I just had another look at the pricing formula in the Carrinho...

I just had another look at the pricing formula in the Carrinho offtake agreement. Even though this was signed 9 months after the DFS, it uses the same/similar formula based on TSP. I’d guess negotiations on the offtake were sufficiently progressed to have a good guess at the pricing when they did the DFS. This should set the benchmark for sales into Angola including Biocom. Presently at December’s TSP price we’d be getting US$315/t (above the DFS base case of $292/t). Our DFS Yr1-7 cost to produce that is $89.90/t so a very healthy margin. If we went straight to stage 2, the DFS shows a cost of $52/t (economies of scale)

The market usually values early stage projects on metrics such as Resource/Reserve (amount + grades), the DFS NPVs IRRs etc, product pricing, and the companies liklihood of getting the project to completion of which finance is a big element. Our capex is very small, only US$26m remaining or $12m after IDC. Our track record is not the greatest, usually get things done but way over time. We’ve applied for more licenses so I’d expect more drilling and an eventual Resource upgrade.

The latest production figures have really made the DFS obsolete. The market doesn’t usually look too much past 3 years into the future, our DFS had us producing 202kt in the 1st 3 years, that has now gone to 474kt - more than double with the latest production figures in the presentation. Plug those figures into a new DFS and it would make a big difference because later years earnings are watered down by the compound discount factor (we used a fairly high 10%). IMO the market hasn’t factored this into valuations.

From the announcements and the new production schedule, it would seem stage 1 is mostly taken up by Carrinho and “current negotiations” (probably Biocom). At the above rates that will be very profitable. Whether we’d get those same (TSP related) rates for P4 or export to S Africa is a good question. I’d expect S Africa to be similarly priced, they mention in the presentation they are looking at our BFR (not raw phosphate rock). IDC are providing the bulk of the funding so may expect us to export to S Africa (quid pro quo) remembering IDC is S African government owned to promote S African development. Wouldn’t surprise me at all to see the IDC funding approved in the same announcement as an offtake to S Africa.

Interesting the Syndicate have now chosen to take up the Board seat, they’ve been entitled to do this since July 2022 - 18 months ago. Why now? I suspect in order to keep an eye on any other 3rd party offtake agreements, potential JVs etc, or in other words to safeguard their own investment. One seat is a minority unable to change such deals, but it does ensure they are not blindsided so the Syndicate is in the loop and able to compete with any other potential deals.

In the presentation there is a large photo of an EV being charged with the caption “Adding scale with strategic partnerships”. It takes up all of page 35 and is in the middle of the Green Ammonia section, despite it’s location you’d have to assume it’s in relation to P4. There are numerous other mentions of partnerships in the presentation for both P4 and GA, they really are promoting these possible partnerships. It will be interesting to see how these evolve.

Usually after the 2nd week of Jan everyone is back at work, so we might get some news in the near term.