Ascendant Copper fka ACX

[calgarylady]

Ascendant Copper Holding Steady on Ecuadorian Nest Egg: Part 1
By Andrew K. Burger
Oct, 10th

http://www.resourcexinvestor.com/news.php?id=2554

The situation at Ascendant Copper (TSX:ACX) in Ecuador might serve as a
snapshot of the enormous risks and rewards facing management at mining
companies-and their investors-worldwide, but particularly in Ecuador and
South America, where the volatile political landscape has shifted towards
socialist-populist democratic inspired government action in recent years.

On the upside, Ascendant is sitting on Junin, a world-class
copper-molybdenum-silver-gold porphyry prospect, as well as two others, the
Chaucha and Telimbela prospects. "We are sitting on the second if not the
largest copper/molybdenum property in the world," commented John Haigh,
Ascendant's Investor Relations manager. "Our Junín property consists of
23,475 acres of property containing billions of pounds of metal resource; in
fact we are looking at a potential in excess of a billion pounds of
molybdenum and in excess of 20 billion pounds of copper."

On the downside, the Correa government on September 25 announced the formal
suspension of Ascendant's mining and community development activities in the
Junin area in an effort to defuse tensions, an announcement Ascendant said
was only a repetition of a previously announced order.

These tensions boiled over in December of last year on Ascendant's
agricultural property. Anti-mining activists confronted a third party
contracted agricultural firm's Intag workers and security guards resulting
in almost 60 people being held captive by activists, and locked in the local
community church for several days until order was restored by Ecuadorian
police.

Ascendant in Ecuador

"ACX has magnificent assets in a country that has not had an operating metal
mine for about 50 years. There are a few artisanal gold miners causing havoc
with the environment with mercury that have the approval of the Government
and that is the extent of metal mining in Ecuador," Haigh told Resourcex.

Ascendant's two main stakes in Ecuador are the Junin and Chaucha prospects,
two NI 43-101 compliant copper-molybdenum properties. The Junin prospect has
an inferred, NI 43-101 compliant resource estimate of 982 million tonnes. A
drilling program is under way at the Chaucha property on the western flank
of the Andes, the results of which are expected to up its combined resource
estimate, according to Haigh.

Though preliminary indications of ore grade at the copper porphyry deposit
at Chaucha are not as high as those at Junin, they are still high
enough-above 0.4% copper excluding molybdenum, gold and silver credits-to
warrant further exploration and development, particularly given the fact
that the Pacific port of Belo lies just 40 kilometers away, he pointed out.

"The Junin deposit is supported by 10,000 meters of historical drilling and
the Chaucha deposit is supported by 13,800 meters of historical drilling
with about 10,000 meters of recent drilling by the company. We will have the
current drilling sanctified by a NI43-101 report, and it looks like the
resource package should increase to about 300 million tons," Haigh
elaborated.

"The Chaucha project would support a 30,000 to 40,000 tonne-per-day
operation that would produce about 100 million pounds of copper per year at
a cost of $1.40 per pound. At $3 copper, it could generate cash flow of
about $160 million a year for 20 years."

Given the company's 70.8 million shares outstanding and excluding deductions
for non-operating and non-cash flow expenses, liabilities and other
deductions, this would translate into annual earnings per share of $2.26.
Taking into account options and warrants, this would result in a rough
annual EPS of $1.69 on a fully diluted basis.

Ascendant's management believe that world copper prices will remain high for
the rest of this year and into next. "We think that reduced residential
copper use in the States will be offset by increased copper use in hybrid
gasoline-electric cars, which is double that of conventional cars and that
China will continue to use all the copper they can get their hands on. We
think that an average price of $3.18 per pound is achievable in 2008," Haigh
commented.

The Vagaries of a Shifting Political Landscape

Just how damaging the potential threat of socialist inspired, populist
government intervention in mining projects is for mining companies and their
investors is evident in the activity of Ascendant's shares over recent
months.

The company's share price has been in steady decline since its November IPO,
It has been trading downwards since July, when it was around C$0.40, only
recently making slight gains to the C$0.20 per share level. Problems with
environmental activists and with Ecuadorian politics have been the main
causes.

"The problems that we have had and are having at Junin are the result of a
massive campaign of 'no mining in Ecuador' conducted by a local NGO. This
particular NGO has been operating since the mid-1990s and were violent
objectors to Mitsubishi when they were drilling there from 1993 to 1997 on
the same deposit."

Despite all the promise Junin and Chaucha hold, and not just for Ascendant,
further development at Junin will have to wait until the dust settles and
Ecuador's government establishes its new constitution and set of mining laws
and regulations. In the meantime, larger mining companies such as Aurelian
and Dynasty are moving forward on mine development in Ecuador; and work on
Ascendant's Chaucha and Telimbela projects continues. Furthermore, Ascendant
is still moving forward with their Rio Tinto strategic partnership to
develop additional properties.

In the meantime, Ascendant is shifting direction. Management began deploying
a new business strategy about four months ago, the main thrust of which is
an aggressive program to acquire near-term copper producing assets in North
America, Haigh explained.

Ascendant is currently negotiating to acquire three copper assets in the
western US. Announcements are expected in two to three months. "This should
provide at least one cash flowing operation in 24 months and two in 36
months. The cash will be used to advance and protect the Ecuadorian assets,"
Haigh commented