M&A activity is beginning to trickle down to junior names within the mining sector, with Cerrado Gold (TSXV: CERT) this morning announcing that it has entered into a definitive agreement to acquire Ascendant Resources (TSX: ASND).
The all share transaction will see Cerrado pay the equivalent of $0.06 per share for Ascendant, which equates to a 14% premium based on thirty day volume weighted averages of the two equities. Ascendant shareholders are to receive one common share of Cerrado for every 7.8 shares of Ascendant they hold as of the time of closing.
27.7 million shares are expected to be issued by Cerrado in connection with the acquisition.
The draw here for Cerrado is Ascendant’s 80% interest in the Lagoa Salgada VMS project in Portugal, which boasts a net present value of US$147 million. The project is currently in the feasibility stage, and contains an estimated all in sustaining cost of $0.59 per pound of zinc equivalent for the first five years. An optimized feasibility study is due to be completed this year, with a construction decision to be made by year end. Production is currently expected to occur in the second half of 2027.
The project is currently in talks for financing as well, with discussions being held for export credit agency project financing supported by the UK Export Credit Agency and Banco Santander, which would finance 70% of capital expenditures.
With funding requirements of sub $5 million, Cerrado is currently forecasting that it will exit 2025 with over $20 million in cash on a post-transaction basis. Lagoa Salgada, once operational, meanwhile is expected to produce $75 million a year in free cash flow.
“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. The existing value and significant near-term exploration potential at Lagoa Salgada is well understood by management who see the opportunity to bring the Lagoa project to a construction decision this year with current funding and banking support,” commented Mark Brennan, CEO of Cerrado.
As part of the acquisition, Cerrado has agreed to a $900,000 private placement with Ascendant, while Sprott Private Resources Streaming and Royalty has agreed to settle US$1.66 million in debt through a share settlement. The settlement is expected to push Sprott to a 25.6% ownership stake in Ascendant on a pre-transaction basis.
The transaction remains subject to shareholder and customary regulatory approvals. The transaction is currently expected to close in April 2025.
Cerrado Gold last traded at $0.49 on the TSX Venture.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
