 81% improvement in monthly tonnes processed and a 31%
reduction in direct operating costs from January to December while delivering a marked
improvement in truck availability, productive working hours and overall worker accountability and
safety.
Operational improvements focused on health and safety, supervisor training, operator training,
improving underground working conditions (improved ventilation, better roadways etc.),
increasing productive hours per day and a general focus on overall efficiency throughout all
operational areas.
As part of the long term renewal of the El Mochito mine, Ascendant commenced a full
underground mine fleet replacement in Q1/17 and Q2/17 ordering 10 new underground mine
trucks, 6 scoops, 2 jumbos, 2 rock bolters and other ancillary equipment. The company also
overhauled two of the older trucks and two scoops. The new equipment has a been major driver
in the increased operational performance due to the increased equipment availability while
reducing maintainance costs. The remainder of the equipment is expected to be delivered by mid
2018 and support further operational improvements while lowering overall direct operating costs.
In Q1/17, Ascendant completed the negotiations for a new collective bargaining agreement with
the union representing the workers at El Mochito. The agreement, which appropriately aligns all
parties’ objectives, was signed in April 2017 and remains valid until Q4 2019.
Contained metal production for the year ended December 31, 2017 was 45.05 million lbs of zinc,
14.90 million lbs of lead and 698,506 ounces of silver. Total contained metal production for the
2017 calendar year was 66.1 million pounds of zinc equivalent exceeding the Company’s guidance
of 65.8 million pounds using average pricing for each month.
During the year ended December 31, 2017, recoveries averaged 88.9% for zinc, 74.2% for lead and
77.4% for silver. Mill throughput for the year was 656,291 tonnes. Average head grades were
3.50% zinc, 1.39% lead and 42.6 g/t silver. The zinc equivalent grade was 5.42%. Zinc recovery was
stronger than expected, while head grades gradually increased through the year.
Adjusted EBITDA for 2017 totalled negative $2.5 million as the operational turnaround took hold
and both zinc and lead prices remained strong. As detailed in the outlook section, the Company
expects robust adjusted EBITDA and free cash flow generation in 2018.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 5
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Direct operating costs per tonne milled for 2017 at El Mochito averaged $88.22/t. During the year
costs decreased from $112.21/t in January 2017 to $77.80/t in December representing a 31%
decrease. Further decreases in costs are expected in 2018 as full commissioning and
implementation of the new mining fleet is completed and an increase in lower-cost, long-hole
stoping is undertaken. Cost reduction is an ongoing focus for the Company and with many
initiatives in place the Company expects to see further reduction over the medium and longer
term.
Exploration
During 2017 Ascendant commenced a new exploration and delineation program completing 26,877
metres of both definition and exploration drilling program at El Mochito. Of this program, 19,562
metres are expected to be included in a new Mineral Resources and Reserves estimation and
presented in a National Instrument 43-101 Technical Report which is expected to be released in Q2/18.
This should materially increase the expected life of mine at El Mochito. Additionally, the Company has
planned a 40,000 metre drilling program in 2018 with the aim to further increase these Resources and
Reserves beyond that included in the NI 43-101 document.
Underground drilling is undertaken using four company owned underground drill rigs to test near-
mine extensions of known high-grade ore bodies such as Palmar Dyke, Santa Elena, Victoria and
Esperanza. All orebodies are close to current workings and will be brought into the mine plan within
the next six to twelve months, enhancing head grade to the mill to increase the revenue per tonne of
ore mined. (See press releases dated June 12, 2017 and October 3, 2017 for full details of drill results
released in 2017). In the fourth quarter, the Esperanza orebody was already being mined on its
southern edge.
In June the Company announced results of 29 diamond drill holes or 7,447 meters. The drilling results
were evenly split between step-out and in-fill drill holes, targeting the extensions of Palmar Dyke,
Santa Elena, Victoria and Esperanza ore bodies. Drilling in Esperanza represented a further extension
to the East and North. All orebodies remain open along strike and at depth.
A few significant results from the June results include (these are all true/apparent widths):
Step-out Holes
HOLE 10846 – 17.6m at 5.3% zinc, 3.8% lead and 83 g/t silver (Palmer Dyke)
HOLE 10844 – 8.6m at 10.7% zinc, 4.0% lead and 95 g/t silver (Palmar Dyke)
HOLE 10845 – 17.0m at 5.0% zinc, 2.0% lead and 53 g/t silver (Victoria)
HOLE 10837 – 5.5m at 17.3% zinc, 3.6% lead and 142 g/t silver (Palmar Dyke)
In-fill Holes
HOLE 10833 – 35.4m at 5.6% zinc, 2.0% lead and 31 g/t silver,
o
including 5.4m at 7.8% zinc, 2.6% lead and 35 g/t silver (Santa Elena)
HOLE 10847 – 17.5m at 6.2% zinc, 2.2% lead, and 41 g/t silver (Esperanza)
HOLE 10828 – 26.5m at 5.7% zinc, 0.6% lead and 18 g/t silver (Santa Elena)
HOLE 10826 – 17.1m at 5.8% zinc, 1.2% lead and 36 g/t silver (Esperanza)
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 6
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
In October, results for an additional 49 diamond drill holes totaling 6,170 meters were released.
The October results come from 4,168 meters of in-fill and 2,541 meters of step-out exploration drilling
which continue to target the extensions of four ore bodies; namely Palmar Dyke, Santa Elena, Victoria
and Esperanza. Significant assay results were reported from 41 of the 49 holes. This second set of drill
results from the 2017 drill program were well above current mining grades and highlight the incredible
potential for additional high-grade zinc mineralization at the El Mochito property.
Management believes that a lack of exploration over the course of many years, prior to Ascendant’s
ownership of AMPAC, created an opportunity to significantly expand the resources and grade at the
mine, and results like these continue to inspire this confidence.
Key Highlights from the October release include: (these are all true/apparent widths):
Step-out Holes
HOLE 10884 – 4.1m at 10.1% zinc, 0.6% lead, 31 g/t silver and 0.12% copper
HOLE 10880 – 5.1m at 3.1% zinc, 2.5% lead, 149 g/t silver and 0.55% copper
HOLE 10870 – 4.1m at 10.0% zinc, 1.9% lead, 95 g/t silver and 0.17% copper
Infill Holes
HOLE 10875 – 5.5m at 5.2% zinc, 2.7% lead, 2,297 g/t silver and 0.98% copper
HOLE 10887 – 23.4m at 6.5% zinc, 1.0% lead, 24 g/t silver and 0.04% copper
HOLE 10904 – 12.2m at 6.6% zinc, 5.6% lead, 81 g/t silver and 0.1% copper
As at the end of 2017 approximately 6,000 metres of drill results remain outstanding to be assayed
and have the results reviewed by the company. These results are expected in Q1/18 and Q2/18 due
to bureaucratic delays in exporting the samples to a certified lab in the USA and will be incorporated
into future resource updates and mine plans.
Appointment of New Directors
During 2017, the Company announced several additions to the Company’s Board of Directors,
bringing additional strength and expertise in mining operations, finance and business development.
On June 21, 2017, Ascendant announced the appointment of Mr. Renaud Adams and Mr. Guillermo
Kaelin to the Company’s Board of Directors. Mr Adams has over 20 years of experience as an executive
and as an operator in the mining industry. Mr. Kaelin is a capital markets professional with over 18
years of experience in private equity, investment banking, research and public securities.
On September 28, 2017 Ascendant announced the appointment of Ms. Petra Decher, CPA, CA to the
Company’s Board of Directors effective October 1, 2017. Ms. Decher is a Chartered Professional
Accountant, and is Chair of the Audit Committee.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 7
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
The Company also announced the appointment of Mr. Stephen Shefsky to the position of Lead
the Board of Directors of Ascendant Resources
Director. Mr. Shefsky has served on
Inc. (formerly Morumbi Resources Inc.) for more than 10 years.
Listing on the TSX and trading on the OTCQX
In July 2017, the Company received final approval from the Toronto Stock Exchange (“TSX”) to graduate
from the TSX Venture Exchange (“TSXV”) and list its common shares and listed common share
purchase warrants on the TSX. The Common Shares and Warrants are trading under their existing
symbols “ASND” and “ASND.WT”, respectively.
On September 5, 2017 the Company announced that its common shares commenced trading in the
United States under the symbol “ASDRF” on the OTCQX® Best Market (“OTCQX”). The Company’s
common shares will continue to trade on the Toronto Stock Exchange and Frankfurt Exchange under
the symbols ASND and 2D9, respectively.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 8
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
KEY OPERATING INFORMATION AND FINANCIAL CONDITION
The following table is a summary of the Company’s key production and operating statistics for the
three months and year ended December 31, 2017 at the El Mochito mine. The summary does not
include the El Mochito Mine results for the comparative periods in the prior year as the El Mochito
mine was acquired by the Company on December 20, 2016.
*Figures do not include results from the El Mochito Operations for the period prior to the acquisition date (December 20, 2016).
* Key Operating Information
December 31,
December 31,
September 30,
June 30,
March 31,
YTD
Q4
Q3
Q2
Q1
Total Tonnes Mined
Total Tonnes Milled
Operating Days
Average Head Grades
Average Zn grade
Average Pb grade
Average Silver grade
ZnEq Head grade
Average Recoveries
Zinc
Lead
Silver
Contained Metal Production
Zinc
Lead
Silver
ZnEq
Payable Production
Zinc
Lead
Silver
ZnEq
Payable Metal Sold
Zinc
Lead
Silver
ZnEq
tonnes
tonnes
days
%
%
g/t
%
%
%
%
lbs
lbs
ozs
lbs
lbs
lbs
ozs
lbs
lbs
lbs
ozs
lbs
(1)
(1)
(3)
(3)
(3)
(1)
(1)
2017
2017
2017
2017
2017
657,287
197,303
177,631
151,028
131,325
656,291
348
198,354
176,035
89
91
150,785
87
131,116
81
3.50%
1.39%
42.6
5.42%
88.9%
74.2%
77.4%
3.65%
1.40%
35.2
5.31%
88.5%
74.6%
75.0%
3.51%
1.46%
38.3
5.36%
88.8%
73.7%
78.0%
3.36%
1.34%
48.9
5.50%
88.9%
72.3%
79.3%
3.43%
1.33%
52.1
5.56%
89.8%
76.9%
78.8%
45,054,075
14,904,550
698,506
14,133,122
12,099,991
4,555,570
4,175,226
169,039
168,181
9,932,559
3,216,476
188,245
8,888,403
2,957,279
173,041
66,120,114
19,576,311
17,494,814
15,377,231
13,671,758
38,295,964
14,159,322
488,954
12,013,154
10,284,992
4,327,791
3,966,464
118,327
117,727
8,442,675
3,055,652
131,771
7,555,143
2,809,415
121,129
56,204,301
16,639,864
14,872,797
13,070,646
11,620,995
35,625,672
12,074,742
460,980
11,006,646
10,037,649
9,889,939
6,190,603
3,902,183
162,619
171,593
-
24,062
50,725,071
17,599,373
15,132,403
10,245,777
4,691,438
1,981,956
102,706
7,747,518
Direct operating cost per tonne milled
(Excl. CAPEX)
(1) Assumes average spot metal prices for the period.
(2)
$/tonne
$88.22
$80.13
$87.86
$89.97
$98.91
(2) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A.
(3) Payability calculation has been modified to conform with industry standards. Deductions for treatment and refinement charges are not included.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 9
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Financial
December 31,
December 31,
September 30,
June 30,
March 31,
2017
2017
2017
2017
2017
YTD
Q4
Q3
Q2
Q1
Revenue
Net income (loss)
Adjusted EBITDA
Operating cash flow before movements in
working capital
Operating cash flow
Cash and cash equivalents
Working capital
Capital Expenditures
(2)
(2)
$
$
$
$
$
$
$
$
59,199,358
23,933,898
17,399,214
(12,057,595)
(1,429,234)
821,009
(2,496,666)
2,281,018
2,423,205
(6,009,302)
(6,468,437)
8,041,307
12,504,909
13,445,155
577,578
2,130,707
5,825,155
8,041,307
(881,626)
6,642,497
12,504,909
15,914,934
16,874,186
5,076,994
2,550,099
4,212,327
9,941,830
(8,555,453)
(5,511,504)
(6,175,510)
(3,077,655)
9,702,058
7,924,416
(2,893,917)
(1,689,385)
(2,542,077)
(8,334,311)
16,813,122
27,159,637
1,605,735
(1) Assumes average spot metal prices for the period.
(2) This is a non-IFRS performance measure, see Non-IFRS Performance Measures section of the MD&A.
(3) Payability calculation has been modified to conform with industry standards. Deductions for treatment and refinement charges are not included.
The following table shows the Company’s realized selling prices:
Realized Metal Prices
December 31,
December 31,
September 30,
June 30,
March 31,
YTD
Q4
Q3
Q2
Q1
Zinc (lb)
Lead (lb)
Silver (oz)
$/lb
$/lb
$/lb
2017
2017
2017
2017
2017
$1.36
$1.06
$17.17
$1.46
$1.13
$16.99
$1.43
$1.06
$16.91
$1.25
$0.98
$16.41
$1.26
$1.04
$18.01
Production of zinc and lead concentrate is trucked daily from the El Mochito mine to Puerto Cortes
where zinc and lead concentrates are stored until sufficient inventory is available for shipment. Under
the terms of the offtake agreement, a minimum 5,000 tonnes of concentrate must be available prior
to shipping.
The Company recognizes revenue from provisional invoicing once the concentrate has been loaded
on the vessel and title transfers to the customer. Final metal pricing occurs according to the
quotational period stated in the offtake agreement and changes in metal prices during the quotational
period may have a significant impact on the final revenue recognized.
Given the Company’s revenue recognition policy and shipment schedule, the dry metric tonne (“DMT”)
concentrate produced in any given quarter may not be immediately reflected in its revenue. The
timing difference between DMT concentrate produced and revenue recognized tends to decrease
significantly when viewed on a yearly basis. In Q4/17, the Company produced 5,449 DMT of zinc
concentrates and 1,963 DMT of lead concentrate, and sold 4,993 DMT of zinc concentrate and 2,808
DMT of lead concentrate.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 10
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
OUTLOOK
During 2017, the Company focused on increasing zinc equivalent production to levels approaching
those the El Mochito mine has historically produced. The Company took milled production from
38,521 tonnes in January to 69,578 tonnes in December, representing an 81% increase in monthly
production year to date. Management expects to deliver further cost and grade improvements in
2018 while delivering on further operational improvements. In 2018, continued improvements at El
Mochito are expected to be achieved by ramping up mining operations in higher grade areas of the
mine and processing of higher grade ore zones, as well as reducing operating costs by employing a
greater degree of longhole stoping, and reducing equipment maintenance costs.
On January 11, 2018, the Company released its initial production guidance for the El Mochito mine
as outlined below:
Contained Metals in Concentrate
Zinc equivalent metal
93 – 109 million lbs
Zinc
Lead
Silver
65 – 73 million lbs
24 – 28 million lbs
900,000 – 1,200,000 ozs
Direct Operating Costs
$70 – $80 / tonne
Capital Expenditure
$16 – $18 million
Financial Metrics
Adjusted EBITDA1
Free Cash Flow2
$32 –$ 40 million
$14 – $20 million
All figures in the above table are based on the following metal price assumptions; $1.50/lb zinc, $1.10/lb lead and $18/oz silver.
1Adjusted EBITDA is a Non-IFRS measure and is calculated by considering the Company's earnings before interest payments, tax,
depreciation and amortization, share-based payments, adjusted for net foreign exchange expenses.
2Free Cash Flow is a Non-IFRS measure and is calculated by considering the Company's cash flows from operations, less the cash used
in investing activities.
The Company’s investment in people, infrastructure and mining equipment has had a direct impact
on operations and resulted in the ability of the Company to achieve such significant production
growth. The benefits realized from the new mining equipment received and deployed in Q4/17 give
management the confidence that the additional equipment should enable the Company to achieve
2018 targets. With the remainder of the new equipment expected to arrive on a staggered basis until
mid-2018, the continued higher availability of trucks, the significant decrease in maintenance costs
expected over the next 6 months along with the continued success in various other productivity
initiatives, are expected to support further operational improvements.
Now that production growth and operational stability have been achieved at the El Mochito mine and
there is clear visibility for additional growth in 2018, the company will spend the year focused on
profitability. Direct operating costs of $80.13/t milled for Q4/17 reflect a decrease of 9% from Q3/17
and 29% from Q1/17, however, did remain higher than originally anticipated for the quarter. This
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 11
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
discrepancy was mainly the result of higher than planned equipment maintenance costs associated
with maintaining the old mining fleet as receipt of the first delivery of the new mining equipment was
delayed, as well as some non-recurring costs associated with information technology and labour.
Direct operating costs are expected to improve in 2018 as the Company continues to replace the
aging mining fleet with the new equipment and implements a number of changes at the mine level
including mining methods and labour.
The Company will continue with its exploration program in 2018 focusing on expanding and upgrading
the current resource with the progressive goal of extending the mine life of El Mochito. The results of
this drill program will be in addition to the 2017 exploration results used to complete an updated NI
43-101 compliant reserve and resource update report expected to be released in Q2/18. Additional
future resource growth is anticipated given the mine’s long track record of resource replacement.
Drilling has been focused on four near mine extensions of known high-grade ore bodies such as
Palmar Dyke, Santa Elena, Victoria and Esperanza, all of which are close to current workings and could
be quickly brought into the mine plan within the next six to twelve months. Assay results released to
date have returned zinc equivalent grades significantly higher than that of the current resource and
mining grade which gives management confidence in the ability to increase the head grade of material
available to the mill in the short term.
With an 11,000 hectare land package and a lack of exploration work over the recent years prior to
Ascendant’s ownership, management plans to also focus on longer-term growth with follow-up on
regional targets identified by historical drilling data. Subsequent to December 31, 2017, management
has begun a surface exploration program and continues to prioritize targets for follow-up work.
SELECTED ANNUAL INFORMATION
The following table set forth selected annual information extracted from the Company’s audited
Consolidated Financial Statements for the years and period noted:
Year Ended Five months ended
December 31, 2017 December 31, 2016
Year Ended
July 31, 2016
Year Ended
July 31, 2015
Revenue
Mine operating expenses
Income (loss) for the year
Income (loss) per share - basic
Income (loss) per share - diluted
Total assets
Non-current financial liabilities
Cash dividends declared
$
$
$
$
$
$
$
$
59,199,358
59,248,063
(12,057,595)
(0.18)
(0.18)
51,956,157
19,418,940
-
(restated)
-
2,538
(2,426,506)
(0.31)
(0.31)
39,179,549
19,018,810
-
-
-
5,918
0.00
0.00
311,501
398,719
-
-
-
(357,404)
0.00
0.00
199,947
137,474
-
The Company recognized $59.2 million in revenues (2016 - $Nil) and $59.25 million in mine operating
expenses (2016 - $Nil) in 2017. The increase is entirely attributed to the sale of concentrate from the
El Mochito Mine, which the Company acquired on December 20, 2016, and fiscal 2017 was the first
full year of commercial operations since the acquisition. The net loss for 2017 of $12.06 million was
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 12
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
the result of high mining production costs incurred in the first half of fiscal 2017, as the Company
focused on turning around the El Mochito mine, and higher general and administrative expenses. The
loss of $2.43 million in the short year ended December 31, 2016 is attributable to general and
administrative expenses incurred of $1.60 million, which included $1.38 million in management
consulting fees, and other expense items of $0.82 million, which included $0.38 million incurred in
transaction costs in connection with the acquisition of AMPAC.
Total assets increased in 2017 due to acquisition of property, plant and equipment for $14.31 million
including continued underground capitalized development at the El Mochito mine. Total assets
increased in the five month period ended December 31, 2016 compared to July 31, 2016 primarily due
to proceeds from private placements of $13.3 million, as well as the acquisition of AMPAC, including
net cash acquired, prepaid expenses of $0.37 million, inventory of $14.7 million, and property, plant
and equipment of $10.41 million (refer to note 6 of the consolidated financial statements).
Non-current financial liabilities increased in 2017 due mainly to the remeasurement of termination
obligations and environmental rehabilitation provision. Non-current liabilities increased in the five
month period ended December 31, 2016 compared to July 31, 2016 due to the acquisition of AMPAC,
including an assumed non-current liability for environmental rehabilitation of $8.43 million, assumed
non-current future termination payments of $7.94 million, due to previous AMPAC owners of $1.45
million and assumed finance liabilities of $0.9 million.
DISCUSSION OF OPERATIONS
With the change in the Company’s year-end reporting period from a July to a December 31 fiscal year-
end in 2016, prior period comparative information has been selected such that the quarters being
compared most closely match the new financial quarter being reported. The variation in the nature
of the comparative periods must be considered in evaluating the financial information noted below.
Three months ended December 31, 2017 versus the two months ended December 31, 2016
During the three months ended December 31, 2017, the Company reported a loss of $1.43 million, or
$0.02 loss per share, compared to a net loss of $1.94 million or $0.22 loss per share in 2016. During
the quarter, the Company produced 16.64 million equivalent payable lbs of zinc and sold 17.6 million
zinc equivalent payable lbs of zinc, compared to the same quarter last year of Nil. Income from mining
operations was $3.60 million during the fourth quarter of 2017.
Revenues of $23.9 million (Q2/SY16 - $Nil) resulted from the sale of 11.0 million lbs (Q2/SY2016 - Nil)
of zinc in concentrates, and 6.19 million lbs (Q2/SY16 – Nil) of lead in concentrates. Provisional realized
commodity prices in USD were $1.46 per pound zinc, $1.13 per pound lead and $16.99 per ounce
silver. The difference to the comparative quarter is entirely attributable to the 2017 fiscal year being
the first financial reporting period reflecting revenue from El Mochito mine operations since the
acquisition of AMPAC on December 2016.
