Lorem
ipsum dolor sit
amet, consectetur
adipiscing elit, sed do
eiusmod tempor incididunt ut
labore et dolore magna aliqua. Quis
ipsum suspendisse ultrices gravida. Risus
commodo viverra maecenas accumsan lacus vel
commodo viverra maecenas accumsan lacus vel
facilisis. Achieving Stability, Cultivating Growth
Achieving Stability,
Cultivating Growth
ANNUAL
REPORT
2018
MESSAGE
FROM THE
President & CEO
“
As we complete our first full year of normalized operations at our El Mochito zinc, lead and
silver mine, we continue to be pleased with the performance and accomplishments the
Company has achieved to date. While 2017 was a building year, 2018 has proven to be a
year of stability and growth, providing a solid foundation on which to accelerate into a new
phase of growth and optimization. Despite the external challenges faced in the commodity
markets in the latter half of the year, the team was able to persevere and deliver strong
operational performance as we continue to push El Mochito to its fullest potential. On
behalfbehalf of the entire team at Ascendant Resources Inc., I would like to thank you for your
continued support as we work towards achieving many more milestones in the year ahead.
”
Throughout 2018 the Company achieved many significant milestones
making it another exceptional and transformational year. By maintaining
a strong focus on operational improvements, execution and prioritization
of core objectives, organic and accretive growth and aggressive yet
prudent exploration, the Company was able to achieve our major
objectives.
ElEl Mochito continued to deliver on improved operational efficiencies
during 2018, highlighted by significant improvement to the grade profile
as a result of the emphasis on dilution control in the mine to help drive
sustained higher contained metal production. The Company produced
91.4 million pounds of zinc equivalent contained metal in 2018,
representing a 38% increase over 2017, and exited the year at a record
grade of 7% zinc equivalent. These results have poised the Company for
furtherfurther production growth into 2019 with mean guidance up 10% over
2018 production levels.
El Mochito’s growth potential was truly illustrated in the results of a
Preliminary Economic Assessment announced in October 2018, outlining
an Internal Rate of Return of 58%, with a payback period of just 2 years and
an increase of over 30% to contained metal production. Fundamental is
the fact that the study presents a robust and compelling opportunity for
Ascendant to position El Mochito as a long-term profitable operation by
reducing the all-in sustaining cost to an average of $0.97 per payable zinc
equivalent
equivalent pound produced, well below the consensus of long-term metal
price expectations.
The study was considered following an extensive underground drill
program in 2017, which resulted in an updated Mineral Resource Estimate
at El Mochito which significantly increased the size and scale of the
resource as total tonnes increased by 35%, near tripling Mineral Reserves
at the time, providing for a materially long resource life over 12 years.
Looking back on the evolution of the El Mochito mine over the past few
years, the great successes we have had can be attributed to the hard work
of our entire team, especially the operating team in Honduras. When we
acquired the 70-year-old mine at the end of 2016, we set out on an
ambitious plan to rehabilitate and return the mine to its prior esteem.
After just two years, we have done just that, achieving our production
targets, significantly extending the mine life and identifying new avenues
forfor growth potential. Without the depth of knowledge and hard work of
the entire management team, the dedication of the workforce and the
support of our local partners and community, we would not have been
able to elevate El Mochito to where it is today.
Our understanding of this is exactly why our core values lie in the health
and safety of our people. Since the Company took over operations at the
El Mochito mine, we have been dedicated to improving the safety culture
and morale while inspiring our employees. Over the course of 2018,
significant reductions in the number total time incidents occurred and the
Company was please to attain its longest stretch of working hours without
injury. Cultural health and safety awareness has greatly improved, and yet
wewe still see room for improvement. This will continue to be a core focus,
with emphasis on strong visible leadership, rigorous educational and
awareness training for the development of a safety-first culture driven by
responsibility and accountability at all levels.
Our continued commitment to the community and environment was once
again recognized as we were the recipients of the 2018 annual award for
corporate social responsibility granted by the Foundation for Corporate
Social Responsibility in Honduras for the 10th consecutive year. We
understand our overall success lies in our relationship with the community
and environment in which we operate, and we intend to continue
prioritizing responsible mining, creating tangible benefits for all our
stakeholders through investment in people, education, and the
stakeholders
environment.
Also in 2018, the Company further demonstrated its ability to identify
unique and accretive mineral opportunities with the investment in the
Lagoa Salgada project in mid-year. The Company viewed the investment
as a low-cost entry into a highly prospective, high-grade VMS polymetallic
deposit with near-term potential for significant scalability and
development opportunity, given its location along the Iberian Pyrite Belt, a
prolific region that has been transformational for many other large-scale
mining companies.
mining companies.
Subsequent to the year, the Company affirmed its growth expectations for
the project with an updated Mineral Resource Estimate significantly
expanding and upgrading the previous estimate, doubling total tonnes in
resource, following a modest 20-hole drill program in 2018. In 2019, the
Company will embark on a 37-hole drill program totaling 15,175 metres,
with the expectation of further expanding and delineating the resource,
with a view to progress the project further towards development.
Looking to 2019, we continue to build upon Ascendant’s solid foundation,
Looking
our objectives remain centered on operational improvements and growth
provided through exploration, expansion and acquisition. We look
forward to securing the proposed project funding for the expansion at El
Mochito and commencing construction later in the year. In the meantime,
we are pushing for better margins through improving cost efficiencies and
production growth. One recent opportunity is provided by the newly
completed
completed production ramp which brings direct and efficient access from
Esperanza to the underground crusher as well as highly prospective
exploration potential as we search in an area that has not been tested
before. As the Company embarks on exploration at both El Mochito and
Lagoa Salgada, we look forward to unlocking the true exploration potential
as both mineral deposits remain limited in exploration compared to our
entire land package in both regions.
While Ascendant reflects on the significant progress made to date, I would
like to take this opportunity to express my gratitude to all stakeholders,
community partners, contractors, my colleagues across the entire
organization and shareholders. Your support through the year and in the
years ahead is what makes our growth and success possible. We look
forward to an exciting and rewarding 2019.
Chris Buncic
President & Chief Executive Officer
President & Chief Executive Officer
TABLE OF CONTENTS
Message from the CEO 1 El Mochito 2018 Highlights 2
Ascendant Operations 3
Growth 4 Corporate Social Responsibility 5 Management Discussion & Analysis and Financial Statements 6
Pg 1
zon 8 �craie�ernemts
. --�'\ �
"":; -rtr, . ._ . .,-,
' -v..', .. '\ {
� �so:z Total Safefy
� 7.0 Related
Incidents
2018 Operational
Highlights
(kt)
ZnEq Production
Tonnes Milled (kt)
� .. . ___,,., , .,
30,000,000
25,000,000
20,000,000
15,000000
10,000,000
,.,00.00
47% Increase I 756.0
656.3
$120.00
67% Increase
41.5
30.0
$100.00
ii 2016A 2017A 2018A
ii 2016A 2017A 2018A
$80.00
$60.00
I
: I.I I I I I I I
Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418
Cost/ifonne
$112.0 I31% Decrease
Milled
$20.00
$40.00
$0.00
$88.2
Contained
Zinc Production Contained
Lead Production
- Zinc Equivalent
Production - Direct Operating
Cost S/t Ore
(USS/t)
Reserves (Contained
ZnEq. kt)
131% Increase 881.5
Jj 2017A 2018A
Cultivating Growth
2019
Guidance
Expansion
Project
Pushing El Mochito to New
Highs
Striving for Long-Term
Profitability El Mochito
ZnEq Production
90-110M lbs
Direct Operating Cost
($US)($US)
$70-$80/t
Capital Expenditure
($US)
$15-$20M
10% increase in 2019 mean ZnEq
production over 2018.
GrowthGrowth driven by higher-grade
profile as dilution control remains
a focus.
Robust Economics with 2 Year
Payback
58% Project IRR
31% Increase in Production to
31% Increase in Production to
Annual Average of
120M lbs
26% Decrease in AISC to Annual
Average of
$0.97/lb ZnEq
22% Increase in Processed Tonnes
22% Increase in Processed Tonnes
to
~2,800tpd
PEA provides compelling results for
the expansion and optimization of
the mine.
Construction
Construction expected to begin in
H2 2019 once project funding term
sheet is finalized.
Exploration
Upside
Highly Prospective Exploration
Potential at both El Mochito &
Lagoa Salgada
HONDURAS
El Mochito
GoalGoal is to further expand Mineral
Resources.
New development allows exploration in
an area of the mine never tested before.
PORTUGAL
LAGOA SALGADA
GoalGoal to further expand and upgrade
Mineral Resource Estimate and
progress the project.
37-hole37-hole drill program totalling 15,175
metres planned for 2019 off the back of
a modest 20-hole, 7,077 metre drill
program in 2018 which doubled total
tonnes in updated Mineral Resource
Estimate.
Pg 4
Our Appraoch
Corporate
to
Social
Responsibility
Inc. is committed
Resources
Ascendant
stakeholders,
in operation
this legacy,
environment
including
in the local community
but exceed it, operating
stewardship
as a socially
by all.
and best practices
our employees,
to responsible
local communities
for over 70 years,
having
responsible
and the environment
contributed
bringing
business
greatly
mining at El Mochito,
prioritizing
the creation
in which we operate.
for all our
of tangible
has been
The El Mochito mine
benefits
to the area. Our objective
development
is to not only maintain
while ensuring
and prosperity
economic
of the Company's active
As a result
once again presented
Business"
2018 -for the 10th consecutive
with the Empresa
award by the Foundation
role and dedication
Socialmente
to corporate
Responsable
Responsibility
social
(ESR) "Socially
for Corporate
in Honduras
Responsible
in
(FUNDAHRSE)
it was
responsibility,
year in 2018.
