broker note on another phosphate play

Two things caught my eye here:

1. People getting richer and consuming a higher protein diet (eating more meat?) increases the demand for phosphates?

2. The broker uses a 12% discount rate to calculate an NPV and then applies an 80% discount for "completion risk". Not sure what risks "completion risk" covers but maybe it includes things like dilution risk, permitting risk, funding risk, etc.

I see Legend International's slurry pipeline would cost US$302m to build to get their rock phosphate to a port (we wouldn't need anything like that). Maybe they and Minemaker are hoping for a railway to be built to get the phosphate to Darwin? Below is broker note on Sunkar Resources (an AIM listed stock with a phosphate mine in Kazakhstan, supposedly close to Asian markets?). Current price is 49p and was floated after the massive rise in phosphate prices at 120p just a few months ago! Broker note is dated 14th Aug 08?

SKR : AIM : 0.67p | £105.5M | Buy , Target £1.50

· Initiating with target of 1.50/share

Sunkar has the potential to become one of the lowest cost producers of
ammonium phosphate in the world with its Chilisai project in
Kazakhstan, because of the project?s proximity to low-cost, surplus
sulphur in the region and the low cost of mining the phosphate ore.
Sunkar?s resource of more than 800Mt averaging 10.5% P205 could
support planned production of 1.76Mt a year of di-ammonium phosphate
(DAP) for over 80 years.

The market is naturally sceptical about the technical feasibility of
commercial ammonium phosphate production from a 10% P2O5 feed-stock,
but if the early tests results are confirmed by the current
feasibility study then we would expect a substantial lift in the share
price as the market begins to capture the potential underlying value
in this project.

Global demand for phosphate fertiliser is forecast by British Sulphur
Consultants to grow by 1.5% per annum from 2007-2015 and thus increase
by 7.6Mt over the next 10 years. The highest demand growth will be in
developing countries close to the Chilisai project. This growth rate
is slightly higher than projected world population growth, and
reflects an expectation of higher food consumption per capita, higher
incomes worldwide and a shift to higher protein food in poorer
countries.

If commercial DAP production proves feasible, then we estimate the
Chilisai project can deliver US$870 million EBITDA per annum when
fully operational after total cash costs of US$119.2/t of DAP from an
investment of US$726 million after 20% contingencies. We calculate
that the project has an embedded NPV12% of US$2,346 million to Sunkar
(90% attributable) fully debt funded against Canaccord Adams?
long-term received DAP price of US$650/t. ! British Sulphur
Consultants forecast international DAP prices averagi ng US$774 FOB US
Gulf from 2014-2025.

We suggest a value for the project today of US$469 million, after an
80% discount for completion risk. After adding the cash on hand since
the recent IPO, we suggest a NAV for the stock of £1.67/share. Given
current market conditions, we suggest a preliminary target price for
the stock of £1.50/share.