Total mine operating expenses of $20.34 million related to the sale of concentrate. Costs consisted of
direct site production costs of $10.43 million related to mining, processing costs of $2.72 million,
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 13
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
selling, general and administration of $2.73 million and government taxes and royalty expense were
$1.00 million. The Company also recorded $1.29 million of depreciation and amortization. The
Company’s direct operating cost for the quarter was $80.13 per tonne milled (see non-IFRS measures
at the end of this MD&A).
During the three months ended December 31, 2017, the Company incurred general and
administrative expenses of $2.36 million (Q2/SY16 – $1.24 million) before non-cash share-based
compensation of $0.37 million (Q2/SY2016 - $0.02 million). The overall increase in general and
administrative expenses is primarily due to the increase in management salaries and consulting fees
of $2.06 million (Q2/SY16 - $1.31 million) as staffing levels increased and accrued bonuses being
awarded in the fourth quarter, professional fees of $0.06 million (Q2/SY16 - $0.13 million) and share-
based compensation of $0.37 million (Q2/SY16 - $0.02 million) as a result of the Company’s increased
general and administrative activities associated with the operations of the El Mochito mine as
explained above.
For the three months ended December 31, 2017, the Company recorded expenses from other items
of $1.14 million (Q2/SY16 – loss of $0.67 million) primarily due to financing charge on termination
obligations of $0.80 million (Q2/SY16 - $Nil), and change in fair value of derivate of $Nil (Q2/SY16 -
$0.27 million), and transaction costs of $Nil (Q2/SY16 - $0.38 million) in connection with the acquisition
of AMPAC.
Also, current tax expense of $1.16 million was recorded in the fourth quarter of 2017 (Q1/SY16 - $Nil),
which includes a $1.10 million payment made to the Honduran tax authority (Servicio de
Administracion de Rentas de Honduras, “SAR”) under the tax amnesty program. This program, which
was available until December 31, 2017, allows taxpayers to settle potential tax disputes upon payment
of 1.5% of the highest revenue amount in one of the open taxation years subject to possible tax audit
(in this case taxation years 2012-2016 given the 5 year statute of limitations). By participating in the
tax amnesty program, the Company has eliminated potential liabilities arising from the period during
Nyrstar ownership, but also affirms the tax attributes related to loss carry-forwards and depreciable
tax assets. Refer to note 29 of the consolidated financial statements.
Year ended December 31, 2017 versus the five months ended December 31, 2016
During the year ended December 31, 2017, the Company reported a loss of $12.06 million (2016 – loss
of $2.43 million) or loss of $0.18 per share (2016 – loss of $0.31 per share). During the year ended
December 31, 2017, the Company sold 50.73 million zinc equivalent payable pounds, compared to the
same period last year of Nil. Loss from mining operations was $0.05 million during the period.
Revenues of $59.2 million (2016 - $Nil) resulted from the sale of 35.62 million lbs of zinc in
concentrates, and 12.07 million lbs (2016 – Nil) of lead in concentrates. Provisional realized commodity
prices in USD were $1.36 per pound zinc, $1.06 per pound lead and $17.17 per ounce silver. The
difference to the comparative period is entirely attributable to the 2017 fiscal year being the first
financial reporting period reflecting revenue from El Mochito mine operations since the acquisition of
AMPAC in December 2016.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 14
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Total mine operating expenses of $59.2 million related to the sale of concentrate. Costs consisted of
direct site production costs of $40.61 million related to mining, processing costs of $8.10 million,
selling, general and administration of $8.90 million and government taxes and royalty expense were
$2.79 million. The Company also recorded $3.32 million of depreciation and amortization. The
Company’s direct operating cost for the YTD was $88.22 per tonne milled (see non-IFRS measures at
the end of this MD&A).
During the year ended December 31, 2017, the Company incurred general and administrative
expenses of $5.62 million (2016 – $1.58 million) before non-cash share-based compensation of $1.79
million (2016 - $0.02 million). The overall increase in general and administrative expenses is primarily
due to the increase in management salaries and consulting fees of $3.87 million (2016 - $1.38 million)
as staffing levels increased and accrued bonuses being awarded in 2017, professional fees of $0.67
million (2016 - $69,823) and share-based compensation of $1.78 million (2016 - $0.02 million).
Professional fees and regulatory costs increased due to the amount of activity during the year
resulting from the year’s financings.
For the year ended December 31, 2017, the Company recorded expenses from other items of $3.44
million (2016 – expenses of $0.82 million) primarily due to a loss on foreign exchange of $1.04 million
(2016 – gain of $0.01 million), financing charge on termination obligations of $1.47 million (2016 -
$0.01 million), accretion expense on rehabilitation liabilities assumed on acquisition of $0.48 million
(2016 - $0.02 million) as described in note 6 of the consolidated financial statements, and change in
fair value of derivative of $Nil (2016 – $0.40 million).
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 15
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
CASH FLOWS
Operating Activities
During the three months ended December 31, 2017, cash from operating activities totalled $5.83
million.
During the year ended December 31, 2017, cash used in operating activities was $6.47 million (2016 -
$0.90 million) due in part to initial operating losses in the first half of 2017 as well as a significant build
up in concentrate inventory and amounts receivable as production and sales increase at the El
Mochito mine. Cash used in operating activities before changes in working capital was $6.0 million.
The increase in cash flow used in operating activities as compared to the five month period ended
December 31, 2016 is mainly the result of the El Mochito mine operating expenses incurred as well
as an increase in general and administrative expenses.
Investing Activities
During the three months ended December 31, 2017, cash used in investing activities was $5.08 million.
During the year ended December 31, 2017, cash used in investing activities was $13.45 million (2016
- $0.05 million). The increase in cash flow used in investing activities is mainly the result of capital
expenditures in connection with the El Mochito mine operations commencing in fiscal 2017 and new
equipment required to increase production.
Financing Activities
During the three months ended December 31, 2017, cash provided by financing activities was $0.87
from exercise of warrants.
During the year ended December 31, 2017, cash provided by financing activities was $14.64 million
(2016 - $13.51 million). The increase in cash flow provided by financing activities is mainly the result
of proceeds received from private placement of units. On March 7, 2017, The Company issued
23,575,000 units at a price of Cdn$0.85 per unit for aggregate gross proceeds of $14.94 million
(Cdn$20.04 million), less cash share issuance costs of $1.23 million resulting in net cash proceeds of
$13.71 million. On December 7, 2017, a total of 2,340,000 compensation warrants were exercised at
Cdn$0.50 each for aggregate gross proceeds of $0.87 million (Cdn$1.17 million).
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 16
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
SUMMARY OF QUARTERLY RESULTS
The following tables provide highlights, extracted from the Company’s financial statements, of
quarterly results for the past eight quarters. The changes in the tables below are exclusively as a result
of the financing and acquisition of AMPAC on December 20, 2016 and the ramp up in operations of
the El Mochito mine.
The exchange rates used for the quarterly financial information were as follows:
U.S. Dollar/Cdn Dollar
exchange rate
Closing rate at the
reporting date
Average for the period
Dec 31,
2017
0.7866
Sep 30,
2017
0.8013
Jun 30,
2017
0.7706
Mar 31,
2017
0.7513
Dec 31,
2016
0.7448
Jul 31,
Oct 31,
2016
2016
0.7454 0.7659
Apr 30,
2016
0.7969
0.7971
0.7982
0.7494
0.7554
0.7564
0.7625 0.7716
0.7535
Revenues
Total assets
Working capital surplus
Income (loss) before other items
Net income (loss) for the period
Basic earnings (loss) per share
Diluted earnings (loss) per share
Revenues
Total assets
Working capital surplus (deficiency)
Income (loss) before other items
Net (loss) income for the period
Basic earnings (loss) per share
Diluted earnings (loss) per share
2017
Three Months Ended
December 31
September 30
June 30
March 31
$ 23,933,899
51,956,157
$
17,399,214 9,941,830
42,337,216
43,944,212
7,924,415
46,608,716
$
$
$
$
$
12,504,909
870,865
(1,429,234)
(0.02)
(0.02)
15,914,934
1,402,866
821,009
0.01
0.01
2016
16,874,186
27,159,637
(7,378,255)
(8,555,453)
(2,349,782)
(2,893,917)
(0.15)
(0.15)
(0.06)
(0.06)
Two Months Ended
Three Months Ended
December 31
(restated)
October 31
July 31
April 30
$ - - - -
$
$
$
$
$
$
39,179,549
14,984,949 311,501 167,126
19,649,754
(1,268,835)
(1,938,122)
(0.22)
(0.22)
(137,739)
(335,439)
(488,384)
(0.11)
(0.11)
(111,899)
(149,567)
(131,637)
(0.02)
(0.02)
(217,577)
113,290
287,986
0.04
0.04
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 17
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
FINANCIAL RISK MANAGEMENT
Fair Value
The carrying values of cash, amounts receivable, due to/from related parties, accounts payable and
accrued liabilities, finance lease liabilities and due to Nyrstar approximate their fair values due to the
relatively short periods to maturity of the financial instruments.
Fair Value Hierarchy and Liquidity Risk Disclosure
The Company classifies fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy shall have the
following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level
1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and (c) inputs for the asset
or liability that are not based on observable market data (unobservable inputs) (Level 3).
LIQUIDITY AND CAPITAL RESOURCES
The Company’s Consolidated Financial Statements have been prepared on the basis of accounting
principles applicable to a going concern, which assumes that the Company will be able to continue in
operation for the foreseeable future, and will be able to realize its assets and discharge its liabilities
and commitments in the normal course of business.
Management has estimated that the Company’s existing cash at December 31, 2017 together with
cash from operations will be sufficient to fund cash requirements in the ordinary course of business
for a period of at least twelve months. The Company’s cash and liquidity position is, however, sensitive
to a number of variables which cannot be predicted with certainty, including, but not limited to,
meeting production targets, metal prices, foreign exchange rates, operational costs, capital
expenditures and the success of the above noted operational initiatives. If the Company’s cash flow
from operations is not sufficient to satisfy its requirements, there can be no assurance that additional
debt or equity financing will be available to meet these requirements or available on terms acceptable
to Ascendant.
Accordingly, these conditions represent a material uncertainty that may cast significant doubt about
the Company’s ability to continue as a going concern. The consolidated financial statements do not
include adjustments to the carrying values of recorded assets and liabilities that might be necessary
should the Company be unable to continue as a going concern. These adjustments may be material.
The Company has not entered into any significant long-term lease commitments other than those
outlined under Note 15 in the Company’s Consolidated Financial Statements for the year ended
December 31, 2017.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 18
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Contractual Obligations and Commitments
The Company has the following constructive obligations and capital commitments as at December 31,
2017:
Capital commitments (i)
Operating leases (i)
Finance leases (i)
Environmental Rehabilitation provisions (i)
$
$
$
$
$
(i) Reported on an undiscounted basis
CAPITAL MANAGEMENT
<1 years
4,346,900
87,974
1,083,857
380,000
5,898,731
Payments due by period
1-5 years
82,523
8,766
380,238
1,728,059
2,199,586
5> years
Total
-
-
-
7,679,789
7,679,789
4,429,423
96,740
1,464,095
9,787,848
15,778,106
The Company's objective when managing capital is to maintain its ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders. The
Company prepares annual budgets and monthly forecasts approved by the Company’s Board of
Directors to facilitate the management of its capital requirements.
The Company includes equity, comprised of issued capital stock, warrants reserve, share-based
payments reserve and deficit, in the definition of capital. The Company manages its capital structure
and makes adjustments to it, based on the funds available to the Company, in order to support the
acquisition, exploration and development of mineral properties.
Management reviews its capital management approach on an ongoing basis and believes that this
approach, given the relative size of the Company, is reasonable. The Company's capital management
objectives, policies and processes have remained unchanged during the year ended December 31,
2017 and the five month period ended December 31, 2016.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 19
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Financial instruments hierarchy and fair values
The Company classifies fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy shall have the
following levels:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable
inputs).
The Company’s financial assets and liabilities are recorded and measured as follows:
The Company’s financial instruments consist of cash, accounts receivable, due to/from related parties,
accounts payable, accrued liabilities, and finance lease liabilities. At December 31, 2017, the carrying
values of these instruments approximate their fair values due to the relatively short periods to
maturity of the financial instruments and are classified as Level 1 in accordance with the fair vale
hierarchy.
December 31, 2017
December 31, 2016
Notes Carrying value
Fair value Carrying value
Fair value
Financial Assets
Loans and receivables
Cash
Accounts receivable
Due from related parties
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities
Due to related parties
Finance leases
Due to Nyrstar
7
26
13
26
15
6
$8,041,307 $8,041,307
$12,614,908 $12,614,908
$2,944,275 $2,944,275
$471,265
$471,265
-
-
-
-
$14,793,291 $14,793,291
$7,806,817 $7,806,817
-
-
$33,515
$33,515
$1,464,095 $1,464,095
$1,453,020 $1,453,020
$1,631,418 $1,631,418
$1,453,020 $1,453,020
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 20
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
DISCLOSURE OF OUTSTANDING SHARE DATA
The following is a summary of the Company’s outstanding share data as of December 31, 2017.
Capital stock
The Company is authorized to issue an unlimited number of common shares. As of December 31,
2017, the Company has 74,214,593 common shares issued and outstanding.
As of March 21, 2018, the Company has 74,214,593 common shares issued and outstanding.
Warrants
On January 23, 2017, 300,000 warrants were exercised into common shares.
On March 7, 2017, 11,787,500 warrants were issued in connection with a private placement, which
are listed under the symbol ASND.WT.
On December 7, 2017, 2,340,000 compensation warrants were exercised into common shares.
As of December 31, 2017, a total of 15,102,000 warrants are issued and outstanding with expiry
dates ranging from October 31, 2018 to March 7, 2019. The weighted average exercise price for
all warrants is Cdn$1.09.
As of March 21, 2018, a total of 15,102,000 warrants are issued and outstanding.
Stock options
On January 23, 2017, 6,000 stock options were exercised.
On July 10, 2017, 13,333 stock options expired unexercised.
On September 19, 2017, 18,000 stock options were exercised.
As of December 31, 2017, a total of 570,334 stock options are issued and outstanding with expiry
dates ranging from May 28, 2018 to October 27, 2020. The weighted average exercise price for all
stock options is Cdn$0.64. Each stock option entitles the holder to purchase one common share
of the Company.
As of March 21, 2018, a total of 570,334 stock options are issued and outstanding.
Restricted share units (RSUs)
On April 18, 2017, the Company granted 5,790,000 Restricted Share Units (“RSUs”), to certain
eligible participants under the Company’s RSU Plan, including certain officers, directors, and
employees. Of the RSUs granted, 1,680,000 vested immediately and 96,666 were converted to
common shares as at December 31, 2017.
On November 22, 2017, the Company granted 665,000 Restricted Share Units (“RSUs”), to certain
eligible participants under the Company’s RSU Plan, including certain officers, directors and
employees. Of the RSUs granted, 91,667 vested immediately and 25,000 were converted to
common shares as at December 31, 2017.
As of December 31, 2017 and March 21, 2018, a total of 6,333,334 RSUs are issued and outstanding,
of which 1,771,667 are fully vested and redeemable.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 21
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
FINANCIAL CONDITION
As at December 31, 2017, the Company’s cash balance was $8.0 million. Total current assets were
$28.81 million and total current liabilities were $16.31 million for positive working capital of $12.5
million. Significant cash resources of $5.73 million have been used during the year ended December
31, 2017 to build up concentrate and ore inventory for an ending value of $6.64 million. Concentrate
inventory is convertible into cash upon shipment and sales of concentrate which occur approximately
every month. As 2017 was a ramp up year, and 2018 is expected to be more steady state, working
capital is expected to remain consistent.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
RELATED PARTY TRANSACTIONS
During the year ended December 31, 2017, the Company received loans of $Nil (December 31, 2016 -
$35,515 (Cdn$45,000)) from directors and officers of the Company to cover operating expenses. These
loans were unsecured, non-interest bearing with no fixed terms of repayment. In January 2017, these
loans were settled in full through a cash payment of Cdn$45,000.
During the year ended December 31, 2017, the Company granted loans of $431,461 (Cdn$575,893) to
certain directors and officers of the Company to cover the tax liability in respect of the vested RSUs.
These loans bear interest at the Canada Revenue Agency’s (“CRA”) quarterly prescribed interest rate
used to calculate employee and shareholder loans calculated annually and payable on the earlier of:
(i) demand by the Company, (ii) sale by the directors and officers of the common shares underlying
the vested RSUs, and (iii) April 18, 2022 for the April 2017 RSU recipients, and November 22, 2022 for
the November 2017 RSU recipients.
Officers and directors’ compensation
The Company paid or accrued compensation of $3,088,481 (2016 - $1,137,303) to directors and
officers during 2017. The Company recorded share-based payment expense related to the vesting of
issued RSUs of $1,763,251 (2016 - $Nil).
As at December 31, 2017, accounts payable and accrued liabilities include $71,094 due to directors
and officers of the Company, and accrued compensation of $1,314,972 due to directors and officers
of the Company.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 22
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
NON-IFRS PERFORMANCE MEASURES
The non-IFRS performance measures presented do not have any standardized meaning prescribed
by IFRS and are therefore unlikely to be directly comparable to similar measures presented by other
issuers.
Non-IFRS reconciliation of adjusted EBITDA
EBITDA is a non-IFRS measure that represents an indication of the Company’s continuing capacity to
generate earnings from operations before taking into account management’s financing decisions and
costs of consuming capital assets, and management’s estimate of their useful life. EBITDA comprises
revenue less operating expenses before interest expense (income), property, plant and equipment
amortization and depletion, and income taxes. Adjusted EBITDA has been included in this document.
Under IFRS, entities must reflect in compensation expense the cost of share-based payments. In the
Company’s circumstances, share-based payments involve a significant accrual of amounts that will
not be settled in cash but are settled by the issuance of shares in exchange for cash. EBITDA and
Adjusted EBITDA do not have any standardized meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared in accordance with
IFRS. EBITDA and Adjusted EBITDA exclude the impact of cash costs of financing activities and taxes,
and the effects of changes in operating working capital balances, and therefore are not necessarily
indicative of operating profit or cash flow from operations as determined under IFRS. Other
companies may calculate EBITDA and Adjusted EBITDA differently. As such, the Company has made
an entity specific adjustment to EBITDA for these expenses. The Company has also made an entity-
specific adjustment to the foreign currency exchange (gain)/loss.
The following table provides a reconciliation of net income (loss) to Adjusted EBITDA:
Adjusted EBITDA
December 31,
December 31,
September 30,
June 30,
March 31,
2017
2017
2017
2017
2017
YTD
Q4
Q3
Q2
Q1
Net (loss) income
Adjusted for:
Depletion and depreciation
Interest income/expense
Accretion expense on rehabilitation liabilities
Financing charge on termination obligations
Share-based payments
Foreign currency exchange gain/loss
Income taxes
Adjusted EBITDA
$
$
$
$
$
$
$
$
$
(12,057,595)
(1,429,234)
821,009
(8,555,453)
(2,893,917)
3,344,927
1,298,214
273,361
482,112
1,471,810
1,786,587
1,043,824
1,158,308
(2,496,666)
53,258
(250,049)
803,453
368,048
279,020
1,158,308
2,281,018
689,584
82,783
316,768
225,835
301,106
(13,880)
-
702,721
87,291
237,467
377,138
1,117,433
521,899
-
654,408
50,029
177,926
65,384
-
256,785
-
2,423,205
(5,511,504)
(1,689,385)
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 23
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Direct operating cost per tonne milled
The Company uses the non-IFRS measure of direct operating cost per tonne milled to manage and
evaluate operating performance. The Company believes that, in addition to conventional measures
prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s
performance and ability to generate cash flows. Accordingly, it is intended to provide additional
information and should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with IFRS. The Company considers cost of sales per tonne milled to be the
most comparable IFRS measure to direct operating cost per tonne milled and has included
calculations of this metric in the reconciliations within the applicable tables to follow.
Direct operating cost per tonne milled includes mine direct operating production costs such as mining,
processing, administration, indirect charges as surface maintenance and camp expenses, and
inventory sales adjustments but does not include, smelting, refining and freight costs, royalties,
depreciation, depletion, amortization, reclamation, and capital costs.
The following table provides a reconciliation of direct operating costs to cost of sales, as reported in
the Company’s consolidated statement of income (loss) for the year ended December 31, 2017:
Direct operating cost per tonne milled
December 31,
December 31,
September 30,
June 30,
March 31,
2017
2017
2017
2017
2017
YTD
Q4
Q3
Q2
Q1
Cost of Sales
Add: Termination Liability Payments
Add: Variation in Finished Inventory
Deduct: Depreciation in production
Total cash cost (including royalties)
Deduct: Government taxes and royalties
(1)
Direct operating cost
Tonnes Milled
$
$
$
$
$
$
$
tonnes
Direct operating cost per tonne milled
(1)
$/tonne
20,336,296
14,340,222
14,864,422
59,248,063
284,358
4,470,022
14,136
76,528
(2,157,809)
2,639,010
(3,318,613)
(1,289,851)
(676,335)
(368,886)
255,555
(699,442)
9,707,123
562,580
3,733,266
(652,985)
60,683,830
16,902,772
16,379,425
14,051,649
13,349,984
(2,788,417)
(1,009,080)
(912,480)
(485,803)
(381,054)
57,895,413
15,893,692
15,466,945
13,565,846
12,968,930
656,291
$88.22
198,354
$80.13
176,035
$87.86
150,785
$89.97
131,116
$98.91
(1) Direct operating cost per tonne milled previously included government taxes and royalties, resulting in YTD/17 - $95.60/t; Q3/17- $93.05/t; Q2/17 - $93.19/t; and Q1/17 - $101.82.
