AGR set to BOOM!!, page-4

Great write up from Trevor Hoey following announcement today:

http://www.marketwire.com.au/market...on-fertiliser-project-not-in-the-share-price/
Aguia enterprise value of $47 million suggests $535 million fertiliser project not in the share price
Fertiliser exploration and development group, Aguia, released an optimised Preliminary Economic Assessment (PEA) of its Tres Estradas phosphate project on Tuesday morning, a development that could well see its share price respond positively.

The revised PEA was aimed at improving the economic viability of the project and this has been achieved by using different processing methods that have improved efficiencies in the mill circuit.

On this note, Technical Director, Fernando Tallarico said, ‘The introduction of column flotation was a definitive positive factor that supported the redesign to a more efficient and higher performing mill circuit’.

He highlighted that new recoveries will facilitate the mining of approximately 50% more tonnes of mineralised rock compared to the previous project design which contemplated a more complicated operation.

Having demonstrated that the production of calcite was viable, Tallarico explained that this by-product was of exceptionally high quality and as such contributed to making the project even more robust.

In addition, the option of producing only phosrock and not competing in the SSP (Single Superphosphate) market translated into project versatility and lower capital costs.

Under the revised PEA, Aguia will be able to produce 466,000 tonnes per year of phosphate concentrate (phosrock) and 1.6 million tonnes per year of calcite.

The financial metrics look sound with a post-tax internal rate of return of 43% over a mine life of 14 years.
Initial capital expenditure of US$118 million will be required, while ongoing operating expenditure is estimated at US$98 per tonne of phosphate concentrate or US$65 per tonne on a phosphate/calcite revenue basis.

To provide some perspective of how this ways up against commodity pricing, the long-term phosphate concentrate pricing estimates provided by Agroconsult is US$210 per tonne.

From an operational standpoint, the project includes an open pit, truck and shovel operation which will result in an estimated processing plant feed of 4.5 million tonnes.

The preliminary financial model indicates a net present value of US$400 million (AUD: $535 million) applying a 7.5% discount rate. These metrics and the internal rate of return are based on industry market analyst’s long-term commodity forecasts for phosphate concentrate and calcite.

Aguia isn’t the easiest company to understand, and the fact that its commodities aren’t as well-known as the likes of precious and base metals arguably works against it in terms of investor recognition.

However, the numbers speak for themselves. Aguia is debt free with cash of $3 million and an enterprise value of $47 million, with the latter appearing to represent a significant discount to fair value when weighed up against the net present value of the project.

The company’s shares have been sold down since September last year with tax loss selling arguably responsible for them recently trading close to the 12 month low as the fiscal year came to a close.

However, with tax loss selling behind it and an impressive project valuation now in the market place a share price rerating could be on the cards.