I can understand the interest in phosphate stocks considering how strong the phosphate price has been in the face of the big corrections across other fertilisers. However, I don't see MNB as a phosphate stock when valuing it. Phosphate is normally something a miner sells to another company to process it into fertilisers such as MAP, DAP and TSP, or they might process it themselves into an end user product to gain the downstream margins.
That is the position that MNB is in - processing it on site to produce a saleable product and that product's price is based on the TSP price, not the phosphate price.
If you buy a phosphate stock now and the sp is factoring in anything near the current phosphate price then I see quite a bit of commodity price risk because of recent strength. At $342/t, the phosphate price is currently multiples of the 20 year average price which is $117/t.
However, it's the TSP price that is important for MNB and the TSP price has already had a big correction with the price now at $392/t which is only just above the prior 20 year average price of $374/t. With all the inflation we have seen in the last few years, downside from here seems very limited and going forward, the TSP price should average a price higher than the prior 20 year average. I.e. the DFS base case $422 looks like a likely (average) base price to me. Therefore much less commodity price risk for TSP from here and personally, I'm bullish on the TSP price going forward. If the phosphate price does stay strong, or only corrects modestly, then I'm even more bullish on the TSP price because of the long term average ratio of TSP price to phosphate price. TSP normally trades around 3.5 times the phosphate price. The current phosphate price is $342/t implying a potential bounce in TSP price to around $1200/t - or (more likely) a sharp correction in the phosphate price to get the ratio back to its norm. Something in between seems more likely which means a higher TSP price going forward - probably comfortably above the DFS base case $422 assumption which gives us the A$315mill valuation, or around three times the current sp. To start heading to that target, it seems the market wants to see the final funding locked in.
I haven't seen any forecasts on TSP prices which is why I've been having a good look at past trends to try and get an idea of likely minimum prices going forward. If anyone has any reliable forecasts, please share. It would be good to know if forecasts are above what I'm estimating as a likely base. What I do like about this stock is that the DFS base case gives us at least three times upside potential to the sp once we hit production next year. A higher TSP price would offer much more upside potential. The DFS gave a post tax NPV of US$261 or A$405mill at a 20% above base case TSP price. That's a big jump for a TSP price increase of 20% and translates to a sp target of 47c. That feels like a big stretch right now but it's a realistic target on this first project.
The 20 year data below is historic data from the World Bank.
https://www.worldbank.org/en/research/commodity-markets
