Thank you, great analysis once again.I would like to know where...

Thank you, great analysis once again.

I would like to know where you found that BHP was a $412 average MOP price fo 25 years.

You have to be careful of using "average" MOP prices. In the short term, MOP prices are averaging $400-500 US per tonne but these price levels will retreat well from their highs by the time this project comes into production. You cant just plug in the higher price levels we are seeing right now into a model whereby the lead time to bring the project to production will be in excess of five years. Indeed, BHP only explicity mentioned in their presentations the average price they expect over a 10 year period, not a 25 year period:


The reason for this is that the expected repayment of the debt is 7 years which indicates financial viability. And note, the range starts at 2027 which coincides with when BHP wants to bring Jansen into production.

The timing of bringing these projects online is vital. You could have insanely high prices in 40 years time, but depressed prices for the next few decades which which still produces a high average. You bring a mine in with the expectation of the average price only for the current prices to be severely lower than the average bring forth all sorts of financial issues and stress. Look at the CRU estimates for MOP:



Prices are expected to subdue in the next few years and revert back to their lower levels of a while before picking up. Indeed for a few of these years, the price will be lower than $250 US a tonne per MOP. Add on top of this any drastic fluctations to the positive or negative side. Along with substantial capex and lead time required to bring this project online, this company is going to need a lot of working capital, equity and credit facilitiies to mitigate financial risks when young. The worst situation is when you have a mine read to produce, right when the shorter term price of your product is below viability levels. I have no clue when SHP project will be in production, but my guess is closer to 10 years. A lot could change then for the better or the worse. Best to remain conservative and keep inputs estimates between $250-$320.

And pay attention to MOP price forecasts in the shorter term which are likely to be much more accurate than longer term forecasts. You'll wnat favourable conditions when bringing this project online. But those conditions will be unknown for a significant time.