Talk of the upcoming Carrinho contract made me revisit the pricing we can expect, we know the cost per tonne from Lindsay’s latest interview at $117/t with a saving of $20-30/t if producing at stage 2 thus reducing the fixed costs on a per tonne basis.
To save rambling on, I’ll cut to the chase and explain the methodology later for those who don’t want to read a long post.
Based on the MOU, at current prices our price equates to the current TSP price + $75 transport fee multiplied by 60.1%
The current price can be downloaded athttps://thedocs.worldbank.org/en/doc/5d903e848db1d1b83e0ec8f744e55570-0350012021/related/CMO-Historical-Data-Monthly.xlsx
The May price for TSP (triple super phosphate) was US$434.90
Which gives $306.20 for our product. The base case in the DFS was based on $291.62/t
The table below is from the DFS, though much of the DFS is out of date, the pricing model was also incorporated into the Carrinho MOU, I’ve also pasted excerpts from that below.
I’ve explained the formula below, basically the main variable is the RAE (Relative Agronomic Effectiveness) which is basically how well crops perform using our fertiliser compared with TSP. The DFS gives us a REA of 85%, which compared to crops fertilised with TSP is 92% as effective.
IMO the main thing with the upcoming agreement is the pricing. End of the day Carrinho willl buy whatever tonnes they need, even the MOU was based on tonnes over 7 years not a per year number. Obviously we’ll need to have a good idea as to what they need each growing season.
The main variable in the pricing formula is the RAE. This is subject to trials, and different crops have different results. What wasn’t know when this 92% was set is that our product isn’t as water soluable (washes away in heavy rain) as imported products and the soil doesn’t absorb the fertiliser robbing the plant. In fact it lasts for 3-4 years which the comparison TSP does not do. If anything the RAE has surpassed the 92% in subsequent trials even ignoring the longevity of it.
Other variable include transport cost for imported TSP - probably gone up, and TSP pricing which has come down from the shock value following the Russia/Ukraine war, but is still above the base case pricing the DFS figures are based on.
To explain the table below & my Statement above that we receive TSP price + $75 x 60.1%
The DFS takes the imported TSP price of $412/t (currently $435/t) add $75 to get a landed price of US$487/t
Now our BPR only has 30.5% phosphate compared with 46% for the imported product, it also only works 92% as effectively as the TSP (which is arguable)
Mathematically 30.6% phosphate cf 46% = 65.3% reduction along with an 92% effectiveness
The DFS used in the base case $412 TSP price, add $75 transport = $487 laned cost
Multiply $487 x 65.3% x 92% and you get the $291.62/t DFS pricing
Or 65.3% x 92% = 60.1% - That’s 60.1% of TSP price + assumed $75 transport price.
Chuffing put up a link about Carrinho, this one in particular I think is well worth reading & watching the contained video, gives a very good insight into Carrinho & their expansion plans.
https://www.buhlergroup.com/global/annual_report1/annual_report_2022/accelerating-impact/carrinho.html
Also Chuk put up this link, gives a very good insight as to the crops etc produced in Angola & their aspirations
https://www.fao.org/docs/handinhandlibraries/countries/angola/apresenta%C3%A7%C3%A3o-angola---26-09-2023-2.pdf?sfvrsn=9684d942_1From Carrinho MOU
The pricing mechanism pegs the relative agronomic
effectiveness (RAE) of Cabinda Phosphate fertilizer to the
price of Triple Super Phosphate. In the formal agreement, the
parties have agreed to review the RAE based on the results
of field trials and also to negotiate final pricing based on the
market price of equivalent products.