COMMUNITY
20 Years
PARTNERED WITH
FUNDEMOCHITO
740
CHILDREN SUPPORTED
THROUGH DAILY
NUTRITIONAL
NEEDS
3,300+
CVEM TRAINED
STUDENTS SINCE
INCEPTION
EMPRESA SOCIA.LIVIENTE
RESPONSABLE
Educational
Development
with the Red Cross, Municipality
and the Catholic
Fund in partnership
of Las Vegas
Church of Las Vegas
Partneres
combat low
surrounding
with the Honduran
malnutrition
Government
levels in the
to
community
The vocationa
Mochito
of mining
l school is 80% funded by the El
mine, training
students
in all aspects
ENVIRONMENT
15,000+
COMMUNITY MEMBERS
BY THE
PROTECTED
OF THE
PRESERVATION
WATER SUPPLY =
400+ HA
OF PROTECTED
PARTNERSHIP
INSTITUTE
CONSERVATION
LAND IN
WITH THE
FOR FOREST
with the municipality, the water
and preserves
protects
the
In partnership
treatment
primary
ensuring
facility
water source for the local community
maintained
water quality
700+
LOCAL & MIGRATORY
BIRD SPECIES
NEAR EL MOCHITO
NEST
to care for and
ives are implemented
initiat
Several
protect
surrounding plant life including
House that supplies seeds
of native trees which
are used to supplement
in
initiatives
reforestation
the surrounding
communities
a Green
At El Mochito, we continually
protected
conservation
reducing
objective
our
monitor
areas and have made
our
the minimum tree cutting threshold
year after year
WORKFORCE
950+
EMPLOYEES
AT EL
MOCHITO MINE
+ REDUCTION
IN NUMBER OF
INCIDENTS
& LONGEST
WORKING HOURS WITH NO
INCIDENTS
10x
THE MULTIPLE
WORKFORCE THAT
RECIEVES
RELATED TO HEALTH
BENEFITS
OF OUR
With a large workforce
services
sourced
impact EL Mochito
far and wide
and 85% of all contracting
from the local community,
the
spreads
has on the community
a safe working environment
means a continuous
for our
push on driving
culture
a safety-first
Providing
employees
change and promoting
emphasis
placing
accountability
on training,
leadership
and
to the health of
and community through
El Mochito contributes
employees
hospital treating
emergency
campaigns
activities
and other disease
throughout the community
services
workers
and their dependents,
in the area and vaccination
prevention
an on-site
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2018 and 2017
(Expressed in thousands of US dollars)
2018
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Ascendant Resources Inc.
Opinion
We have audited the consolidated financial statements of Ascendant Resources Inc. (the Entity), which
comprise:
•
•
•
•
the consolidated statements of financial position as at December 31, 2018 and December 31, 2017
the consolidated statements of operations and comprehensive loss for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
• and notes to the consolidated financial statements, including a summary of significant accounting
policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at December 31, 2018 and December 31, 2017, and its
consolidated financial performance and its consolidated cash flows for the years then ended in accordance
with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the “Auditors’ Responsibilities for the
Audit of the Financial Statements” section of our auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit
of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 in the financial statements, which notes that while the Entity believes that its
existing cash, together with cash from operations and additional financing will be sufficient to meet its
obligations as they become due, however the Entity’s ability to fund its obligations is sensitive to a number
of variables which cannot be predicted with certainty, including the production output and cash flows from
the Entity’s operations. As stated in Note 1 in the financial statements, these events or conditions, along
with other matters as set forth in Note 1 in the financial statements, indicate that a material uncertainty
exists that casts significant doubt on the Entity's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
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.
Other Information
Management is responsible for the other information. Other information comprises:
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit and remain alert for indications that the other
information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions as at the date of this auditors’ report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with International Financial Reporting Standards (IFRS), and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Entity or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes
our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
2
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit 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.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report.
However, future events or conditions may cause the Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group Entity to express an opinion on the financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditors’ report is Lee Hodgkinson
Toronto, Canada
March 20, 2019
3
ASCENDANT RESOURCES INC.
Consolidated Statements of Financial Position
As at December 31, 2018 and 2017
(Expressed in thousands of US dollars)
As at
ASSETS
Current
Cash
Trade and other receivables
Other financial assets
Prepaid expenses and deposits
Concentrate and ore inventory
Materials and supplies inventory
Total current assets
Non-current
Due from related parties
Taxes receivable
Investment in joint venture
Property, plant and equipment
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Trade and other payables
Credit facility
Finance lease obligations
Provision for environmental rehabilitation
Taxes payable
Total current liabilities
Non-current
Finance lease obligations
Due to Nyrstar
Provision for environmental rehabilitation
Provision for future termination payments
Total liabilities
Shareholders' equity
Share capital
Warrants
Share-based payment reserve
Accumulated other comprehensive income
Deficit
Total shareholders' equity
Total liabilities and shareholders' equity
Notes
December 31, 2018 December 31, 2017
6
20
7
22
6
5
8
9
10
11
12
26
11
18
12
13
14
15
16
$
3,808
4,093
137
325
$
8,041
3,125
-
156
2,003
9,436
19,802
833
3,085
3,011
39,340
66,071
19,374
4,775
1,185
1
1,577
26,912
270
-
6,664
8,601
42,447
36,041
4,935
3,095
2,299
(22,746)
23,624
6,643
10,849
28,814
471
1,296
-
21,376
51,957
14,793
-
1,084
381
50
16,308
380
1,453
8,787
8,799
35,727
$
34,194
4,967
2,106
733
(25,770)
16,230
$
66,071
$
51,957
Nature of Operations and Going Concern (Note 1) , Commitments and Contingencies (Note 23)
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 Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, excepts for share and per share amounts)
REVENUE
17
$
85,618
$
59,199
Notes
December 31, 2018 December 31, 2017
Year ended
MINE PRODUCTION EXPENSES
Mining
Processing
Government Royalties
Selling, General and Administration
Concentrate Inventory
Depreciation and amortization
Total production expenses
38,334
$
40,614
12,129
4,375
9,971
4,641
4,712
74,162
8,101
2,788
8,897
(4,471)
3,319
59,248
TOTAL OPERATING PROFIT (LOSS)
$
11,456
$
(49)
GENERAL AND ADMINISTRATIVE EXPENSES
INCOME (LOSS) BEFORE OTHER EXPENSE (INCOME)
OTHER EXPENSE (INCOME)
INCOME (LOSS) BEFORE INCOME TAXES
Income taxes
18
18
26
5,984
5,472
804
4,668
(1,663)
7,405
(7,454)
3,445
(10,899)
(1,158)
Net income (loss) for the period
$
3,005
$
(12,057)
OTHER COMPREHENSIVE INCOME (LOSS)
Items that may be reclassified subsequently to profit or loss
Translation adjustment
(34)
641,740
Items that will not be reclassified subsequently to profit or loss
Remeasurement of future termination payments
13
1,600
-
Other comprehensive income (loss)
Total comprehensive income (loss)
Basic and diluted (loss) earnings per share
Basic
Diluted
Weighted average number of shares outstanding
Basic
Diluted
1,566
641,740
$
4,571
$
629,683
$
0.04
$
(0.18)
$
0.04
$
(0.18)
14
14
74,310,271
77,766,769
65,482,243
65,482,243
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars)
OPERATING ACTIVITIES
Net income (loss) for the period
Add (deduct) the following items
Depreciation
Advances to joint venture expensed
Accretion expense on rehabilitation liabilities
Change in environmental rehabilitation estimate
Environmental rehabilitation payments
Charge on termination obligations
Termination liability payments
Assumed termination liability
Value added tax write-down
Material and supplies inventory adjustment
Materials and supplies obsolescence adjustment
Gain on settlement of amounts payable
Share based payments
Operating cash flows before changes in working capital
Total changes in non-cash working capital
Net cash flows from (used in) operating activities
INVESTING ACTIVITIES
Acquisition of property, plant and equipment
Payments on finance leases
Investment in joint venture
Advances to joint venture
Net cash flows (used in) investing activities
FINANCING ACTIVITIES
Net proceeds from private placement of equity
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Proceeds from revolving credit facility
Repayment of revolving credit facility
Net cash flows provided by financing activities
Change in cash during the period
Cash, beginning of period
Impact of foreign exchange in cash balances
Notes
Year ended
Year ended
December 31, 2018 December 31, 2017
$
3,005
$
(12,057)
8
5
12
12
12
13
13
13
18
16
25
8
11
5
5
14
14
14
10
10
4,724
2,248
310
(2,788)
(25)
2,335
(932)
-
904
1,391
266
(1,592)
1,022
10,868
5,408
16,276
(21,738)
(305)
(1,361)
(1,918)
(25,322)
-
151
-
5,850
(1,075)
4,926
(4,120)
8,041
(113)
3,345
-
482
62
(297)
1,472
(726)
105
-
-
-
-
1,787
(5,827)
(640)
(6,467)
(13,445)
-
-
-
(13,445)
13,709
930
5
-
-
14,644
(5,268)
12,615
694
Cash, end of period
$
3,808
$
8,041
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Consolidated Statements of Changes in Equity
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of 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
Balance, December 31, 2017
Warrants exercised
Shares issued as consideration
for investment in joint venture
RSUs vested
RSUs redeemed
RSUs cancelled
Income for the period
Foreign currency translation
adjustment
Remeasurement adjustment of
termination obligation
Balance, December 31, 2018
15
5
16
16
16
13
74,214,593
800,000
$ 4,967
$ 34,194
183 (32)
$ - $ 2,106 $ (25,770)
-
- -
$ 733
$ 16,230
- 151
2,052,546
-
25,000
1,650
-
- -
-
14
-
- 1,022
- (14)
- -
-
-
- 1,650
- 1,022
- -
-
-
-
- -
- -
- (19)
-
19
- 3,005
- -
- 3,005
- -
-
- - (34) (34)
77,092,139
- -
$ 36,041
$ 4,935
-
$ - $ 3,095 $ (22,746)
- - 1,600
$ 2,299
1,600
$ 23,624
Balance, December 31, 2016
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
Balance, December 31, 2017
Number of
Issued Share
Shares to be
Share-based
Accumulated
Accumulated other
comprehensive
shares
8,853,927
Capital
10,991
$
Warrants
435
$
issued
13,026
$
payments reserve
$
463
deficit
(13,792)
$
$
income
91
Total
11,214
$
14
14, 15
15
14, 15
14, 16
16
14
14, 16
39,000,000
23,575,000
-
2,640,000
24,000
-
-
121,666
-
13,026
8,845
-
1,263
8
-
-
-
61
-
4,196
668
(332)
-
-
-
-
-
(13,026)
-
-
-
-
-
-
-
-
-
-
-
-
(4)
(79)
1,787
(61)
-
-
-
-
-
-
79
-
-
(12,057)
-
-
-
-
-
-
-
-
-
-
13,041
668
931
4
-
1,787
-
(12,057)
-
74,214,593
-
34,194
$
$
-
4,967
-
$
-
$
-
2,106
-
(25,770)
$
$
642
733
642
16,230
$
The accompanying notes are an integral part of these consolidated financial statements.