Government taxes and royalties are no longer included in the Direct Operating Cost per Tonne Milled calculation.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 24
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Additional non-IFRS measures
The Company uses other financial measures, the presentation of which is not meant to be a substitute
for other subtotals or totals presented in accordance with IFRS, but rather should be evaluated in
conjunction with such IFRS measures. The following other financial measures are used:
- Operating cash flows before movements in working capital - excludes the movement from period-
to-period in working capital items including trade and other receivables, prepaid expenses,
deposits, inventories, trade and other payables and the effects of foreign exchange rates on these
items.
The terms described above do not have a standardized meaning prescribed by IFRS, and therefore
the Company’s definitions are unlikely to be comparable to similar measures presented by other
companies. The Company’s management believes that their presentation provides useful information
to investors because cash flows generated from operations before changes in working capital
excludes the movement in working capital items. This, in management’s view, provides useful
information of the Company’s cash flows from operations and are considered to be meaningful in
evaluating the Company’s past financial performance or its future prospects. The most comparable
IFRS measure is cash flows from operating activities.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 25
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
USE OF ACCOUNTING ESTIMATES AND JUDGEMENTS
The following are significant judgements and estimates impacting the consolidated financial
statements:
Mineral reserves and resources - Proven and probable mineral reserves are the economically
mineable parts of the Company’s measured and indicated mineral resources demonstrated by
at least a preliminary feasibility study. The Company estimates its proven and probable mineral
reserves and measured and indicated and inferred mineral resources based on information
compiled by appropriately qualified persons. The estimation of future cash flows related to
proven and probable mineral reserves is based upon factors such as estimates of foreign
exchange rates, commodity prices, future capital requirements and production costs along with
geological assumptions and judgments made in estimating the size and grade of the ore body.
Changes in the proven and probable mineral reserves or measured and indicated and inferred
mineral resources estimates may impact the carrying value of property, plant and equipment,
reclamation and remediation obligations, recognition of deferred tax amounts and
depreciation, depletion and amortization.
-
-
Purchase Price Allocation (note 6) - Applying the acquisition method to business combinations
requires each identifiable asset and liability to be measured at its acquisition-date fair value. The
excess, if any, of the fair value of consideration over the fair value of the net identifiable assets
acquired is recognized as goodwill. The determination of the acquisition-date fair values often
requires management to make assumptions and estimates about future events. The
assumptions and estimates relating to determining the fair value of property, plant and
equipment acquired generally require a high degree of judgment, and include estimates of
mineral reserves acquired, future metal prices and discount rates. Changes in any of the
assumptions or estimates used in determining the fair value of acquired assets and liabilities
could affect the amounts assigned to assets, liabilities and goodwill in the purchase price
allocation. As noted in Note 6 the Purchase Price Allocation relating to the acquisition of AMPAC
was finalized during the fourth quarter of 2017.
Tax provisions (note 29) - management makes estimates in determining the measurement and
recognition of deferred tax assets and liabilities recorded on the consolidated balance sheets.
The measurement of deferred tax assets and deferred tax liabilities is based on tax rates that
are expected to apply in the period that the asset is realized or liability is settled based on tax
rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets, including those arising from unutilized tax losses, require management to
assess the likelihood of taxable income in future periods in order to utilize recognized deferred
tax assets. Estimates of future taxable income are based on forecasted cash flows from
operations and the application of existing tax laws in each jurisdiction. To the extent that future
cash flows and taxable income differ significantly from estimates, the ability to realize the net
deferred tax assets recorded at the balance sheet date could be affected. At the end of each
reporting period, management reassesses the period that assets are expected to be realized or
liabilities are settled and the likelihood of taxable income in future periods in order to support
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 26
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
-
and adjust the deferred tax assets and deferred tax liabilities recognized on the consolidated
balance sheets.
Functional currency (note 2c) - judgement was required in determining that the US dollar is the
appropriate functional currency of certain subsidiaries of Ascendant. This was determined by
assessing the currency which influences sales prices for concentrate and metals sales, labour
and input costs, as well as the currency in which AMPAC finances its operations. If the judgement
was altered and a different functional currency was selected for certain subsidiaries of
Ascendant, this could result in material differences in the amounts recorded in the consolidated
statement operations and comprehensive loss pertaining to foreign exchange gains or losses.
Provision for environmental rehabilitation (note 16) – the Company recognizes a provision for
environmental rehabilitation when the obligation occurs. Provisions for environmental
rehabilitation are periodically reviewed to reflect known developments, including updated cost
estimates. The calculation of the present value of the necessary costs to settle the obligation in
the future includes assumptions regarding the risk-free interest rate for discounting future cash
flows, inflation, foreign exchange rates, and estimates of the underlying currencies in which the
provisions will ultimately be settled. Although the ultimate cost to be incurred is uncertain, the
Company estimates its costs based on studies using current restoration standards and
techniques.
Termination benefits (note 17) - the Company’s termination obligations relate mainly to ongoing
severance plans. The Company estimates obligations related to the employee benefits plans
using actuarial determinations that incorporate assumptions using management’s best
estimates of factors including, salary escalation, retirement dates of employees and discount
rates. Due to the complexity of the valuation, the underlying assumptions and its long-term
nature, the termination obligation is highly sensitive to changes in these assumptions.
Management reviews all assumptions at each reporting date. In determining the appropriate
discount rate, the Company considers the interest rates on government bonds in the respective
currency, with extrapolated maturities corresponding to the expected duration of the defined
benefit obligation. The mortality rate is based on publicly available mortality tables for the
specific country, and the Company bases future salary increases and severance increases on
expected future inflation rates for Honduras.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
Future accounting changes
The following standards and amendments to existing standards have been published and are
mandatory for annual periods beginning January 1, 2018, or later periods:
IFRS 2 - Share-based Payment (“IFRS 2”) was amended in June 2016, clarifying the accounting for
certain types of share-based payment transactions. The amendments provide requirements on
accounting for the effects of vesting and non-vesting conditions of cash-settled share-based
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 27
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
payments, withholding tax obligations for share-based payments with a net settlement feature, and
when a modification to the terms of a share-based payment changes the classification of the
transaction from cash-settled to equity-settled. The amendments are effective for the year beginning
on or after January 1, 2018. The Company intends to adopt the amendments to IFRS 2 in its financial
statements for the annual period beginning on January 1, 2018. The extent of the impact of adoption
of the amendments has not yet been determined.
IFRS 9 – Financial Instruments (“IFRS 9”) was issued by the IASB in November 2009 with additions in
October 2010 and May 2013 and will replace IAS 39 Financial Instruments: Recognition and
Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is
measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS
9 is based on how an entity manages its financial instruments in the context of its business model and
the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for
classification and measurement of financial liabilities were carried forward unchanged to IFRS 9,
except that an entity choosing to measure a financial liability at fair value will present the portion of
any change in its fair value due to changes in the entity’s own credit risk in other comprehensive
income, rather than within profit or loss. The new standard also requires a single impairment method
to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods
beginning on or after January 1, 2018. Earlier adoption is permitted though management does not
anticipate early adoption of the standard. The Company is currently assessing the impact on the
adoption of this standard.
IFRS 15 - Revenue from Contracts with Customers (“IFRS 15”) was issued in May 2014 and amended in
April 2016. IFRS 15 establishes a five-step model to account for revenue arising from contracts with
customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.
This standard is effective for annual periods beginning on or after January 1, 2018 and permits early
adoption. The Company intends to adopt the amendments to IFRS 15 in its financial statements for
the annual period beginning on January 1, 2018. The impact of the standard has been evaluated and
is expected to have no material impact on the Company’s financial statements as no material changes
are expected in respect of timing and amount of revenue currently recognized by the Company.
Additional disclosure may be required upon implementation of IFRS 15 in order to provide sufficient
information to enable users to understand the nature, amount, timing, and uncertainty of revenue
and cash flows arising from the contracts with customers.
IFRS 16 – Leases (“IFRS 16”) was issued in January 2016 and replaces IAS 17 – Leases as well as some
lease related interpretations. With certain exceptions for leases under twelve months in length or for
assets of low value, IFRS 16 states that upon lease commencement a lessee recognises a right-of-use
asset and a lease liability. The right-of-use asset is initially measured at the amount of the liability plus
any initial direct costs. After lease commencement, the lessee shall measure the right-of-use asset at
cost less accumulated depreciation and accumulated impairment. A lessee shall either apply IFRS 16
with full retrospective effect or alternatively not restate comparative information but recognise the
cumulative effect of initially applying IFRS 16 as an adjustment to opening equity at the date of initial
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 28
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
application. IFRS 16 requires that lessors classify each lease as an operating lease or a finance lease.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to
ownership of an underlying asset. Otherwise it is an operating lease. IFRS 16 is effective for annual
periods beginning on or after January 1, 2019. Earlier adoption is permitted if IFRS 15 has also been
applied. The Company intends to adopt the amendments to IFRS 16 in its financial statements for the
annual period beginning on January 1, 2019. The extent of the impact of adoption of the standard has
not yet been determined.
IFRIC 22 – Foreign currency transactions and advance consideration (“IFRIC 22”) was issued in
December 2016 by the IASB. IFRIC 22 clarifies the date that should be used for translation when a
foreign currency transaction involves an advance payment or receipt. The Interpretation is applicable
for annual periods beginning on or after January 1, 2018. The Company is currently assessing the
impact on the adoption of this standard.
IFRIC 23 - Uncertainty over Income Tax Treatments (“IFRIC 23”) was issued in June 2017 by the IASB.
IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in
circumstances in which there is uncertainty over income tax treatments. The Interpretation is
applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted.
The extent of the impact of adoption of the Interpretation has not yet been determined.
Internal Controls over Financial Reporting (ICFR)
The CEO and the CFO, with the assistance of management, conducted an evaluation of the
effectiveness of the Company's internal control over financial reporting as at December 31, 2017.
Based on the evaluation, the CEO and the CFO have concluded that as at December 31, 2017, the
Company's internal control over financial reporting is effective, based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control —
Integrated Framework (2013).
The inherent limitations in all control systems are such that they can provide only reasonable, not
absolute, assurance that all control issues and instances of fraud or error, if any, within the Company
have been detected. Therefore, no matter how well-designed, ICFR has limitations and can provide
only reasonable assurance with respect to financial statement preparation and may not prevent and
detect all misstatements.
As of the end of the period covered by this MD&A and accompanying Financial Statements,
Ascendant’s management evaluated the effectiveness of its disclosure controls. Based on that
evaluation, the CEO and the CFO have concluded that Ascendant’s disclosure controls and procedures
and internal controls over financial reporting, provide reasonable assurance that they were effective.
There have been no changes in our internal control over financial reporting during the year ended
December 31, 2017 that have materially affected, or are reasonably likely to materially affect, internal
control over financial reporting.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 29
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
RISKS AND UNCERTAINTIES
The Company’s business contains significant risk due to the nature of mining, exploration, and
development activities. For additional discussion of these and other risk factors, please refer to the
Company’s Annual Information Form for the five month period ended December 31, 2016, which can
be found under the Company’s profile at www.sedar.com.
Limited Operating History
The Company has a limited history of earnings. The Company's continued operation will be dependent
upon its ability to generate operating revenues and to procure additional financing.
Dependence on El Mochito mine for the Company's Operating Revenue and Cash Flow
Substantially all of the Company's operations are carried out through, and substantially all of the
Company's operating revenue and cash flow are generated by, AMPAC a Honduran Company and a
wholly owned subsidiary of the Company. Accordingly, the Company is dependent on the cash flows
from AMPAC to meet its obligations. However historic and current performance of the AMPAC
business may not be indicative of success in future periods, and there is no assurance as to future
performance of AMPAC. The future performance of the AMPAC business and the ability of AMPAC to
provide the Company with payments may be constrained by factors such as, among others: the
operation of the Offtake Agreements; economic downturns; technological and regulatory changes;
the cash flows generated by operations, investment activities and financing activities; and the level of
taxation, particularly corporate profits and withholding taxes. If the Company is unable to receive
sufficient cash from AMPAC, the Company may be required to incur indebtedness, raise funds in a
public or private equity or debt offering, or sell some or all of its assets. There can be no assurance
that any such financing will be available on satisfactory terms or that it will be sufficient. The Company
may be subject to limitations on the repatriation of earnings in Honduras. In particular, there may be
significant withholding taxes applicable to the repatriation of funds from Honduras to Canada. There
can be no assurance that changes in regulations, including tax treaties, in and among the relevant
countries where the Company does business will not take place, and if such changes occur, they may
adversely impact the Company's ability to receive sufficient cash payments from its subsidiaries.
Dependence on Nyrstar for Revenue
Substantially all of the Company's revenue is derived from sales of its concentrate products pursuant
to the Offtake Agreements with Nyrstar. Bulk sales of concentrate pursuant to the Offtake Agreements
are highly periodic.
Exploration, Development and Production Risks
Mining and mineral operations involve many risks that even a combination of experience and
knowledge and careful evaluation may not be able to overcome. The long-term commercial success
of the Company will depend on its ability to find, acquire, develop and commercially produce mineral
deposits. Without the continual addition of new resources, any existing resources the Company may
have at any particular time and the production therefrom will decline over time as such existing
resources are exploited. A future increase in the Company’s resources will depend not only on its
ability to explore and develop any properties it may have from time to time, but also on its ability to
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 30
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
select and acquire suitable producing properties or prospects. No assurance can be given that the
Company will be able to continue to locate satisfactory properties for acquisition or participation.
Moreover, if such acquisitions or participations are identified, the Company may determine that
current markets, terms of acquisition and participation or pricing conditions make such acquisitions
or participations uneconomic. There is no assurance that further commercial quantities of resources
will be discovered or acquired by the Company.
Mining and Processing
Mining operations involve a high degree of risk. Such operations are subject to all the hazards and
risks normally encountered in the development and production of zinc, lead, silver and other base or
precious metals in a developing country, including but not limited to:
industrial accidents;
failure of processing and mechanical equipment and other performance problems;
labour force disruptions;
environmental hazards;
-
- discharge of pollutants or hazardous chemicals;
-
-
-
- unavailability of materials and equipment;
-
interruption of power supply;
- unanticipated transportation costs;
-
-
changes in the regulatory environment;
climate change, including changes to weather patterns, increased frequency of extreme
weather events, temperatures and water availability;
- unusual and unexpected geologic formations, water conditions, surface or underground
conditions and seismic activity;
cybersecurity breaches, hacking and cyberterrorism;
- diseases perceived as a serious threat to maintaining a skilled workforce;
-
- unanticipated changes in metallurgical and other processing problems; and
-
rock bursts, cave-ins, structural failures, flooding and fire.
Any of these can materially and adversely affect, among other things, the development of properties,
production quantities and rates, costs, capital expenditures and production commencement dates.
Such risks could also result in: damage to, or destruction of, mines and other producing facilities;
damage to property; loss of key employees; loss or compromise of data, financial and other digital
records and information; environmental damage; delays in mining, monetary losses and possible legal
liability.
AMPAC's processing facilities are dependent on continuous mine feed to remain in operation.
Should the El Mochito mine not maintain material stockpiles of ore or material in process, any
significant disruption in either mine feed or processing throughput, whether due to equipment
failures, adverse weather conditions, power supply interruptions, export or import restrictions,
labour force disruptions or other causes, may have an immediate adverse effect on the results from
the operations of the Company. A significant reduction in mine feed or processing throughput could
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 31
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
cause the direct operating cost of production to increase to a point where the Company may
determine that it is no longer economical to exploit some or all of its mineral reserves.
Although AMPAC utilizes the operating history of its existing mine complex to derive estimates of
future operating costs and capital requirements, such estimates may differ materially from actual
operating results at new deposits or expansion of existing deposits. The economic feasibility analysis
with respect to any individual project is based upon, among other things: the interpretation of
geological data obtained from drill holes and other sampling techniques; internal feasibility analysis
(which derive estimates of cash operating costs based upon anticipated tonnage and grades of ore to
be mined and processed); base and precious metals price assumptions; the configuration of the ore
body; expected recovery rates of metals from the ore; comparable facility and equipment costs;
anticipated climatic conditions; and estimates of labour, productivity, royalty, tax rates, or other
ownership burdens and other factors.
The Company expects to periodically review mining schedules, production levels and asset lives in its
life-of mine planning. Significant changes in the life-of-mine plans can occur as a result of mining
experience, new ore discoveries, changes in mining methods and rates, process changes, investment
in new equipment and technology, base and precious metals price assumptions, and other factors.
As a result of the foregoing risks, expenditures on all projects, actual production quantities and rates,
and cash costs may be materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs. In addition, estimated production dates may
be delayed materially, especially to the extent that development projects are involved. Any such
events can materially and adversely affect the Company's business, financial condition, results of
operations and cash flows.
Competition
The mining industry is competitive in all its phases. The Company will compete with numerous other
participants in the search for the acquisition of mineral properties and in the marketing of mineral
resources. Their competitors include mining companies that have substantially greater financial
resources, staff and facilities than those of the Company, as the case may be. The Company’s ability
to increase resources in the future will depend not only on its ability to explore and develop its present
properties, but also on its ability to select and acquire suitable producing properties or prospects for
exploratory drilling. Competitive factors in the distribution and marketing of mineral resources
include price and methods and reliability of delivery.
Regulatory
Mining operations (exploration, production, pricing, marketing and transportation) are subject to
extensive controls and regulations imposed by various levels of government that may be amended
from time to time. The Company’s operations may require licenses from various governmental
authorities. There can be no assurance that the Company will be able to obtain all necessary
approvals, licenses and permits that may be required to carry out exploration and development at its
projects. A failure to obtain such approval on a timely basis or material conditions imposed by such
authority in connection with the approval would materially affect the prospects of the Company.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 32
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Environmental
All phases of the mining business present environmental risks and hazards and are subject to
environmental regulation pursuant to a variety of federal, provincial and local laws and regulations.
Environmental legislation provides for, among other things, restrictions and prohibitions on spills,
releases or emissions of various substances produced in association with mining operations. The
legislation also requires that wells and facility sites be operated, maintained, abandoned and
reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can
require significant expenditures and a breach may result in the imposition of fines and penalties,
some of which may be material. Environmental legislation is evolving in a manner expected to result
in stricter standards and enforcement, larger fines and liability and potentially increased capital
expenditures and operating costs. The discharge of resources or other pollutants into the air, soil or
water may give rise to liabilities to governments and third parties and may require the Company to
incur costs to remedy such discharge. Although the Company believes that it will be in material
compliance with current applicable environmental regulations no assurance can be given that
environmental laws will not result in a curtailment of production or a material increase in the costs of
production, development or exploration activities or otherwise adversely affect the Company’s
financial condition, results of operations or prospects.
Reclamation and Mine Closure Costs
Closing a mine can have a significant impact on local communities and site remediation activities may
not be supported by local stakeholders. AMPAC reviews and updates closure plans regularly with
external stakeholders over the life of the mine and considering where post-mining land use for mining
affected areas has potential benefits to the communities.
In addition to the immediate closure activities, including ground stabilization, infrastructure
demolition and removal, top soil replacement, re-grading and re-vegetation, closed mining operations
require long-term surveillance and monitoring.
Site closure plans have been developed and amounts accrued in AMPAC's financial statements to
provide for mine closure obligations. Future remediation costs for inactive mines are estimated at the
end of each period, including ongoing care, maintenance and monitoring costs. Changes in estimates
at inactive mines are reflected in earnings in the period an estimate is revised. Actual costs realized in
satisfaction of mine closure obligations may vary materially from management's estimates. Changes
in environmental laws can create uncertainty with regards to future reclamation costs and affect the
requirements.
Market Conditions
In the last decade, market events and conditions, including the disruptions in the international credit
markets and other financial systems and the deterioration of global economic conditions, have caused
significant volatility in commodity prices. These conditions also caused a loss of confidence in the
broader US and global credit and financial markets and resulted in the collapse of, and government
intervention in, major banks, financial institutions and insurers and created a climate of greater
volatility, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses
and tighter credit conditions. Notwithstanding various actions by governments, concerns about the
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 33
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
general condition of the capital markets, financial instruments, banks, investment banks, insurers and
other financial institutions caused the broader credit markets to further deteriorate and stock markets
to decline substantially. More recently, there has been mounting government debt in many western
nations, significant volatility and depression in the price of oil and numerous environmental disasters
globally. These events are illustrative of the effect that events beyond the Company's control may
have on commodity prices, demand for metals such as zinc, lead and silver, availability of credit,
investor confidence and general financial market liquidity, all of which may affect the Company's
business. Any or all of these economic factors, as well as other related factors, may cause decreases
in asset values that are deemed to be other than temporary, resulting in impairment losses. If such
increased levels of volatility and market turmoil continue, the Company's operations could be
adversely impacted and the trading price of the Common Shares may be adversely affected.
The Company is also exposed to liquidity and various counterparty risks including, but not limited to,
through: (i) financial institutions that hold the Company's or AMPAC's cash; (ii) companies that have
payables to AMPAC or the Company; (iii) the Company's or AMPAC's insurance providers; (iv) future
lenders to the Company or AMPAC; and (v) companies that have received deposits from AMPAC for
the future delivery of equipment. AMPAC is also exposed to liquidity risks in meeting its capital
expenditure requirements in instances where cash positions are unable to be maintained or
appropriate financing is unavailable.
Issuance of Debt
From time to time Ascendant may enter into transactions to acquire assets or the shares of other
Companies. These transactions may be financed partially or wholly with debt, which may increase the
Company’s debt levels above industry standards. Depending on future exploration and development
plans, the Company may require additional equity and/or debt financing that may not be available or,
if available, may not be available on favorable terms. Neither the Company’s articles nor its by-laws
limit the amount of indebtedness that Ascendant may incur. The level of the Company’s indebtedness
from time to time could impair the Company’s ability to obtain additional financing in the future on a
timely basis to take advantage of business opportunities that may arise.
