Aguia Resources has nailed down a 10-year binding lease agreement to process organic phosphate from its Três Estradas project near Caçapava do Sul in southern Brazil’s agribusiness heartland.
Under the terms of the lease, Aguia will operate the Dagoberto Barcelos-owned processing facility at a monthly cost of BRL$163,000 (A$43,000) and a BRL$5 million (A$1.4m) one-off payment to the owners. Aguia has an option to extend the lease for a further 10 years.
The agreement grants Aguia control over a fully operational fertiliser processing facility, which will save the company at least two years of construction time and significantly reduce its capital expenditure. Processing is set to begin in the third quarter this year, with an initial capacity of 100,000 tonnes per annum (tpa).
The deal marks a major milestone for Aguia and its ambitions to become a phosphate producer as soon as possible. For more than three years, the project had been bogged down in legal battles with local ranchers, who successfully blocked any production at Pampafos.
However, in a decisive turn of events, the regional court overturned the final objection three months ago, clearing the way for the project to reach its full potential.
The Três Estradas project – 100 kilometres from the plant and the source of its Pampafos rock phosphate - will initially fuel the processing plant. However, a real game-changer for the company lies in its closer Mato Grande and Passo Feio deposits, which are 3km and 8km from the factory. The company is quickly evaluating both sites, with drilling already in full swing.
By 2026, Aguia says it aims to completely switch processing to the new deposits, saving almost $10 per tonne in trucking costs and improving profit margins.
The DB plant has been humming along at 100,000 tonnes per year for the past eight years, but Aguia sees serious expansion potential. When the cash starts flowing, the company is looking to add a hammer mill, a second drying unit and some system enhancements to the plant, which would triple the plant’s production capacity to more than 300,000tpa.
Aguia’s decision to lease the DB plant appears a savvy shift in strategy since a 2023 bankable feasibility study suggested a standalone 300,000t production plant could have cost the company as much as $26m to build.
The study made compelling reading given it projected annual earnings of $22m (EBITDA) over an 18-year mine life, with a short payback period of 2.9 years.
In parallel with the DB plant signing, Aguia is in talks with an additional processing facility in the Caçapava do Sul region to expand production capabilities.
Aguia Resources executive chairman Warwick Grigor said: “This binding lease agreement with DB is a major step forward for Aguia in Brazil. With Brazil largely dependent on phosphate imports, we are confident of carving out a meaningful market position in southern Brazil, the country’s pre-eminent agricultural region.”
The Rio Grande do Sul region, where Aguia operates, currently imports 100 per cent of its phosphate needs at a cost of about $344 per tonne. Aguia is aiming to at least halve that amount by providing a locally sourced, high-grade product at a forecast price of $150-$160 per tonne, creating a substantial competitive advantage.
With Brazil so heavily reliant on imports, mostly from North Africa, Aguia views its move as a significant step toward building homegrown supply security.
Aguia has good reason for betting big on its branded Pampafos product to shake up Brazil’s phosphate market. With global field trials spanning four years, its organic product has proven itself to be far more effective than imported alternatives.
Unlike chemical fertilisers that degrade the soil over time, Pampafos boosts crop performance naturally without degradation, making it a cost-efficient, high-performance solution for Brazilian farmers.
Beyond phosphate, Aguia has also been busying itself with the recommissioning of its uber-high-grade Santa Barbara gold project in Colombia after successfully taking over ASX-listed Andean Mining 12 months ago.
With the mine and a 30-tonne-per-day pilot plant now refurbished and up and running at site - costing less than $2m - first ore has been processed, kicking off an initial cashflow with a maiden pour of the yellow metal.
Aguia will shortly crank up the drilling rigs to build a JORC-compliant resource base for a mine that has historically produced gold at more than one ounce per tonne. The company also plans to increase its processing capacity by 66 per cent to 50tpd within the next three months.
With Brazil seeking greater self-sufficiency in agricultural inputs, the impending start of Aguia’s local phosphate production seems particularly well-timed. As it edges closer to first cash flow, the company appears poised to cash in on rising phosphate demand while avoiding the volatility of international shipping and global supply chains.
Not long ago Aguia was just about keeping its head above water on the ASX junior explorers index, with an empty bank balance and a project bogged down in long-term legal issues.
Remarkably, within 15 months and with little capital expenditure, plenty of hard work - and a bit of luck – the company can now see a clear path to a dual income stream from gold and phosphate operations, putting it in an enviable position among some of its mining peers.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
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