"It’s still a block of dirt with a fence and a padlock"
If that's all you see in it, why would you be holding?
How has nothing advanced?
Multiple years of greenhouse and field trials completed with very good results,
FS completed,
Full permitting received.
Progressive funding raised to advance the project.
Site secured.
Plant components paid for and on site.
Sales Offtake in place.
Working through the IDC US$14mill DD stage.
Continuing working on the last US$12 mill required.
Construction and mining ready pending remaining funding completion.
Likely worst case from here, hypothetically let's say you're right and we don't see meaningful cash flow until next year.
The DFS was completed prior to the Carihno offtake. Post Carihno offtake sales expectations have changed the expected production volumes (and therefore cash flows) dramatically. Rather than wait until year six for production to ramp up towards full capacity (157ktpa in year 6 in the DFS), we now see that (153ktpa) in the first full year and a higher level (163ktpa) in year 2. So the average cash surplus in the first two years could now be just above the DFS forecast for year 6.
The DFS shows the operating surplus in year 6 at US$62mill or A$93mill at today's exchange rate. It could now be close to that in the first year and more in year 2.
What's a reasonable multiple for that surplus? Even a multiple of just four could give us a market cap of A$372mill which is around 43cps fully diluted for all outstanding options. That's nearly five times return on our current investment in one year if those earnings are expected next year. Much sooner if we see construction begin early this year as planned.
A PFS could be completed by the start of next year on the green ammonia in partnership with a much larger company. That PFS completion plus the reliable fertiliser cash flow which can help fund that green ammonia project could see a significant amount added to the market cap to reflect the value of that green ammonia project.
I don't think we need to wait for the operating surplus before we see big upside. I think we just need to see the final funding secured and construction in full swing. That is likely just months away. Plenty of ASX stocks have reached market caps in the multiple hundreds of millions and billions, years in advance of any expected cash flow.
It's easy to get frustrated with delays and it clearly impacts on the sp in the short term but to me the big picture still points to a likely minimum five times upside within a year. Potentially much more if the market starts to factor in any valuation for the green ammonia.
The advancement of the green ammonia project should see the sp continue higher than the 40-50c. The green ammonia could be worth much more than the phosphate fertiliser project so upside over the next 3-5 years could still easily be over $1 or more than ten times the current market cap.
Even without the updated guidance above, the DFS Base case, After tax NPV for MNB's 85% share of the project is US$203mill or A$304mill which is 35c per share fully diluted for all outstanding options. The updated guidance should increase that NPV.
These earnings are only up to one year out even allowing for further delays. The sp is far too cheap for that and I think that should change rapidly on completion of financing and start of construction. That should happen within a few months (again allowing for further delays) and further delays or not, I think that's well worth waiting for.
(20min delay)
