Adventus Mining (ADZN) - Planning for Near-Term Wins

Adventus Mining is a public company focused on copper-gold exploration and development in Ecuador. Adventus Mining also owns a portfolio of exploration projects and equity investments in Ireland and Canada that are funded by commercial partners.

Recently we had a chance to speak with Christian Kargl-Simard, the CEO of Adventus mining. He shared with us Adventus’ overall business model as well as the company plan for upcoming exploration and financing activities.

Company Overview

Adventus Mining, formerly known as Adventus Zinc, is a publicly traded company focused on copper and gold exploration and development in Ecuador. In addition, the company owns a portfolio of exploration projects and equity investments in Ireland and Canada that are funded its commercial partners. Adventus Mining is uniquely backed by a group of globally respected investors including Altius Minerals, Wheaton Precious Metals and others.

Management

In addition to CEO Kargl-Simard, Adventus Mining is managed by the following 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 Ecuador.

Adventus’ Projects

Adventus is firmly committed to exploration in Ecuador because of management’s perception of that country’s vast geologic upside for economic copper and gold deposits and well as its strong government support. Its projects there include:

The Curipamba Copper-Gold Project. The Curipamba project in central Ecuador includes seven concessions representing approximately 21,500ha and includes the advanced, volcanic-massive-sulphide (VMS)-hosted, high-grade copper-gold El Domo deposit as well the La Vaquera deposit, a probable 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. Adventus plans on building a functioning mine by 2022

The Pijilí and Santiago Projects. Pijilí project, located in southwestern Ecuador, contains untested copper-gold-molybdenum porphyry and epithermal gold-silver targets. Santiago, in the south-central part of the country, is believed to host an untested copper-gold porphyry system and an epithermal target area denoted by a swarm of mineralized veins and breccia units. Both of these are joint ventures with Salazar Resources.

In addition, Adventus Mining owns one of the largest mineral concessions in the Republic of Ireland as well as additional mineral interests in Canada and Australia.

The CEO’s Perspective

Adventus entered Ecuador 3 years ago. At the time, the company had sufficient financial backing and could go anywhere in the world, said the CEO. We chose to go to Ecuador, he said, because of its geology. The company believes that Ecuador is the best place to explore for copper anywhere in the world and likens Ecuador to a Peru or Chile some 50 to 75 years ago. Kargl-Simard has partnered with Freddy Salazar, the most successful explorer in the country, to build a copper business there.

Political Situation in Ecuador

We asked the CEO about the political situation in Ecuador, and how that may affect their business, despite the fact that the geology looks so promising. He responded that they had no real opinion on the outcome of recent presidential elections there. Among other things, one candidate was leaning toward a tilt to China, the other was eager to bring on geed relations with the International Monetary Fund (IMF). Both perspectives would work as far as Adventis is concerned, said Kargl-Simard, because both are pro-mining.

We pressed further on the country factor with Kargl-Simard. He responded that there is always the South American factor. Depending on how things shake out, it could be difficult for Ecuador to access to capital, but because mining is so important in the county’s economy, that sector will be less affected one way or the other by election results, he said.

Further Details on Adventus’ Decision for Ecuador

Kargl-Simard came to Adventus with ten years as an investment banker in the mining sector and having forged a solid working relationship with Altius Minerals. Out of that relationship came strong financial backing and the move to run Adventus.

Altius and the other financial backers strongly supported a heavy emphasis on the base metal space. With that in mind, Kargl-Simard steered the backers toward Ecuador, which first was met with a bit of push back. As he said: “I think they fell off their chairs in the first discussion about that. But they quickly got comfortable with it.”

Since then, Adventus have raised an additional $100M in public equity. The raising of public funding was actually not that bit of a stretch, said Kargl-Simard. Other firms, such as some in Australia, China and elsewhere recognize the geologic endowment of Ecuador and are active players in the country. It is an up-and-coming jurisdiction that is attracting investment. In fact, over the last three-year period, the number one South American country for raising private equity on the TSX was Ecuador.

Working Relationship With Salazar Resources

We then turned to Adventus’ relationship with their preferred partner in Ecuador, Salazar Resources. In the currently structured deals, Adventus is the operator.

