the challenges for new projects: building a...
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AGUIA RESOURCES LIMITED 1 21st January 2013 AGUIA Resources Limited
THE CHALLENGES FOR NEW PROJECTS: BUILDING A BRAZILIAN FERTILISER COMPANY
Fertilizer Latino Americano, São Paulo, Brazil
ASX Code: AGR
This document has been prepared as a summary only, and does not contain all information about the Company’s assets and liabilities, financial position and
performance, profits and losses, prospects and the rights and liabilities attaching to the Company’s securities. This document should be read in conjunction
with any public announcements and reports (including financial reports and disclosure documents) released by Aquia Resources Limited. The securities
issued by the Company are considered speculative and there is no guarantee that they will make a return on the capital invested, that dividends will be paid
on the Shares or that there will be an increase in the value of the Shares in the future. Further details on risk factors associated with the Company’s
operations and its securities are contained in the Company’s prospectuses and other relevant announcements to the Australian Securities Exchange.
Some of the statements contained in this release are forward-looking statements. Forward looking statements include but are not limited to, statements
concerning estimates of tonnages, expected costs, statements relating to the continued advancement of the Company’s projects and other statements which
are not historical facts. When used in this document, and on other published information of the Company, the words such as “aim”, “could”, “estimate”,
“expect”, “intend”, “may”, “potential”, “should” and similar expressions are forward-looking statements.
Although the company believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and
uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual
results to differ from these forward-looking statements include the potential that the Company’s projects may experience technical, geological, metallurgical
and mechanical problems, changes in product prices and other risks not anticipated by the Company or disclosed in the Company’s published material.
The Company does not purport to give financial or investment advice. No account has been taken of the objectives, financial situation or needs of any
recipient of this document. Recipients of this document should carefully consider whether the securities issued by the Company are an appropriate
investment for them in light of their personal circumstances, including their financial and taxation position.
Competent Persons Statement
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Dr Fernando
Tallarico who is a member of the Association of professional Geoscientists Ontario. Dr Tallarico is a full-time employee of Aguia Resources Limited. Dr
Tallarico has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (“JORC Code”). Dr Tallarico consents to the inclusion in this report of the matters based on his information in the form and
context in which it appears.
DISCLAIMER
The fertilizer sector has not always
been a target for explorers
Phosphate – 1987 – 2006: Money made selling companies
– Average phosphate rock price ~US$50/t fob
– Average DAP gross margins of ~US$11/t
– Almost no funding for Juniors
Potash – 1987 – 2004: No greenfield developments
– KCl average price US$90/t
– Almost no funding for Juniors
Higher commodity prices have given
investors an incentive to explore…..
Phosphate Juniors
– < 5 juniors in 2006 to > 23 today
– < $50M Market Cap in 2006 to > $1.0B today
Potash Juniors
– < 5 juniors in 2006 to > 26 today
– < $50M Market Cap in 2006 to > $2.0B today
– Potash One bought by K+S for $434M; Athabasca bought by BHP
Biliton for $331M
Segmentation by Exchange of Companies Developing Phosphate and
Potash Resources
Phosphate Juniors Potash Juniors
# Companies Market Cap ($M) # Companies Market Cap ($M)
TSX / TSX-V 11 738 17 1,055
ASX 9 204 7 375
Other 3 63 2 572
Total 23 1,005 26 2,003
Australia / NZ
Phosphate: Chatham Rock Phos Korab Resources Krucible Metals Ltd. Legend International Minemakers NuPower Resources Phosphate Australia Rum Jungle Strata Minerals
Potash: Potash West NL Reward Minerals Sirius Minerals South Boulder Mines
Latin America
Phosphate: Aguia Resources Eagle Star Minerals Focus Ventures Ltd. Fosfatos del Pacifico MBAC Fertilizers Redstone Res Rio Verde Minerals Stonegate Agricom
Potash: Aguia Resources Allana Potash Eagle Star Minerals MBAC Fertilizers Pacific Potash Corp Redstone Res. Rio Verde Minerals Sirocco Mining Verde Potash
Africa
Phosphate: Celamin Great Quest Metals Minbos Resources Oklo Resources Plains Creek Phos
UCL / Sandpiper Vale
Potash: Allana Potash Elemental Minerals Ethiopian Potash MagIndustries South Boulder Mines
North America
Phosphate: D’Arianne Resources Glen Eagle Resources Jourdan Resources PhosCan Chemical Stonegate Agricom
Potash: Encanto Potash Corp EPM Mining Ventures Grizzly Discoveries IC Potash Karnalyte Resources
North American Potash Dev. Pacific Potash Corp Passport Potash Potash Minerals Red Metal Ltd. Red Moon Potash
Softrock Minerals Ltd. Universal Potash Corp Western Potash
Europe / Asia
Phosphate: Sunkar Resources Eurochem Yara
Potash: Sprint Capital / Satimola Sirius Minerals
The Americas, Africa, and Australia
dominate the exchange-listed projects…..