Impairment of PP&E assets
Under IFRS, impairment of PP&E is calculated at a more granular level than under the Canadian GAAP
Full Cost Accounting method where all the Company’s mining assets are accumulated into costs
centres. Impairment calculations are performed at a “Cash Generating Unit” level (“CGUs”) by
comparing the CGUs carrying value to a corresponding risk adjusted recovery of proved and probable
resources. The Company has allocated its costs to each block acquired during the year based on
individual acquisition costs and on the Company’s proved plus probable resources or resource values
where costs were not separately identified.
Resource Estimates
There are numerous uncertainties inherent in estimating quantities of resources and cash flows to be
derived there from, including many factors that are beyond the control of the Company. The resource
and cash flow information set forth herein represent estimates only. These evaluations include a
number of assumptions relating to factors such as initial production rates, production decline rates,
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 34
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
ultimate recovery of resources, timing and amount of capital expenditures, marketability of
production, future prices, operating costs and royalties and other government levies that may be
imposed over the producing life of the resources. These assumptions were based on price forecasts
in use at the date the relevant evaluations were prepared and many of these assumptions are subject
to change and are beyond the control of the Company. Actual production and cash flows derived
there from will vary from these evaluations, and such variations could be material. The foregoing
evaluations are based in part on the assumed success of activities the Company intends to undertake
in future years. The resources and estimated cash flows to be derived there from contained in such
evaluations will be reduced to the extent.
Insurance and Uninsured Risks
The Company's business is subject to a number of risks and hazards generally, including adverse
environmental conditions, industrial accidents, labour disputes, civil unrest and political instability,
unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the
regulatory environment and natural phenomena such as inclement weather conditions, floods and
earthquakes. Such occurrences could result in damage to mineral properties or production facilities,
personal injury or death, environmental damage to the Company's properties or the properties of
others, delays in development or mining, monetary losses and possible legal liability. The Company
will maintain insurance to protect against certain other risks in such amounts as it considers
reasonable. However, its insurance will not cover all the potential risks associated with its operations.
The Company may also be unable to maintain insurance to cover these risks at economically feasible
premiums. Insurance coverage may not continue to be available or may not be adequate to cover any
resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards
as a result of exploration and production is not generally available to the Company or to other
companies in the mining industry on acceptable terms. The Company might also become subject to
liability for pollution or other hazards which may not be insured against or which the Company may
elect not to insure against because of premium costs or other reasons. Losses from these events may
cause the Company to incur significant costs that could have a material adverse effect upon its
financial performance and results of operations.
Reliance on Key Personnel
The Company’s success will depend in large measure on certain key personnel. The loss of the services
of such key personnel could have a material adverse effect on the Company. The Company does not
anticipate having key person insurance in effect for management. The contributions of these
individuals to the immediate operations of the Company are likely to be of central importance. In
addition, the competition for qualified personnel in the mining industry is intense and there can be
no assurance that the Company will be able to continue to attract and retain all personnel necessary
for the development and operation of its business. Investors must rely upon the ability, expertise,
judgment, discretion, integrity and good faith of the management of the Company.
Labour and Employment Matters
Relations with employees and key skilled personnel in Honduras could be impacted by changes in the
scheme of labour relations that may be introduced by relevant governmental authorities. Adverse
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 35
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
changes in such legislation may materially adversely affect the Company's business, results of
operations and financial condition. In addition, labour disruption or work stoppages by AMPAC's
employees , most of whom are unionized, or its contractors could materially adversely affect its
business and operations.
Operations in Foreign Jurisdiction and Emerging Market
Substantially all of the Company's operations are located in Honduras. Like many emerging markets,
Honduras is a developing country that at times may face challenges in terms of natural resource
development governance, physical and institutional infrastructure, governmental and regulatory
bureaucracy and delays associated therewith. Additionally, the Company's AMPAC operations may at
various times be exposed to political, economic and other risks and uncertainties associated with
operating in a foreign jurisdiction. These risks and uncertainties
include, but are not limited to:
-
renegotiation, nullification, termination or rescission of existing concessions, licenses, permits
and contracts;
expropriation and/or nationalization;
repatriation restrictions;
echanging political conditions;
currency exchange rate fluctuations;
-
-
-
-
- war and civil unrest;
- military repression;
- hostage-taking;
-
-
-
-
-
-
-
-
-
taxation policies;
labour unrest;
changing government policies and legislation;
import and export regulations;
restrictions on foreign exchange;
currency controls;
environmental legislation;
infrastructure development policy; and
certain non-governmental organizations
development.
that oppose globalization and
resource
Changes, if any, in mining or investment policies or shifts in political attitude in Honduras may
adversely affect the Company's operations or profitability. Operations may be affected in varying
degrees by government regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, income taxes, foreign investment, maintenance
of claims, environmental legislation, land use, land claims by locals, water use, infrastructure and mine
safety. Additionally, there may be restrictions that interfere with the ability of AMPAC to make
distributions to the Company. Failure to comply strictly with applicable laws, regulations and local
practices relating to mineral right applications and tenure could result in loss, reduction or
expropriation of entitlements. The occurrence of these various factors and uncertainties cannot be
accurately predicted and could have an adverse effect on the Company's operations and profitability.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 36
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
There can be no assurance that companies and/or industries which are deemed of national or
strategic importance in Honduras, including mineral exploration, production and development, will
not be nationalized. There is a risk that further government limitations, restrictions or requirements,
not presently foreseen, may be implemented. Changes in policy that alter laws regulating the mining
industry could have a material adverse effect on the Company.
There can be no assurance that AMPAC's assets in Honduras will not be subject to nationalization,
requisition or confiscation, whether legitimate or not, by an authority or body.
In addition, in the event of a dispute arising from operations in Honduras, the Company may be
subject to the exclusive jurisdiction of foreign courts. The Company may also be hindered or
prevented from enforcing its rights with respect to a governmental instrumentality due to the doctrine
of sovereign immunity.
The Company has taken certain steps to mitigate certain of the foregoing risks, including but not
limited to: implementing appropriate internal financial control policies, retaining qualified local
experts to advise on matters such as title to the El Mochito mine, licenses and permits, environmental
regulation and related matters, hiring personnel with appropriate specialized knowledge, skill and
experience, maintaining positive government relations, maintaining positive labour relations, and
maintaining appropriate insurance policies.
However notwithstanding the Company's efforts to mitigate risks associated with operations in a
developing jurisdiction, most of the foregoing risks and uncertainties are beyond the Companys
control and the occurrence of any of them could adversely affect the operations of AMPAC and the
Company's future cash flow, results of operations and financial condition.
Title Matters
The Company obtained, as a condition of closing for the El Mochito Acquisition, a favourable legal
report as to the quality of AMPAC's title to the property and assets comprising the El Mochito mine,
however should AMPAC's titles not be honoured or become unenforceable for any reason, the
Company's business, financial condition and prospects will be materially adversely affected. While the
Company has diligently investigated AMPAC's title to, rights over and interests in and relating to its
mining assets and mineral properties, this should not be construed as a guarantee of AMPAC's title to
its mining assets and/or the area covered by such mining rights. AMPAC's mineral property interests
may be subject to prior unregistered agreements or transfers and title may be affected by undetected
defects. There can be no guarantee that title to some of AMPAC's properties will not be challenged or
impugned. Additionally, the land upon which AMPAC holds mineral exploitation rights may not have
been surveyed; therefore, the precise area and location of such interests may be subject to challenge.
Changes in Legislation
The return on an investment in securities of the Company is subject to changes in Canadian and
Honduras federal and provincial tax laws and government incentive programs and there can be no
assurance that such laws or programs will not be changed in a manner that adversely affects the
Company or the holding and disposing of the securities of the Company.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 37
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Assessments of Value of Acquisitions
Acquisitions of mining issuers and mineral resources assets are typically based on engineering and
economic assessments made by independent engineers and the Company’s own assessments. These
assessments both will include a series of assumptions regarding such factors and recoverability and
marketability of mineral resources, future prices of mineral resources and operating costs, future
capital expenditures and royalties and other government levies which will be imposed over the
producing life of the resources. Many of these factors are subject to change and are beyond the
Company’s control. In particular, the prices of and markets for mineral resources products may
change from those anticipated at the time of making such assessment. In addition, all such
assessments involve a measure of geologic and engineering uncertainty which could result in lower
production and resources than anticipated. Initial assessments of acquisitions may be based on
reports by a firm of independent engineers that are not the same as the firm the Company uses for
its year end resource evaluations. Because each of these firms may have different evaluation methods
and approaches, these initial assessments may differ significantly from the assessments of the firm
used by the Company. Any such instance may offset the return on and value of the Company shares.
Income Taxes
The Company will file all required income tax returns and believes that it will be in full compliance
with the provisions of the Income Tax Act (Canada), all applicable provincial tax legislation as well as
the Income Tax Law in Honduras. However, such returns are subject to reassessment by the
applicable taxation authority. In the event of a successful reassessment of the Company whether by
re-characterization of exploration and development expenditures or otherwise, such reassessment
may have an impact on current and future taxes payable.
Dilution
The Company may make future acquisitions or enter into financings or other transactions involving
the issuance of securities of the Company which may be dilutive.
Third Party Credit Risk
The Company is or may be exposed to third party credit risk through its contractual arrangements
with future joint venture partners, and other parties. In the event such entities fail to meet their
contractual obligations to the Company, such failures could have a material adverse effect on the
Company and its cash flow from operations.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 38
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The information provided in this MD&A and the Consolidated Financial Statements is the
responsibility of management. In the preparation of these statements, estimates are sometimes
necessary to make a determination of future values for certain assets or liabilities. Management
believes such estimates have been based on careful judgments and have been properly reflected in
the audited financial statements.
Additional Information
Additional information relating to the Company can also be found on SEDAR.
CORPORATE STRUCTURE
The Consolidated Financial Statements include the financial statements of the Company and it’s
subsidiaries, Morumbi Capital Inc. and AMPAC.
TECHNICAL INFORMATION
All technical information contained herein has been reviewed and approved by Robert A. Campbell,
M.Sc, P.Geo, a director of the Company. Mr. Campbell is a "qualified person" within the meaning of NI
43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 39
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
CAUTIONARY NOTES TO US INVESTORS
The information concerning the Company’s mineral properties has been prepared in accordance with
National Instrument 43-101 (“NI-43-101”) adopted by the Canadian Securities Administrators. In
accordance with NI-43-101, the terms “mineral reserves”, “proven mineral reserve”, “probable mineral
reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred
mineral resource” are defined in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”)
Definition Standards for Mineral Resources and Mineral Reserves adopted by the CIM Council on May 10,
2014. While the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and
“inferred mineral resource” are recognized and required by NI 43-101, the U.S. Securities Exchange
Commission (“SEC”) does not recognize them. The reader is cautioned that, except for that portion of mineral
resources classified as mineral reserves, mineral resources do not have demonstrated economic value.
Inferred mineral resources have a high degree of uncertainty as to their existence and as to whether they
can be economically or legally mined. It cannot be assumed that all or any part of any inferred mineral
resource will ever be upgraded to a higher category. Therefore, the reader is cautioned not to assume that
all or any part of an inferred mineral resource exists, that it can be economically or legally mined, or that it
will ever be upgraded to a higher category. Likewise, you are cautioned not to assume that all or any part
of a measured or indicated mineral resource will ever be upgraded into mineral reserves.
Readers should be aware that the Company’s financial statements (and information derived
therefrom) have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board and are subject to Canadian
auditing and auditor independence standards. IFRS differs in many respects from United States
generally accepted accounting principles and thus the Company’s financial statements (and
information derived therefrom) may not be comparable to those of United States companies.
FORWARD LOOKING INFORMATION
This news release contains "forward-looking statements" and "forward-looking information" (collectively,
"forward-looking information") within the meaning of applicable Canadian securities legislation. All
information contained in this news release, other than statements of current and historical fact, is forward-
looking information. Often, but not always, forward-looking information can be identified by the use of
words such as "plans", "expects", "budget", "guidance", "scheduled", "estimates", "forecasts", "strategy",
"target", "intends", "objective", "goal", "understands", "anticipates" and "believes" (and variations of these
or similar words) and statements that certain actions, events or results "may", "could", "would", "should",
"might" "occur" or "be achieved" or "will be taken" (and variations of these or similar expressions). Forward-
looking information is also identifiable in statements of currently occurring matters which may continue in
the future, such as "providing the Company with", "is currently", "allows/allowing for", "will advance" or
"continues to" or other statements that may be stated in the present tense with future implications. All of
the forward-looking information in this news release is qualified by this cautionary note.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 40
ASCENDANT RESOURCES INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
(Expressed in US dollars)
Forward-looking information in this news release includes, but is not limited to, statements regarding the
consistency of processing recovery levels, improvements of grades in 2018, deployment of new mining
equipment, increase in contained metal production, maintenance of production rates, increase of mill feed
grades, reduction of costs, monthly shipments of concentrate, the ability to fully fund planned development,
exploration and capital expenditures, completion of an NI 43-101 report and the undertaking of various
long-term optimization programs. Forward-looking information is not, and cannot be, a guarantee of future
results or events. Forward-looking information is based on, among other things, opinions, assumptions,
estimates and analyses that, while considered reasonable by Ascendant at the date the forward-looking
information is provided, inherently are subject to significant risks, uncertainties, contingencies and other
factors that may cause actual results and events to be materially different from those expressed or implied
by the forward-looking information. The material factors or assumptions that Ascendant identified and were
applied by Ascendant in drawing conclusions or making forecasts or projections set out in the forward-
looking information include, but are not limited to, the ability of the Company to maintain the consistency
of processing recovery levels, to improve grades in 2018, to deploy new mining equipment, increase
contained metal production, maintain production rates, increase mill feed grades, reduce costs, make
monthly shipments of concentrate, fully fund planned development, exploration and capital expenditures,
complete an NI 43-101 report and undertake various long-term optimization programs and other events
that may affect Ascendant's ability to develop its project; and no significant and continuing adverse changes
in general economic conditions or conditions in the financial markets.
The risks, uncertainties, contingencies and other factors that may cause actual results to differ materially
from those expressed or implied by the forward-looking information may include, but are not limited to,
risks generally associated with the mining industry, such as economic factors (including future commodity
prices, currency fluctuations, energy prices and general cost escalation), uncertainties related to the
development and operation of Ascendant's projects, dependence on key personnel and employee and union
relations, risks related to political or social unrest or change, rights and title claims, operational risks and
hazards, including unanticipated environmental, industrial and geological events and developments and
the inability to insure against all risks, failure of plant, equipment, processes, transportation and other
infrastructure to operate as anticipated, compliance with government and environmental regulations,
including permitting requirements and anti-bribery legislation, volatile financial markets that may affect
Ascendant's ability to obtain additional financing on acceptable terms, the failure to obtain required
approvals or clearances from government authorities on a timely basis, uncertainties related to the geology,
continuity, grade and estimates of mineral reserves and resources, and the potential for variations in grade
and recovery rates, uncertain costs of reclamation activities, tax refunds, hedging transactions, as well as
the risks discussed in Ascendant's most recent Annual Information Form on file with the Canadian provincial
securities regulatory authorities and available at www.sedar.com.
Should one or more risk, uncertainty, contingency, or other factor materialize, or should any factor or
assumption prove incorrect, actual results could vary materially from those expressed or implied in the
forward-looking information. Accordingly, the reader should not place undue reliance on forward-looking
information. Ascendant does not assume any obligation to update or revise any forward-looking
information after the date of this news release or to explain any material difference between subsequent
actual events and any forward-looking information, except as required by applicable law.
Management’s Discussion and Analysis For The Year Ended December 31, 2017 | Page 41
CONSOLIDATED FINANCIAL STATEMENTS
As at December 31, 2017 and 2016 Year ended December 31, 2017 and stub year
(five months) ended December 31, 2016
(Expressed in US dollars)
2017
KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto, ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Ascendant Resources Inc.
We have audited the accompanying consolidated financial statements of Ascendant Resources Inc., which
comprise the consolidated statements of financial position as at December 31, 2017 and December 31,
2016, the consolidated statements of operations and comprehensive loss, changes in equity and cash flows
for the year ended December 31, 2017 and the five month period ended December 31, 2016, and notes,
comprising a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide
a basis for our audit opinion.
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the
consolidated financial position of Ascendant Resources Inc. as at December 31, 2017 and December 31,
2016, and its consolidated financial performance and its consolidated cash flows for the year ended
December 31, 2017 and the five month period ended December 31, 2016 in accordance with International
Financial Reporting Standards.
Emphasis of Opinion
Without qualifying our opinion, we draw attention to Note 1 to the consolidated financial statements, which
describes that Ascendant Resources Inc. has prepared the consolidated financial statements using
accounting principles applicable for a going concern. Ascendant Resources Inc. has incurred recurring
operating losses and negative cash flows from operations, and its continuation as a going concern is
dependent on the generation of positive cash flow, however the ability to do so cannot be predicted with
any certainty. These conditions along with other matters as set forth in Note 1 indicate the existence of
material uncertainties that may cast significant doubt about Ascendant Resources Inc.’s ability to continue
as a going concern.
Chartered Professional Accountants, Licensed Public Accountants
March 21, 2018
Toronto, Canada
ASCENDANT RESOURCES INC.
Consolidated Statements of Financial Position
As at December 31, 2017 and 2016
Expressed in US dollars
ASCENDANT RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Expressed in US dollars)
As at
ASSETS
Current
Cash
Amounts receivable
Prepaid expenses and deposits
Concentrate and ore inventory
Materials and supplies inventory
Total current assets
Non-current
Deposits
Due from related parties
Other assets
Property, plant and equipment
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities
Provision for environmental rehabilitation
Finance leases
Taxes payable
Due to related parties
Total current liabilities
Non-current
Finance leases
Due to Nyrstar
Provision for environmental rehabilitation
Provision for future termination payments
Total liabilities
Shareholders' equity
Share capital
Shares to be issued
Warrants
Share-based payment reserve
Accumulated other comprehensive income
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
Notes
December 31,
December 31,
2017
2016
(restated - note 6)
7
8, 10
9
9
10
26
11
6, 12
13
16
15
29
26
15
6
16
17
18
18
19
20
2(c)
$
8,041,307
$
12,614,908
3,124,552
155,442
6,643,410
10,848,542
84,170
562,861
2,173,388
13,161,487
$
28,813,253
$
28,596,814
-
471,265
1,296,016
21,375,623
137,146
-
36,093
10,409,496
$
51,956,157
$
39,179,549
$
14,793,291
$
7,806,817
381,196
1,083,857
50,000
-
$
16,308,344
380,000
726,728
-
$
33,515
8,947,060
$
380,238
1,453,020
$
904,690
1,453,020
8,786,874
8,738,727
8,798,808
35,727,284
$
7,922,373
27,965,870
$
$
34,193,756
-
4,966,944
2,105,884
732,560
(25,770,271)
$
10,991,105
13,025,596
435,644
462,526
90,820
(13,792,012)
$
16,228,873
$
11,213,679
$
51,956,157
$
39,179,549
Nature of Operations and Going Concern (Note 1) , Commitments and Contingencies (Note 27)
APPROVED AND AUTHORIZED ON BEHALF OF THE BOARD:
Signed: "PETRA DECHER"
Signed: "MARK BRENNAN"
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Consolidated Statements of Operations and Comprehensive Loss
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
Year ended Five months ended
Notes December 31, 2017
December 31, 2016
REVENUES
21
$
59,199,358
$
-
MINE OPERATING EXPENSES
21
$
59,248,063
$
2,538
GROSS PROFIT (LOSS)
$
(48,705)
$
(2,538)
GENERAL AND ADMINISTRATIVE EXPENSES
22
$
7,405,601
$
1,601,736
(LOSS) INCOME BEFORE OTHER EXPENSE (INCOME)
$
(7,454,306)
$
(1,604,274)
OTHER EXPENSE (INCOME)
22
$3,444,981
$822,232
(LOSS) INCOME BEFORE INCOME TAXES
$
(10,899,287)
$
(2,426,506)
Income taxes
29
$
(1,158,308)
$
-
Net (loss) income for the period
$
(12,057,595)
$
(2,426,506)
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss
Translation adjustment
Total comprehensive income (loss)
$ 641,740 $ (14,372)
$
(11,415,855)
$
(2,440,878)
Basic and diluted (loss) earnings per share
Basic
Diluted
$
(0.18)
$
(0.31)
$
(0.18)
$
(0.31)
Weighted average number of shares outstanding
Basic
Diluted
18
18
65,482,243
65,482,243
7,890,528
7,890,528
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Consolidated Statements of Cash Flows
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
OPERATING ACTIVITIES
Net (loss) income for the period
Add (deduct) the following items
Depreciation
Accretion expense on rehabilitation liabilities
Change in environmental rehabilitation estimate
Financing charge on termination obligations
Assumed termination liability
Termination liability payments
Share based payment transactions
Change in fair value of conversion feature of
convertible debentures
Advances to related parties
Interest expense
Operating cashs flow before changes in working capital
Changes in non-cash working capital
Amounts receivable
Prepaid expenses and deposits
Concentrate and ore inventory
Materials and supplies inventory
Other assets
Accounts payable and accrued liabilities
Environmental rehabilitation
Other
Total changes in non-cash working capital
Net cash flows from (used in) operating activities
INVESTING ACTIVITIES
Acquisition of AMPAC, net of cash acquired
Acquisition of property, plant and equipment
Net cash flows (used in) investing activities
FINANCING ACTIVITIES
Net proceeds from private placement of equity
Proceeds from issuance of convertible debentures
Interest paid on debentures
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Advances from related parties
Year ended Five months ended
Notes December 31, 2017 December 31, 2016
(restated - note 6)
$
(12,057,595)
$
(2,426,506)
12
16
16
17
17
17
20
14
26
7
7
9
9
11
13
16
6
12
18
14
14
18
18
26
3,344,927
482,112
62,369
1,471,810
104,814
(726,216)
1,786,587
-
(478,110)
-
2,538
18,639
-
8,126
-
-
24,638
401,673
-
40,549
$
(6,009,302)
$
(1,930,343)
(3,035,173)
430,356
(4,470,022)
2,312,945
(1,258,348)
6,048,936
(297,249)
$
(190,580)
(459,135)
(71,566)
(189,100)
(755,328)
101,273
(36,093)
1,975,657
-
-
$
1,024,843
$
(6,468,437)
$
(905,500)
-
(13,445,155)
57,657
(1,510)
$
(13,445,155)
$
56,147
13,709,052
13,339,000
-
-
930,486
4,924
-
153,120
(11,562)
-
-
33,515
13,514,073
$
Net cash flows provided by financing activities
$
14,644,462
Change in cash during the period
$
(5,269,130)
$
12,664,720
Cash, beginning of period
$
12,614,908
$
113
Impact of foreign exchange in cash balances
$
695,529
$
(49,925)
Cash, end of period
$
8,041,307
$
12,614,908
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Consolidated Statements of Changes in Equity
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
Notes
Number of
shares
Issued Share
Capital
Warrants
Shares to be
issued
Share-based
payments
reserve
Accumulated
deficit
Accumulated
other
comprehensive
income
Total
6,653,927
$
10,330,168
$
122,240
$
-
$
437,888
$
(11,365,506)
$
105,192
$
(370,018)
18, 19
2,200,000
660,937
-
-
19
20
-
-
-
-
-
-
-
-
313,404
13,025,596
-
-
-
-
-
-
-
-
24,638
-
-
-
-
-
(2,426,506)
-
-
-
-
660,937
13,339,000
24,638
(2,426,506)
-
(14,372)
(14,372)
Balance, July 31, 2016
Shares issued on convertible
debentures
Subscription receipts
Share-based payments
Loss for the period
Foreign currency translation
adjustment
Balance, December 31, 2016
8,853,927
$
10,991,105
$
435,644
$
13,025,596
$
462,526
$
(13,792,012)
$
90,820
$
11,213,679
Shares issued on conversion of
subscription receipts
Private placement
Broker warrants
Warrants exercised
Options exercised
Options expired
RSUs vested
RSUs redeemed
Loss for the period
Foreign currency translation
adjustment
6, 18
18, 19
19
18, 19
18, 19
20
20
20
39,000,000
13,025,596
(13,025,596)
23,575,000
8,845,063
4,195,589
-
-
2,640,000
1,263,175
24,000
8,238
-
-
-
-
121,666
60,579
-
-
-
-
668,400
(332,689)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,314)
(79,336)
1,786,587
(60,579)
-
-
-
-
-
-
-
79,336
-
-
(12,057,595)
-
-
-
-
-
-
-
-
-
-
13,040,652
668,400
930,486
4,924
-
1,786,587
-
(12,057,595)
-
641,740
641,740
Balance, December 31, 2017
74,214,593
$
34,193,756
$
4,966,944
$
-
$
2,105,884
$
(25,770,271)
$
732,560
$
16,228,873
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
1. NATURE OF OPERATIONS AND GOING CONCERN
The Company filed articles of amendment to give effect to its name change from Morumbi Resources Inc.