Kargl-Simard first met Freddy Salazar in 2009, right after the big discovery at El Domo. Salazar is the top explorer in Ecuador’s history, has a nose for finding new projects, and has impressive in-country credentials. It was easy, then to go back to Salazar in 2017 to begin deal possibilities with him, said Kargl-Simard. Fortunately, Salazar was looking for a partner whom he could trust so Adventus had a leg up on the competition.

The CEO told us that they wanted to do more than just Curipamba. The net result is that Salazar is a joint venture partner not only at Curipamba, but also at Pijilí and Santiago as well. In actuality, they formed a working joint-venture relationship with Salazar Resources called the “Exploration Alliance”.

With the Exploration Alliance, Adventus Mining has exclusivity on any new zinc projects that may come into play. Even though they are primarily looking for large porphyry copper projects, zinc is a top 2 metal for Adventus.

Curipamba Update

We asked Kargl-Simard to update us on business and activity at Curipamba, the company’s flagship project. Adventus has to spend $25M over a 5-year span and deliver a feasibility study to earn a 75% interest in the project. Already 3.5 years in, they have spent $30M and the study is expected to reach completion by October 2021. Adventus Mining is also required to fund 100% of the CAPEX needed to achieve commerciality. Once producing, Adventus will receive 95% of the free cash flow out of the project until all of its sunk cost is recouped. After that, the ratio drops to 75-25, said the CEO.

The Prefeasibility Study (PFS) is already complete. Adventus is committed to a robust exploration program in the near future in order to get the feasibility study done and to bring additional ore volume into the El Domo fold. The joint venture has identified 15 new clusters of exploration significance near El Domo using airborne geophysics and other tools. They intend to drill 400 additional m of borehole this year to evaluate these targets.

Adventus has, in addition, completed some drilling some drilling the La Vaquera ore body. Expect results in May, the CEO told us.

Additionally, the company is deep in discussions regarding an overall financing package for Curipamba commerciality. Announcements are likely to be forthcoming soon on that as well as on the ongoing environmental permitting process.

Furthermore, Adventus is also focused on building a high-quality team, including metallurgists, engineers, and geotechnical specialists, to keep after their aggressive schedule. Most of these people have built mines before.

Adventus has some $33M in cash, as of April 2021. The CEO indicated that this was sufficient to bring the company to a construction decision early nest year.

The CEO’s Vision

Although Curipamba is a VMS deposit, ore-hosting porphyries are also a coveted target for Adventus. So far they have spent some $10M on advancing the Pijilí and Santiago porphyry projects. The Santiago project, he said, is huge deep-seated anomaly that could easily comprise “several billion tonnes.” The company plans on spending $2.5M on further studies at Santiago this year.

The company’s vision, said Kargl-Simard, is to put El Domo into production, turning it into a cash flow machine to explore for and fund even greater commercial projects. The biggest prize, he believes, is the potential for huge porphyry copper discoveries throughout Ecuador.

He cited Ludin Mining as an example of what he sees Adventus becoming. Ludin is a Canadian base metal company with operations in Brazil, Chile, Portugal, Sweden and the United States of America, primarily producing copper, zinc, gold and nickel. Many of these are hosted in large magmatic porphyry systems. Ludin is a soup-to-nuts miner, involved with discovering early-stage opportunities, acquiring high-quality advanced-stage projects, and extending the life of existing commercial mines.

Is Commercializing El Domo the Only Way To Go?

We the asked the CEO if there are other ways to monetize the company’s value, particularly inquiring about the merger and acquisition (M&A) route. Clearly, he said, with the current net present value (NPV8) of El Domo at US$500M, there is a possibility to go the M&A route. Especially so, he said, because of the high associated precious-metal content of the deposit.

In fact, the company is receiving quite a bit of interest in El Domo these days. A deal is possible if Adventis can get its share price higher than its current value of about CAD $1, he indicated. He further speculated that if somebody were to buy the company, it would be before construction starts in mid to late 2022. But for now, they are focused on building the mine, he said.

Future Plans

As we closed out our conversation with Kargl-Simard he reiterated that they really want to become a big company. He left us with this: “If we build El Domo, we’re going to be super aggressive to build a major mining company. We’ve got all the pieces in place. We clearly have access to capital. We’ve got expertise in M&A and it’ll be fun”.

To find out more, go to the Adventus Mining Website.