Transcription of The Stock Network Interview with Aguia Resources (ASX:AGR), Executive Chairman Warwick Grigor
Lel Smits: Aguia Resources is advancing a multi-commodity portfolio across Brazil and Colombia, with operations delivering strong momentum early this year. In Brazil, the company is progressing its phosphate strategy as it moves to commencing production in April this year, and at the Santa Barbara Gold Project in Colombia, gold recoveries have recently improved. Ahead of appearing at Stoxx on location, I’m joined by Executive Chairman Warwick Grigor to discuss how these developments position Aguia for both gold and phosphate growth.
Warwick, welcome to The Stock Network.
Warwick Grigor: Thank you, Lel. Nice to be here.
Lel Smits: Pleasure to have you on. Now, with the Tres Estradas nearing its operating license and strong drilling results at Paso Feo showing grades, how is Aguia positioning its phosphate assets to expand resources and meet demand as you move towards initial production?
Warwick Grigor: Well, the initial production is scheduled for April. That’s assuming we get the operating license at the end of this month, which seems to be all on track.
The cash flow will start, positive cash flow will start in May, June, when we start to sell our first phosphate. And production will ramp up over nine months to get the 150,000 to 160,000 tonnes per annum capacity, which the plant is designed to do. Now, the Paso Feo ore body you mentioned, that’s a second ore body, which is only five or 10 kilometers away from the plant.
That’s something that we’re drilling to take up the JORC resource standard, and that will come into play probably this time next year as we’re looking for alternative ore sources to supplement the Tres Estradas. But basically, there’s very few companies out there in the market that are capitalized at only 30 million with a project about to start production. You have a look around, there’s a lot of companies talking about what great prospects they’ve got or projects, but they’re two or three years out.
Our production is imminent. Now, one of the best features is our capital expenditure from here to production is only about $4 million, and we’ve got more than that in the bank right now. So the market doesn’t have to be worried about dilution from further issues before we get into cash flow.
Now, what happens when we start production? We’re basically going to be doubling capacity every 12 or 18 months over the next three or four years. So we start at 150,000 tons per annum, we double it to 300,000 and then to 600,000 tons per annum. At the moment, on the current economics, on the current pricing of phosphate, we’re looking at a cash profit return of roughly $20 million per annum based on less than $5 million to get up and running.
So the rate of return is phenomenal. And as we expand over the next four and five years, those expansions will be fully fundable out of positive cash flow. So, you know, it’s really a very low technical risk, high return cash flow operation, which should have our shareholders smiling very quickly as we start production in April.
So that is really the backbone to the future of the company. That’s where the strength is coming from. It’s a multi-decade project, and we’re right at the starting gate now.
Lel Smits: Warwick, it’s great to hear, but it’s not just phosphate. You’ve also got the gold at Santa Barbara. Gold recoveries rose above 85% in the first month of this year, with increased production achieved even while processing low-grade stockpiles.
How do these improving recoveries support Aguirre’s confidence in delivering stronger grades? And also, what are your priorities in the months ahead here?
Warwick Grigor: Well, it’s been a steep learning curve over the last 12 months at the Santa Barbara project. We’ve expanded the plant, so we’ve got good capacity, but we’ve had to experiment with different styles of mining, different mining methods. We did have a challenge with the recovery of gold because for some reason the gold wasn’t coming out, but we made a few personnel changes, a few management changes, and we wound back the clock a little bit to concentrate on grade and quality of operation as opposed to trying to move too many tons.
So we’re looking good on the recoveries. The grade is still going to be, the recovered grade is still going to be somewhere in the order of 10 or 20 grams per ton from an ore body that can grade up to 30 grams per ton in situ, but of course you’ve got to get mining deletion. So what we’ve done over the 12 months, we spent a bit of money.
We have underperformed in terms of delivery, but the learning curve that we’ve experienced sets us up very well for the future. And, you know, a gold project in a country like Colombia, very valuable. Maybe the Australians don’t appreciate it as much, but it’s interesting how much the Canadians operate in that country and how keen they are on that.
So that’s a high risk, high reward development exploration project, and it should be seen as that. You can’t talk about low risk as you can with the phosphate, but it’s the spice which is very relevant in today’s gold market. It certainly is, and there’s a lot of spice.
Lel Smits: Warwick, really appreciate your update and look forward to hearing more at the Stocks on Location event.
Warwick Grigor: Thanks, Lel. I look forward to presenting then.
Ends