Juniors play a pivotal role in new
discoveries....
JUNIORS PROVIDE FOCUS:
Able to focus on exploration and project development
Able to move swiftly – no competing corporate distractions
Able to raise money – provide investors with targeted investments with
sizable potential returns
Prove the resource
Environmental Permitting
Complete Studies
Construction
Commissioning & Start-up
TIME
Raise Capital
• Drilling licences
• NI 43-101 or JORC Report
• EIA Report • Preliminary
/ Full Installation licences
• Final NI 43-101 or JORC
• Pre-feasibility • Full Feasibility • Detailed
Engineering
The Process
What are investors looking for?
Project
– Location
– Resource
Structure
– Public vs. Private
– Exchange
Management
– Industry knowledge
– Technical expertise
– Public markets experience
Taken together
= Value
Aguia Projects Overview
World-class Assets
■ BUILDING A FERTILISER COMPANY
Phosphate Projects – Near Term Focus
✔RIO GRANDE, new discovery, flag ship project
✔ Initial 21Mt JORC Inferred resource
✔Resource upgrade 1st qtr 2013
✔Beneficiation concentrate up to 36% P2O5
✔Scoping for near term cash flow from high
grade surface resource
✔Large, long life & low cost resources
✔A new world class phosphate province
Potash Project - World class basin
✔Adjacent to Brazil’s only operating potash mine
✔Historic Drill Results throughout Basin
■ STRONG BOARD & FERTILISER EXPERTS
■ EXCELLENT TECHNICAL TEAM IN BRAZIL
■ LOW SOVEREIGN RISK, SUPPORTIVE GOVT.
BRAZIL: AN AGRICULTURAL
POWERHOUSE, AND A GREAT
LOCATION FOR PROJECTS
✔ Excellent infrastructure
✔ Primary fertiliser markets
✔ Heavily reliant on imports
Rio Grande do Sul Discoveries - A New Phosphate Province for Brazil
AGR has been first mover in region
Large landholding over 860 square kms
Potential for new world class phosphate province – LARGE RESOURCE BASE
NEW DISCOVERY from first drilling program
– Três Estradas (TE) - Nov 2011
Numerous untested targets including:
Joca Tavares (JT) rock chips to 11% P2O5
NEW TARGETS
TRES ESTRADAS
NEW DISCOVERY
JOCA TAVARES
NO DRILLING
Similar in style to Brazilian producing
phosphate mines – carbonatite hosted
Três Estradas JORC Inferred Resource
Initial JORC compliant inferred resource of 21Mt @ 4.6% P2O51 including higher
grade oxide zone from surface of 1.8Mt @ 10.9% P2O5
1 SRK Consulting: cut-off grade of 3.0% P2O5)
Resource calculated from drilling
over 1.2 km to 100 metre depth
Stage 2 drilling completed – JORC
resource upgrade 1st qtr 2013
Potential to expand resource
along a total strike of 2.6km
UNTESTED EXTENSION 1.4
km “no drilling”
TOTAL POTENTIAL 2.6 km
INFERRED RESOURCE
EXTENDS OVER 1.2 km
NEW APPLICATION
Três Estradas Scoping on near surface resource
High Grade oxide results from surface – scoping for initial early cash flow Excellent mining parameters, easy access, low strip ratio
Shallow High
Grade Oxide
From Surface
Três Estradas Preliminary beneficiation results
Sample Number & Description Head Grade Metallurgical Flotation Results
(100 kg samples) P2O5 Recovery P2O5 SiO2 Fe2O3
EB-01, Oxidised Carbonatite 16.2% 83.4% 36.0% 3.3% 6.2%4
EB-02, Fresh Carbonatite 4.2% 65.0% 31.4% 3.6% 1.2%
EB-01&3, Oxidised Blend Carbonatite &
Amphibolite 14.2% 79.9% 35.9% 5.6% 6.0%4
Initial metallurgical recoveries up to 83.4% and concentrate grades up to 36.0% P2O5
Results indicate the potential to produce a commercial concentrate using standard
methods and reagents available in the market
Further optimisation test work to commence 1st half 2013
Name of Deposit Location Tonnage
(Mt)
Head
Grade Recovery
Concentration
Grade Stage
Siilinjärvi (Yara) Finland 465 4% 84% 35% Production
Cajati (Vale) Brazil 100 5% 78% 36% Production
Três Estradas (Aguia) Brazil 212 4.6% 65-83% 31-36%3 Exploration /
Development
1JSA Consultoria e Assessoria Técnica, Company data 2 Inferred resource calculated from 40% of potential target length and to 100 metres depth
3 Based on preliminary beneficiation test work, optimisation test work underway . 4 No magnetic separation conducted on samples
Excellent infrastructure access to
markets
• Excellent infrastructure with good road, rail, power, port and services
• Railway within the project that goes north and south to Brazil and southwest to Argentina and Uruguay.