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
1. NATURE OF OPERATIONS AND GOING CONCERN
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.
Ascendant Resources Inc. (“Ascendant” or “the Company”) through its 100%-owned subsidiary American
Pacific Honduras S.A. (“AMPAC”) is focused on its producing El Mochito zinc, silver and lead mine in west-
central Honduras, which has been in near continuous production since 1948. Since acquiring the mine in
December 2016, the Company has been focused on increasing zinc equivalent production and optimizing
mine operations. The Company is also engaged in the evaluation of producing and advanced development
stage mineral resource opportunities, on an ongoing basis.
Management expects that the Company’s existing cash at December 31, 2018 together with cash from
operations and additional financing will be sufficient to fund cash requirements in the ordinary course of
business for a period of at least twelve months, our 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
(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”).
These consolidated financial statements were reviewed by the Audit Committee, and approved by the Board
of Directors for issue on March 20, 2019.
(b) 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
5
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
Honduran subsidiary AMPAC. All values are rounded to the nearest thousand ($000) except where otherwise
indicated.
(c) Basis of measurement:
These consolidated financial statements have been prepared on the historical cost basis except for
derivatives, embedded derivatives, other financial instruments at fair value through profit or loss (“FVTPL”),
which are measured at fair value.
The accounting policies set out in Note 3 have been applied consistently by the Company and its subsidiaries
in preparing the consolidated financial statements for the years ended December 31, 2018 and 2017.
(d) Use of accounting estimates and judgements:
The preparation of the 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.
The following are significant judgements and estimates impacting the consolidated financial statements:
Mineral reserves and resources - the Company estimates mineral reserves and resources to determine
future recoverable mine production based on assessment of geological, engineering and metallurgical
analyses, estimates of future production costs, capital costs and reclamation costs, as well as long term
commodity prices and foreign exchange rates. There are numerous uncertainties inherent in estimating
mineral reserves and resources, including many factors beyond the Company’s control. The estimates
are based on information compiled by appropriately qualified persons relating to the geological data
on the size, depth and shape of the ore body and interpreting this data requires complex geological
judgements.
Changes in the mineral reserve or resource estimates may affect:
-
the carrying value of exploration and evaluation assets, capital works in progress, mining properties
and plant and equipment;
- depreciation expense for assets depreciated either on a unit-of-production basis or on a straight-
line basis where useful lives are restricted by the life of the related mine or plan;
the provision for decommissioning, restoration and similar liabilities; and
the carrying value of deferred tax assets.
-
-
6
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
-
-
Property plant and equipment (note 8) - the carrying amounts of property, plant and equipment and
exploration and evaluation assets on the Company’s consolidated balance sheets are significant and
reflect multiple estimates and applications of judgement. Management exercises judgement in
determining whether the costs related to exploration and evaluation are eligible for capitalization and
whether they are likely to be recoverable by future exploration, which may be based on assumptions
about future events and circumstances. Judgement and estimates are used when determining whether
exploration and evaluation assets should be transferred to assets under construction within property,
plant and equipment. For mines in the production stage, management applies judgement to determine
development costs to be capitalized based on the extent they are incurred in order to access reserves
mineable over more than one year. In doing this, estimates such as number of tonnes of waste to be
removed over the life of the mining area and economically recoverable reserves extracted as a result.
For depreciable property, plant and equipment assets, management makes estimates to determine
depreciation. For assets depreciated using the straight-line method, useful lives of the assets or
components are estimated. A significant estimate is required to determine the total production basis for
units-of-production depreciation. The most currently available reserve and resource report is utilized in
determining the basis which has material impacts on the amount of depreciation recorded through
inventories and the consolidated income statements. There are numerous uncertainties inherent in
estimating mineral 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.
Tax provisions (note 26) - 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.
7
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
-
Functional currency (note 2b) - 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 12) - significant judgement and estimates are utilized in
the determination of the decommissioning and restoration provisions in the consolidated balance
sheets. Judgement is involved in determining the timing and extent of cash outflows required to satisfy
constructive obligations based on the timing of site closures in the Life-of-Mine (“LOM”) plans,
expected unit costs to determine cash obligations to remediate disturbances and regulatory and
constructive requirements to determine the extent of the remediation required. The timing of cash
outflows and discount rates associated with discounting the provision are also key estimates. Changes
in these estimates may result in a change in classification of the provision between non-current and
current as well as material differences in the total provision recorded in the consolidated balance
sheets.
Post-employment benefits (note 13) - 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.
8
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
3.
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.
9
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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 cash generating units (“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.
10
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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 period end 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, 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.
11
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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.
(a) Revenue:
Revenue from the sale of goods to customers is measured at the fair value of the consideration received
or receivable, net of treatment and refining charges. Revenue from the sale of by-products is included in
revenue.
Sales revenue is recognized when control of the goods sold has been transferred to the buyer. Control is
deemed to have passed to the customer when significant risk and reward of the product has passed to the
buyer, the Company has a present right to payment and physical possession of the product has been
transferred to the buyer. For medium and long-term contracts, revenue recognition criteria are assessed
for individual sales within the contracts.
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. Therefore, revenue is initially recorded based on an initial provisional invoice. Such a provisional sale
contains an embedded derivative that must be separated from the host contract. Subsequently, at each
reporting date, until the provisionally priced sale is finalized, sales receivables are marked to market, with
adjustments (both gains and losses) recorded within revenue and in trade and other receivables on the
consolidated balance sheets. As per IFRS 15 Revenue, variability in price is deemed to be fair value
movements on provisionally price receivables under the scope of IFRS 9 Financial Instruments.
The Company only includes in the transaction price an amount which is not highly likely to be subject to
significant subsequent revenue reversal. Within sales contracts with customers, separate performance
obligations may arise pertaining to the shipping of goods sold. Where significant, costs and the transaction
price are allocated on a relative stand-alone selling basis to any separate performance obligations and are
recognized over the period of time the goods sold are shipped, on a gross basis.
12
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(b) 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 other 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.
(c) 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.
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.
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.
(d) 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.
13
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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.
(e) 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.
Exploration and evaluations costs are initially capitalized as either tangible or intangible exploration or
evaluation assets according to the nature of the assets acquired. These costs include acquisition of rights to
explore, exploration drilling, carrying costs of unproved properties, and any other activities relating to
evaluation of technical feasibility and commercial viability of extracting mineral resources. Cash flows
associated with exploration and evaluation assets are classified as investing activities in the consolidated
statements of cash flows.
Judgement is required in determining whether the respective costs are eligible for capitalization where
applicable, and whether they are likely to be recoverable, which may be based on assumptions about future
events and circumstances. Estimates and assumptions made may change if new information becomes
available. Management has determined that exploration and evaluation costs incurred and capitalized have
future economic benefits and are economically recoverable. In making this judgment, management has
assessed various sources of information including but not limited to the geologic and metallurgic
information, history of conversion of mineral deposits to proven and probable mineral reserves, operating
management expertise and existing permits. Costs incurred relating to the acquisition and claim
maintenance of mineral properties, including option payments and annual fees to maintain the project in
good standing, are capitalized and deferred by project until the project to which they relate is sold,
abandoned, impaired or placed into production.
14
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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 for impairment when
assets reach the end of the exploration and evaluation phase.
Exploration and evaluation assets are transferred to assets under construction 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.
