World markets have been understandably very volatile. Rising rate expectations started a correction two months ago and the Russia's invasion of Ukraine is causing more economic concerns, especially in Europe. However it has not a case off sell everything is the best strategy. The German economy is one that is particularly exposed to the war, especially with its heavy reliance on Russian energy supply. The 5 year, weekly candle charts below show that the German market has effectively crashed as a result of the war and it might go lower. It is now below its pre-covid highs.
The US is less exposed to the economic effects of the war but with its tech heavy index, it has corrected to a lessor extent (second chart) over the last two months, more so on interest rate expectations. It is still well above its pre-covid highs.
Our All Ords (3rd chart) corrected with international markets but is probably least exposed to this war with our resource stocks actually likely to benefit and interest rate expectations here are less of a concern with our inflation well below that of the US. Our market is up for the week after bouncing off the level of our pre-covid highs. Being near its pre-covid levels means our market has not followed the large gains of the US market in the last two years so we may have less risk of further correction from here, especially with our resources exposure. The gain in our market this week compared to the big fall in Germany shows a big contrast in these two markets.
Now looking at individual stocks and what I think all this might mean for MNB.
Gold stocks regularly show how some stocks can go against the market trend. They are currently benefiting from the war with gold prices often spiking at times like this. Gold stocks have rallied over the last four weeks. This can be short lived because the gold price gains are often no more than a short term spike at times like this.
However, it's not just the flight to safety gold sector that can go against the market. BHP and Rio have ignored markets and climbed on the back of rising iron ore prices. They are following their own fundamentals. I expect that MNB should be able to do the same, i.e. regardless of what markets are doing, MNB's sp should eventually track its improving fundamentals. RIO and BHP are large cap stocks so less affected by retail investor panic selling or desire for cash. These things can affect MNB to a much greater extent but for only so long. RIO weekly chart below.
Now, more relevant to MNB than other resource stocks like RIO, is Mosaic. MNB has a large, high grade phosphate project currently under development and should start producing in under a year. Mosaic is a very large producer of phosphate fertilisers. Mosaic is completely bucking the market trend and roaring ahead on the back of higher fertiliser prices which are being compounded by this war. Below is a one year daily chart of Mosaic. Money has been pouring into this stock, especially over the last few weeks and despite it being a large cap, the price has doubled in just the last six months and shows no signs of slowing. With the war having reached the stage it is at, sanctions are likely here for the long term. While the price of gold might come off after the war ends, assuming the likely outcome in Ukraine, sanctions remaining in place probably for many years would mean much higher fertiliser prices for much longer. Little wonder that this fertiliser stock chart is so bullish despite the trends of other markets.
That brings us to Minbos. We are up for the week but still near recent lows. Our fundamentals have improved just as much as Mosaic's. We are a much smaller stock and the sp is still pressured by small traders and more volatile but there is no fundamental reason why we should not follow Mosaic to a much higher high than last year's high. MNB had been pressured for some weeks following the cr with selling from both broker firms that handled the cr. That selling slowed but then we had the crossing which has led to increased selling through the broker that handled the crossing. That selling has been going on for two weeks and it too will fade off.
It is easy to look at another 4% fall in European markets last night and want to cash up. However the US S&P 500 only dropped 0.8% last night, many resource stocks are climbing and Mosaic, with its phosphate jumped a very impressive 7.5% last night. Sooner or later, MNB will follow Mosaic to new highs. BHP, RIO, other resource stocks and especially Mosaic show that individual stock picking can reap rewards regardless of overall market direction. MNB's fundamentals as shown by its scoping study support much more than just a doubling of the sp and that's without the majority of the increase in fertiliser prices of the last couple of years.
MNB directors and the consultants must be wondering what price assumptions to make in the upcoming DFS. Have they been amending price assumptions higher recently and will they need to do so again with yesterday's news on Russia wanting to limit all fertiliser exports? No doubt they will make an assumption well below current prices but current prices might prove resilient well after MNB begins production and the market will price MNB accordingly as it is doing for existing producers.
This stock quadrupled in just 4 months earlier this year. It has corrected and consolidated over the latest 4 months. Where to from here? Can the stock quadruple again considering the much higher fertiliser prices and the fact that those higher prices might now be here for much longer? I see no reason why it shouldn't. I think 30c is going to be much closer than many holders might think.
Let's see how the jump in overseas fertiliser company's sp's last night rub of on MNB in the coming week.