to Ascendant Resources Inc. effective December 21, 2016. The Company’s head office, principal address and
records office are located at 79 Wellington Street West, TD Tower South, Suite 2100, Toronto-Dominion
Centre, Toronto, Ontario, Canada, M5K 1H1. In July 2017, the Company received final approval from the
Toronto Stock Exchange (“TSX”) to graduate from the TSX Venture Exchange (“TSXV”) and list its common
shares and listed common share purchase warrants on the TSX, which began trading on July 20, 2017, under
the symbols ASND and ASND.WT, respectively.
On December 20, 2016, the Company acquired all of the outstanding shares of American Pacific Honduras
S.A. de C.V. (“AMPAC”) from affiliates of Nyrstar International B.V. ("Nyrstar") and assumed ownership and
control of the producing El Mochito zinc, lead and silver mine in Honduras ("El Mochito") for a total
consideration of $500,000 cash (the “Acquisition”). See Note 6.
In connection with the acquisition of AMPAC, the Company closed a private placement financing of
subscription receipts at a price of Cdn$0.50 per subscription receipt for aggregate gross proceeds of
approximately $14,550,900 (Cdn$19,500,000). The proceeds were placed in escrow and were released when
the closing conditions were met. The automatic exercise of the subscription receipts and compensation
warrants, and issuance of the underlying common shares and compensation options occurred on January
20, 2017. See Notes 18 (ii) and 19 (ii).
On March 7, 2017, the Company closed an underwritten public offering (the "Offering") through a syndicate
of underwriters led by Eight Capital and including Canaccord Genuity Corp. and GMP Securities L.P. (the
"Underwriters"). In connection with the closing of the Offering (Note 18 (iii)), the Underwriters exercised their
over-allotment option in full. The Company issued 23,575,000 units ("Units") at a price of Cdn$0.85 per Unit
(the "Offering Price") for aggregate gross proceeds of Cdn$20,038,750. See Notes 18 (iii) and 19 (iii).
Ascendant Resources Inc. is focused on its 100%-owned producing El Mochito zinc, silver and lead mine in
west-central Honduras, which has been in continued production since 1948. Since acquiring the mine in
December 2016, the Company has been focused on increasing zinc equivalent production to levels nearing
that of what the El Mochito mine has historically produced. The Company is also engaged in the evaluation
of producing and advanced development stage mineral resource opportunities, on an ongoing basis.
5
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
1. NATURE OF OPERATIONS AND GOING CONCERN (continued)
Management has estimated that the Company’s existing cash at December 31, 2017 together with cash from
operations will be sufficient to fund cash requirements in the ordinary course of business for a period of at
least twelve months. The Company’s cash and liquidity position is, however sensitive to a number of
variables which cannot be predicted with certainty, including, but not limited to, meeting increased
production targets, metal prices, foreign exchange rates, operational costs, and capital expenditures. If the
Company’s cash flow from operations is not sufficient to satisfy its requirements, there can be no assurance
that additional debt or equity financing will be available to meet these requirements or available on terms
acceptable to Ascendant.
Accordingly, these conditions represent a material uncertainty that may cast significant doubt about the
Company’s ability to continue as a going concern. The consolidated financial statements do not include
adjustments to the carrying values of recorded assets and liabilities that might be necessary should the
Company be unable to continue as a going concern. These adjustments may be material.
2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE
The Company changed its fiscal year end from July 31 to December 31 in 2016. As a result, the period ended
December 31, 2016 is a stub year, comprised of five months. The comparative period to these consolidated
financial statements is the five month period ended December 31, 2016.
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards and Interpretations (collectively “IFRS”), as issued by the International Accounting
Standards Board (“IASB”) as at and for the year ended December 31, 2017. The Board of Directors approved
these consolidated financial statements for issuance on March 21, 2018.
(b) Basis of measurement
These consolidated financial statements have been prepared on a historical cost basis except for share-
based payments which are measured at fair value.
6
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
2. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE (continued)
(c) Functional and presentation currency
The functional currency of Ascendant Resources Inc. is the Canadian dollar (“CAD”). These consolidated
financial statements are presented in US dollars (“USD”) which is also the functional currency of the
Honduran subsidiary AMPAC.
Change in presentation currency
In 2016, the Company changed its presentation currency from the CAD to USD on December 31, 2016 to
better reflect the Company’s business activities and to improve investor’s ability to compare the Company’s
financial results with other publicly traded businesses in the mining industry. In making this change in
presentation currency to USD, the Company followed the guidance in IAS 21 The Effects of Changes in Foreign
Exchange Rates and have applied the change retrospectively as if the USD had always been the Company’s
presentation currency, as follows:
Assets and liabilities have been translated into the USD at the rate of exchange prevailing at the
respective reporting dates;
The statements of operations and comprehensive loss were translated at the average exchange
rates for the respective reporting periods, or at the exchange rates prevailing at the applicable
transaction date;
Equity transactions have been translated at the exchange rate prevailing at the date of the
transactions; and
Exchange differences arising on translation were recorded in accumulated other comprehensive
loss in shareholders’ equity.
3.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of these consolidated financial statements in conformity with IFRS requires the Company
to make judgements, estimates and assumptions that affect the application of accounting policies,
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements, and reported amounts of revenue and expenses during the
reporting period. Actual results may differ from these estimates.
The Company reviews these estimates and underlying assumptions on an ongoing basis, based on
experience and other factors, including expectations of future events that the Company believe to be
reasonable under the circumstances. Revisions to accounting estimates are recognized prospectively in the
period in which the estimates are revised and in any future periods affected.
7
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
3.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)
The following are significant judgements and estimates impacting the consolidated financial statements:
Mineral reserves and resources - Proven and probable mineral reserves are the economically mineable
parts of the Company’s measured and indicated mineral resources demonstrated by at least a
preliminary feasibility study. The Company estimates its proven and probable mineral reserves and
measured and indicated and inferred mineral resources based on information compiled by
appropriately qualified persons. The estimation of future cash flows related to proven and probable
mineral reserves is based upon factors such as estimates of foreign exchange rates, commodity
prices, future capital requirements and production costs along with geological assumptions and
judgments made in estimating the size and grade of the ore body. Changes in the proven and probable
mineral reserves or measured and indicated and inferred mineral resources estimates may impact
the carrying value of property, plant and equipment, reclamation and remediation obligations,
recognition of deferred tax amounts and depreciation, depletion and amortization.
Purchase Price Allocation (note 6) - Applying the acquisition method to business combinations requires
each identifiable asset and liability to be measured at its acquisition-date fair value. The excess, if any,
of the fair value of consideration over the fair value of the net identifiable assets acquired is
recognized as goodwill. The determination of the acquisition-date fair values often requires
management to make assumptions and estimates about future events. The assumptions and
estimates relating to determining the fair value of property, plant and equipment acquired generally
require a high degree of judgment, and include estimates of mineral reserves acquired, future metal
prices and discount rates. Changes in any of the assumptions or estimates used in determining the
fair value of acquired assets and liabilities could affect the amounts assigned to assets, liabilities and
goodwill in the purchase price allocation. As noted in Note 6 the Purchase Price Allocation relating to
the acquisition of AMPAC was finalized during the fourth quarter of 2017.
-
Tax provisions (note 29) - management makes estimates in determining the measurement and
recognition of deferred tax assets and liabilities recorded on the consolidated balance sheets. The
measurement of deferred tax assets and deferred tax liabilities is based on tax rates that are expected
to apply in the period that the asset is realized or liability is settled based on tax rates that have been
enacted or substantively enacted by the end of the reporting period. Deferred tax assets, including
those arising from unutilized tax losses, require management to assess the likelihood of taxable
income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable
income are based on forecasted cash flows from operations and the application of existing tax laws in
each jurisdiction. To the extent that future cash flows and taxable income differ significantly from
estimates, the ability to realize the net deferred tax assets recorded at the balance sheet date could
be affected. At the end of each reporting period, management reassesses the period that assets are
expected to be realized or liabilities are settled and the likelihood of taxable income in future periods
in order to support and adjust the deferred tax assets and deferred tax liabilities recognized on the
consolidated balance sheets.
8
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
3.
-
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (continued)
Functional currency (note 2c) - judgement was required in determining that the US dollar is the
appropriate functional currency of certain subsidiaries of Ascendant. This was determined by
assessing the currency which influences sales prices for concentrate and metals sales, labour and
input costs, as well as the currency in which AMPAC finances its operations. If the judgement was
altered and a different functional currency was selected for certain subsidiaries of Ascendant, this
could result in material differences in the amounts recorded in the consolidated statement operations
and comprehensive loss pertaining to foreign exchange gains or losses.
Provision for environmental rehabilitation (note 16) – the Company recognizes a provision for
environmental rehabilitation when the obligation occurs. Provisions for environmental rehabilitation
are periodically reviewed to reflect known developments, including updated cost estimates. The
calculation of the present value of the necessary costs to settle the obligation in the future includes
assumptions regarding the risk-free interest rate for discounting future cash flows, inflation, foreign
exchange rates, and estimates of the underlying currencies in which the provisions will ultimately be
settled. Although the ultimate cost to be incurred is uncertain, the Company estimates its costs based
on studies using current restoration standards and techniques.
Post-employment benefits (note 17) - the Company’s termination obligations relate mainly to ongoing
severance plans. The Company estimates obligations related to the employee benefits plans using
actuarial determinations that incorporate assumptions using management’s best estimates of factors
including, salary escalation, retirement dates of employees and discount rates. Due to the complexity
of the valuation, the underlying assumptions and its long-term nature, the termination obligation is
highly sensitive to changes in these assumptions. Management reviews all assumptions at each
reporting date. In determining the appropriate discount rate, the Company considers the interest
rates on government bonds in the respective currency, with extrapolated maturities corresponding
to the expected duration of the defined benefit obligation. The mortality rate is based on publicly
available mortality tables for the specific country, and the Company bases future salary increases and
severance increases on expected future inflation rates for Honduras.
9
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements and by all Company entities.
(a) Basis of consolidation:
These consolidated financial statements include the financial statements of the Company and its wholly-
owned subsidiaries, Morumbi Capital Inc. and AMPAC.
Subsidiaries
A subsidiary is an entity controlled by the Company. The Company controls an entity when it is exposed
to, or has right to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases.
Business combinations and goodwill
When the Company makes an acquisition, it first determines whether the assets acquired and liabilities
assumed constitute a business, in which case the acquisition requires accounting as a business
combination. Management applies judgement in determining whether the acquiree is capable of being
conducted and managed for the purpose of providing a return, considering the inputs of the acquiree and
processes applied to those inputs that have the ability to create outputs.
The Company applies the acquisition method of accounting to business combinations, whereby the
goodwill is measured at the acquisition date as the excess fair value of the consideration transferred
including the recognized amount of any non-controlling interests in the acquiree as compared to the fair
value of the net assets acquired. When the excess is negative, a bargain purchase gain is recognized
immediately in the consolidated statement of operations and comprehensive loss. The assessment of fair
values on acquisition includes those mineral reserves and resources that are able to be reliably measured.
In determining these fair values, management must also apply judgement in areas including future cash
flows, metal prices, exchange rates and appropriate discount rates. Changes in such estimates and
assumptions could result in significant differences in the amount of goodwill recognized.
The consideration transferred is the aggregate of the fair values at the date of acquisition of the sum of
the assets transferred, the liabilities incurred or assumed, and the equity instruments issued by the
acquirer in exchange for control of the acquiree. Acquisition-related costs are recognized in the
consolidated statement of operations and comprehensive loss as incurred, unless they relate to issue of
debt or equity securities.
10
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of consolidation: (continued)
Business combinations and goodwill (continued)
Where applicable, the consideration transferred includes any asset or liability resulting from a contingent
consideration arrangement, which is measured at its acquisition date fair value. Subsequent changes in
such fair values are adjusted against the cost of acquisition where they qualify as measurement period
adjustments. All other subsequent changes in the fair value of contingent consideration classified as an
asset or liability are accounted for in accordance with relevant IFRS.
After initial recognition, any goodwill is measured at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Company’s CGUs that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Goodwill is allocated to the lowest level at which it is monitored for internal management purposes and is
not larger than an operating segment before aggregation. Where goodwill forms part of a CGU and part
of the operation within that unit is disposed of, the goodwill associated with the disposed operation is
included in the determination of any gain or loss on disposal.
Goodwill is not amortized but is tested for impairment annually and whenever there is an indication of
impairment. If any such indication exists, the recoverable amount of the CGU is estimated in order to
determine the extent of the impairment, if any. The recoverable amount is determined as the higher of
fair value less costs of disposal and the CGU’s value in use. An impairment loss in respect of goodwill is not
reversed.
Fair value for mineral interests and related goodwill is generally determined as the present value of the
estimated future cash flows expected to arise from the continued use of the asset, including any expansion
prospects, and its eventual disposal, using assumptions that an independent market participant may take
into account.
Value in use is determined as the present value of the estimated future cash flows expected to arise from
the continued use of the asset in its present form and its eventual disposal. Value in use is determined by
applying assumptions specific to the Company’s continued use and cannot take into account future
development.
The weighted average cost of capital of comparable market participants is used as a starting point for
determining the discount rates, with appropriate adjustments for the risk profile of the country in which
the operations are located and the specific risks related to the development of the project.
11
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of consolidation: (continued)
Business combinations and goodwill (continued)
Where the asset does not generate cash flows that are independent of other assets, the Company
estimates the recoverable amount of the CGU to which the asset belongs. If the carrying amount of an
asset or CGU exceeds its recoverable amount, the carrying amount of the asset or CGU is reduced to its
recoverable amount. An impairment loss is recognized as an expense in the consolidated statement of
operations and comprehensive loss.
(b) Translation of foreign currencies:
Management determines the functional currency of each subsidiary as the currency of the primary
economic environment in which the entity operates.
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the entity at
exchange rates in effect at the transaction dates.
At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are
translated to the functional currency using the daily average exchange rate. Non-monetary assets and
liabilities measured at fair value are translated using the exchange rates at the date when fair value was
determined. Non-monetary assets and liabilities measured at historical cost in a foreign currency are
translated using exchange rates that were in effect at the transaction dates.
Foreign currency gains and losses arising on period-end revaluations are recognized in the consolidated
statement of operations and comprehensive loss, except for differences arising on translation of available-
for-sale equity instruments, a financial liability designated as a hedge of a net investment in a foreign
operation, or qualifying cash flow hedges, which are recognized in OCI.
Foreign operations
For the purpose of the consolidated financial statements, assets and liabilities of entities that have
functional currencies other than the US dollar are translated to US dollars at the reporting date using the
exchange rate on that date. Revenue and expenses are translated at monthly average exchange rates that
approximate those in effect at the transaction dates. Differences arising from these foreign currency
translations are recognized in OCI and presented within equity in the foreign currency translation reserve.
When a foreign operation is disposed, the relevant exchange differences accumulated in the foreign
currency translation reserve are transferred to the consolidated statement of operations and
comprehensive loss as part of the profit or loss on disposal.
12
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Translation of foreign currencies: (continued)
Net investment in a foreign operation
Foreign currency gains and losses arising on translation of a monetary item receivable from or payable to
a foreign operation for which settlement is neither planned nor likely to occur in the foreseeable future
are considered to form part of a net investment in the foreign operation. Such gains and losses are
recognized in OCI and presented within equity in the foreign currency translation reserve.
(c) Revenue recognition:
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable,
net of treatment and refining charges.
Sales revenue is recognized when the significant risks and rewards of ownership have been transferred to
the buyer, the Company has insignificant continuing management involvement with the goods, the
amount of revenue can be measured reliably, recovery of the consideration is probable and the associated
costs and possible return of goods can be estimated reliably. Transfers of risks and rewards vary
depending on individual contract terms and frequently occur at the time when title passes to the customer.
For medium and long-term contracts, revenue recognition criteria are assessed for individual sales within
the contracts. Revenue from the sale of by-products is included within revenue.
Sales of concentrate and certain other products are “provisionally priced”. For these contracts, sales prices
are subject to final adjustment at the end of a future period after shipment, based on quoted market prices
during the quotational period specified in the contract. Revenue is recognized when the above criteria are
met, using weight and assay results and forward market prices to estimate the fair value of the total
consideration receivable. Such a provisional sale contains an embedded derivative that must be separated
from the host contract. At each reporting date, provisionally priced metals sales are marked to market,
with adjustments (both gains and losses) recorded in revenue in the consolidated statement of operations
and comprehensive loss and in trade and other receivables on the consolidated statement of financial
position.
The Company recognizes deferred revenue in the event it receives payments from customers before a sale
meets criteria for revenue recognition.
(d) Cost of sales:
Cost of sales consists of those costs previously included in the measurement of inventory sold during the
period, as well as certain costs not included in the measurement of inventory, such as the cost of
warehousing and distribution to customers, royalty payments, share-based payments and other indirect
expenses related to producing operations.
13
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Cash and cash equivalents:
Cash and cash equivalents include cash, demand deposits and short-term, highly liquid investments that
are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in
value. Cash equivalents have maturities of three months or less at the date of acquisition. Interest earned
is included in finance income on the consolidated statement of operations and comprehensive loss and in
investing activities on the consolidated statements of cash flows.
Amounts that are restricted from being used for at least twelve months after the reporting date are
classified as non-current assets and presented in restricted cash on the consolidated balance sheets.
Changes in restricted cash balances are classified as investing activities on the consolidated statements of
cash flows.
(f)
Inventories:
Inventories consist of stockpiles, in-process inventory (concentrates), and supplies. Concentrates and all
other saleable products are valued at the lower of cost and estimated net realizable value. Net realizable
value represents the estimated selling price for inventories less all estimated costs of completion and costs
necessary to make the sale. Where the net realizable value is less than cost, the difference is charged to
the consolidated statement of operations and comprehensive loss as an impairment charge in cost of
sales.
Cost of production of concentrate inventory is determined on a weighted average cost. The cost of
production includes direct costs associated with conversion of production inventory: material, labour,
contractor expenses, and an attributable portion of production overheads and depreciation of all property,
plant and equipment involved with the mining and production process. Estimates and judgements are
required to assess the nature of any significant changes to levels of ore stockpiles and determining
whether allocation of costs is required.
Materials and supplies include consumable stores and spare parts used in operations. Appropriate
allowances for damage, obsolescence and slow-moving items are recorded based on an identification
process. Spare parts include spares that are regularly replaced, usually as part of a replacement
programme (circulating spares). However, major spare parts on hand to ensure the uninterrupted
operation of the production equipment before an unexpected breakdown or equipment failure and stand-
by equipment are accounted for as property, plant and equipment and depreciated over the same period
as the component they are associated with.