(h) 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.
15
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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)
Assets under construction:
Assets under construction 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. Assets under construction are not depreciated.
(ii) Mining properties:
Mining properties consist of costs transferred from assets in construction 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.
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 mine production expenses in profit or
loss. These include ore stope access drifts, footwall and hanging-wall drifts in stopes, drawpoints,
16
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
drill drifts, sublevels, slots, drill raises, stope manway access raises and definition diamond
drilling.
(ii)
Property, 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.
(iii) 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.
17
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(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.
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.
18
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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.
19
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(k) 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.
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.
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.
20
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(l)
Financial Instruments:
Non-derivative financial instruments are initially recognized at fair value plus, in the case of a financial asset
or financial liability not measured at fair value through profit or loss, directly attributable transaction costs.
Measurement in subsequent periods depends on the financial instrument’s classification. The Company
uses trade date accounting for regular way purchases or sales of financial assets. The Company determines
the classification of its financial instruments and non-financial derivatives at initial recognition.
Financial assets and liabilities are offset and the net amount presented in the consolidated balance sheets
when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a
net basis or to realize the asset and settle the liability simultaneously.
The classification of financial assets is based on the results of the contractual characteristics test and the
business model assessment which will result in the financial asset being classified as either: amortized cost,
fair value through profit or loss (“FVTPL”) or fair value through other comprehensive income (“FVTOCI”).
(i) Non-derivative financial instruments - classification:
Financial assets at fair value through profit or loss
Provisionally priced zinc sales receivables and the Company’s advances to associates and joint ventures
where repayments do not meet the criteria as Solely Payments of Principal and Interest (“SPPI”) are
classified as financial assets at fair value through profit or loss and are measured at fair value. The
unrealized gains or losses related to changes in fair value are reported in other finance income/expense
in the consolidated income statements, except gains and losses on the non-hedge financial derivatives
related to customer sales contracts are presented in revenue.
Amortized cost
Cash and other receivables are classified as and measured at amortized cost and are carried at amortized
cost using the effective interest rate method, less impairment losses, if any.
Non-derivative financial liabilities
Accounts payable and credit facility are initially recognised at FVTPL and subsequently accounted for at
amortized cost, using the effective interest rate method.
(ii) Derivatives:
Derivatives are initially recognized at fair value when the Company becomes a party to the derivative
contract and are subsequently re-measured to fair value at the end of each reporting period. The
resulting gain or loss is recognized in the consolidated income statements immediately unless the
derivative is designated and effective as a hedging instrument. Derivatives with positive fair value are
recognized as assets; derivatives with negative fair value are recognized as liabilities.
Contracts to buy or sell non-financial items that meet the definition of a derivative but were entered into
and are held in accordance with the Company's expected purchase, sale or usage requirements are not
recognized as derivatives. Such contracts are recorded as non-derivative purchases and sales.
21
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(iii) Embedded derivatives:
The Company considers whether a contract contains an embedded derivative when it becomes a party
to the contract. Derivatives embedded in other financial instruments or other host contracts are treated
as separate derivatives when their risks and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.
(iv) Fair values of financial instruments:
The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s-length transaction.
Fair values of financial instruments traded in active markets are determined based on quoted market
prices, where available. Bid prices are generally used for assets held or liabilities to be issued; asking
prices are generally used for assets to be acquired or liabilities held.
For financial instruments not traded in an active market, fair values are determined based on appropriate
valuation techniques. Such techniques may include discounted cash flow analysis, using recent arm’s-
length market transactions, reference to the current fair value of another instrument that is substantially
the same, and other valuation models.
The Company applies a hierarchy to classify valuation methods used to measure financial instruments
carried at fair value. Levels 1 to 3 are defined based on the degree to which fair value inputs are
observable and have a significant effect on the recorded fair value, as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Valuation techniques use significant observable inputs, either directly (i.e., as prices) or
indirectly (i.e., derived from prices), or valuations are based on quoted prices for similar instruments; and
Level 3: Valuation techniques use significant inputs that are not based on observable market data
(unobservable inputs).
An analysis of fair values of financial instruments is provided in note 20.
22
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(vi) Derecognition of financial instruments:
The Company derecognizes financial assets when the contractual rights to the cash flows from the assets
expire, or when the Company transfers the rights to receive the contractual cash flows on the financial
assets in a transaction in which substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets that is created or retained by the Company is
recognized as a separate asset or liability.
The Company derecognizes financial liabilities when its contractual obligations are discharged, cancelled
or expire or when its terms are modified and the cash flows of the modified liability are substantially
different.
(m) Taxation:
Current tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted by the balance sheet date.
The Company is subject to income taxes in numerous jurisdictions. Significant judgement is required in
determining the worldwide provision for income taxes due to the complexity of legislation. There are many
transactions and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business. The Company recognizes liabilities for anticipated tax based on estimates of whether
additional taxes will be due. Where the final outcome of these matters is different from the amounts that
were initially recorded, such differences will affect the income tax and deferred tax provisions in the period
in which such determination is made.
Additionally, future changes in tax laws in the jurisdictions in which the Company operations could limit the
ability of the Company to obtain tax deductions in future periods.
Deferred Tax
Deferred tax is recognized using the balance sheet method in respect of temporary differences at the
balance sheet date between the tax basis of assets and liabilities, and their carrying amounts for financial
reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences, except:
- where the deferred income tax liability arises from the initial recognition of goodwill, or the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, where the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
-
23
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused
tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax
losses can be utilized, except:
- where the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilized.
-
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at
each balance sheet date and are recognized to the extent that it has become probable that future taxable
profit will be available to allow the deferred tax asset to be recovered.
Judgement is required in determining whether deferred tax assets are recognized on the consolidated
balance sheets. Deferred tax assets, including those arising from unutilized tax losses, require management
to assess the likelihood of taxable profit in future periods in order to utilize recognized deferred tax assets.
Estimates of future taxable income are based on forecast 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.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods
in which the asset is realized or the liability is settled, based on tax rates and tax laws enacted or
substantively enacted at the balance sheet date.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists
to offset current tax assets against current tax liabilities and the deferred income taxes relate to the same
taxable entity and the same taxation authority.
Current and deferred taxes relating to items recognized outside profit or loss (whether in other
comprehensive income or directly in equity) are recognized outside profit or loss and not in the consolidated
income statements. Mining taxes and royalties are treated and disclosed as current and deferred taxes if
they have the characteristics of an income tax.
24
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(n) Loss per share:
The Company presents basic and diluted earnings (loss) per share (“EPS”) data for its common shares. Basic
EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the
weighted average number of common shares outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to common shareholders and the weighted average number of
common shares outstanding for the effects of all dilutive potential common shares, which currently consist
of stock options and RSUs granted to employees and warrants.
When calculating earnings per share for periods where the Company has a loss, Ascendant's calculation of
diluted earnings per share excludes any incremental shares from the assumed conversion of stock options,
RSUs, and warrants as they would be anti-dilutive.
(o) Share Capital and Reserves:
Transaction costs
Transaction costs directly attributable to equity transactions are recognized as a deduction from equity.
Share-based payment reserve
Share-based payment reserve is used for equity-settled share-based payments and includes amounts for
stock options and RSUs granted, vested and not exercised.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation
of the financial statements of foreign operations. Exchange differences arising from the translation of the
financial statements of foreign operations form part of the net investment in the foreign operation.
Translation gains and losses remain in the reserve until disposal of all or a portion of the foreign operation.
(p) 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 share-based payment reserve.
25
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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 16. 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 in accordance with vesting terms and conditions, with a corresponding increase to share-based
payment reserve. At the end of each reporting period, the Company revises its estimate of the number of
equity instruments expected to vest, if any.
(p) Leases
Finance leases, under which substantially all the risks and rewards incidental to ownership of the leased
item are transferred to the Company, are capitalized as assets at the inception of the lease at the lower of
fair value or the present value of the minimum lease payments. Lease payments are apportioned between
finance charges and the reduction of the liability so as to achieve a constant periodic rate of interest on the
remaining balance of the liability. Finance charges are reflected in the consolidated income statements as
finance costs.
Under operating lease arrangements, the risks and rewards incidental to ownership are not transferred to
the Company. Operating lease payments are recognized as an expense in the consolidated income
statements on a straight-line basis over the lease term.
(q) Interests in Joint Arrangements
A joint arrangement can take the form of a joint venture or joint operation. All joint arrangements involve a
contractual arrangement that establishes joint control, which exists only when decisions about the activities
that significantly affect the returns of the investee require unanimous consent of the parties sharing control.
A joint operation is a joint arrangement in which the Company has rights to the assets and obligations for
the liabilities relating to the arrangement. A joint venture is a joint arrangement in which the Company has
rights to only the net assets of the arrangement.
Joint ventures are accounted for in accordance with the policy “Investments in Associates and Joint
Ventures.” Joint operations are accounted for by recognizing the Company’s share of the assets, liabilities,
revenue, expenses and cash flows of the joint operation in the consolidated financial statements.
(r) Investments in Associates and Joint Ventures
Investments over which the Company exercises significant influence and which the Company does not
control or jointly control are associates. Investments in associates are accounted for using the equity
method, except when classified as held for sale. Investments in joint ventures as determined in accordance
with the policy “Interests in Joint Arrangements” are also accounted for using the equity method.
