Aguia Resources has delivered a powerful update for its Tres Estrades phosphate project in Brazil, with a revised economic study pointing to pre-tax free cash flow for the life of the project rocketing by 150 per cent to $411 million (US$274 million). Total mine revenue is anticipated to exceed $900 million.
The massive jump in project economics has been fuelled by soaring global fertiliser prices, resulting in much higher prices today, relative to the numbers used in February’s economic study. The company used $200 per tonne (US$133.30/t) as a base price used for its 12 per cent high-grade phosphorus pentoxide Pampafos product in the study, up from a previous $150/t price assumption. Its 6.27 per cent phosphorus pentoxide mixed fertiliser is expected to fetch $127/t.
It all adds up to a compelling scenario for the company, with pre-tax net present value, using a 10 per cent discount rate, leaping to $171 million, up 76 per cent and EBITDA soaring to $444 million, up 73 per cent on February’s figure. A payback period of about 2.5 years underscores the project’s transformed economics due to the commodity’s improved pricing.
Aguia is positioning itself as a low-cost, eco-friendly supplier in a market starved for sustainable fertilisers, providing the company with robust cash flows at today’s numbers and the opportunity for strategic growth in South America's fertile heartland.
At the forefront of this potentially transformative company-making project is the compelling economics, which is a testament to Aguia's sharp market foresight. The original 2022 definitive feasibility study was solid, but the phosphate price boom - driven by supply disruptions, inflation and surging demand from Brazil's massive soybean and corn belts - has supercharged the numbers.
Capital expenditure for mine and plant, including contingencies, totalled more than $27 million, seemingly on the low side relative to the expected pre-tax free cash flow and EBITDA figures of more than $400 million.
The revised study included an audit of the existing processing facility, indicating a potential boost to production numbers from 100,000 tonnes per annum to 150,000tpa. The plan is for a greater than 20-year mine life, ramping up production to 300,000tpa after the initial two years. Through the addition of a further drying unit to the beneficiation processing plant, plans are to lift production to 200,000tpa of high-grade ore and 100,000tpa of lower-grade fertiliser.
Cash operating costs are expected to be in the range of $55/t to $70/t, including costs to lease the processing plant.
Aguia Resources executive chairman Warwick Grigor said: “The Tres Estrades rock phosphate project is making steady progress towards achieving first production in March-April next year, enabling initial sales in the middle of 2026. This could be exceptionally profitable at recent phosphate prices. It is technically very simple, with the process involving free digging, drying and minor crushing.”
The company fully owns Tres Estrades, which is 320 kilometres from Porto Alegre, Rio Grande do Sul in Brazil. It benefits from world-class infrastructure, including roads, rail and ports, and sits in the region’s agricultural heartland.
Aguia recently locked in a $4 million loan from the government-owned Southern Development Bank in Brazil to refurbish the company’s leased processing plant and then kick-start mining operations at Tres Estradas.
The 20-year loan covers the initial $118,000 capital expenditure required to kick off mining activities and fund an estimated $1.97 million needed to bring the plant up to speed to process an initial 100,000tpa of phosphate.
The company is eyeing processing operations beginning early next year on its organic phosphate product, dubbed Pampafos. Recent field trials showed Pampafos rivals the performance of top-shelf imported fertilisers at a fraction of their price.
After a $1.97 million refurb and small capital expenditure outlay at the mine site, local mine services firm Contrasaper will then be positioned to smash into mining operations.
Contrasaper will undertake contract mining at the project and transport the phosphate to feed the processing facility at Caçapava do Sul, one of the oldest municipalities in the state of Rio Grande Do Sul.
While the Tres Estradas project seems set to add grunt to the company’s project mix, Aguia remains focused on its flagship Santa Barbara gold project in Colombia.
The company unearthed some seriously high-grade gold hits at Santa Barbara in July. It also pulled $316,600 from its first gold sales of 58 ounces (1.82 kg), providing a huge jump in gold material processed.
Management recently noted its underground development has pushed down to 150 metres, as it prioritises the high-grade Santa Barbara vein 1 to test its strike potential and prepare for a long-term ventilation system linked to the company’s nearby Mariana workings.
The company could be forgiven for turning one eye towards Tres Estrades with the latest impressive numbers from the economic study. Phosphate is the unsung hero of food production, and Tres Estrades should be viewed as a strategic gem. With growing demand for world food production due to an ever-increasing population, Aguia may have a very appetising opportunity on its hands and sit in a prime position to feed the future.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Craig Nolan
