Aguia Resources (AGR AU) - Update

Stock has been weak. Two updates worth commenting. Broadly, these two pieces of news were negative. The investment case taking longer but still OK.

Regulatory/legal (See Pic 1)..... On Sept 15, the appeal court handed down its ruling against Aguia. The court ruled that its environmental study should be declared invalid. Background to this was AGR won the case previously and the prosecutor chose to appeal. In the worst case scenario, the mine could be shut down !!!

Here is my take. After Aguia won the case in 2024, the regulator proceeded to issue the environmental permit and the subsequent operating license. The entire licensing process was 100% legal/legitimate. NOW, despite the appeal court decision to overturn the trial judge, in my view + based on similar situations in Brazil, the phosphate mine will remain open. Aguia will appeal the decision. It will take another 2-3 years. A likely order is Aguia may need to undertake more consultations with the local population in a revised environmental study.

Business development (Pic 2)...... Again, the original plan was to scale to full capacity of 150K tons quickly. Looks like it will take longer. My guess is 2 years to get to full capacity of 150K tons. Why ? Farmers are doing it tough in Brazil (very high interest rate). El Nino (dry spell) is expected. In addition, farmers are still testing the Pampafos product from Aguia i.e. if a farm needs 1000K tons of phosphate a year, it would only order 10 tons from Aguia in order to see if the yield is competitive.

As a consequence, Aguia will likely slow walk its capacity expansion plan, driving total capacity to 500-600k tons.

What does the future hold ? Again.. Keep in mind the big picture. Brazil relies on phosphate imports. Phosphate from Aguia can be 20-25% cheaper than imports. Aguia will win market share in the future. Base case is Aguia will hit its production target of 5-600K tons target in the future (likely 2029/2030, rather than 2028). Short term, 4K tons a month through Mar/April 2027, then 8K tons in the next planting season (May).... Then 12K tons in Sept 27 planting season.

Also see Pic 3. Aguia is making progress in turning around its gold mine in Colombia.

After the pull back, the stock MV is $31M. Even if it only produces 100-150K tons, we are looking at EBITDA of $13-20M a year. Not to mention, the gold operation is on the verge of turning around..... Aguia remains a stock with significant upside.