Some here might look at our much larger earnings from year six and beyond as too far off to factor into our valuation, even though the forecast annual A$90mill after tax cash profits (and growing) from year six should give the company a mc around $1bill by then. Some here also think the green ammonia is too far off to be given a significant value if first production is around 3 or 4 years away.
Today LKE gave a more realistic guidance on their production and timing. The stock got sold down 20% as it was a drop in output from previous guidance to what will be a more affordable staged expansion. First production of meaningful (and profitable) scale is expected to be 5 years away in 2028 - if that is met. The market cap is still sitting at $540mill and it was in the multiple billions of dollars at its peak. The mc reached a billion dollars in 2021 when it was still at least 7 years from first production.
I don't know why some holders here think that our large cash flows from the green ammonia and the A$90mill/y plus from the phosphate are too far off to be given a reasonable value now. That makes no sense to me and it will change at some point. There probably won't even be an obvious reason for the change. It will just happen. I certainly didn't expect LKE to go from 40c in 2021 when I sold, to $2.80. That was unbelievable and it seems way over the top (now back to 38c) but it ran up anyway. For MNB a solid run up to a A$500mill mc will be justified over the next year or two. It won't be unbelievable or over the top and neither will a billion dollar mc if the company delivers what looks to me to be deliverable. The forecast volumes on the phosphate that would provide the cash flows forecast in the DFS are independent and probably quite reliable, IFDC forecasts. The green ammonia is at world's best cash costs for green electricity at just 1.1c/kw ave locked in for 25 years. That's a project that would be very likely to go ahead and the company has said that it is already in talks with a number of possible partners. Those partners don't need to see the DFS when the company has electricity prices locked in at a small fraction of the global average. Both projects have far less technical risk than LKE's DLE lithium project but that company still has a mc of over a half a billion at least 5 years from first profits.
LKE updated guidance. 2029 to first stage full production of 25ktpa. 2028 for first meaningful production. MC over a half a billion dollars.
With MNB, we don't need to wait 5 years to first cash flow. First profit is next year, it is meaningful, it justifies a mc three times the current and it ramps up strongly year on year on year for 13 years. Those steadily rising cash flows should keep the sp in a very strong uptrend over the next 10-12 years and those cash flows don't include the green ammonia or yellow phosphorous. Those numbers below are USD and the average annual after tax cash flow between years six and nineteen is around US$90mill or A$130mill. The market is not factoring in these cash flow forecasts despite the plant components being paid for and delivered to site and the construction now starting. The green ammonia could double the A$130mill per year profits. What mc would that justify when the project starts production? That could be just 3-4 years away. Not long in the resource sector.