26
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
The equity method involves recording the initial investment at cost and subsequently adjusting the carrying
value of the investment for the Company’s proportionate share of the profit or loss, other comprehensive
income or loss and any other changes in the associate’s or joint venture’s net assets such as dividends.
The Company’s proportionate share of the associate’s or joint venture’s profit or loss and other
comprehensive income or loss is based on its most recent financial statements. Adjustments are made to
align any inconsistencies between the Company’s accounting policies and the associate’s or joint venture’s
policies before applying the equity method. Adjustments are also made to account for depreciable assets
based on their fair values at the acquisition date of the investment and for any impairment losses recognized
by the associate or joint venture.
If the Company’s share of the associate’s or joint venture’s losses equals or exceeds the investment in the
associate or joint venture, recognition of further losses is discontinued. After interest is reduced to zero,
additional losses will be provided for and a liability recognized only to the extent that the Company has
incurred legal or constructive obligations to provide additional funding or make payments on behalf of the
associate or joint venture. If the associate or joint venture subsequently reports profits, the Company
resumes recognizing its share of those profits only after its share of the profits equals the share of losses
not recognized.
At each reporting date, the Company considers whether there is objective evidence of impairment in
associates and joint ventures, and records an impairment charge accordingly.
27
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
4.
NEW STANDARDS
New standards and interpretations adopted
(a) IFRS 9, Financial Instruments (“IFRS 9”)
Issued on July 24, 2014, IFRS 9 is the IASB’s replacement of IAS 39, Financial Instruments: Recognition and
Measurement. The standard includes requirements for recognition and measurement, impairment,
derecognition and general hedge accounting. The IASB completed its project to replace IAS 39 in phases,
adding to the standard as it completed each phase. The version of IFRS 9 issued in 2014 supersedes all
previous versions and is mandatorily effective for periods beginning on or after January 1, 2018 with early
adoption permitted. The Company has finalized its determination of the effect of adoption of IFRS 9 on its
consolidated financial statements:
-
The embedded derivatives within our provisionally priced sales receivables are no longer bifurcated
from the accounts receivable recorded; therefore, both are presented together on the balance sheets,
and provisionally priced sales receivables are recorded at FVTPL.
- An expected credit loss model is used to impair any financial assets measured at amortized cost when
material. There was no impact to earnings as a result of this.
The Company applied this amendment on January 1, 2018, and as a result of the adoption no adjustments
were required to the Company’s consolidated financial statements.
(b) IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
In May 2014, the IASB issued IFRS 15 which is effective for periods beginning on or after January 1, 2018
and is to be applied retrospectively. IFRS 15 clarifies the principles for recognizing revenue from contracts
with customers. IFRS 15 will also result in enhanced disclosures about revenue, provide guidance for
transactions that were not previously addressed comprehensively and improve guidance for multiple-
element arrangements. The Company finalized its determination of the effect of adoption of IFRS 15 on its
consolidated financial statements:
-
The Company does not have any differences pertaining to the timing or the amount of revenue
recognition for concentrate sales.
- Within sales contracts with customers, separate performance obligations may arise pertaining to the
shipping of goods sold. Where significant, costs and the revenue allocated to this separate
performance obligation are recognized over the period of time the goods sold are shipped, on a gross
basis. No material impacts occurred as a result of separate performance obligations.
The Company has disclosed revenue generated from changes in mark-to-market of its provisionally
priced sales separately from revenue from sale of concentrates. This has created differences in
revenue from sale of concentrates as previously reported due to the fair value adjustments
subsequent to initial provision invoicing being reported on a separate line.
-
The Company applied this amendment on January 1, 2018, and as a result of the adoption no adjustments
were required to the Company’s consolidated financial statements.
28
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
(c) IFRIC Interpretation 22, Foreign Currency Transactions and Advance Consideration (“IFRIC 22”)
IFRIC 22 provides requirements about which exchange rate to use in reporting foreign currency transactions
(such as revenue transactions) when payment is made or received in advance. The Interpretations
Committee concluded that the exchange rate should be the rate used to initially measure the non-monetary
asset (prepaid asset) or liability (deferred credit) when the advance was made. If there were multiple
advances, each receipt or payment would be measured at the date the non-monetary asset or liability is
recognized. This interpretation is effective for annual periods beginning on or after January 1, 2018, is
consistent with the Company’s existing policies, and therefore does not have any effect on the Company’s
financial results.
New standards and interpretations not yet adopted
The Company’s consolidated financial statements have been prepared based on all IFRS and interpretations
effective as at December 31, 2018. The following new standards, amendments to standards and
interpretations are not yet effective or have otherwise not yet been adopted by the Company:
(d) IFRS 16, Leases (“IFRS 16”)
In January 2016, the IASB issued this standard which is effective for periods beginning on or after January 1,
2019, which replaces the current guidance in IAS 17, Leases (“IAS 17“), and is to be applied either
retrospectively or using the modified retrospective approach. Early adoption is permitted, but only in
conjunction with IFRS 15, Revenue from Contracts with Customers. Under IAS 17, lessees were required to
make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet).
IFRS 16 now requires lessees to recognize a lease liability reflective of future lease payments and a “right-of-
use asset” for virtually all lease contracts, which will cause, with limited exceptions, most leases to be
recorded ‘on balance sheet’. The new standard also requires more extensive disclosures than under IAS 17.
The Company will apply the new standard on its effective date of January 1, 2019 using the modified
retrospective approach, which means the cumulative effect of adoption will be recognized upon adoption
and comparatives will not be restated. The Company will record right-of-use assets based on the lease
liabilities determined as at January 1, 2019 and a result, will not have a retained earnings adjustment on
transition.
The Company will apply the transitional practical expedient to apply the criteria of IFRS 16 only to
arrangements that were previously identified as leases by applying IAS 17, and IFRIC 4: Determining whether
an Arrangement contains a Lease. Only contracts entered into or amended after January 1, 2019, will be
assessed for being, or containing, leases by applying the criteria of the new standard. The Company has
further elected to use the available exemptions as permitted by IFRS 16 for lease contracts for which the
lease terms ends within 12 months as of the date of initial application, and lease contracts for which the
underlying asset is of low-value.
As at December 31, 2018, the review of the effect of adopting IFRS 16 on the Company’s financial statements
is nearing completion. Work related to the calculation and review of the lease balances under the
requirements of IFRS 16 is being finalized.
29
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
The Company’s existing operating lease commitments under IAS 17, as disclosed in Note 11, will be the main
source of leases under the new standard. The final quantitative impact of adopting IFRS 16 will be provided
in the Company’s report for the first quarter of 2019.
On the transition date of January 1, 2019, the Company expects to recognize additional leases on the
consolidated balance sheet, which will increase finance lease obligations and property, plant and equipment
balances. As a result of recognizing additional finance lease obligations, the expected impact is a reduction
in cost of sales, as operating lease expense will be replaced by depreciation expense and finance expenses.
In addition, the classification between cash flow from operating activities and cash flow from financing
activities will also change.
(e) IAS 28, Investments in Associates and Joint Ventures (“IAS 28”)
The IASB issued amendments to IAS 28 "Investments in Associates and Joint Ventures". The amendment is
intended to clarify that an entity applies IFRS 9 "Financial Instruments" to long-term interests in an associate
or joint venture that form part of the net investment in the associate or joint venture but to which the equity
method is not applied. The amendments are to be applied retrospectively for fiscal years beginning on or
after January 1, 2019. The amendments and additions to IAS 28 have resulted in the Company recording the
advances to joint venture where the repayments do not meet the SPPI criteria as financial assets at fair value
through profit or loss and measured at fair value.
30
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
5.
INVESTMENT IN REDCORP
On June 27, 2018 (the “closing date”), the Company entered into an agreement with TH Crestgate GmbH
(“Crestgate”) to acquire an initial 25% interest in its Portuguese subsidiary Redcorp - Emprendimentos
Mineiros, Lda (“Redcorp”), which holds an 85% interest in the polymetallic Lagoa Salgada volcanogenic
massive sulphide (“VMS”) Project, as well as an option to earn up to an 80% interest in Redcorp upon
completion of certain milestones.
• Ascendant acquired an initial effective 25% interest in Redcorp for an upfront payment of $2.45 million
composed of $0.8 million in cash ($0.4 million on closing of the transaction and $0.4 million on July 15, 2018)
and $1.65 million in 2,053,546 Ascendant shares.
• Ascendant has the right to earn a further effective 25%, totaling an 50% interest in Redcorp via staged
payments and funding obligations as outlined below:
Investing a minimum of $9.0 million directly in Redcorp within 48 months of the closing date, to fund
exploration drilling, metallurgical test work, economic studies and other customary activities for
exploration and development, and
Making payments totaling $3.5 million to Crestgate according to the following schedule or earlier:
6 months after the closing date: $0.25 million (December 27, 2018 – paid)
12 months after the closing date: $0.25 million (June 27, 2019)
18 months after the closing date: $0.5 million (December 27, 2019)
24 months after the closing date: $0.5 million (June 27, 2020)
36 months after the closing date: $ 1.0 million (June 27, 2021)
48 months after the closing date: $ 1.0 million (June 27, 2022)
• The Company then has the option to earn an additional 30%, totaling an 80% interest in Redcorp, by
completing a Feasibility study within 54 months (December 27, 2022) of the closing date and making a
further payment of $2.5 million to Crestgate.
• The Company will fund all development and future construction costs and recoup Crestgate’s share of
investment through shareholders’ distributions until all the expenditures incurred in the project have been
repaid.
