MNB trial update on phosphate fertiliser product

Minbos Resources (ASX: MNB) just put out an update on its phosphate fertiliser project in Angola.

MNB is currently constructing its project which is forecast to deliver ~US$55M in EBITDA per year (base case, on average) mine, over a 20 year mine life.

(That EBITDA number is based on the company’s DFS in 2022)

Last week, MNB put out an update on the product qualification process th 혀at has been ongoing for over 12 months now.

MNB has been testing its phosphate in field trials to show that it is suitable for the domestic agricultural industry.

Last week’s announcement showed:

1. MNB’s phosphate fertiliser improved crop yields over and above the results from previous trials.
2. The latest field trials included the use of MNB’s new “Primeiro Plus+” product which is a dry-blend fertiliser using phosphate rock and a mix of nitrogen and potassium (NPK fertiliser). The new product is showing strong yields again on different types of soils. The positive here is it opens up MNB’s product to different markets.

Why do the field trials matter?

The short answer is because it's important for project financing…

MNB has been working on three financing deals to fully fund the construction of its project:

1. (Deal #1) ✅ US$10M has now been received - MNB has received the full US$10M in funding from the Angolan Sovereign Wealth Fund. The final tranche of that was received by MNB inside the last few months.
2. (Deal #2) US$12M loan from Angolan bank in the final stages of being completed - With this loan, MNB is at the stage where it just needs to do all of the legal/structuring work before the deal is completed.
3. (Deal #3) US$14M loan from the International Development Corporation (IDC) of South Africa expected to be drawn down in July - MNB confirmed that it was renegotiating the offtake condition in this loan to reflect the company’s sales strategy. Once sorted, MNB can move to close out this deal.

MNB had ~A$12.5M in cash in the bank at the end of the March quarter which means construction works can continue while the two remaining deals are finalised.

MNB’s current cash along with the US$26M from the two loan deals (IDC and Banco BAI) that are getting close now are enough to cover the US$29M needed to get both phase 1 and 2 of MNB’s project built.

The field trials are most important for deal #3 - the US$14M loan from the International Development Corporation (IDC) of South Africa.

A main condition for that loan was MNB getting an offtake completed for its product.

Previously the condition was very specific and required one domestic buyer for MNB’s phosphate fertiliser.

Recently, MNB announced that the offtake condition was “currently being updated” in line with MNB’s sales strategy which is a mix of export (into the seaborne market) and domestic sales (to small hold farmers).

Last week’s announcement helps give a clearer line of sight as to how MNB will do that with its multiple products & application in different soil types.

What’s next from MNB?

Construction and assembly of MNB’s Phosphate Fertiliser Plant

We want to see MNB complete construction works and get its plant operation ready.

We should see a fair bit of newsflow on this front between now and the end of this year.

Lock in remaining financing to get the project into production

At the same time, we want to see MNB lock in the remaining funding deals to cover Phase 1 and 2 construction costs.

As mentioned above, there are two main deals we want to see MNB close out over the coming months.