Baillieu Holst have upgraded their analysis of DNK based on...

Baillieu Holst have upgraded their analysis of DNK based on today's news. Still rated as a speculative buy and a SP target of .50c.

It reads:

M added to the SOP

DNK have signed an offtake agreement for 200,000tpa of SOP- M (sulphate of
potash magnesia. This is in addition to the MOU’s previously signed for 800ktpa of SOP (sulphate of potash).

• What is it?

SOP-M is a multi-nutrient potash type comprising potassium, magnesium and sulphur.
Economically exploitable resources for primary production are scarce. There is a very limited number of producers worldwide, and production is currently limited to China,
Germany and the USA. The product is both naturally occurring, and can be made by combining a variety of potassium and magnesium salts. Current primary production centres are geographically disadvantaged for product export (over 700km from
the coast).”

Not included in our numbers –
SOP-M is one of a number of by-products or co-products of DNK mining and processing the Colluli deposit. Our modelling and valuation includes only SOP production. DNK have indicated that SOP-M sells for around US$450/t. These is in between MOP, currently US$250/t and MOP which we estimate is a US$550/t. There is no additional cost to produce SOP-M as it would just be an intermediate bleed from the processing circuit.

• More marketing upside

– unlike some other SOP-M, DNK’s is highly soluble and fits well in the direct
fertilizing of plants, a trend which is gaining a lot of traction to improve productivity, efficiency, water consumption and reduce run-off.

• Further upside to earnings and valuation.