• Ascendant will retain a Right of First Offer on the remaining equity held by Crestgate.
31
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
5.
INVESTMENT IN REDCORP (continued)
At December 31, 2018, the Company holds a 25% interest in the Redcorp joint venture, with the remaining
75% held by Crestgate. The Redcorp joint venture is governed by the Shareholders’ Agreement between the
joint venture partners that requires unanimous approval for certain key strategic, operating, investing and
financing policies of the Redcorp joint venture. There are no publicly quoted market prices for Redcorp.
It is expected that the net assets and liabilities of Redcorp will be distributed to the Company. The Company
accounts for this investment using the equity method; accordingly, the investment will be adjusted for the
Company’s share of profit and loss at each reporting period. As a Project site operating entity, Redcorp’s
exploration and evaluation expenditures are capitalized, and the Company did not report losses attributable
to Redcorp’s operations in its Consolidated Financial Statements. The advances to Redcorp of $2,248 are
classified as financial assets at fair value through profit or loss and are measured at fair value, which resulted
in a total expense of $2,248 recognized in other expense items (see note 18).
The following is a summary of selected financial information of Redcorp prepared under IFRS, which is
considered to be a joint venture at December 31, 2018, and the carrying amount of the investment on the
consolidated statements of financial position:
Summarized consolidated statements of financial position:
Item
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (liabilities)
Statement of investment in joint venture:
Balance, beginning of period
Investment in joint venture
Acquisition costs
Loss from investment in joint venture
Balance, end of period
Advances to joint venture:
Balance, beginning of period
Advances to joint venture
Valuation allowance
Balance, end of period
December 31, 2018
$
618
1,789
(163)
$
(1,996)
248
Year ended
December 31, 2018
$
-
2,700
311
-
$
3,011
Year ended
December 31, 2018
$
-
2,248
(2,248)
$
-
32
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
6.
TRADE AND OTHER RECEIVABLES
Prepaid insurance and other - Corporate
Current
Trade receivables
Taxes receivable
Other receivables
Non-current
Taxes receivable
Notes December 31, 2018 December 31, 2017
(i)
$
4,031
62
-
4,093
$
2,944
37
144
3,125
$
3,085
7,178
$
1,296
4,421
(i) Trade receivables are from sales to Nyrstar
Current taxes receivable relates to refundable Harmonized Sales Tax (“HST”) in Canada
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, 2018 and 2017, non-current assets consist entirely
of Honduran VAT receivable.
7.
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.
Notes
Prepaid insurance and other - Corporate
Mineralized stockpiles
Concentrates
Concentrate and ore inventory
$
Notes December 31, 2018 December 31, 2017
134
295
6,509
1,708
6,643
2,003
$
$
33
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
8.
PROPERTY, PLANT AND EQUIPMENT
Cost as at January 1, 2018
Additions
Foreign currency translation
As at December 31, 2018
Notes
Property,
Plant and
Equipment
$ 24,021
20,589
-
44,610
Computer
and Office
Equipment
Assets Under
Total
Construction
$ 36 $ 24,723
$ 666
2,095
22,690
6
- (4) (4)
47,409
2,761 38
Accumulated depreciation and amortization as at January 1, 2018
Charge for the period
Foreign currency translation
As at December 31, 2018
Net book value, December 31, 2018
(3,321)
(4,712)
-
(8,033)
$ 36,577
- (26) (3,347)
- (12) (4,724)
- 2
2
- (36) (8,069)
$ 2,761 $ 2 $ 39,340
Cost as at January 1, 2017
Additions
Transfers
Foreign currency translation
As at December 31, 2017
$ 10,411
11,713
1,897 (1,897)
-
$ - $ 1 $ 10,412
14,310
2,563 34
-
-
24,021
- 1
666 36
1
24,723
Accumulated depreciation and amortization as at January 1, 2017
Depreciation
Foreign currency translation
As at December 31, 2017
Net book value, December 31, 2017
(2)
(3,319)
-
(3,321)
$ 20,700
- (2)
-
- (26) (3,345)
-
-
- (26) (3,347)
$ 10 $ 21,376
$ 666
-
The carrying value of property, plant and equipment under finance leases at December 31, 2018 was $1,660
(December 31, 2017 - $1,464). Refer to Note 11.
9.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade Payables
Accrued liabilities
Accrued payroll and other
Notes
$
December 31, 2018 December 31, 2017
7,264
3,819
3,710
14,793
7,779
8,612
2,983
19,374
$
$
$
34
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
10. CREDIT FACILITY
On August 24, 2018 the Company entered into a $5.0 million 12-month term revolving credit facility. The
credit facility bears interest at a rate of 8% for drawn downs in US dollar (“USD”) currency and 13% for drawn
downs in Honduran Lempira (“HNL”) currency, and is renewable on an annual basis. Any amounts drawn
under the revolving credit facility are payable in 12 monthly instalments. The credit facility is secured by a
pledge of the Company’s real estate assets at the port of Puerto Cortes, Honduras as well as a corporate
guarantee to AMPAC by the parent company. The interest rate effective at December 31, 2018 was 8%
relating solely to amounts drawn in USD.
11. FINANCE LEASE OBLIGATIONS
Total minimum lease payments
Effect of discounting
Present value of minimum lease payments
Less: current portion
Minimum payments under finance leases
Due no later than 1 year
Due later than 1 year less than 5 years
Notes
December 31, 2018 December 31, 2017
1,477
1,548
(93)
1,455
(1,185)
270
1,205
343
1,548
(13)
1,464
(1,084)
380
1,095
382
1,477
The annual interest rate on the finance leases were in the range of 2.0% and 5.5%.
35
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
12. 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 assumptions used in the estimate of the provision are as follows:
El Mochito mine operation
Undiscounted liability
for closure
11,745
$
Expected dates of
expenditure
2019 - 2038
Pre-tax
discount
rate
4.09%
Inflation
factor
2.39%
Present value of cash
flow required on
closure
6,664
$
The following is a continuity schedule of the Company’s estimated provisions:
Year ended
Year ended
Balance, beginning of period
Change in estimate
Accretion
Rehabilitation payments
Rehabilitation of McKinley Property
Foreign currency translation adjustment
Balance, end of period
Less: Current portion
$
$
Notes December 31, 2018 December 31, 2017
9,119
9,168
62
(2,788)
482
310
(297)
(25)
(202)
-
4
-
9,168
6,665
381
1
8,787
6,664
$
$
36
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
13. 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 10.08% for employees who receive benefits in Honduran Lempiras
and 3.76% for employees who receive benefits in US dollars.
Actuarial Valuation of termination benefits:
Termination obligation
Balance at December 31, 2017
Current service cost
Past service cost
Net interest cost
Notes
$
Notification
1,115
78
167
90
$
Severance
7,669
804
597
600
Remeasurement adjustment of termination obligation
Exchange rate adjustment
Benefit payments
Balance at December 31, 2018
(235)
-
(115)
1,100
$
(1,374)
(1)
(807)
7,488
$
Termination obligation
Balance at December 31, 2016
Current service cost
Past service cost
Net interest cost
Exchange rate adjustment
Benefit payments
Assumed liability
Balance at December 31, 2017
Notes
$
Notification
1,060
103
-
82
3
(133)
-
1,115
$
Severance
6,862
706
-
566
23
(593)
105
7,669
$
$
$
$
Death
15
$
-
(3)
2
9
-
(10)
13
$
Death
-
$
-
15
-
-
-
-
$
15
$
Total
8,799
882
761
692
(1,600)
(1)
(932)
8,601
$
Total
7,922
809
15
648
26
(726)
105
8,799
37
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
14. 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, December 31, 2016
Shares issued on conversion of subscription receipts
Warrant valuation
Share issue costs
Private placement
Private placement - warrant valuation
Private placement - share issue costs
Warrants exercised
Options exercised
RSUs redeemed
Balance, December 31, 2017
Shares issued as consideration for investment in Redcorp
Warrants exercised
RSUs redeemed
Balance, December 31, 2018
Notes
(i)
(i)
(i)
(iii)
(iii)
(iii)
(ii)
5
Share Capital
Number of
Common Shares
8,853,927
$ 10,991
39,000,000 14,551
- (313)
- (1,212)
23,575,000 14,935
- (4,744)
- (1,346)
2,640,000 1,263
24,000 8
61
121,666
74,214,593
2,052,546
800,000
25,000
77,092,139
34,194
1,650
183
14
36,041
$
(i)
In tandem with the completion of the acquisition of AMPAC in December 2016, the Company 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 $14,551
(Cdn$19,500), issuance costs of $1,212 (Cdn$1,624), and 2,340,000 compensation warrants valued at
$313 (Cdn$420). On January 20, 2017, all of the subscription receipts were converted into 39,000,000
common shares of the Company.
(ii) On December 7, 2017, all of the 2,340,000 compensation warrants issued in 2016 in connection with
the acquisition of AMPAC were exercised at Cdn$0.50 each for gross proceeds of $873 (Cdn$1,170).
38
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
14. 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 (Cdn$20,038). 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 (Cdn$6,365) reduced by issuance costs of $548 (Cdn$736),
resulting in a net value of $4,196 (Cdn$5,629).
See Note 15 (i) for details on the assumptions used to value the warrants and compensation
warrants issued with the offering of these units.
