Aguia to Bring On-Stream the Very High-Grade
Santa Barbara Gold Mine
For the last six months Aguia Resources (AGR) has been
in a virtual news flow lockdown due to the rules surrounding
takeover bids. Finally, last week Aguia announced the
closure of the successful bid for the unlisted public
company, Andean Mining, that was originally announced
last December. The first piece of news, released last
Friday, was the plan to fast-track the reopening of the St
Barbara Gold Mine in Colombia. As one shareholder
commented, it provided a lot of detailed information that is
worth reading. https://aguiaresources.com.au/asx-announcements/fasttrack-development-of-santa-barbara-gold-mine/
Located in Serranía de San Lucas, known as the richest
gold belt in Colombia, the very high-grade underground
mine has already demonstrated its merit through a 12
month pilot mining program that mined and treated 500
tonnes of ore through a 30 tpd, pilot scale CIL processing
plant. An average recovered grade of 20 gpt was reported
from mineralisation that has been consistently assayed
around 30 gpt gold. The difference between the in-situ
grade and that recovered can be attributed to mining
dilution and the inclusion of lower grade development ore.
While high-grade silver values are present, they were not
recorded at the time.
The fast-track development to reach gold production by the
end of 2024 involves minor capital works such as
installation of a larger (though still small) crusher, additional
tankage, instillation of a Merrill Crowe gold precipitation
circuit and a new gold smelting room. Additional power
generation units will be installed and there will be upgrades
to access roads, accommodation and administration
buildings. The end result will be a processing plant that
increases capacity from 30 tpd to 50 tpd. The ballpark
capital costs will be circa $2m. Capital works and continual
mine development will carry over into 2025, but the
expected strong cash flow will be able to fund these
expenditures.
Very-high grades mean very low costs
I would love to give you the details of the in-house Start-Up
Report that gives all the fine detail on costing, but the ASX
rules prohibit companies without JORC resources from
issuing economics and guidance. So I have to walk a fine
line and hope that you are able to do the math yourself.
You can be smarter than the simplest investor who needs
the protection of inflexible compliance rules.
Look at a modest grade underground mine planning to start
up in South Africa with a head grade of around 3-4 gpt. It
expects to produce gold at a cost of US$900/oz. A
company in Colombia with head grades above 20 gpt
should be able to do better than that - much, much better.
Pick a figure and whatever it is, you will see the potential to
produce very strong cash flows at Santa Barbara. You will
have to do your own estimate for the gold production, but
start with 50 tpd and that gives you 17-18,000 tpa. Use a
grade of around 20 gpt, which has already been achieved.
Aguia owns 100% of the mine. There is a 4% royalty owing
to the government.
Where will the money go?
Cashflow from operations will go towards continual
upgrading and expansion of the mine with a broad plan to
double the scale over a two year period. For those who
want to see JORC resources, an early priority will the
commencement of exploration drilling that will allow a rapid
calculation of a JORC figure. Think about it. The
exploration holes will be drilled above and below existing
workings and along strike. The company won’t be relying
on dozens of drill holes to get an understanding of the
orebody. It is already exposed and very well understood as
it is already being mined. The drilling will be more akin to
brownfields exploration testing for extensions of the veins.
That means lower risks. There are 7 km of veins that have
been sampled and mapped that are awaiting drill testing,
so the target is substantial.
… but consider the big picture, the blue sky
Having a strong cash flow from an operating mine will place
Aguia in a great position as it will enable the Company to
be self-funding without having to go back to the equity
markets to suffer the huge discounts on capital raisings that
brokers are forcing on companies. However, there is a
much bigger story to consider and that relates to the blue
sky potential.
There is a 400,000 oz p.a. gold mine not far away named
Buritica (circa 100 km distant). About ten years ago
Continental, a TSX-listed company, had a 30 tpd pilot plant
like the one at Santa Barbara. It was embarking on an
exploration program to come up with gold resources. Over
a period of years it eventually proved up a resource of 7-8
Moz and then it began the construction of a 250,000 oz p.a.
gold mine. Zijin Mining came along and bought Continental
for C$1.4bn, with its 65% interest in the project. It
subsequently expanded the mine to 400,000 oz p.a.
Aguia is optimistic that it has a similar style gold system at
Santa Barbara. It will only know for sure once it has
completed extensive drill programs and there will always be
differences, but what an exploration target! (Note, this is not
an Exploration Target as defined by the JORC Code).
The Bottom Line
Aguia is in a very advantageous position with Santa
Barbara. The high-risk exploration phase has been
circumvented through the excavation of a 200m adit and
associated development along the orebody that gives
immeasurably more information than dozens of drill holes
could. Mining conditions are well-understood from the
extraction of 500 tonnes and the metallurgy has been
confirmed with a reported recovered grade of 20 gpt. The
economics are well understood but they can’t be disclosed
because of the need to comply with the ASX and JORC
rules that protect lesser analytical investors who don’t
understand mining. Yet, smart investors can do their own
assessment.
Now it is up to the Company to deliver on its expectations
and prove to the market the value of the project. That
involves leadership, good management and technical skills.
Admittedly, these characteristics are sadly lacking in many
companies, but as chairman of Aguia, I believe the
company to be well endowed here.
On a separate note, Aguia still owns some very valuable
rock phosphate projects in Brasil that have been the
subject of favourable BFS studies; more on them in later
Weeklies.
Selling at 2.1¢ and a market capitalisation of around $23m,
the market is totally ignoring the upside potential of strong
earning streams from two projects across two commodities.
Perhaps the story is too good to believe, but from where I
sit, this is an extraordinary opportunity. The market will
better appreciate the merit as the news starts to flow over
the coming weeks.
NB: These are personal comments of the Chairman in his capacity
as an analyst at Far East Capital. They are not representations by
Aguia. See the following link for the ASX release and note he
disclosure below.
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