• Franchise owner is América
Latina Logística.
Schematic of Key
Railway Lines Relevant
to Rio Grande
Phosphate Projects
Railway runs through the project
RIO GRANDE Phosphate Projects
Três Estradas
Development options
The Process – Internal Scoping commenced
Mine rock, beneficiate by flotation
Sell rock concentrate
Phase 1: Near Term - Mine high grade oxide for
cash flow to fund on-going development and Capex
Phase 3: Depending on ultimate resource
size, plan for either increased SSP or MAP
/ TSP production
Phase 2: Longer Term – Large resource to
sustain 25 year mine life - Single Super
Phosphate (“SSP”) production.
The Process – Internal scoping commenced
Mine rock, beneficiate by flotation
Use rock concentrate to produce and sell SSP
2-3 years
4 years
5+ years
Current Status
Phase 1
Conceptual
Rock Concentrate
2Mt Oxide
Phase 2
Conceptual
SSP Project
60Mt Total Resource
Resource Tonnage 21.3 M tonnes 1 2 M tonnes 60 M tonnes 2
Resource Grade 4.63% P2O5 1 11% P2O5
3 4.60% P2O5 3
Mine Life 3 years 18.5 years
Concentrate Grade 31% - 36% P2O5 35% P2O5 32 - 35% P2O5
P2O5 Recovery to Conc. 65% - 83% 4 80% 76% 5
Sales 150ktpa rock conc. 600ktpa SSP
CAPEX (US$ million) $40-50m $250-$280m
OPEX (US$ /tonne) $90/tonne rock $150/tonne SSP
Sales Price (US $ /tonne) $190/tonne rock $350/tonne SSP
NPV @ 8% Real DR 6 ($US million) $14.4M pa EBITDA $230M
IRR @ 8% Real DR 27%
Tres Estradas Project: Conceptual Rock & SSP
Production Scenarios
1: Inferred resource, SRK Consulting, 2: Assumed “resources” of 74Mt primary @ 4.05% P2O5 and 6Mt oxide @ 11% P2O5 , 3: Grades as for current inferred resource, 4: Results of initial metallurgical recovery beneficiation test work
at University of Sao Paulo – Test work continues, 5: Assumed 80% oxide and 75% primary recoveries, 6: Real discount rate of 8% equates to a nominal rate of ~10% using 2% cost and revenue inflation
7. Due to the relatively early stage of the Tres Estradas Project and the absence of any detailed technical studies, assessments of the potential value of the Tres Estradas opportunity are highly speculative and unreliable. The analysis
above relies on a number of assumptions that are not based on any detailed technical or economic evaluations of the project and are provided for illustrative purposes only. “Reserve” figures are conceptual only, and are not JORC or
NI43-101 compliant.
Assumptions - For illustrative purposes only – not based on actual
project studies, based on 60Mt resource = 18.5 year mine life, 7
Atlantic Potash Project Highlights
ATLANTIC POTASH PROJECT Adjacent to Brazil’s only operating potash
mine
Taquari-Vassouras Mine (Vale) produces <10% of country’s consumption, with reserves in place until 2019.
Concurrently Vale is developing its Carnallita Potash Project for 1.2Mt solution-mined KCl from carnallite
AGR controls a large land holding of ~ 200,000 hectares
Excellent Infrastructure in Place
Basin Consolidation - Opportunity
Atlantic Potash Project Exceptional discovery potential
Vale Mining Permit
Aguia Project
Potash Claims - Other
Oil Exploration Wells
■ Historical exploration data obtained from
Brazilian Geological Survey
■ Petroleum exploration and production
data – more than 300 wells analyzed
■ Seismic data – basin is well covered with
public 2D seismic data (2D lines- 32,000
km)
■ Locations for further drilling under review
Taquari-Vassouras Mine - Vale
Underground / Room and Pillar
700,000t KCl pa
Associated to Bull’s-eyes Gravity
Low
Conclusions
Project
• Location = Brazil = Market
• Resource = igneous, >34% P2O5
• Scale = Developing significantly
Structure
• Public
• ASX
Management
• Industry knowledge
• Technical expertise
• Public markets experience
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