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Cerrado Gold (TSXV: CERT) announced Monday it will acquire all outstanding shares of Ascendant Resources (TSX: ASND) it does not already own. The deal would give it an 80% interest in the Lagoa Salgada project in Portugal.
Under the terms, Cerrado will issue one common share to Ascendant shareholders for every 7.8 shares acquired, or around 27.7 million shares in total in exchange for 131.3 million Ascendant shares. On closing, Ascendant shareholders would own approximately 21% of Cerrado.
Lagoa Salgada represents a potentially low-cost zinc-lead-copper VMS (volcanogenic massive sulphide) project located in the northwestern section of the Iberian Pyrite Belt, host to some of the world’s largest VMS mines such as Neves-Corvo (recently bought by Boliden from Lundin Mining).
The Lagoa Salgada deposit was first discovered by the Portuguese Geological Survey in 1992. In the following years, it was explored by various parties including Rio Tinto, and its majority interest was eventually acquired by Ascendant in 2018.
The project now comprises a single exploration permit covering an area of approximately 72 sq. km, with total reserves of 14.6 million tonnes grading 0.36% copper, 1.55% lead and 1.84% zinc.
In 2023, Ascendant completed an NI 43-101 feasibility study on Lagoa Salgada that outlined a project with an after-tax net present value of $147 million and internal rate of return of 39%. It is expected to generate approximately C$75 million in free cash flow a year over the first five years, based on annual payable zinc equivalent production of 124 million lb. per annum.
“The acquisition of Lagoa Salgada is a tremendous opportunity for Cerrado to add a world-class, low-cost asset with strong cash flow potential and create significant value as well as support our longer-term development plans without compromising our financial strength and current operations,” CEO Mark Brennan said in a news release.
“The existing value and significant near-term exploration potential at Lagoa Salgada is well understood by management,” Brennan said.
Lagoa Salgada has earned “Project of National Interest” status from the government of Portugal, and approval of the recently submitted environmental impact assessment is expected in the coming months.
Ascendant is currently advancing an optimized feasibility study, which is expected to further improve the project economics and be in a position to undertake a construction decision by year-end, the company said. The study is due by late summer.
Cerrado Gold shares were down 10% in Toronto late afternoon trading Monday, while Ascendant Resources shares were down 8%. Their market caps are C$45 million and C$10.3 million, respectively.
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