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.
AGR Price at posting:
2.1¢ Sentiment: Buy Disclosure: Held
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