Ann: DFS Delivers Compelling Economics for Cabinda Project, page-361

There have been a few posters that felt that management was to blame for the sp decline due to missed timelines. I don't share that view and others have agreed. We have seen big delays and very high inflation leading to cost blowouts across the globe mainly because of covid and the war. That's out of the control of anyone. A couple of other stocks I have held in the past have not had their sp hit as hard despite much larger delays to their timelines. I've mentioned A4N as an example before. They have been delayed by several years now on their commercial plant because they are yet to secure offtakes for a specialised product. Who knows what the capex would now look like after 2-3 years of delay. That sp has done well despite that very long delay. The other stock that has done relatively well despite not delivering on a promised JORC that was due several years ago is TTM. That one has really surprised me as the failure to provide encouraging drill results over the last 1-2 years is probably why the JORC hasn't been delivered and that brings into question whether they will even have an economic resource. Somehow the sp has rallied hard recently, almost doubling in a couple of months (chart below). Shareholders there seem much more forgiving than a few Minbos posters here have been. MNB has delivered a DFS showing a high margin project even at base case price assumptions.



The other reason I think you can't blame the sp on anything company specific is the similarity of the MNB chart to many of the US indexes during the bear market (at least up to a month ago when the DJIA began a big rally). See charts below, especially the Nasdaq. On the subject of bear market, the DJIA has managed to break its bear market down trend line and the DJ transports has done the same. The leaders in the DJIA are typically going to lead out of a bear market but the transports are a good sign that the US economy is doing ok.





The Nasdaq has been the biggest drag through the bear and it just broke out of its base pattern last night with follow through buying after the big gains the day before. Is the bear market over??? We'll only know for sure when it's too late to make the best gains. The DJIA has already recovered more than half its losses and we still can't say we are out of the bear with any confidence.



Now look at the charts above and compare to the MNB chart over the same two year period and there is no way you can conclude that the MNB share price is reflective of anything company specific. Having said that, the higher capex may have driven the sp below 10c but the sell-off is way overdone when you compare the $64mill mc to the $300mill base case NPV and the $600mill NPV at spot prices. The company could double the shares on issue (I'm certainly not expecting that) to bring the mc up to $128mill at the current sp and there would still be multiples of upside to the base case NPV. The company has $23mill cash and will likely raise further funds in other ways such as debt so there is certainly no need to double the shares on issue but that example is meant to show just how oversold and how much upside there is for this stock. Then there's the green ammonia project!
Has the stock had delays and cost over-runs? Yes. Do these justify the current sp? Not even close. This stock should be currently trading at least at the 25c target that Evolution just put on the stock and that will still offer a lot of upside ahead, especially from the green ammonia.



A zoom in to 12 months shows what I think is an important break above 8.1c.



I believe the main reason for the break below 10c was consistent selling from one top 20 holder (which would have pushed other traders into selling as well). My guess is that seller was selling to raise funds to exercise their 5c options. I could be wrong but if that was the reason, they would have sold enough over the last month and a half to fully fund that conversion suggesting their selling should now be done. The top 20 list shows around 6 million sold in that period from that one nominee holding, at an average price over that period of probably around 8-9c for at least $450k. That is the amount needed for the conversion of 9mill shares at 5c. Citicorp nominee held 14,115,432 shares at 28th Sept and is now at 8,274,422. We saw a few hundred thousand shares sold down yesterday but 300,000 at 8.5c is only $25,500 and that could just have been a trader that bought a few days ago below 8c looking for a quick profit.
For many stocks, the value of stock sold by Citcorp nominee over 6 weeks would not affect the sp but for a stock with relatively low liquidity like MNB at the depths of a bear market, it has made a big difference and created a great buying opportunity on a very depressed sp. I've added a lot of shares from 11c in the cr, down to 7.5c recently. It's impossible to ever know what the exact low will be and even harder with a stock like MNB to get much volume on the low even if you pick it.
The turn in the sp coincides with a big slow down by the selling out of the Citicorp nominee holding, to just a trickle recently. The latest Top 20 update actually shows a small increase in that nominee holding (with T+2 for settlement, that may have been purchased on Wednesday). That's the first day since 28th of September that that nominee holding has increased (at least on the days that I recorded the top 20 list).
The data is delayed by 2 days for settlement, So the Citicorp nominee selling continued up to around 6 or 7 trading days ago as the sp formed its lows and the sp has been recovering since that selling has slowed to almost nothing and then a small purchase.
Things are looking up for markets and now also for MNB's sp as the major seller for this stock over the last 6 weeks appears to have finished any significant selling.