Aguia Resources Limited (ASX:AGR), a company focused on the development of its phosphate assets and its copper exploration assortment located in Southern Brazil to supply the Brazilian agriculture sector has reported Management’s Discussion and Analysis (MD&A) about the Company’s progress with the information available.
Concluded Scoping Study for Phase 1
In February 2020, AGR had reported the completion of the Scoping Study for Phase 1 of its Três Estradas Phosphate Project, which characterizes a significant new phosphate discovery with features similar to current producers in Brazil. GE21 Consultoria Mineral Ltda (GE21) conducted the study in Brazil which included
- Pit optimization and design,
- Mine scheduling,
- Capital expenditure (CAPEX),
- Operational expenditure (OPEX) estimates
- Economic analysis on the basis of the production of a DANF from a Mineral Resource of 5.1Mt at 8.79% P2O5 (representing the oxidized portion)
Interesting Read: Why is Phosphate Such a Lucrative Opportunity for Aguia Resources
A financial model in the GE21 Study indicates a post-tax IRR of 51% with NPV of AUD 69.3 million using an 8% discount rate with the assumptions that the Project Phase 1 shall have a life of mine of 18 years that will require an initial capex of AUD 9.72 million and a long-term DANF price of AUD 72/tonne and BRL/AUD foreign exchange of 2.85.
Agronomic Trials and Lab Results
Currently, Agronomic efficiency tests with the DANF product are being conducted with soybean in the field and maize in pots, representing the summer crops in Brazil for the current harvest by Integrar Gestão e Inovação Agropecuária.
Subsequent to the current harvest, the Company has plans to continue test work to Brazilian winter crops with ryegrass and wheat, and the initial results from the tests with soybean and maize are expected during May 2020.
In accordance with the guidelines of Brazilian Ministry of Agriculture, Livestock and Supply, agronomical laboratory tests have been carried out at the Instituto Brasileiro de Analises Agronomic Lab on a representative sample from the carbonatite saprolite ore. The results announced by AGR showed that the P2O5 solubility of 2% concentration at a 1:100 ratio in citric acid is the nearest condition to the acidity found in Brazilian soils and the laboratory test returned a solubility of 22.9%, which is above the minimum requirement of 15%.
Environmental Licensing for Três Estradas Phosphate Project
Aguia Resources had obtained Preliminary License (LP) by the State Government Agency (FEPAM) in October 2019 for its Três Estradas Phosphate Project, subsequent to which, the Company has been progressing toward obtaining Installation License (LI), which would offer the required approval to commence construction and start the development of the mine site at the project.
The Company has a team actively progressing with the environmental plans and programs and with the detailed engineering for Phase 1 in Brazil. In March 2020, the company continued the archaeological survey over the project area and is continuing with the preparation of the detailed engineering for Phase 1 in compliance with the LP conditions.
Moreover, the available capacity to provide power from a transmission line located approximately 10km from the planned production unit has been confirmed by the state power company (CEEE) after formal consultation on the capacity to supply power to the project for Phase 1.
Simultaneously, in accordance with the Brazilian Mining Law, AGR is progressing with all requirements of the Brazilian Mining Agency (ANM) and is expected to file the Economic Exploitation Plan (PAE) with ANM in Q4 2020 and receive the approval (mandatory for the granting of the Installation Licence (LI) for the project) for the same by Q1 2021.
- Aguia continued to advance its Três Estradas Phosphate Project by focusing its exploration efforts on the highly prospective copper targets by undertaking a more specific drilling campaign in the Andrade area in the Rio Grande Copper Belt.
- Jonathan Guinness, Non-Executive Director, resigned from the Board of the Company in February 2020 to pursue other business opportunities
- The Company received a letter of support from the Development Bank of Southern Brazil to fund up to 50% of the capital expenditure for the Três Estradas Phosphate Project
With the Company’s focus on the final development phase of Três Estradas, AGR has further simplified its operations and cost base with continuing monthly costs anticipated to be in the vicinity of AUD 180,000 offering the Company adequate financial flexibility to secure all outstanding permits to move Três Estradas to a shovel ready phase and to confirm that all the copper tenements continue to be in good standing.
Unaudited Quarterly Results
As a result of the corporate level staff reductions implemented by the Board, the Corporate expenses decreased by AUD 172,089 in Q3 2020 (period ended 31 March 2020,) compared with Q3 2019. Moreover, AGR witnessed an increase of AUD 99,933 in its expenditures on business development during the quarter due to the growth in the use of technical consultants for the advancement of Três Estrade Phosphate Project.
Other than this,
- Increase of AUD 35,266 in employee benefit expenditures during Q3 2020 was seen due to staff reductions in Brazil
- Reduction of AUD 181,704 was seen in the general administration due to administrative cost structure reductions implemented by the Board
- Driven by additional legal fees incurred, professional fees increased by AUD 57,587 in Q3 2020
AGR has reported total assets of AUD 35,837,542 in its Interim Financial Statements to 31 March 2020. The cash used in operating activities amounted to AUD 3,095,128 for Nine months ended 31 March 2020 and generated AUD 6,199,756 cash from financing activities during the same period.
During the nine months ended 31 March 220, a sum of AUD 2,492,983 was spent on the exploration and evaluation activities at the Rio Grande Copper Belt and on the public hearings for the environmental permitting process for the Três Estradas Phosphate Project.
With a focus on developing its flagship, Três Estradas Phosphate Project and exploration of the Rio Grande Copper belt, AGR’s exploration and evaluation expenses are indicative of the work on the environmental studies and social communication for the approval process for the Três Estradas Phosphate Project.
Liquidity and Capital Resources
With current negative operating cash flow, the Company finances its mineral exploration activities through equity financings, and the success of AGR is reliant on the economic viability of its mineral exploration properties and the degree to which it can establish economic mineral reserves and operations.
The Company’s working capital stood at AUD 103,904, and the cash and cash equivalent of the Company stood at AUD 477,711 at the end of the period ending 31 March 2020.
Moreover, the Company’s ability to secure financing when required shall be a major governing factor for the acquisition as well as the development of additional properties in the resource sector or to continue development of its existing properties.
The Company is uncertain about the raising of funding at the time required by the Company due to the constantly changing financial markets. However, AGR’s focus remains on the advancement of Três Estradas Phosphate Project and Rio Grande Copper belt.
Latest Developments and Outlook
In the month of April 2020, AGR concluded a private placement financing for gross proceeds of approximately AUD 730,250 in connection with the issue of approximately 9,128,126 fully paid ordinary shares at a price of AUD 0.08 per share.
The Company looks forward to continuing agronomic trials during the June 2020 quarter to determine the efficiency of the DANF product and commence the detailed engineering with a focus on advancing the LI at its Três Estradas Phosphate Project.