Supplies are valued at the lower of average cost and net realizable value. A regular review is undertaken
to determine the extent of any provision for obsolescence.
14
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Intangible assets:
Computer software is measured at cost less accumulated amortization and accumulated impairment
losses. Costs include all directly attributable costs necessary to create, produce and prepare the asset to
be capable of operating it in the manner intended by management.
Amortization methods, useful lives, and residual values if any, are reviewed at each year end and adjusted
prospectively, if required. When an intangible asset is disposed of, or when no further economic benefits
are expected, the asset is derecognized, and any resulting gain or loss is recorded in the consolidated
statement of operations and comprehensive loss.
Currently, the Company’s intangible assets relate primarily to enterprise resource planning (“ERP”)
information systems, which are amortized over their estimated useful lives.
(h) Exploration and evaluation expenditures:
Exploration and evaluation activity begins when the Company obtains legal rights to explore a specific area
and involves the search for mineral reserves, the determination of technical feasibility, and the assessment
of commercial viability of an identified resource. Expenditures incurred in the exploration and evaluation
phase include the cost of acquiring interests in mineral rights, licenses and properties and the costs of the
Company’s exploration activities, such as researching and analyzing existing exploration data, gathering
data through geological studies, exploratory drilling, trenching, sampling, and certain feasibility studies.
The Company expenses the cost of its exploration and evaluation activities and capitalizes the cost of
acquiring interests in mineral rights, licenses and properties in business combinations, asset acquisitions
or option agreements. Amounts capitalized are recognized as exploration and evaluation assets and
presented in property, plant and equipment. Exploration and evaluation assets acquired as a result of an
asset acquisition or option agreement are initially recognized at cost, and those acquired in a business
combination are recognized at fair value on the acquisition date. They are subsequently carried at cost less
accumulated impairment. No depreciation is charged during the exploration and evaluation phase. The
Company expenses the cost of subsequent exploration and evaluation activity related to acquired
exploration and evaluation assets. Cash flows associated with acquiring exploration and evaluation assets
are classified as investing activities in the consolidated statements of cash flows; those associated with
exploration and evaluation expenses are classified as operating activities.
The Company monitors exploration and evaluation assets for factors that may indicate their carrying
amounts are not recoverable. If such indicators are identified, the Company tests the exploration and
evaluation assets or their CGUs, as applicable, for impairment. The Company also tests impairment when
assets reach the end of the exploration and evaluation phase.
15
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Exploration and evaluation expenditures: (continued)
Exploration and evaluation assets are transferred to capital works in progress within property, plant and
equipment once the Company determines that probable future economic benefits will be generated as a
result of the expenditures. The Company’s determination of probable future economic benefit is based on
management’s evaluation of the technical feasibility and commercial viability of the geological properties
of a given ore body based on information obtained through evaluation activities, including metallurgical
testing, resource and reserve estimates and the economic assessment of whether the ore body can be
mined economically. Tools that may be used to determine this include a preliminary feasibility study,
confidence in converting resources into reserves and the probability that the property could be developed
into a mine site. At that time, the property is considered to enter the development phase, and subsequent
evaluation costs are capitalized.
(i) Property, plant and equipment:
The Company measures items of property, plant and equipment at cost less accumulated depreciation
and any accumulated impairment losses.
The initial cost of an item of property, plant and equipment includes its purchase price or construction
costs, including import duties and non-refundable purchase taxes, any costs directly attributable to
bringing the asset into operation, and for qualifying assets, borrowing costs. The initial cost of property,
plant and equipment also includes the initial estimate of the cost of dismantling and removing the item
and restoring the site on which it is located, the obligation for which the Company incurs either when the
item is acquired or as a consequence of having used the item during a particular period for purposes other
than to produce inventories during that period.
Capitalization of costs ceases once an asset is in the location and condition necessary for it to be capable of
operating in the manner intended by management. At this time, depreciation commences. For a new mine,
this occurs upon commencement of commercial production. Any revenue earned in the process of
preparing an asset to be capable of operating in the manner intended by management is included in the
cost of the constructed asset. Any other incidental revenue earned prior to commencement of commercial
production is recognized in the consolidated statement of operations and comprehensive loss.
Carrying amounts of property, plant and equipment, including assets under finance leases, are
depreciated to their estimated residual value over the estimated useful lives of the assets or the estimated
life of the related mine or plant, if shorter. Where components of an asset have different useful lives,
depreciation is calculated on each separate component. Components may be physical or non-physical,
including the cost of regular major inspections and overhauls required in order to continue operating an
item of property, plant and equipment.
16
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property, plant and equipment: (continued)
Certain items of property, plant and equipment are depreciated on a unit-of-production basis. The unit-of-
production method is based on proven and probable tonnes of ore reserves. There are numerous
uncertainties inherent in estimating ore reserves, and assumptions that were valid at the reporting date
may change when new information becomes available. The actual volume of ore extracted and any
changes in these assumptions could affect prospective depreciation rates and carrying values.
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no
future economic benefits are expected from its use or disposal. Upon derecognition of an item of property,
plant and equipment, the difference between its carrying value and net sales proceeds, if any, is presented
as a gain or loss in other operating income or expense in the consolidated statement of operations and
comprehensive loss.
(i)
Capital works in progress:
Capital works in progress consist of items of property, plant and equipment in the course of
construction or mineral properties in the course of development, including those transferred
upon completion of the exploration and evaluation phase. On completion of construction or
development, costs are transferred to plant and equipment and/or mining properties as
appropriate. Capital works in progress are not depreciated.
(ii) Mining properties:
Mining properties consist of costs transferred from capital works in progress when a mining
property reaches commercial production, costs of subsequent mine and exploration
development, and acquired mining properties in the production stage.
Mining properties include costs directly attributable to bringing a mineral asset into the state
where it is capable of operating in the manner intended by management and includes such costs
as the cost of shafts, ramps, track haulage drifts, ancillary drifts, pumps, electrical substations,
refuge stations, ventilation raises, permanent manways, and ore and waste pass raises. The
determination of development costs to be capitalized during the production stage of a mine
operation requires the use of judgements and estimates such as estimates of tonnes of waste
to be removed over the life of the mining area and economically recoverable reserves extracted
as a result.
A mining property is considered to be capable of operating in a manner intended by
management when it commences commercial production. Upon commencement of commercial
production, a mining property is depreciated on a unit-of-production method. Unit-of-
production depreciation rates are determined based on the related proven and probable
mineral reserves.
17
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property, plant and equipment: (continued)
(ii) Mining properties: (continued)
Subsequent mine development costs are capitalized to the extent they are incurred in order to
access reserves mineable over more than one year. Ongoing maintenance and development
expenditures are expensed as incurred and included in cost of sales in profit or loss. These
include ore stope access drifts, footwall and hangingwall drifts in stopes, drawpoints, drill drifts,
sublevels, slots, drill raises, stope manway access raises and definition diamond drilling.
(iii) Plant and equipment:
Plant and equipment consists of buildings and fixtures, surface and underground fixed and
mobile equipment and assets under finance lease.
Plant and equipment are depreciated on either unit-of-production or straight-line basis based
on factors including the production life of assets and mineable reserves. In general, mining
assets are depreciated using a unit-of-production method; equipment is depreciated using the
straight-line method, based on the shorter of its useful life and that of the related mine or facility;
and plants are depreciated using the straight-line method, with useful lives limited by those of
related mining assets.
(iv) Depreciation rates of major categories of assets:
- Mining properties
- Mining assets
- Other plant assets
-
Equipment
- unit-of-production
- unit-of-production
- straight-line over 1 to 5 years
unit-of-production
- straight-line over 1 to 5 years
The Company reviews its depreciation methods, remaining useful lives and residual values at
least annually and accounts for changes in estimates prospectively.
18
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property, plant and equipment: (continued)
(v)
Leased assets
Leases in which the Company assumes substantially all risks and rewards of ownership are
classified as finance leases. Assets held under finance leases are recognized at the lower of the
fair value and the present value of minimum lease payments at inception of the lease, less
accumulated depreciation and impairment loss.
Assets held under finance leases are depreciated over their expected useful lives on the same
basis as owned assets.
(j)
Impairment of non-financial assets:
At the end of each reporting period, the Company reviews the carrying amounts of property, plant and
equipment, exploration and evaluation assets and intangible assets - computer software to determine
whether there is any indication of impairment. If any such indication exists, the Company estimates the
recoverable amount of the asset in order to determine the extent of the impairment loss, if any. The
Company generally assesses impairment at the level of CGUs, which are the smallest identifiable groups
of assets that generate cash inflows that are largely independent of cash inflows from other assets.
The Company allocates exploration and evaluation assets to CGUs based on their operating segment,
geographic location and management’s intended use for the property. Exploration and evaluation assets
are allocated to CGUs separate from those containing producing or development-phase assets, except
where exploration and evaluation assets have the potential to significantly affect the future production of
producing or development-phase assets.
Where an indicator of impairment exists, a formal estimate of the recoverable amount of the asset or CGU
is made. The recoverable amount is the higher of the fair value less costs of disposal and value in use:
Fair value less costs of disposal is the amount obtainable from the sale of the asset or CGU in an arm’s
length transaction between knowledgeable, willing parties, less costs of disposal. Fair value for
mineral assets is often determined as the present value of the estimated future cash flows expected
to arise from the continued use of the asset, including any expansion prospects, and its eventual
disposal, using assumptions that an independent market participant may take into account. These
cash flows are discounted by an appropriate discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset to arrive at a net present value of the
asset.
19
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Impairment of non-financial assets: (continued)
Value in use is determined as the present value of the estimated future cash flows expected to arise
from the continued use of the asset or CGU in its present form and its eventual disposal, discounted
using a pre-tax rate that reflects current market assessments of the time value of money and risks
specific to the asset for which estimates of future cash flows have not been adjusted. Value in use
calculations apply assumptions specific to the Company’s continued use and cannot take into account
future development. These assumptions are different to those used in calculating fair value, and
consequently the value in use calculation is likely to give a different result to a fair value calculation.
The Company estimates future cash flows based on estimated future recoverable mine production,
expected sales prices (considering current and historical commodity prices, price trends and related
factors), production levels and cash costs of production, all based on detailed engineering LOM plans.
Future recoverable mine production is determined from reserves and resources after taking into account
estimated dilution and recoveries during mining, and estimated losses during ore processing and
treatment. Estimates of recoverable production from measured, indicated and inferred mineral resources
not included in the LOM plan are assessed for economic recoverability and may also be included in the
valuation of fair value less costs of disposal. Gains from the expected disposal of assets are not included
in estimated future cash flows. Assumptions underlying future cash flow estimates are subject to risks and
uncertainties. Changes in estimates may affect the expected recoverability of the Company's investments
in mining properties.
If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount is reduced
to the recoverable amount, and an impairment loss is recognized in the consolidated statement of
operations and comprehensive loss in the expense category consistent with the function of the impaired
asset or CGU. The Company presents impairment losses on the consolidated statement of operations and
comprehensive loss as part of results from operating activities. Impairment losses recognized in respect
of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then
to reduce the carrying amounts of other assets in the CGU on a pro-rata basis for depreciable assets.
The Company assesses previously recognized impairment losses each reporting date for any indications
that the losses have decreased or no longer exist. Such an impairment loss is reversed, in full or in part, if
there has been a significant change with a positive effect on the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized for the asset in prior years. Such reversals of
impairment losses are recognized in the consolidated statement of operations and comprehensive loss.
An impairment loss recognized in relation to goodwill is not reversed for subsequent increases in the
recoverable amount.
20
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(k) Share-based payments:
The Company maintains a Restricted Share Unit (“RSU”) and stock option plan for employees, directors, and
other qualified individuals.
Equity-settled transactions, which include RSUs and stock options, are measured by reference to their fair
value at the grant date. The fair value for RSUs is determined using the market value of the common shares,
as listed on the TSX, at the close of business at the grant date. The fair value for stock options is determined
using a Black-Scholes option pricing model, which relies on estimates of the future risk-free interest rate,
future dividend payments, future share price volatility and the expected average life of options. The
Company believes this model adequately captures the substantive features of the option awards, and are
appropriate to calculate their fair values. The fair value determined for both RSUs and stock options at grant
date is recognized over the vesting period in accordance with the vesting terms and conditions, with a
corresponding increase to contributed surplus.
Equity-settled share-based payments to employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date. Details regarding the determination of the fair
value of equity-settled share-based payment transactions are set out in Note 20.
The fair value determined at the grant date of the equity-settled share-based payments is expensed in profit
or loss over the vesting period, if any, which is the period during which the employee becomes
unconditionally entitled to equity instruments. At the end of each reporting period, the Company revises its
estimate of the number of equity instruments expected to vest, if any.
Equity-settled share-based payment transactions with parties other than employees, if any, are measured
at the fair value of the goods or services received, except where that fair value cannot be estimated reliably,
in which case they are measured at the fair value of the equity instruments granted, measured at the date
the entity obtains the goods or the counterparty renders the service.
(l)
Financial Instruments:
Financial assets
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss
(“FVTPL”), loans and receivables, held-to-maturity investments, or available-for-sale financial assets. The
Company determines the classification of its financial assets at initial recognition. All financial assets are
recognized initially at fair value plus, in the case of investments not at FVTPL, directly attributable transaction
costs. Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, (i.e.,
the date that the Company commits to purchase or sell the asset). The Company’s financial assets include
cash and amounts receivable.
21
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Financial Instruments: (continued)
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at FVTPL include financial assets held for trading and financial assets designated upon initial
recognition at FVTPL. Financial assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term. This category includes derivative financial instruments entered
into by the Company that are not designated as hedging instruments in hedge relationships as defined by
IAS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless
they are designated as effective hedging instruments. Financial assets at FVTPL are carried in the statements
of financial position at fair value with changes in fair value recognized in finance income or finance costs in
the consolidated statement of operations and comprehensive loss.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value
if their economic characteristics and risks are not closely related to those of the host contracts and the host
contracts are not held for trading or designated at FVTPL. These embedded derivatives are measured at fair
value with changes in fair value recognized in the statements of operations and comprehensive loss.
Loans and receivables
Loans receivable are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial measurement, such financial assets are subsequently measured at
amortized cost using the effective interest rate (“EIR”) method, less impairment. Amortized cost is calculated
by taking into account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortization is included in finance income in the statements of operations and
comprehensive loss. The losses arising from impairment are recognized in the consolidated statement of
operations and comprehensive loss.
Derecognition
A financial asset (or, where applicable a part of a financial asset or part of a Company of similar financial
assets) is derecognized when:
The rights to receive cash flows from the asset have expired; and
The Company has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-
through’ arrangement; and either:
(a) the Company has transferred substantially all the risks and rewards of the asset; or
(b) the Company has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
22
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Financial Instruments: (continued)
Impairment of financial assets
The Company assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is
deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more
events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
has an impact on the estimated future cash flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation and where
observable data indicate that there is a measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortized cost, the Company first assesses whether objective evidence of
impairment exists for financial assets that are individually significant, or collectively for financial assets that
are not individually significant. If the Company determines that no objective evidence of impairment exists
for an individually assessed financial asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is, or continues to be,
recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured
as the difference between the assets’ carrying amount and the present value of estimated future cash flows
(excluding future expected credit losses that have not yet been incurred). The present value of the estimated
future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The
carrying amount of the asset is reduced through the use of an allowance account and the amount of the
loss is recognized in the consolidated statement of operations and comprehensive loss. Interest income
continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment loss. The interest income is
recorded as part of finance income in the consolidated statement of operations and comprehensive loss.
Loans together with the associated allowance are written off when there is no realistic prospect of future
recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent
year, the amount of the estimated impairment loss increases or decreases because of an event occurring
after the impairment was recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance
costs in the consolidated statement of operations and comprehensive loss.
The present value of the estimated future cash flows is discounted at the financial asset’s original effective
interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is
the current effective interest rate.
23
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Financial Instruments: (continued)
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit
or loss or as other financial liabilities. The Company determines the classification of its financial liabilities at
initial recognition. All financial liabilities are recognized initially at fair value and in the case of other financial
liabilities, plus directly attributable transaction costs. The Company’s financial liabilities include accounts
payable and accrued liabilities.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
After initial recognition, other financial liabilities are subsequently measured at amortized cost using the
effective interest rate (“EIR”) method. Gains and losses are recognized in the consolidated statement of
operations and comprehensive loss when the liabilities are derecognized, as well as through the EIR
amortization process. Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance
cost in the consolidated statement of operations and comprehensive loss.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expired.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined
by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs. For financial instruments not traded in an
active market, the fair value is determined using appropriate valuation techniques. Such techniques may
include using recent arm’s length market transactions; reference to the current fair value of another
instrument that is substantially the same; discounted cash flow analysis or other valuation models.
(m) Loss per share:
Basic loss per share is calculated by dividing the loss available to common shareholders by the weighted
average number of common shares outstanding in the period. For all periods presented, the loss available
to common shareholders equals the reported loss. In the Company’s case, diluted loss per share is the same
as basic loss per share as the effects of including outstanding options, restricted share units and warrants
would be anti-dilutive.
24
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) Share Capital:
Financial instruments issued by the Company are classified as equity only to the extent that they do not
meet the definition of a financial liability or financial asset. The Company’s common shares, share purchase
warrants and stock options are classified as equity instruments. Incremental costs directly attributable to
the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(o) Taxation:
Tax expense comprises both current and deferred tax expense for the period. Tax expense is recognized in
the consolidated statement of operations and comprehensive loss, except to the extent that it relates to
items recognized in other comprehensive loss or directly in equity.
Current income tax expense is the tax expected to be payable on the taxable income for the year calculated
using rates (and laws) that have been enacted or substantively enacted at the consolidated statements of
financial position date in the countries where the Company operates. It includes adjustments for tax
expected to be payable or recoverable in respect of previous periods.
Deferred income tax is recognized, using the liability method, on temporary differences arising between the
tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have
been enacted or substantively enacted by the consolidated statements of financial position date and are
expected to apply when the related deferred income tax liability is settled. Deferred income tax assets are
recognized only to the extent that it is probable that they will be realized in the future. Deferred income tax
assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied
by the same taxation authority.
(p) Provisions:
Provisions are recognized when the Company or its subsidiaries has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. The amount recognized
as a provision is the best estimate of the consideration required to settle the present obligation at the end
of the reporting period. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a pre‐tax rate that reflects current market assessments of the
time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognized as a finance cost.
25
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) Provisions: (continued)
Contingent liabilities are recognized in the consolidated financial statements, if estimable and probable, and
are disclosed in notes to the financial information unless their occurrence is remote.
Contingent assets are not recognized in the consolidated financial statements but are disclosed in the notes
if their recovery is deemed probable.
Mine closure and restoration
Provisions for mine closure and restoration are made in respect of the estimated future costs of closure and
restoration and for environmental rehabilitation costs (which include such costs as dismantling and
demolition of infrastructure, removal of residual materials and remediation of disturbed areas) in the
accounting period when the related environmental disturbance occurs. The provision is discounted using a
pre‐tax rate and the accretion is included in finance costs. At the time of establishing the provision, the net
present value of the obligation is capitalized as part of the cost of mineral properties.
The provision is reviewed on an annual basis for changes in cost estimates, discount rates, inflation and
operating lives. The net present value of changes in cost estimates of the mine closure and restoration
obligations are capitalized to mineral properties.
Restoration activities will occur primarily upon closure of a mine but can occur from time to time throughout
the life of the mine. As restoration projects are undertaken, their costs are charged against the provision as
the costs are incurred.
26
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
5.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
At the date of these consolidated financial statements, certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective and have not been early
adopted by the Company.
Management anticipates that all of the pronouncements will be adopted in the Company’s accounting
policies for the first period after the effective date of the pronouncement. Information on new standards,
amendments and interpretations that are expected to be relevant to the Company’s consolidated financial
statements is provided below. Certain other new standards and interpretations have been issued but are
not expected to have a material impact on the Company’s consolidated financial statements.
IFRS 2 - Share-based Payment (“IFRS 2”) was amended in June 2016, clarifying the accounting for certain
types of share-based payment transactions. The amendments provide requirements on accounting for the
effects of vesting and non-vesting conditions of cash-settled share-based payments, withholding tax
obligations for share-based payments with a net settlement feature, and when a modification to the terms
of a share-based payment changes the classification of the transaction from cash-settled to equity-
settled. The amendments are effective for the year beginning on or after January 1, 2018. The Company
intends to adopt the amendments to IFRS 2 in its financial statements for the annual period beginning on
January 1, 2018. The extent of the impact of adoption of the amendments has not yet been determined.
IFRS 9 – Financial Instruments (“IFRS 9”) was issued by the IASB in November 2009 with additions in October
2010 and May 2013 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”).
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair
value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its
financial instruments in the context of its business model and the contractual cash flow characteristics of
the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial
liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial
liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own
credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires
a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is
effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted though
management does not anticipate early adoption of the standard. The Company is currently assessing the
impact on the adoption of this standard.
27
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
5.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)
IFRS 15 - Revenue from Contracts with Customers (“IFRS 15”) was issued in May 2014 and amended in April
2016. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers.
Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects
to be entitled in exchange for transferring goods or services to a customer.
This standard is effective for annual periods beginning on or after January 1, 2018 and permits early
adoption. The Company intends to adopt the amendments to IFRS 15 in its financial statements for the
annual period beginning on January 1, 2018. The impact of the standard has been evaluated and is expected
to have no material impact on the Company’s financial statements as no material changes are expected in
respect of timing and amount of revenue currently recognized by the Company. Additional disclosure may
be required upon implementation of IFRS 15 in order to provide sufficient information to enable users to
understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from the
contracts with customers.