The weighted average number of shares outstanding used to calculate basic and diluted earnings (loss) per
share for the years ended December 31, 2018 and 2017 is as follows:
Weighted Average Number of Shares
Outstanding
Basic
Dilutive effect of warrants
Dilutive effect of options
Dilutive effect of RSUs
Diluted
Year ended
December 31, 2018
December 31, 2017
74,310,271
65,482,243
776,094
287,155
2,393,249
77,766,769
-
-
-
65,482,243
The determination of weighted average number of common shares for the purpose of diluted Earnings and
(Loss) per Share excludes the following shares relating to warrants and options that were anti-dilutive for
the periods below noted:
Loss per Share
Anti-dilutive warrants
Anti-dilutive options
Anti-dilutive RSUs
Year ended
December 31, 2018
December 31, 2017
13,202,000
163,334
-
15,102,000
570,334
6,333,334
39
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
15. WARRANTS
As at December 31, 2018 and 2017, warrants outstanding were as follows:
Expiry Date
October 31, 2018
July 31, 2019
March 7, 2022
March 7, 2019
Exercise Price
(Cdn$)
December 31, 2018
Number of
Warrants
-
$0.25
$0.25
$1.25
$0.85
$1.13
-
1,100,000
11,787,500
1,414,500
14,302,000
1,100,000
11,787,500
1,414,500
14,302,000
Exercisable Exercise Price
Exercisable
December 31, 2017
Number of
Warrants
(Cdn$)
$0.25
$0.25
$1.25
$0.85
$1.09
800,000
1,100,000
11,787,500
1,414,500
15,102,000
800,000
1,100,000
11,787,500
1,414,500
15,102,000
On March 7, 2019, a total of 1,414,500 compensation warrants expired unexercised.
At December 31, 2018, the weighted average remaining contractual life of the warrants was 2.69 years
(December 31, 2017 – 3.54 years).
Warrants transactions are summarized as follows:
December 31, 2018
December 31, 2017
Balance, beginning of period
Warrants granted
Compensation warrants granted (i)
Warrants exercised
Balance, end of period
(i)
Number of
warrants
15,102,000
-
-
(800,000)
14,302,000
Exercise price
(Cdn$)
$1.09
-
-
$0.25
$1.13
$
Warrants
4,967
-
-
(32)
4,935
$
Number of
warrants
4,540,000
11,787,500
1,414,500
(2,640,000)
15,102,000
Exercise price
(Cdn$)
$0.38
$1.25
$0.85
$0.47
$1.09
$
Warrants
435
4,196
668
(332)
4,967
$
40
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
15. WARRANTS (continued)
(i)
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 (Cdn$20,038). 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
(Cdn$6,365) reduced by issuance costs of $548 (Cdn$736), resulting in a net value of $4,195
(Cdn$5,629). 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 (Cdn$896).
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.
16. SHARE-BASED PAYMENT RESERVE
Balance, beginning of period
Options exercised
Options expired
RSUs vested
RSUs redeemed
RSUs cancelled/forfeited
Balance, end of period
Options
Options
380
$
-
-
-
-
-
$
380
Share-based
December 31, 2018
Restricted
share units
1,726
$
-
-
1,022
(14)
(19)
2,715
payment reserve Options
463
2,106
$
(3)
-
(80)
-
-
1,022
-
(14)
-
(19)
$
380
3,095
$
$
$
December 31, 2017
Restricted share
units
-
$
-
-
1,787
(61)
-
1,726
$
Share-based
payment reserve
463
$
(3)
(80)
1,787
(61)
-
2,106
$
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.
41
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
16. SHARE-BASED PAYMENT RESERVE (continued)
No options were granted under the Option Plan during the years ended December 31, 2018 and 2017, and
none have been granted since 2015.
As at December 31, 2018 and 2017 the Company had outstanding stock options enabling the holders to
acquire common shares as follows:
Expiry date
May 28, 2019
January 14, 2020
June 15, 2020
October 27, 2020
December 31, 2018
December 31, 2017
Exercise Price
(Cdn$)
Number of
Options
Exercisable
Exercise Price
(Cdn$)
Number of
Options
Exercisable
$0.75
$5.25
$0.25
$0.25
$0.64
131,667
31,667
367,000
40,000
570,334
131,667
31,667
367,000
40,000
570,334
$0.75
$5.25
$0.25
$0.25
$0.64
131,667
31,667
367,000
40,000
570,334
131,667
31,667
367,000
40,000
570,334
At December 31, 2018, the weighted average remaining contractual life of the stock options was 1.22 years
(December 31, 2017 – 2.22 years).
Stock option transactions are summarized as follows:
Balance, beginning of period
Options exercised
Options expired
Balance, end of period
December 31, 2018
December 31, 2017
Number of
Options
570,334
-
-
570,334
Exercise Price
(Cdn$)
$0.64
-
-
$0.64
Share-based
payment reserve
380
$
-
-
380
$
Number of
Options
607,667
(24,000)
(13,333)
570,334
Exercise Price
(Cdn$)
$0.77
$0.25
$7.05
$0.64
Share-based
payment reserve
463
$
(3)
(80)
380
$
42
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
16.
SHARE-BASED PAYMENT RESERVE (continued)
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.
As at December 31, 2018 and 2017 the Company had restricted share units enabling the holders to redeem
common shares as follows:
December 31, 2018
December 31, 2017
April 18, 2017
November 22, 2017
Number of
RSUs Granted
5,693,333
565,000
6,258,333
Grant date fair
value (Cdn$)
$0.65
$0.70
$0.66
(i)
(ii)
Number of
RSUs Vested &
Redeemable
3,513,333
238,333
3,751,667
Number of RSUs
Granted
5,693,334
640,000
6,333,334
Grant date fair
value (Cdn$)
$0.65
$0.70
$0.65
Number of
RSUs Vested &
Redeemable
1,583,334
66,667
1,650,001
As of December 31, 2018, there were 6,258,332 RSUs outstanding, which includes 3,751,667 RSUs that have
vested, and are redeemable as of December 31, 2018.
For the year ended December 31, 2018, the Company recognized share-based payment expense relating to
the vesting of RSUs of $1,022 (2017 - $1,787).
Restricted share unit vesting transactions are summarized as follows:
December 31, 2018
December 31, 2017
Balance, beginning of period
RSUs Vested
RSUS Redeemed
RSUs Forfeited/Cancelled
Balance, end of period
Number of
RSUs Vested &
Redeemable
1,650,001
2,126,667
(25,000)
-
3,751,667
Grant date fair
value (Cdn$)
$0.65
$0.66
$0.70
-
$0.66
Share-based
payment
reserve
1,726
1,022
(14)
(19)
2,715
$
$
Number of RSUs
Vested &
Redeemable
Grant date fair
value (Cdn$)
-
1,771,667
(121,666)
-
1,650,001
-
$0.65
$0.66
-
$0.65
Share-based
payment
reserve
-
1,787
(61)
-
1,726
$
$
43
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
16. 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.
(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.
44
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
17. REVENUE
GENERAL AND ADMINISTRATIVE EXPENSES
Year ended
Year ended
December 31, 2018 December 31, 2017
Notes
Revenue from zinc and lead concentrates
$
91,166
$
56,311
Adjustments from initial estimate
(i)
$
(5,548)
85,618
$
2,888
59,199
(i) Adjustments from initial estimate represent mark-to-market adjustments on provisionally priced sales.
The Company’s analysis of revenues by product is as follows:
Zinc
Lead
Silver
Year ended
Year ended
December 31, 2018 December 31, 2017
$
55,404
18,273
$
40,518
11,061
11,941
7,620
$
85,618
$
59,199
45
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
18. ADMINISTRATIVE EXPENSES AND OTHER EXPENSE ITEMS
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
Charge on termination obligations
Accretion expense on rehabilitation liabilities
Interest and bank charges
Advances to joint venture
Gain on settlement with Nyrstar
Gain on remeasurement of environmental
rehabilitation estimate
Other loss (income)
Year ended
Year ended
Notes December 31, 2018 December 31, 2017
$
135
$
387
3,506
549
630
12
130
3,473
670
877
26
185
$
1,022
5,984
$
1,787
7,405
$
(49)
$
1,044
2,335
310
1,022
2,248
(2,953)
(2,788)
679
1,472
482
273
-
-
-
174
$
804
$
3,445
8
16
(i)
12
5
(ii)
13
(i) Charge on termination obligations includes an assumed liability expense of $761to reflect the transfer of employees from a third-
party contractor into AMPAC’s payroll and severance plan (see Note 13).
(ii)
In May 2018 the Company finalized a working capital adjustment and certain other matters related to the El Mochito acquisition,
with a value of $2,953 to the Company. Of this amount, $1,500 was a direct cash payment to the Company, and $1,453 was an off-
set against a loan in that same amount advanced by Nyrstar Finance International AG to the Company in December 2016.
46
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
19. 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, 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 years ended December 31, 2018 and 2017.
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.
