ucl 9 for 1 bid, page-38

Makattack, hi again.

Your post has made me think a bit more deeply about a comparison between the two. The science behind vacuuming up phospahtic sediment off the seabed may be straightforward, but the engineering problems perhaps aren't. So there must be engineering (technical risk?) risk in UCL's/BON's project (and MAK perhaps doesn't have that type of risk: I'll come on to MAK's risks later). If we just think obstructions on the seabed (rocks, shipwrecks, dumped garbage, etc.) it is possible to get a mega shareholder wealth destruction scenario of production risk going bad (break down of mining equipment) causing the company to miss an interest payment on debt and this in turn causing the lenders to grab the project at firesale prices only to unlock the value later through solving the engineering problems and thus giving themselves a massive windfall at the expense of shareholders (who lose everything).

As to why it hasn't been done before, I guess it is because it is only about 30 years since this phosphate was first discovered and because phosphate prices were too low in the past to justify investigating it properly. The ability of Trailer Suction Hopper Dredgers to operate at depths of 225m is a new development too. They were only created to build that artificial island off Dubai?

MAK as a higher cost producer will have more commodity price risk (and to compensate for that will offer higher returns in a phosphate bull market, all other things being equal, which they never are: that is, it is more leveraged to the phosphate price than BON/UCL. My zero holding in MAK doesn't mean I don't think MAK is a good company: I am just late in researching it properly, and I've been in UCL and BON for a while now.

I agree with Wasiabarako all three companies are highly speculative, and that UCL is even more so. I won't have time to follow events during the week or to post anymore for a while now. There is one valid reason for UCL to go down this week and that is if they get hit with aborted takeover costs, which they may do. All the best.