IFRS 16 – Leases (“IFRS 16”) was issued in January 2016 and replaces IAS 17 – Leases as well as some lease
related interpretations. With certain exceptions for leases under twelve months in length or for assets of
low value, IFRS 16 states that upon lease commencement a lessee recognises a right-of-use asset and a lease
liability. The right-of-use asset is initially measured at the amount of the liability plus any initial direct costs.
After lease commencement, the lessee shall measure the right-of-use asset at cost less accumulated
depreciation and accumulated impairment. A lessee shall either apply IFRS 16 with full retrospective effect
or alternatively not restate comparative information but recognise the cumulative effect of initially applying
IFRS 16 as an adjustment to opening equity at the date of initial application. IFRS 16 requires that lessors
classify each lease as an operating lease or a finance lease. A lease is classified as a finance lease if it
transfers substantially all the risks and rewards incidental to ownership of an underlying asset. Otherwise
it is an operating lease. IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Earlier
adoption is permitted if IFRS 15 has also been applied. The Company intends to adopt the amendments to
IFRS 16 in its financial statements for the annual period beginning on January 1, 2019. The extent of the
impact of adoption of the standard has not yet been determined.
IFRIC 22 – Foreign currency transactions and advance consideration (“IFRIC 22”) was issued in December
2016 by the IASB. IFRIC 22 clarifies the date that should be used for translation when a foreign currency
transaction involves an advance payment or receipt. The Interpretation is applicable for annual periods
beginning on or after January 1, 2018. The Company is currently assessing the impact on the adoption of
this standard.
IFRIC 23 - Uncertainty over Income Tax Treatments (“IFRIC 23”) was issued in June 2017 by the IASB. IFRIC 23
provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in
which there is uncertainty over income tax treatments. The Interpretation is applicable for annual periods
beginning on or after January 1, 2019. Earlier application is permitted. The extent of the impact of adoption
of the Interpretation has not yet been determined.
28
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
6. ACQUISITION OF AMPAC
On December 20, 2016 (the “Acquisition Date”), the Company acquired all of the outstanding shares of
AMPAC from affiliates of Nyrstar and assumed ownership and control of the producing El Mochito zinc, lead
and silver mine in Honduras ("El Mochito") for a total consideration of $500,000 cash (the “Acquisition”). The
Company determined that the Acquisition was a business combination in accordance with the definition in
IFRS 3, Business Combinations (“IFRS 3”), and as such has accounted for it in accordance with this standard,
with the Company being the accounting acquirer on the acquisition date of December 20, 2016.
The purchase price allocation recognized in 2016 was based on a preliminary assessment of fair value while
the Company finalized an independent valuation. Accordingly, the acquisition cost has been allocated to the
underlying assets acquired and liabilities assumed, based upon their estimated fair values at the date of
acquisition. The finalization of the purchase price allocation has been completed and adjustments to the
provisional amounts have been reflected in the comparative period as if the accounting for the business
combination had been completed at the acquisition date. Refer to the table below for details.
The revised allocation is outlined as follows:
Original Purchase price
allocation as at
Notes
December 20, 2016 (i)
Adjustments
Cash
Prepaid expenses and other
Inventories
Property, plant and equipment
Accounts payable and accrued liabilities
Provision for environmental rehabilitation
Termination payment liabilities
Due to Nyrstar
Other liabilities
Total net identifiable assets acquired
Bargain purchase gain
Total consideration paid
12
16
17
$557,657
369,121
14,680,820
7,721,168
(5,522,982)
(6,989,174)
(7,229,197)
(1,453,020)
(1,634,393)
$500,000
-
$500,000
Restated
$557,657
369,121
14,680,820
-
-
-
2,689,377
10,410,545
-
(5,522,982)
(1,974,198)
(8,963,372)
(715,179)
(7,944,376)
-
-
-
-
-
(1,453,020)
(1,634,393)
$500,000
-
$500,000
(i) Preliminary estimates of the fair value of assets acquired and liabilities assumed are presented as reported in the Company's audited
consolidated financial statements for the five month period ended December 31, 2016.
29
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
6. ACQUISITION OF AMPAC (continued)
In connection with the acquisition of AMPAC, the Company closed a private placement financing of
subscription receipts at a price of Cdn$0.50 per subscription receipt for aggregate gross proceeds of
approximately $14,550,900 (Cdn$19,550,000). Each subscription receipt was to convert into one common
share of the Company. On January 20, 2017 all subscription receipts were converted and the Company
issued 39,000,000 common shares. See Notes 18 (ii) and 19 (ii).
The Company entered into two offtake agreements (the "Offtake Agreements") at market terms based on
international benchmarks and prices quoted on the London Metal Exchange (“LME”) with Nyrstar and its
affiliate Nyrstar Sales & Marketing AG with respect to the purchase by Nyrstar from the Company of all of
the silver-rich zinc and lead concentrates from El Mochito, as a condition of the transaction.
7.
AMOUNTS RECEIVABLE
Input tax credit receivable - Corporate
Other amounts receivable - El Mochito
Trade receivables
(i)
Notes
December 31,
2017
$36,452
143,825
2,944,275
December 31,
2016
$76,206
7,964
-
$3,124,552
$84,170
(i) Trade receivables are from sales to Nyrstar
8.
PREPAID EXPENSES
Prepaid insurance and other - Corporate
Prepaid insurance and other - El Mochito
Deposits
December 31,
December 31,
Notes
10
2017
$103,499
1,184
50,759
$155,442
2016
$193,740
369,121
-
$562,861
30
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
9.
INVENTORIES
Stockpile inventories represent mineralized material that has been mined at the El Mochito mine,
Honduras. All concentrate and ore inventories are valued at the lower of cost and net realizable value.
Mineralized stockpiles
Concentrates
Concentrate and ore inventory
Materials and supplies
10.
DEPOSITS
December 31,
December 31,
2017
2016
$133,912
$271,226
6,509,498
1,902,162
$6,643,410
10,848,542
$2,173,388
13,161,487
$17,491,952
$15,334,875
McKinley Property, Alberta, Canada – 100% interest
In 2016, the Company was obligated to make deposits of $137,146 (Cdn$183,916), which are held by the
Alberta Energy Regulator (“AER”). The deposits will be held until the closure of the land, at which time, the
amounts will either be refunded or used towards the restoration of the land. Although the Company does
not expect that it will have to perform significant restoration activities, it has recorded a provision for the
rehabilitation costs based on the amount of the deposit held by the AER. See Note 16.
During October 2016, the Company received a notification that the Company was required to rehabilitate
the McKinley Property by February 17, 2017. The Company abandoned the well site by that date and a
deposit of $90,550 (Cdn$121,326) was refunded by the AER on March 21, 2017. The remaining deposit of
$50,759 (Cdn$63,131) will be refunded once the Energy Resources Conservation is satisfied that the
Company has performed all necessary restoration activities, both of which are planned for 2018.
11.
OTHER ASSETS
The Company has recorded valued added tax (“VAT”) paid in Honduras and related to the El Mochito mine
as a recoverable asset. Honduras law allows for certain VAT payments to be recovered through ongoing
applications for refunds or tax credits.
At December 31, 2017, other assets consist entirely of Honduran VAT receivable.
31
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
12.
PROPERTY, PLANT AND EQUIPMENT
Costs
Balance, July 31, 2016
Property,
Plant and
Equipment
Assets Under
Construction
Computer
and Office
Equipment
Notes
Total
$
-
$
-
$
-
$
-
Acquisition through business combination
6
10,410,545
Transfer from Assets Under Construction
1,896,073
(1,896,073)
Additions
Foreign currency translation
Balance, December 31, 2016
Additions
Foreign currency translation
Balance, December 31, 2017
Accumulated depreciation
Balance, July 31, 2016
Depreciation
Foreign currency translation
Balance, December 31, 2016
Depreciation
Foreign currency translation
Balance, December 31, 2017
-
-
-
-
-
-
10,410,545
1,510
(20)
1,510
(20)
$
10,410,545
$
-
$
1,490
$
10,412,035
11,713,385
2,563,132
33,638
14,310,155
-
-
-
1,205
-
1,205
$
24,020,003
$
667,059
$
36,333
$
24,723,395
$
-
$
-
$
-
$
-
(2,324)
-
-
-
(214)
(1)
(2,538)
(1)
$
(2,324)
$
-
$
(215)
$
(2,539)
(3,318,613)
-
-
-
(26,314)
(3,344,927)
(306)
(306)
$
(3,320,937)
$
-
$
(26,835)
$
(3,347,772)
Net book value, December 31, 2016
$
10,408,221
$
-
$
1,275
$
10,409,496
Net book value, December 31, 2017
$
20,699,066
$
667,059
$
9,498
$
21,375,623
During the fourth quarter of 2017, the Company finalized the estimate of the fair value of the property, plant
and equipment acquired, resulting in an adjustment of $2,689,377 to property, plant and equipment in the
purchase price allocation. Refer to Note 6.
The carrying value of property, plant and equipment under finance leases at December 31, 2017 was
$1,464,095 (December 31, 2016 - $1,631,418). Refer to Note 15.
32
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31,
2017
$7,263,836
3,819,671
3,709,784
$14,793,291
December 31,
2016
$2,862,485
3,541,642
1,402,690
$7,806,817
Trade Payables
Accrued liabilities
Accrued payroll and other
14. CONVERTIBLE DEBENTURES
On July 31, 2016, the Company closed a convertible debenture financing of 70 units at a price of Cdn$5,000
per unit, with each unit consisting of Cdn$5,000 principal amount of convertible unsecured debentures
maturing on July 31, 2019 and 4,000 share purchase warrants for aggregate gross proceeds of Cdn$350,000.
The convertible debentures contained a feature in the holders’ conversion rights that resulted in the
conversion feature being accounted for as a derivative with changes in fair value recorded in the statement
of operations and comprehensive loss.
See Note 19 (i) for details of the assumptions used to value the warrants issued with the convertible
debentures.
In October 2016, all of the convertible debentures were converted into common shares of the Company.
The Company issued 2,200,000 common shares to the debenture holders. See Note 18 (i).
33
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
15. FINANCE LEASE LIABILITIES
Payments due no later than 1 year
Raise Bore
Underground Drill Rig
Excavator
Later than 1 year less than 5 years
Raise Bore
Underground Drill Rig
Excavator
More than 5 years
Raise Bore Future Finance Charges
Underground Drill Rig Future Finance Charges
Finance Lease Obligation
Less: current portion
Non-current portion
December 31, 2017 December 31, 2016
$904,764
150,196
28,897
$475,140
94,881
46,569
$1,083,857
$616,590
$219,674
157,745
2,819
$380,238
-
-
$1,464,095
1,083,857
$380,238
$502,066
310,828
33,714
$846,608
$140,245
27,975
$1,631,418
726,728
$904,690
The finance lease liabilities were assumed with the business combination (see Note 6).
The annual interest rate on the finance leases are in the range of 2.0% and 5.5%.
34
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
16. PROVISION FOR ENVIRONMENTAL REHABILITATION
The Company’s provision for environmental rehabilitation consists of costs accrued based on the best
estimate of mine closure and reclamation activities that will be required at the El Mochito mine site upon
completion of mining activity. These costs will largely be incurred on mine closure. These activities include
costs for earthworks, including land re-contouring and re-vegetation, water treatment and demolition.
The following is a continuity schedule of the Company’s estimated provisions:
Notes
December 31,
2017
Balance, beginning of period
Acquired through business combination
Change in estimate
Accretion
Payments
Rehabilitation of McKinley Property
Foreign currency translation adjustment
Balance, end of period
Less: Current portion
6
22
10
$9,118,727
-
62,369
$482,112
(297,249)
(201,756)
3,867
$9,168,070
381,196
$8,786,874
December 31,
2016
(restated - note 6)
$140,600
8,963,372
-
$18,639
-
-
(3,884)
$9,118,727
380,000
$8,738,727
35
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
17. PROVISION FOR FUTURE TERMINATION PAYMENTS
The Company provides severance benefits to its employees in accordance with Honduran Labour Law. The
severance accrues based on the years of service of employees with the Company up to a maximum of 25
years. The present value of the severance liability is based on expected future payments that arise from
future potential terminations. This obligation has been calculated by independent actuaries using the
projected unit credit method. Expected future payments are discounted using the risk-free rate of Honduran
state bonds average in recent years of 10.14% for employees who receive benefits in Honduran Lempiras
and 2.83% for employees who receive benefits in US dollars.
Actuarial Valuation of termination benefits:
Termination obligation
Balance at July 31, 2016
Assumed through business combination
Balance at December 31, 2016
Current service cost
Net interest cost
Past service cost
Exchange rate adjustment
Benefit payments
Assumed liability
Balance at December 31, 2017
Notes
Notification
6
-
1,060,109
$1,060,109
102,729
82,289
-
3,305
(133,022)
-
$1,115,410
-
Severance
Total
-
6,862,264
$6,862,264
706,279
565,754
Death
-
7,922,373
-
$7,922,373
-
809,008
-
648,043
-
14,759
14,759
26,027
-
(726,216)
-
104,814
-
$7,668,639 $14,759 $8,798,808
-
22,722
(593,194)
104,814
36
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
18. SHARE CAPITAL
Authorized
Unlimited number of common shares, no par value
Unlimited number of preferred shares
The following is a summary of changes in common share capital:
Balance, July 31, 2016
Shares issued on convertible debentures
Balance, December 31, 2016
Shares issued on conversion of subscription receipts
Warrant valuation
Share issue costs
Private placement
Private placement - warrant valuation
Private placement - issue costs
Warrants exercised
Options exercised
RSUs redeemed
Balance, December 31, 2017
(i)
(ii)
(ii)
(ii)
(iii)
(iii)
(iii)
Number of
Common Shares
6,653,927
2,200,000
8,853,927
39,000,000
-
-
23,575,000
-
-
2,640,000
24,000
121,666
74,214,593
Issued Capital
$10,330,168
660,937
$10,991,105
14,550,900
(313,404)
(1,211,900)
14,935,343
(4,744,168)
(1,346,112)
1,263,175
8,238
60,579
$34,193,756
On December 21, 2016, the Company’s shares were consolidated on a 5 for 1 basis. All share, option and
warrant quantities have been adjusted in these consolidated financial statements.
(i)
(ii)
In October 2016, all of the convertible debentures (see Note 14) were converted into common shares
of the Company. The Company issued 2,200,000 common shares to the debenture holders.
In tandem with the completion of the Acquisition (see Note 6) and following the receipt by Ascendant
and Nyrstar of the approval of the Honduran Commission for the Defense and Promotion of
Competition for the Acquisition, announced on December 16, 2016, the Company also satisfied the
outstanding conditions for the release of the escrowed funds from the 39,000,000 subscription
receipts at a price of Cdn$0.50 per subscription receipt for aggregate gross proceeds of $14,550,900
(Cdn$19,500,000), issuance costs of $1,211,900 (Cdn$1,624,095), and 2,340,000 compensation
warrants valued at $313,404 (Cdn$420,000). On January 20, 2017, all of the subscription receipts were
converted into 39,000,000 common shares shares of the Company. On December 7, 2017, all of the
2,340,000 compensation warrants were exercised at Cdn$0.50 each for gross proceeds of $873,043
(Cdn$1,170,000).
37
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
18. SHARE CAPITAL (continued)
(iii) On March 7, 2017, the Company closed an underwritten public offering through a syndicate of
underwriters led by Eight Capital and including Canaccord Genuity Corp. and GMP Securities L.P. The
Company issued 23,575,000 units at a price of Cdn$0.85 per unit for aggregate gross proceeds of
$14,935,343 (Cdn$20,038,750). Each unit is comprised of one common share and one-half of one
common share purchase warrant. Each whole warrant will entitle the holder to acquire one additional
common share at an exercise price of Cdn$1.25 per share on or before March 7, 2022. The estimated
fair value of the warrants is $4,744,168 (Cdn$6,365,250) reduced by issuance costs of $548,579
(Cdn$736,029), resulting in a net value of $4,195,589 (Cdn$5,629,221).
See Note 19 (iii) for details on the assumptions used to value the warrants and compensation warrants
issued with the offering of these units.
The weighted average number of shares outstanding used to calculate basic and diluted earnings (loss) per
share for the year ended December 31, 2017 and five month period ended December 31, 2016 is as follows:
Weighted Average Number of Shares
Outstanding
Year ended
Five months ended
December 31, 2017
December 31, 2016
Basic
Dilutive effect of warrants
Dilutive effect of options
Dilutive effect of RSUs
Diluted
65,482,243
7,890,528
-
-
-
-
-
-
65,482,243
7,890,528
Net (Loss) Income for the Period
$ (12,057,595) $ (2,426,506)
Comprehensive Loss for the Period
$ (11,415,855) $ (2,440,878)
The determination of weighted average number of common shares for the purpose of diluted Earnings and
(Loss) per Share excludes the following shares relating to warrants and options that were anti-dilutive for
the periods below noted:
Loss per Share
Anti-dilutive warrants
Anti-dilutive options
Anti-dilutive RSUs
Year ended
Five months ended
December 31, 2017
December 31, 2016
15,102,000
570,334
6,333,334
4,540,000
607,667
-
38
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
19. WARRANTS
As at December 31, 2017 and 2016, warrants outstanding were as follows:
Expiry Date
October 31, 2018
July 31, 2019
October 31, 2018
March 7, 2022
March 7, 2019
Exercise Price
(Cdn$)
December 31, 2017
Number of
Warrants
(i)
(ii)
(iii)
(iii)
$0.25
$0.25
$0.50
$1.25
$0.85
$1.09
800,000
1,100,000
Exercisable
800,000
1,100,000
-
-
11,787,500
1,414,500
15,102,000
11,787,500
1,414,500
15,102,000
December 31, 2016
Exercise Price
(Cdn$)
Number of
Warrants
$0.25
800,000
$0.25 1,400,000
$0.50 2,340,000
Exercisable
800,000
1,400,000
2,340,000
-
-
-
-
-
-
$0.38 4,540,000
4,540,000
At December 31, 2017, the weighted average remaining contractual life of the warrants was 3.54 years
(December 31, 2016 – 2.06 years).
Warrants transactions are summarized as follows:
(i)
(ii)
Balance, January 31, 2016
Warrants granted
Balance, July 31, 2016
Warrants granted
Balance, December 31, 2016
Warrants granted on private
placement
Warrant issue costs
Compensation warrants granted (iii)
Warrants exercised
Balance, December 31, 2017
(iii)
(ii)
(iii)
Number of
Warrants
800,000
1,400,000
2,200,000
2,340,000
4,540,000
11,787,500
-
1,414,500
(2,640,000)
15,102,000
Weighted average
exercise price
(Cdn$)
$0.25
$0.25
$0.25
$0.50
$0.38
$1.25
-
$0.85
$0.47
$1.09
Warrants
reserve
$32,247
89,993
$122,240
313,404
$435,644
4,744,168
(548,579)
668,400
(332,689)
$4,966,944
39
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
19. WARRANTS (continued)
(i)
On July 31, 2016, the Company issued an aggregate of 1,400,000 warrants to debenture holders (Note
13). Each whole warrant will entitle the holder to acquire one common share of the Company at an
exercise price of Cdn$0.25 per share on or before July 31, 2019. The estimated fair value of the
warrants is Cdn$168,000. The value of the warrants was determined using the Black-Scholes option
pricing model with the following assumptions: an expected yield of 0%, expected volatility of 105%, a
risk-free interest rate of 0.54% and an expected life of 3 years. The warrant value has been reduced
by deferred taxes of Cdn$45,800 and costs of issuance of Cdn$4,700 resulting in a net value of $89,993
(Cdn$117,500).
(ii) On October 13, 2016, in connection with the acquisition of AMPAC (see Note 6) the Company issued
an aggregate of 2,340,000 compensation warrants to the agent which will entitle the holder to acquire
one common share of the Company at an exercise price of Cdn$0.50 on or before October 31, 2018.
The estimated fair value of the warrants is $313,404 (Cdn$420,000). The value of the compensation
warrants was estimated using the Black-Scholes option pricing model with the following assumptions:
an expected yield of 0%, expected volatility of 115%, a risk-free interest rate of 0.60% and an expected
life of 2 years. On December 7, 2017, all of the 2,340,000 compensation warrants were exercised at
Cdn$0.50 each for gross proceeds of $873,043 ($Cdn1,170,000).
(iii) On March 7, 2017, the Company closed an underwritten public offering and issued 23,575,000 units
at a price of Cdn$0.85 per unit for aggregate gross proceeds of $14,935,323 (Cdn$20,038,750). Each
unit is comprised of one common share and one-half of one common share purchase warrant. Each
whole warrant will entitle the holder to acquire one additional common share at an exercise price of
Cdn$1.25 per share on or before March 7, 2022. The estimated fair value of the warrants is $4,744,168
(Cdn$6,365,250) reduced by issuance costs of $548,579 (Cdn$736,029), resulting in a net value of
$4,195,589 (Cdn$5,629,221). The value of the warrants was estimated using the Black-Scholes option
pricing model with the following assumptions: an expected yield of 0%, expected volatility of 185%, a
risk-free interest rate of 1.08% and an expected life of 5 years.
In connection with the March 7, 2017 public offering, the Company issued an aggregate of 1,414,500
compensation warrants to the broker which will entitle the holder to acquire one broker unit at an
exercise price of Cdn$0.85 per broker unit on or before March 7, 2019. Each broker unit is comprised
of one common share and one-half of one common share purchase warrant. Each whole warrant will
entitle the holder to acquire one additional common share at an exercise price of Cdn$1.25 per share
on or before March 7, 2022. The estimated fair value of the compensation warrants is $668,400
(Cdn$896,793). The value of the compensation warrants was estimated using the Black-Scholes option
pricing model with the following assumptions: an expected yield of 0%, expected volatility of 189%, a
risk-free interest rate of 0.79% and an expected life of 2 years.