47
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
20. FINANCIAL INSTRUMENTS
(a) Fair value and carrying value of financial instruments:
The following represents the carrying value and fair value of the Company’s financial instruments and non-
financial derivatives:
Recurring measurements
Carrying Value
Fair Value
Carrying Value
Fair Value
December 31, 2018
December 31, 2017
Financial Assets
Amortised cost
Cash
Trade and other receivables
Due from related parties
Fair value through profit or loss
Advances to joint venture
Non-hedge derivative assets
Total financial assets
Financial liabilities
Amortised cost
Trade and other payables
Credit facility
Finance leases
Due to Nyrstar
Total financial liabilities
Net financial asset (liability)
(i)
$
3,808
$
3,808
$
8,041
$
8,041
(i)(ii)
(iii)
(i)(ii)
(iv)
4,031
833
-
137
4,031
833
-
137
2,944
471
2,944
471
-
-
-
-
8,809
8,809
11,456
11,456
19,374
19,374
14,793
14,793
4,775
1,455
-
4,775
1,455
-
-
1,464
1,453
-
1,464
1,453
25,604
25,604
17,710
17,710
$
(16,795)
$
(16,795)
$
(6,254)
$
(6,254)
(i)
(ii)
(iii)
(iv)
Cash, trade and other receivables, and trade and other payables are recorded at carrying value, which approximates fair
value due to their short-term nature and generally negligible credit losses.
Excludes tax and other statutory amounts.
Derivatives and embedded provisional pricing derivatives are carried at their fair value, which is determined on internal
valuation models that reflect observable market commodity prices.
The carrying value of the credit facility approximates the fair value due to their short-term nature.
48
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
20.
FINANCIAL INSTRUMENTS (continued)
Fair value hierarchy
The Company’s financial assets and liabilities are recorded and measured as follows:
a) The fair values for cash, trade and other receivables, due from related parties, trade and other payables,
finance leases and revolving credit facility, approximate carrying values due to the immediate or short-
term maturities of these financial instruments and are classified as Level 1 in accordance with their fair
value hierarchy.
b) For the non-derivative hedge assets and liabilities, the fair value is determined by reference to the
quoted prices for the underlying commodity, and is classified as Level 1 on the fair value hierarchy.
The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels of the date
of the event or change in circumstances that caused the transfer. During the years ended December 31,
2018 and 2017, the Company did not make any transfers.
(b) Derivatives and hedging:
Non-hedge derivative zinc contracts
Ascendant enters into fixed price sales contracts with zinc customers and, to ensure that the Company
continues to receive a floating or unhedged realized zinc price, Ascendant enters into forward zinc purchase
contracts that effectively offset the fixed price sales contracts. At December 31, 2018, the Company held
contracts for forward zinc purchased of 2,000 tonnes that related to forward customer sales of zinc. Prices
range from $2,598 to $2,625 per tonne and settlement dates extend to March 2019. The aggregate fair value
of the transactions at December 31, 2018 was net asset position of $137.
(c) Embedded derivatives:
Changes in fair value of provisionally price receivables
The Company records changes in fair value of provisionally priced receivables related to provisional pricing
in concentrate sale contracts. Under the terms of these contracts, prices are subject to final adjustment at
the end of a future period after title transfers based on quoted market prices during the quotation period
specified in the contract. The period between provisional pricing and final pricing is typically up to three
months.
Changes in fair value of provisionally priced receivables are presented in trade and other receivables when
they relate to sales contracts. At each reporting date, provisionally priced metals are marked-to-market, with
changes in fair value recognized in revenue from concentrates. Cash flows related to changes in fair value
of provisionally priced receivables are classified in operating activities.
49
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
21.
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 years ended December 31, 2018 and
2017.
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, 2018, the Company had a cash balance of $3,808 (December 31, 2017 - $8,041), to settle
current liabilities of $26,912 (December 31, 2017 - $16,308). The Company has working capital deficit of
$7,110 at December 31, 2018 (December 31, 2017 – working capital of $12,506). See Note 1 Basis of
Presentation and Going Concern.
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. As of December 31, 2018, the Company had net monetary liabilities
totalling $8,900 (2017 - $9,539) denominated in Honduran Lempiras, and $1,000 (2017 - $864) denominated
in Euro. The Company’s sensitivity analysis suggests that for the year ended December 31, 2018 a change in
the absolute rate of exchange in the Honduran Lempira by 1% would increase or decrease net income by
$89 (2017 - $94) and in the Euro by 1% would increase or decrease net income by $10 (2017 – $9). 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 as of December 31, 2018 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 $1,909 (2017 - $487).
50
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
Interest Rate Risk
The Company has cash balances and interest-bearing debt as described in Note 11. The Company has no
short-term investments as at December 31, 2018 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 and amounts receivable is remote.
22.
RELATED PARTY TRANSACTIONS AND BALANCES
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.
(a) Compensation of key management personnel
Year ended
Year ended
December 31, 2018 December 31, 2017
$
$
2,202
$
189
905
3,296
$
2,953
136
1,751
4,840
Management compensation
Directors' fees
Share-based payments
(b) Due from related parties
During the years ended December 31, 2018 and 2017, the Company granted loans of $432 (2017 - $431) 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 and August 24, 2023 for the April 2017 RSU recipients, and November 22, 2022 for the
November 2017 RSU recipients.
As at December 31, 2018, amounts due from related parties including the balance related to these loans
and accrued interest is $833 (2017 - $471).
23.
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.
51
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
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, 2018, 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, 2018:
Capital commitments (i)
$
3,337
$
522
$
-
$
3,859
Payments due by period
<1 years
1-5 years
5> years
Total
Office leases (i)
Finance leases (i)
Credit facility payments (i)
Environmental rehabilitation provision (i)
(i) Reported on an undiscounted basis
Environmental contingencies
7
1,205
4,775
-
-
343
-
1,104
-
-
-
7
1,548
4,775
9,621
10,725
$
9,324
$
1,969
$
9,621
$
20,914
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 Note 12.
52
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
24. SEGMENTED INFORMATION
The Company’s sole mining operation is the El Mochito mine in Honduras. The Company’s investment
and exploration activities in the Lagoa Salgada Project in Portugal are not individually significant, as they
do not meet the minimum quantitative thresholds. Accordingly, the chief decision makers consider
Ascendant Resources Inc. to currently have one segment and, therefore, segmented information is not
presented.
25.
SUPPLEMENTAL CASH FLOW INFORMATION
a) Change in non-cash working capital:
Change in:
Amounts receivable
Prepaid expenses and deposits
Concentrate and ore inventory
Materials and supplies inventory
Value added tax receivable
Accounts payable and accrued liabilities
Current income taxes payable
Other
b) Non-cash transactions:
Notes December 31, 2018 December 31, 2017
Year ended
(1,110)
(186)
4,641
(244)
(2,693)
3,894
1,527
(421)
5,408
(3,035)
430
(4,470)
2,313
(1,258)
6,049
-
(669)
(640)
During the year ended December 31, 2018, the Company entered into the following non-cash investing
activities which are not reflected in the consolidated statements of cash flows:
-
-
-
-
Remeasurement of the Company’s environmental rehabilitation provision for the year ended
December 31, 2018 led to a decrease in the provision and a corresponding gain of $2,788 mainly as
a result of an increase in El Mochito’s Life-of-Mine and a decrease in expected costs of rehabilitation.
Property, plant and equipment included $295 of net additions related to capital additions under
finance lease (2017 - $Nil).
In June 2018, the Company issued 2,052,546 common shares with a fair value of $1,650 as
consideration for its investment in Redcorp (see Note 5).
Charge on termination obligations for the year ended December 31, 2018 of $2,355 (2017 - $1,722)
includes current service cost, past service cost and net interest cost (see Note 13).
53
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
26.
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, 2017 – 26.5%) were as follows:
December 31, 2018
December 31, 2017
Income (loss) before income taxes
$
4,668
$
(10,899)
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
1,237
(148)
273
217
84
$
-
1,663
(2,888)
(122)
474
300
2,236
1,158
1,158
$
Current tax expense of $1.16 million in 2017 includes a $1.10 million payment made to the Honduran tax
authority (Servicio de Administración 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.
54
ASCENDANT RESOURCES INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2018 and 2017
(Expressed in thousands of US dollars, except where otherwise noted)
26.
INCOME TAXES (continued)
(b) Deferred income tax balances
Deferred tax assets have not been recognized in respect of the following items:
December 31, 2018
December 31, 2017
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
$
$
4,516
270
927
7,656
35,881
49,250
$
$
3,384
557
983
16,200
39,900
61,024
The Company has approximately $17.04 million (2017 - $12.77 million) of non-capital losses in Canada which
under certain circumstances can be used to reduce taxable income for future years. These losses expire
from 2027 to 2038. Other tax pools in Canada totalling $6.23 million (2017 - $7.91 million) do not expire.
The Company also has approximately $31 million (2017 - $54 million) of tax losses in Honduras, which under
certain circumstances can be used to reduce taxable income for future years. The losses expire from 2019-
2020. Other tax pools in Honduras totalling $134 million (2017 - $133 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.
The aggregate amount of taxable temporary differences associated with investments in subsidiaries and
interests in joint arrangements, for which deferred tax liabilities have not been recognized, as at December
31, 2018 is $4.0 million (December 31, 2017 - $nil).
55
ASCENDANT
RESOURCES INC.
Corporate
Office
Pg 1
110 Yonge Street,
Toronto,
ON Canada MSC 1T4
Suite 500
Investor
Relations
Pryde
Katherine
Director,
T: 647 796 0083
E: info@ascendantresources.com
Communications
and Investor
Corporate
Relations
Transfer
Agent
Share Trust Company of
Computer
100 University
T: 416 263 9200
W: www.computershare.com
Canada
North Tower
8th Floor,
Avenue,
Auditors
KPMG LLP
TSX:ASND
OTCQX:ASDRF
www.ascendantresources.com