Adventus Mining (ADZN) - Engineering Solution Speeds up Permit Process

Matthew Gordon caught up with Christian Kargl-Simard, the CEO of Adventus Mining Corporation. He updated us about his company’s recently released Feasibility Study results at the Curipamba Copper-Gold Project. Be sure to check out Crux Investor’s earlier conversations with Adventus.

Company Overview

Adventus Mining is a publicly traded company focused on copper and gold exploration and development in Ecuador. In addition to its interests in Ecuador, the company owns a portfolio of exploration projects and equity investments in Ireland and Canada that are funded by its commercial partners. Adventus is partnered with a group of global minerals and mining investors including Altius Minerals, Wheaton Precious Metals and others.

Leadership at Adventus

In addition to CEO Kargl-Simard, Adventus Mining is co-managed by five vice presidents: Sam Leung, Corporate Development; Frances Kwong, Finance and Corporate Secretary; Jason Dunning, Exploration, Olivia Gamache; Environmental Management and Community Development; and Dustin Small, Projects. The management team is rounded out by Alvaro Duenas, Country Manager in Ecuador.

The Curipamba Project

The Curipamba Project in central Ecuador comprises seven concessions representing approximately 21,500 ha and includes the volcanic-massive-sulphide (VMS)-hosted copper-gold El Domo deposit as well the La Vaquera deposit, a porphyry ore body. Earlier this year Adventus announced highly successful results in their drilling campaign at El Domo. Curipamba is held as a joint venture with Salazar Resources. 

The company recently completed its Feasibility Study at the project. Adventus plans on building a functioning mine by 2022. 

Curipamba Feasibility Study Now Completed

The following highlights related to the completed Feasibility Study were released to the market community in late October 2021:

• The project is strongly defined with detailed geotechnical and hydrogeological drilling programs completed.
• It has an improved and larger resource base with high quality copper and zinc concentrates, grading 28% copper and 56% zinc respectively.
• An Environmental, Social and Impact Assessment (ESIA) for open-pit mine and mill development will be submitted to the Ecuadorian Ministry of Environment in November 2021.
• The company has initiated a comprehensive assessment of all strategic development options, including concentrate off-take and project finance packages. Advanced discussions are underway for up to US$240M in non-equity financing.
• Detailed engineering studies for project development are expected to begin in Q1 2022.
• The tailings storage facility design has sufficient capacity for significant mineral reserve additions.

Market Reaction to The Feasibility Study

Adventus’ share price took a significant dip immediately following the announced feasibility results. The CEO isn’t too worried about it. He indicated that on average, mining company shares drop some 15 to 20 percent after the release of feasibility study results, and Adventus was down only 8 percent. 

One of the main results of the study that may have affected the stock price was a higher CAPEX requirement. Total CAPEX was about $190 M in the Preliminary Economic Assessment (PEA) done in the summer of 2019. It’s $248 M this Feasibility Study. 

The main reason why the CAPEX came in higher in the Feasibility Study has to do with earthworks at the project. Adventus completed significant geotechnical and hydrogeological drilling as part of this Feasibility Study. This work revealed that the initial assumptions regarding the construction of the tailings dam needed to be upgraded, resulting in a higher capital cost. Additionally, the work showed that a larger earth-removing operation is needed to build the process plant than was previously thought. 

Can Adventus Raise the Cash It Needs?

This increase in the CAPEX estimate may make it more difficult for Adventus to raise funds. Kargl-Simard is not too worried, though. He believes that $248 M is absolutely financeable. Indeed, they are now in advanced stages of negotiating $240M of non-equity financing. Kargl-Simard is confident that this financing component will be secured by January 2022. 

In addition to the non-equity component, the CEO believes that Adventus will need about US $45 M in equity financing. The CEO is not in a huge rush to obtain the equity component; he can wait for prices to rebound, rerate and do that equity at a more leisurely pace. M&A options are not off the table and are currently being considered as part of the comprehensive funding assessment. 

Financing of the project is strongly supported by the margins expected. Kargl-Simard suggested that investors view the project in gold-equivalent terms: Adventus will be producing 90,000 oz. of gold equivalent a year for 14-years at an all-in-sustaining costs of US $360/oz. That would put Adventus within the lowest 10% cash-cost tranche of any gold-producing asset on a global basis.

Local Reaction in Ecuador

Adventus’ most recent meeting with the Ecuadorian president and other officials took place a week before the results of the feasibility study were released to the public. Also present at the meeting was the company’s partner, Salazar Resources. The company conveyed to the government that the feasibility study dictates that a mine should be built and can be done in the current term of national officeholders. Adventus also told the officials that all-Ecuadorian contractors would be used in the construction phase.   

At the end of the governmental meeting, the president of Ecuador indicated that he'd like to see the permits and authorizations move forward on time without any issues. Thus, there are no impediments from the governmental side regarding the commencement of full-scale construction in October or November of 2022. 

Environmental Assessment

One of the fast-track benefits that came out of the government meeting was the granting of an upgraded mining license at Curipamba. This was needed in order to submit the ESIA. As mentioned in the Feasibility Study announcement, the environmental assessment study (EAS) will now be submitted to the authorities in November of 2021. 

Fredy Salazar and His Potential Role

Salzar Resources owns a quarter of the Curipamba project. Fredy Salazar is a local guy and is well known in Ecuador. Kargl-Simard is very happy to have him involved with the project. Salazar is highly supportive and fully up to speed and everything that Adventus is doing. His presence provides an enhanced opportunity for whatever trajectory the asset takes going forward. 

Comments on Adventus’ Low Multiple

As of November 2021, Adventus trades as a multiple of about 0.3 to 0.5 to net asset value (NAV), which is considerably lower than its peers, which are at 0.6 to 0.7.  Kargl-Simard addressed that by referring to two other projects of similar tonnage and ore quality, The Adriatic project in Bosnia and Silver Crest in Mexico. In both of these cases, those company’s multiples to NAV come in at 6 to 10. 

Kargl-Simard believes that Adventus has to do a better job at marketing. He intends to get out in front of the institutional investment community over the next month, explain in detail what the project is about, discuss how it compares to other projects, and promote the idea that the path to production is real and going to happen. 

The Road Ahead

Kargl-Simard closed out the discussion by reiterating that he has a great project that is clearly moving forward. They have $10 M in the bank and that cash takes them through the second quarter of 2022. The investor community should be looking for upcoming news items regarding the continued financing of the project.

To find out more, go to the Adventus Mining Website