Why has “execution” become such a big buzz term in business lately?
It’s because it has become analogous to the Hollywood- inspired expression, “Show me the money!”
Indeed, the execution (monetization) of most new businesses is usually challenging, to say the least. In an era with so many start-ups soliciting investors with highly ambitious business ventures, it’s sobering to realize that few will ever thrive.
Furthermore, the ability of mining start-ups to successfully execute has always been especially rare.
Beyond figuring out how to make money, most mining companies face a succession of other logistical, legal, and political barriers to entry.
However, occasionally a mining start-up is able to innovate a business model that makes monetizing mineral extraction look easy — particularly if the company has “green” credentials.
Centurion Minerals Ltd.
(TSX.V: CTN) is such a company.
In fact, the Vancouver-headquartered start-up is expecting to be cash-flow-positive within a month or two thanks to the recent successful commercialization of its fertilizer business, an agricultural gypsum mining operation, in Argentina.
Furthermore, sales are expected to grow exponentially due to a business model that is not just environmentally-friendly, but is also farming-friendly, too.
This is something of a game-changer. Here’s a mining company that is empowering the agricultural sector, rather than threatening it. It does this by improving farming yields with gypsum, which is a natural soil conditioner that is high in calcium and sulphur.These minerals make ideal “organic” supplements to maintain soil structure and plant health.
Key to gypsum’s appeal to Latin American farmers is that it is an inexpensive agri-mineral alternative to pricey synthetic agri-chemical fertilizers.
The Ana Sofia agricultural gypsum project is located in Santiago del Estero Province, Argentina. The project comprises two mining concessions with exploration rights totalling 500 hectares.
Centurion to be Cash-FlowPositive within Weeks
The company just published its July sales figures, which attest to the viability of its new business venture. In total, sales of approximately 1,000 tonnes of gypsum at an average price of US$75 per tonne were recorded.
However, Centurion intends to ramp-up to full-scale capacity for the pilot processing plant within a couple of months. This should amount to around 40,000 tonnes a year, translating into projected revenues of $4-$5 million and profits in excess of $1million. But this is just the starting point for Centurion.
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Shipping agri-gypsum —
an organic fertilizer —
to end users
Commenting on the company’s much-anticipated inaugural production numbers, company president David Tafel says, “In the short-term, unforeseen weather conditions delayed the commencement of production. But now we have started to implement our long-term strategy which is very expansion-minded.
In the near-term, demand for our agri-gypsum fertilizer is proving to be strong and growing as anticipated.”
This rolling-out of the company’s business model is expected to expand to a production goal of 160,000 tonnes per annum for the Ana Sofia Project. This translates into projected revenues of around CDN $16 million per year and healthy profit margins of at least 25%, or better.
Additionally, the company is pursuing growth opportunities elsewhere in Argentina and other nearby nations where it can replicate the Ana Sofia business model.
The company’s near-term mandate is to optimize pilot-scale production, which amounts to around 4,000 tonnes of gypsum per month. This will make the company cash-flow-positive. Centurion anticipates this can be achieved within the next few weeks.
The processing facility at Ana Sofia is officially in business
A full build-out of the project’s processing facility is expected to only cost around $2.5 million to $3 million, making for a prospectively very fast payback on invested capital.
Once Centurion expands capacity to 160,000 tonnes per annum, a ten-year mine life has been projected. However, the inferred resource only applies to 10% of the overall property. Ultimately, a much longer mine life is envisioned. In fact, the deposit is “open” (continuous) in several directions, thereby providing considerable expansion potential.
Fortunately for Centurion, all of the mineralization appears to be located within 10 metres of the surface — making for an inexpensive quarry-like excavation process.
Plentiful near-surface agri-gypsum makes for a low-cost mining operation
It is the scalability of this project that offers considerable upside for investors. On this note, all the necessary exploration, extraction, environmental, and export permits are already in-place.
A Pioneering “Green” Mining Operation
Centurion has formed a joint venture partnership with privately-owned Demetra Minerals to commercialize the Ana Sofia deposit. It currently owns 50% of the project, with an option to own it outright.
Due to gypsum’s advantages as a natural fertilizer, demand across South America is very strong. However, supply is still very limited with the industry fragmented among a few small operations with marginal efficiency.
These are key reasons why management at Centurion saw an opportunity to bring North American mining expertise to this under-developed industry and to consequently become a dominant player in Argentina.
Centurion has also signed sales contracts with fertilizer distributors in Paraguay and Argentina for a combined 42,500 tonnes per year at a price of approximately CDN $100 a tonne.
The sales contracts are essentially a turnkey operation as all transportation logistics to get the product to market are managed by the distributor. This is an ideal arrangement for Centurion as all sales are “FOB mine gate”.
Management is confident that Ana Sofia can help meet this agricultural demand for many years to come. The project currently hosts an inferred NI 43-101 compliant resource of 1.47 million tonnes of high-grade gypsum.
The Ana Sofia Project is very scalable
Gypsum’s Agricultural Demand: The BigPicture
The soil throughout much of South America tends toward higher levels of salinity. Compounding this issue are pollutants such as aluminum, especially in Brazil, as well as soil salination issues in some of the more heavily-farmed regions.
A key benefit of agricultural gypsum is that it “flocculates” clay particles (groups them together), increasing soil porosity and reducing compaction. This benefits crop yields because it increases the uptake of other nutrients such as nitrogen, phosphate and potassium.
Studies have even shown that this organic soil input can remediate non-arable saline land into soil that is fertile enough to farm crops. To this point, gypsum can even improve the Ph balance in soil.
In terms of defining the potential market, there are more than 125 million hectares of agricultural land in Argentina and neighbouring countries which can benefit from the soil conditioning provided by agricultural gypsum.
Hence, Centurion’s turnkey solution business model can be applied elsewhere in Latin America. So this is just the beginning of Centurion’s plans to become South America’s first significantly-sized producer of high-quality agricultural gypsum.
Investment Summary
The company’s key differentiator is that it is a bona-fide “green” mining company that has a first-mover advantage in a burgeoning global business for improving crop yields without the use of expensive, potentially toxic agri-chemicals. To this point, agricultural gypsum can even be used in organic farming — which is a huge competitive advantage and investment driver for Centurion.
Additionally, the company has a simple but dynamic business model which is on-track to scale-up significantly in the coming 12 months. This promises to translate into revenues of up to $16 million per annum at full production, with very healthy margins of 25%, or better.
Centurion has a relatively tight share structure with approximately 61 million shares outstanding. Additionally, a large block of outstanding warrants could add as much as $4 million to the company’s treasury if they are exercised.
This undervalued stock is nonetheless expected to respond positively to the prospect of ever-improving sales metrics in the coming months and beyond.
With a pending tripling or quadrupling of output on the horizon, early-stage investors will likely benefit from an ascendant share price as Centurion’s dynamically disruptive business model kicks into high gear.
About the Author: Marc Davis has a deep background in the capital markets spanning 25 years. He is also a longstanding financial journalist, having worked for leading digital financial news agencies in North America and in London’s financial centre. He is also a former business reporter for CBC Television.
Over the years, his articles have also appeared in dozens of digital publications worldwide. They include USA Today, CBS Money Watch, Investors’ Business Daily, the Financial Post, Reuters, National Post, Google News, Barron’s, China Daily, Huffington Post and AOL.