MoneyTalks: Centrex’s Ardmore Phosphate Project boost to unlock bigger offtake deals, says broker
Taylor Collison says Centrex’s upcoming expansion of its Ardmore phosphate project in Queensland will ‘lift revenues (while) reducing operating costs’.
Stockhead
Don't miss out on the headlines from Stockhead. Followed categories will be added to My News.
Taylor Collison says Centrex’s upcoming expansion of its Ardmore phosphate project in Queensland will “lift revenues (while) reducing operating costs”.
The broker has slapped a “Speculative Buy” recommendation on Centrex (ASX:CXM), with no specific price target.
As well as exploring the Ardmore project in northwest Queensland, the $40 million market-capped company is pursuing the Oxley potash project in Western Australia’s midwest.
The products from both of these projects are used in sustainable agriculture and food production.
For the latest resources news, sign up here for free Stockhead daily newsletters
Taylor believes Centrex is on the cusp of transitioning Ardmore to a more cost-efficient operation that will benefit from economies-of-scale, with only modest capital expenditure required.
Funding for the Stage 1.5 expansion of Ardmore (total capex $17.6 million) has been secured from the share placement in Q1, and the $10 million from National Australia Bank’s financing package.
The project’s expansion forms part of the company’s strategy to invest and focus on increasing production rates at Ardmore in anticipation of larger and more frequent shipments.
Taylor said that currently the mine was producing >34.5 per cent P205 (phosphorus pentoxide) concentrate, considered a premium concentrate by international standards, with a low level of harmful elements being generated by the mine.
“This has been validated by the customer base established by Centrex,” said the note out of Taylor Collison.
Total resources for Ardmore currently stand at 16.2Mt @ 27.8 per cent P2O5, which support a healthy mine life at the proposed production rates.
“Ardmore has a low life-of-mine (LOM) strip ratio of 5.6, with progressive backfilling into the pits limiting rehabilitation liabilities and environmental footprint,” said Taylor.
The LOM strip ratio is a metric used to describe the ratio of the volume of waste material that must be removed to the volume of ore extracted over the life of a mining project.
A lower strip ratio indicates that less waste needs to be removed per unit of ore, which typically suggests a more economically favourable mining operation.
“The company has a simple process flowsheet with well-understood commercial techniques, and the plant has exceeded metallurgical design parameters, consistently achieving above nameplate throughput capacity,” added Taylor.
MORE FROM STOCKHEAD: Silver surfs past gold | iTech could have next low-cost graphite winner | Musk, miners embrace Argentina
Recent developments
Meanwhile, the production at Ardmore continues to grow, and as of March 25, Centrex reported that more than 16,000 tonnes (t) of phosphate product was stored at the Townsville port.
On Monday, the company announced that 7199t of beneficiated phosphate concentrate had been successfully loaded aboard in preparation for shipping to an existing customer.
The product was loaded from May 18 to 19 May, and was scheduled to depart Townsville Port on Monday morning.
The company’s next anticipated shipment, scheduled for early June, which is expected to be approximately 15,000t.
Centrex also reported the successful installation of a wet concentrate overflow storage pad and the northern drying pads.
This will boost the company’s drying capacity and make the whole process more efficient. When that’s done, Centrex can handle more phosphate concentrate, dry it, and get it ready to sell in bigger batches.
And May 17, additional cyclone banks arrived at Mt Isa. They are to be installed as part of the Ardmore processing plant.
This is expected to enhance plant separation and efficiency, which will enable higher hourly throughput rates.
Increased production will in turn lift revenues and reduce operating costs on a per tonne, FOB Townsville basis, said the company.
Expansion to unlock offtake deals
In February, Centrex received credit approval from National Australia Bank for a ~$10 million secured financing package designated for the Ardmore Mine.
The loan now fully funds Ardmore’s planned production upgrade, and will increase output from the current ~240,000tpa rate to 625,000tpa by December this year.
“This substantial increase in production capacity is set to lift revenues whilst also reducing operating costs on a per-tonne basis,” said Taylor Collison.
“Furthermore, the expansion will cement the Centrex’s position as a major and dependable supplier of rock phosphate in the key Asia-Pacific market, thereby underpinning food security throughout the region.”
Upon completion of the Stage 1.5 expansion, Centrex estimates all-in sustaining costs (AISC) will be in the range of $160-$180 per tonne of phosphate concentrate.
Visit Stockhead, where ASX small caps are big deals
Several offtake agreements are already in place with industry-leading names including Incitec Pivot, Samsung C&T, Ameropa AG, Ballance Agri-Nutrients and Ravensdown.
These contracts essentially cover the majority of the projected production from Ardmore over the next three years.
“Capital remains allocated in a prudent manner, ensuring the expansion remains on budget and on schedule as previously outlined,” said Centrex’s CEO, Robert Mencel.
Mencel adds that we’ll really start seeing the benefits of the Stage 1.5 expansion as it ramps up production in the latter half of 2024.
“During December 2024, upon the conclusion of the Stage 1.5 Expansion, Ardmore will unlock a production run-rate of 625ktpa, transforming it into a highly cashflow positive asset for the company,” Mencel said.
Mencel adds that he sees Centrex eventually becoming a major supplier of beneficiated phosphate concentrate.
This content first appeared on stockhead.com.au
The views, information, or opinions expressed in the interview in this article are solely those of the broker and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
SUBSCRIBE
Get the latest Stockhead news delivered free to your inbox. Click here
Originally published as MoneyTalks: Centrex’s Ardmore Phosphate Project boost to unlock bigger offtake deals, says broker
Investor Guide: Health & Biotech FY2025
In this special investor guide, health and biotech guru Tim Boreham leads Stockhead’s deep dive into the most cutting edge sector on the ASX.
Investor Guide: Gold & Copper FY2025
Stockhead's writers - including mining guru Barry FitzGerald - take you inside the copper and gold markets, and zero in on juniors exploring for the next major mine.