40
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
20. SHARE-BASED PAYMENT RESERVE
Balance, July 31, 2016
Options vested
Balance, December 31, 2016
Options exercised
Options expired
RSUs vested
RSUs redeemed
Balance, December 31, 2017
Options
Restricted
share units
-
-
-
-
-
Stock
options
$437,888
24,638
$462,526
(3,314)
(79,336)
-
-
1,786,587
(60,579)
$379,876 $1,726,008
Share-based
payment reserve
$437,888
24,638
$462,526
(3,314)
(79,336)
1,786,587
(60,579)
$2,105,884
The Company has an incentive stock option plan ("the Option Plan") whereby the Company can grant to
directors, officers, employees and consultants options to purchase common shares of the Company. The
Option Plan provides for the issuance of stock options to acquire up to 10% of the Company's issued and
outstanding capital. The Option Plan is a rolling plan as the number of shares reserved for issuance pursuant
to the grant of stock options will increase as the Company's issued and outstanding share capital increases.
The Company does not expect to use the Option Plan as part of its executive compensation program going
forward and has no plans to issue further options.
As at December 31, 2017 and 2016 the Company had outstanding stock options enabling the holders to
acquire common shares as follows:
Expiry date
July 10, 2017
May 28, 2019
January 14, 2020
June 15, 2020
October 27, 2020
Exercise Price
(Cdn$)
-
$0.75
$5.25
$0.25
$0.25
$0.64
December 31, 2017
Number of
Options
-
Exercisable
December 31, 2016
Exercise Price
(Cdn$)
Number of
Options
Exercisable
131,667
31,667
367,000
40,000
570,334
-
131,667
31,667
367,000
40,000
570,334
$7.05
$0.75
$5.25
$0.25
$0.25
$0.77
13,333
131,667
31,667
391,000
40,000
607,667
13,333
131,667
31,667
391,000
40,000
607,667
At December 31, 2017, the weighted average remaining contractual life of the stock options was 2.22 years
(December 31, 2016 – 3.17 years).
41
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
20. SHARE-BASED PAYMENT RESERVE (continued)
Stock option transactions are summarized as follows:
Number of
Options
579,334
28,333
607,667
(24,000)
(13,333)
570,334
Weighted Average
Exercise Price
(Cdn$)
$0.76
$1.15
$0.77
$0.25
$7.05
$0.65
Share-based
payment reserve
$437,888
24,638
$462,526
(3,314)
(79,336)
$379,876
Balance, July 31, 2016
Options granted
Balance, December 31, 2016
Options exercised
Options expired
Balance, September 30, 2017
Restricted Share Units (“RSUs”)
On October 7, 2016, the Company’s shareholders approved the Restricted Share Unit Plan (the “RSU Plan”),
whereby RSUs may be granted to directors, officers, consultants or employees at the discretion of the Board
of Directors. The RSU Plan provides for share unit awards (the “RSUs”) to be granted by the Board of
Directors to employees of the Company. An RSU is a unit representing the right to receive one common
share issued from treasury. The RSU Plan provides for the issuance of RSUs to acquire up to 10% of the
Company's issued and outstanding capital. The RSU Plan is a rolling plan as the number of shares reserved
for issuance pursuant to the grant of RSUs will increase as the Company's issued and outstanding share
capital increases.
The number of RSUs awarded will be determined based on the market price on the date of the grant, as
approved by the Board of Directors. The market price shall be calculated at the closing market price on the
Toronto Stock Exchange of the common shares on the date of the grant. The vesting requirements are
established from time to time by the Board of Directors.
Number of
RSUs
Outstanding
Number of
RSUs
Redeemable
-
6,455,000
(121,666)
6,333,334
-
-
1,771,667
(121,666)
1,650,001
Weighted
Average Grant
date fair value
(Cdn$)
$0.65
$0.65
$0.66
$0.65
Share-based
payment reserve
-
-
$1,786,587
(60,579)
$1,726,008
Balance at December 31, 2016
RSUs Granted
RSUs Vested
RSUs Redeemed
Balance at December 31, 2017
42
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
20. SHARE-BASED PAYMENT RESERVE (continued)
Restricted Share Units (“RSUs”) (continued)
(i)
On April 18, 2017, the Company granted 5,790,000 Restricted Share Units (“RSUs”), subject to certain
eligible participants under the Company’s RSU Plan, including certain officers, directors, and
employees.
Of the 5,790,000 RSUs granted, 5,040,000 will vest in accordance with the following schedule: (i) 33
1/3% immediately; (ii) 33 1/3% one year from the date of the grant; and (iii) 33 1/3% two years from
the date of the grant. The remaining 750,000 RSUs will vest in accordance with the following
schedule: (i) 33 1/3% one year following the date of the grant; (ii) 33 1/3% two years from the date of
the grant; and (iii) 33 1/3 three years after the date of the grant.
Of the 5,790,000 RSUs granted, 1,680,000 RSUs vested on the grant date of April 18, 2017. Of the
remaining 4,110,000 RSUs granted 1,930,000, 1,930,000 and 250,000 RSUs will vest in each of the
second quarters of 2018, 2019 and 2020 respectively. The total estimated fair value was $2,813,411
(Cdn$3,763,500) or $0.49 (Cdn$0.65) per RSU based on the market value of the Company’s common
shares on the grant date of April 18, 2017. Of the 1,680,000 RSUs that vested on April 18, 2017, 96,666
were converted to common shares on December 8, 2017 and 1,583,334 remain issued and
redeemable as at December 31, 2017. See Note 26.
(ii)
On November 22, 2017, the Company granted 665,000 Restricted Share Units (“RSUs”), subject to
certain eligible participants under the Company’s RSU Plan, including certain officers, directors, and
employees.
Of the 665,000 RSUs granted, 275,000 will vest in accordance with the following schedule: (i) 33 1/3%
immediately; (ii) 33 1/3% one year from the date of the grant; and (iii) 33 1/3% two years from the
date of the grant. The remaining 390,000 RSUs will vest in accordance with the following schedule:
(i) 33 1/3% one year following the date of the grant; (ii) 33 1/3% two years from the date of the grant;
and (iii) 33 1/3 three years after the date of the grant.
Of the 665,000 RSUs granted, 91,667 RSUs vested on the grant date of November 22, 2017. Of the
remaining 573,333 RSUs granted 221,667, 221,667 and 130,000 RSUs will vest in each of the fourth
quarters of 2018, 2019 and 2020 respectively. The total estimated fair value was $361,975
(Cdn$465,500) or $0.52 (Cdn$0.70) per RSU based on the market value of the Company’s common
shares on the grant date of November 22, 2017. Of the 91,667 RSUs that vested on November 22,
2017, 25,000 were converted to common shares on December 8, 2017 and 66,667 remain issued
and redeemable as at December 31, 2017. See Note 26.
For the year ended December 31, 2017, the Company recognized share-based payment expense relating to
the vesting of RSUs of $1,786,587 (Cdn$2,386,457) (2016 - $Nil), and will recognize an amount of $1,388,799
(Cdn$1,842,253) over the respective RSU vesting periods.
As of December 31, 2017, there were 6,333,334 RSUs outstanding. For the comparative period in 2016 there
were none outstanding.
43
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
21. REVENUES AND MINE OPERATING EXPENSES
GENERAL AND ADMINISTRATIVE EXPENSES
December 31, 2017 December 31, 2016
Year ended
Five months ended
REVENUES
Zinc Concentrate
Lead Concentrate
Total Revenues
MINE OPERATING EXPENSES
Mining
Processing
Government Royalties
Selling, General and Administration
Change in Concentrate Inventory
Depreciation
Total production expenses
$41,627,434
17,571,924
$59,199,358
$40,614,444
8,101,067
2,788,417
8,896,682
(4,471,160)
3,318,613
$59,248,063
-
-
-
-
-
-
-
-
2,538
$2,538
22. ADMINISTRATIVE EXPENSES AND OTHER EXPENSE ITEMS
Year ended Five months ended
Notes December 31, 2017 December 31, 2016
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting fees
Wages and salaries
Professional fees
Office and miscellaneous
Depreciation
Travel and promotion
Share-based payments
OTHER EXPENSE (INCOME) ITEMS
Loss (gain) on foreign exchange
Change in fair value of derivative
Financing charge on termination obligations
Accretion expense on rehabilitation liabilities
Interest and bank charges
Other loss
Transaction costs
14
17
16
$386,712
3,473,036
670,505
877,607
26,314
184,840
1,786,587
$7,405,601
$1,043,824
-
1,471,810
482,112
273,361
173,874
-
$3,444,981
$1,378,641
-
69,823
118,467
-
10,167
24,638
$1,601,736
-$8,108
401,673
(8,126)
18,639
40,549
-
$377,605
$822,232
44
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
23. FINANCIAL INSTRUMENTS
Financial instruments hierarchy and fair values
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy shall have the following levels:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Company’s financial assets and liabilities are recorded and measured as follows:
The Company’s financial instruments consist of cash, accounts receivable, due to/from related parties,
accounts payable, accrued liabilities, and finance lease liabilities. At December 31, 2017, the carrying values
of these instruments approximate their fair values due to the relatively short periods to maturity of the
financial instruments and are classified as Level 1 in accordance with the fair vale hierarchy.
December 31, 2017
December 31, 2016
Notes Carrying value
Fair value Carrying value
Fair value
Financial Assets
Loans and receivables
Cash
Accounts receivable
Due from related parties
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities
Due to related parties
Finance leases
Due to Nyrstar
7
26
13
26
15
6
$8,041,307 $8,041,307
$12,614,908 $12,614,908
$2,944,275 $2,944,275
$471,265
$471,265
-
-
-
-
$14,793,291 $14,793,291
$7,806,817 $7,806,817
-
-
$33,515
$33,515
$1,464,095 $1,464,095
$1,631,418 $1,631,418
$1,453,020 $1,453,020
$1,453,020 $1,453,020
45
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
24. CAPITAL MANAGEMENT
The Company's objective when managing capital is to maintain its ability to continue as a going concern in
order to provide returns for shareholders and benefits for other stakeholders.
The Company includes equity, comprised of issued capital stock, warrants reserve, share-based payments
reserve and deficit, in the definition of capital. The Company manages its capital structure and makes
adjustments to it, based on the funds available to the Company, in order to support the acquisition,
exploration and development of mineral properties. The Board of Directors does not establish quantitative
return on capital criteria for management, but rather relies on the expertise of the Company's management
to sustain future development of the business.
The Company is dependent on external financing to fund its mineral exploration and evaluation activities.
In order to carry out the planned exploration and pay for administrative costs, the Company will spend its
existing working capital and raise additional amounts as needed.
Management reviews its capital management approach on an ongoing basis and believes that this approach,
given the relative size of the Company, is reasonable. The Company's capital management objectives,
policies and processes have remained unchanged during the year ended December 31, 2017 and the five
month period ended December 31, 2016.
The Company will continue to assess new properties and seek to acquire an interest in additional properties
if it feels there is sufficient geologic or economic potential and if it has adequate financial resources to do
so.
25.
FINANCIAL RISK MANAGEMENT
The Company may be exposed to risks of varying degrees of significance which could affect its ability to
achieve its risk management objectives. The main objective of the Company's risk management process is
to ensure that the risks are properly identified and that the capital base is adequate in relation to those
risks. The principal risks to which the Company is exposed to are described below. There have been no
changes in the risks, objectives, policies and procedures during the year ended December 31, 2017 and the
five month period ended December 31, 2016.
Liquidity Risk
Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due. The
Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet
liabilities when due.
At December 31, 2016, the Company had a cash balance of $8,041,307 (December 31, 2016 - $12,614,908),
to settle current liabilities of $16,308,344 (December 31, 2016 - $8,947,060). The Company has working
capital surplus of $12,504,909 at December 31, 2017 (December 31, 2016 – $19,649,754). See Note 1 Basis
of Presentation and Going Concern.
46
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
25.
FINANCIAL RISK MANAGEMENT (continued)
Foreign Currency Risk
The Company is exposed to foreign currency risk to the extent expenditures incurred or funds received, and
balances maintained by the Company are denominated in currencies other than the functional currency of
the entity party to the transaction. The Company had net monetary liabilities totalling $9,369,000
denominated in Honduran Lempiras, and $864,000 denominated in Euro as of December 31, 2017. The
Company’s sensitivity analysis suggests that a change in the absolute rate of exchange in the Honduran
Lempira by 1% would increase or decrease net loss by $94,000 and in the Euro by 1% would increase or
decrease net loss by $9,000 for the year ended December 31, 2017. The Company’s objective in managing
its foreign currency risk is to minimize its net exposure to foreign currency cash flows by obtaining most of
its estimated annual U.S. cash requirements and holding the remaining currency in Canadian dollars. The
Company has not, to the date of these consolidated financial statements, entered into derivative
instruments to offset the impact of foreign currency fluctuations.
Commodity Price Risk
The Company is exposed to price risk with respect to commodity prices arising from changes to the market
prices for zinc, lead and silver between the time of the provisional invoicing of concentrates to the time of
final price settlement. The Company closely monitors commodity prices to determine the appropriate
course of action to be taken by the Company. The Company’s future operations will be significantly affected
by changes in the market prices of these commodities. Prices fluctuate on a daily basis and are affected by
numerous factors beyond the Company’s control. The supply and demand, the level of interest rates, the
rate of inflation, and stability of exchange rates can all cause significant fluctuations in prices. Such external
economic factors may in turn be influenced by changes in international investment patterns and monetary
systems and political developments. Management estimates that a 5% decrease in the market prices for
zinc, lead and silver would reduce the provisionally priced mark-to-market revenues and related accounts
receivable by $487,000 as of December 31, 2017.
Interest Rate Risk
The Company has cash balances and interest-bearing debt as described in Note 15. The Company's current
policy is to invest excess cash in investment-grade short-term deposit certificates issued by its banking
institutions. The Company has no short-term investments as at December 31, 2017 and is not subject to any
significant impact on the cash balance as a result of changes in interest rates.
Credit Risk
The Company has no significant concentration of credit risk arising from operations. Management believes
that the credit risk concentrating with respect to cash, restricted cash and amounts receivable is remote.
Fair Value
The carrying values of cash, restricted cash and amounts receivable, accounts payable, accrued liabilities,
finance lease liabilities, and subscription receivable approximate their fair values due to the relatively short
periods to maturity of the financial instruments.
47
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
25.
FINANCIAL RISK MANAGEMENT (continued)
Fair Value Hierarchy and Liquidity Risk Disclosure
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy shall have the following levels: (a)
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than
quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices) (Level 2); and (c) inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (Level 3).
26.
RELATED PARTY TRANSACTIONS
These consolidated financial statements include balances and transactions with directors and officers of the
Company and corporations related to them. The Company paid fees for services to certain officers and
directors or companies controlled by certain officers and directors during the period that were recorded in
the accounts shown below.
In accordance with IAS 24, key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the Company directly or indirectly, including any
directors (executive and non-executive) of the Company.
During the year ended December 31, 2017, the Company received loans of $Nil (December 31, 2016 -
$35,515 (Cdn$45,000)) from directors and officers of the Company to cover operating expenses. These loans
were unsecured, non-interest bearing with no fixed terms of repayment. On January 2017, these loans were
settled in full through a cash payment of Cdn$45,000.
During the year ended December 31, 2017, the Company granted loans of $431,461 (Cdn$575,893) to certain
directors and officers of the Company to cover the tax liability in respect of the vested RSUs. These loans
bear interest at the Canada Revenue Agency’s (“CRA”) quarterly prescribed interest rate used to calculate
employee and shareholder loans calculated annually and payable on the earlier of: (i) demand by the
Company, (ii) sale by the directors and officers of the common shares underlying the vested RSUs, and (iii)
April 18, 2022 for the April 2017 RSU recipients, and November 22, 2022 for the November 2017 RSU
recipients.
Officers and directors’ compensation
The Company paid or accrued compensation of $3,088,481 (2016 - $1,137,303) to directors and officers
during 2017. The Company recorded share-based payment expense related to the vesting of issued RSUs of
$1,763,251 (2016 - $Nil).
As at December 31, 2017, accounts payable and accrued liabilities include $71,094 due to directors and
officers of the Company, and accrued compensation of $1,314,972 due to directors and officers of the
Company.
48
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
27.
COMMITMENTS AND CONTINGENCIES
By their nature, contingencies will only be confirmed by the occurrence or non-occurrence of one or more
uncertain future events. The assessment of contingencies inherently involves the exercise of significant
judgments and estimates of the outcome of future events.
The Company operates in countries where it may be subject to assessments by the regulatory authorities in
each of those countries, which can be complex and subject to interpretation. Assessments may relate to
matters such as income and other taxes, duties and environmental matters. The Company is diligent, and
exercises informed judgment to interpret the provisions of applicable laws and regulations as well as their
application and administration by regulatory authorities to reasonably determine and pay the amounts due.
From time to time, the Company may undergo a review by the regulatory authorities and in connection with
such reviews, disputes may arise with respect to the Company’s interpretations about the amounts due and
paid.
The Company may also be subject to various litigation actions. In-house counsel, outside legal advisors, and
other subject matter experts assess the potential outcome of litigation and regulatory assessments.
Accordingly, the Company establishes provisions for future disbursements considered probable.
As at December 31, 2017, the Company did not have any material provisions for litigation claims or
regulatory assessments. Further, the Company does not believe claims or regulatory assessments, for which
no provision has been recorded, will have a material impact on the financial position of the Company.
The Company has the following commitments as at December 31, 2017:
Capital commitments (i)
Operating leases (i)
(i) Reported on an undiscounted basis
Environmental contingencies
<1 years
$4,346,900
87,974
$4,434,874
Payments due by period
1-5 years
$82,523
8,766
$91,289
5> years
-
-
-
Total
$4,429,423
96,740
$4,526,163
The Company’s mineral exploration and evaluation in oil and gas activities are subject to various federal and
provincial laws and regulations governing the protection of the environment. These laws and regulations
are continually changing and generally becoming more restrictive. The Company conducts its operations so
as to protect public health and the environment and believes its operations are materially in compliance
with all applicable laws and regulations. The Company has made, and expects to make in the future,
expenditures to comply with such laws and regulations. See also Notes 10 and 16.
49
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
28. SEGMENTED INFORMATION
The Company’s sole operation is the El Mochito mine in Honduras. Accordingly, the chief decision makers
consider Ascendant Resources Inc. to currently have one segment and, therefore, segmented information
is not presented.
29.
INCOME TAXES
(a) Tax rate reconciliation
Major items causing the Company’s income tax rate to differ from the Canadian statutory rate of 26.5%
(December 31, 2016 – 26.5%) were as follows:
December 31,
2017
$
December 31,
2016
$
Loss before income taxes
(10,899,287)
(2,426,506)
Expected income tax recovery based on statutory rate
Foreign tax rate differential
Share-based compensation
Other non-deductible expenses
Unrecognized/(recognized) temporary differences
Tax amnesty payment
Current income tax expense / (recovery)
(2,888,300)
(121,600)
473,400
300,400
2,236,100
1,158,308
1,158,308
(643,000)
(3,200)
1,000
167,000
478,200
-
-
Current tax expense of $1.16 million in 2017 (2016 - $Nil) includes a $1.10 million payment made to the
Honduran tax authority (Servicio de Administracion de Rentas de Honduras, “SAR”) under the tax amnesty
program. This program, available until December 31, 2017, allows taxpayers to settle potential tax disputes
upon payment of 1.5% of the highest revenue amount in one of the open taxation years subject to possible
tax audit (in this case taxation years 2012-2016 given the 5-year statute of limitations). By participating in
the tax amnesty program, the Company has eliminated potential liabilities arising from the period during
Nyrstar ownership, but also affirms the tax attributes related to loss carry-forwards and depreciable tax
assets.
50
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Year Ended December 31, 2017 and Five Month Period Ended December 31, 2016
Expressed in US dollars
29.
INCOME TAXES (continued)
(b) Deferred income tax balances
Deferred tax assets have not been recognized in respect of the following items:
December 31,
2017
$
December 31,
2016
$
Deferred income tax assets:
Non-capital losses carry-forwards - Canada
Capital losses - Canada
Other deductible temporary differences - Canada
Tax losses - Honduras
Other deductible temporary differences - Honduras
Total deferred income tax assets not recognized
3,384,200
556,200
986,400
16,200,000
39,900,000
61,026,800
1,555,500
519,700
592,400
17,700,000
41,100,000
61,467,600
The Company has approximately $12.77 million (December 31, 2016 - $5.87 million) of non-capital losses in
Canada which undercertain circumstances can be used to reduce taxable income for future years. These
losses expire from 2027 to 2037. Other tax pools in Canada totalling $7.92 million (December 31, 2016 -
$6.16 million) do not expire.
The Company also has approximately $54 million (December 31, 2016 - $59 million) of tax losses in
Honduras, which under certain circumstances can be used to reduce taxable income for future years. The
losses expire from 2018-2020. Other tax pools in Honduras totalling $133 million (December 31, 2016 - $137
million) do not expire.
Deferred tax assets have not been recognized in respect of these items because it is not probable that future
taxable profit will be available against which the Company can use the benefits.
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Corporate Office
79 Wellington Street West
TD South Tower, Suite 2100
Toronto, ON Canada M5K 1H1
T: 647 796 0066
F: 647 796 0067
TF: 1 888 723 7413
Investor Relations
Katherine Pryde,
Director, Corporate Communications and Investor Relations
T: 647 796 0083
E: info@ascendantresources.com
Transfer Agent
Computer Share Trust Company of Canada
100 University Avenue, 8th Floor, North Tower
Toronto, ON Canada M5J 2Y1
T: 416 263 9200
W: www.computershare.com
Auditors
KPMG LLP
TSX:ASND
OTCQX:ASDRF
www.ascendantresources.com
Notice of Annual and Special Meeting of Shareholders and Management Information Circular | Page 52