Centurion Minerals (TSXV: CTN): High Potential Deposit in the Right Market

The high-grade gypsum deposit of Centurion Mineralshelps address global fertilizer issues

SmallCapPower | January 4, 2017: According to data collected by the World Bank, the current population growth rate is about 1.2%, or 80 million people per year. With more individuals to feed, farmers need to increase their yields in order to satisfy demand. Since about 1861, when the potassium fertilizer industry started in Germany1, chemical fertilizers have been used largely to increase yields. With agriculture intensification happening so quickly, and more chemical fertilizer being used, Glenn Benoy, a senior water quality specialist and science advisor with the International Joint Commission, believes it is leading to the increased number of toxic algae blooms that are poisoning our waters. This is supported by the string of large algae blooms experienced over the past summers in Lake Erie, caused by phosphorus run-off that have affected the freshwater habitats and shorelines of the smallest Great Lake, so what can be done?

The natural solution

Calcium sulfate dihydrate (CaSO42H2O), also known as agricultural gypsum, is a naturally occurring mineral used to reduce soil acidity, compaction and provide sulfur fertilization. According to a guide released by the Ohio State University2 and partly funded by the U.S Environmental Protection Agency, gypsum is a more readily available source of nutrients for plants than traditional fertilizer, and improves both the physical properties and chemical properties of soil. One of the largest benefits is that it flocculates clay particles (groups them together), increasing soil porosity and reducing compaction (Figure 1: below).  In doing so, gypsum improves crop yields by: increasing the uptake of other nutrients such as nitrogen, phosphate and potassium, preventing run off during rainfall, a major concern and cause of

Figure 1: Diagram of the Effects of Gypsum on Soil
algae blooms; and increasing the root structures of plants as they can penetrate deeper into the porous soil structure.

In addition, when found in pure enough deposits (greater than 85% gypsum for agricultural use), it is as easy as scooping it out of the ground, putting it through a grinding process, bagging it and shipping it out by the tonne. What you get is a no-chemicals added, organically-certified soil amendment solution that will even turn non-arable into land fit for crops, as studies have

Source: Eco-gem

shown that gypsum can reduce the pH of soil and enhance the leaching of soluble salts and exchangeable sodium, which increases macroporosity, in just one year3. With the current population size and growth that the world is experiencing and the fact that the UN estimates the pace of arable land degradation is 30 to 35 times the historic rate, we are in need of a sustainable agricultural solution.

Centurion Minerals- Imminent growth from a high-grade deposit

Centurion Minerals Ltd. (“Centurion”) (TSXV:CTN) is a Canada-based company focused on the exploration and development of agri-mineral and precious-metals projects. Recently, through a joint venture with Demetra Minerals Inc. (“Demetra”), Centurion began production at its agricultural gypsum deposit in Santiago Del Estero, Argentina through its first phase, pilot plant. The plant, capable of producing 200 tonnes per day (tpd) or approximately 40,000 tonnes per year (t/yr), is producing agricultural quality gypsum at an average grade of 94%, without the use of chemicals or water, while also producing no tailings in the process.

The deposit, located just a 90-minute flight from Buenos Aires, sits only 1.2km from a major highway, has all of the infrastructure already built in the area, and sits within 1,000km of its entire initial market. It has a NI 43-101 certified Inferred resource of 1.47mm tonnes, with only 10% of the property surveyed, sitting within 10m of the surface. Being situated on top of scrubland it also means that no large deforestation will take place in order to produce. The mineral and environmental profile of this deposit is so promising that Dr. Patrick Moore, PhD and ex-President and Founder of Greenpeace, sits on the Board of Directors for Demetra.

Although the pilot plant has a projected capacity of 40,000 t/yr, Centurion has an offtake agreement with a fertilizer distributor in Paraguay for up to 50,000 t/yr at a price of approximately CAD$100/ tonne. The offtake agreement is also extremely advantageous for Centurion as all transportation logistics are managed by the distributor. Once the 1 tonne tote bag is loaded onto the flatbed transport, Centurion’s responsibilities are complete, and the distributor takes over.

 

Source: Company Presentation

As this deposit does not have the charateristics of a traditional mining operation (high capex, tailings, etc) a larger portion of the revennue is expected to contribute to the bottom line. Centurion also has plans to scale quickly as they look to increase capacity to 150,000 t/yr through the construction of a full-scale plant that is expected to be completed within the next 9-10 months. The plant will be constructed for a cost of just $2.5mm-$3mm, which it plans to finance through a combination of cash flow and capital markets raise in mid-2017. Presuming construction is completed on-time, it could add up to $3.75mm to Centurion’s top line over the next 12 months.

Right mineral in the right location

Gypsum’s properties make it a perfect solution for the various soil problems that are prevalent in many of the countries in South America. In Argentina and Paraguay, soils are very saline as they have a high proportion of sodium and/ or magnesium with clay accumulation, making them very hard and compact, which causes pooling of water during rain showers, preventing water infiltration into the soil4. In Brazil, acrisols (acidic soils) and ferralsols (high in aluminum) are deficient in nutrients, causing many farmers to heavily apply fertilizers according to the Joint Research Commission of the European Soil Data Center. All of these soil issues gypsum can solve, and as the revival of gypsum as a fertilizer is made through farmer education and experience, you will see more of the potential 250mm tonne market for gypsum5 in South America materialize.

When will the true valuation be realized?

If projections prove correct, and further developments are accomplished within the forecasted schedule, this puts Centurion’s forward revenue at approximately $7mm, and an Enterprise Value to the Next Twelve Months Forward Revenue Multiple (EV/NTM Forward Revenue) of just 0.7x. Compared to a peer group of diversified miners EV/ NTM Forward Revenue multiple median of 2.1x, Centurion is undervalued. Even if the larger full-scale plant isn’t built within the next nine months and Centurion only recognizes $4mm in revenue from its pilot plant, Centurion’s conservative EV/ Forward Revenue multiple is 1.2x, still well below the industry median. With a share price of $0.08, this stock certainly has the ability to provide big upside for investors.

Centurion Minerals Ltd. (TSXV:CTN) is a featured sponsored company and has paid SmallCapPower.com a fee for coverage. To learn more, see our full disclosure HERE >>

  1. Russel, D. A., & Williams, G. G. (1977). History of Chemical Fertilizer Development1. Soil Science Society of America Journal, 41(2), 260. doi:10.2136/sssaj1977.03615995004100020020x
  1. Dick, W. R., & Chen, L. (2011). Gypsum as an Agricultural Amendment: General Use Guidelines. Retrieved December 12, 2016, from http://fabe.osu.edu/sites/fabe/files/imce/files/Soybean/Gypsum Bulletin.pdf
  1. Bonadeo, E., Moreno, I., Baranda, A., & Milan, C. (2014). Changes in a sodic soil after gypsum application under dryland conditions.European Scientific Journal,10(27).
  1. Soils of 20 latin america and the caribbean – ESDAC. (2012). European Union Science Hub. Joint Research Commission European Soil Data Center Retrieved December 13, 2016, from Click Here >>
  1. Calculations based on 128 million hectares of land in agricultural production in South America, at a typical application rate of 0.5 to 2 tonnes per hectare, per annum. Taken from Centurion Minerals Presentation.

To find out more about Centurion Minerals Ltd., please visit the company’s Investor Hub.

Ubika Research/SmallCapPower has received compensation from Centurion Minerals to provide analyst research coverage. For full disclosure please visit here >>

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