MNB (ASX) Ann: Phosphate Fertilizer Project Update

Originally posted by chuk: ↑

In the past, I posted that MNB was caught up in the small cap bear market but that it was outperforming for quite a while while others were being decimated. That was probably at least partly helped by the fact that it hadn't gone into bubble territory like some others, so didn't correct as hard.
More recently, MNB has dropped more significantly, although less than many others and I thought that it was being punished for delays and the recent cr.
I also thought the bear market for small resource stocks was over from around late last year. However after having a look over 5 year charts of a lot of stocks on my old watchlist, it is clear that the bear market really hasn't ended yet and that MNB, as bad as it's been recently, has still outperformed many other small caps.
Most still look very weak on the 5 year charts but most (not all) also appear to have leveled off. I expect that at least the worst is over for the sector. This has been the worst 2-3 year period for small cap resources that I can remember in 40 years in the market, with the exception maybe of the GFC. I can understand why some newer investors might hate small cap resource stocks after these severe declines. I do know one thing though and that is that the very bleakest periods are usually followed by the best periods. That can be seen in these charts as most of these stocks rallied incredibly after the corona virus shock. The stimulus packages that followed was like an adrenaline shot for the sector but resulted in a bubble that has since popped and possibly overshot on the downside. I prefer to select stocks rather than hope for a sector wide recovery but a sector wide recovery is inevitable at some point.
What is also clear is that MNB really has not underperformed versus most of these with many near and some below their 2020 prices.
Not many of the stocks below will be going into production next year or even in the next 2-3 years. MNB very likely will be so will hopefully outperform strongly from here.

Last but not least! MNB

MNB zoomed in to 6 months;

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“I thought that it was being punished for delays and the recent cr.
I also thought the bear market for small resource stocks was over from around late last year. However after having a look over 5 year charts of a lot of stocks on my old watchlist, it is clear that the bear market really hasn't ended yet and that MNB, as bad as it's been recently, has still outperformed many other small caps.”

Chuk whilst I value the knowledge you give to this forum, I don’t think you can pull up the 5 year charts for a handful of small cap stocks and say thats representative of small caps, or is why we’re at 5.6 cents.

IMO Minbos’ SP is 5c instead of 10c because of the cap raise, that 10c would now be a lot higher if not for the delays. I’ve put the 5 year chart for the asx small ordinaries below. I could pull up 5 year charts of companies like PLS, LTR etc which would show massive gains over the 5 years. If a small cap stock is lower than it was 5 years earlier clearly it hasn’t achieved it’s business plan, those that have succeeded like PLS are no longer small caps. I’m not saying they haven’t had a bad run, however there are a lot of unsuccessful small caps that just flounder, whilst many flourish. Many do cap raise after cap raise with a little drilling in between, they keep the Directors and management in a job and that’s about all.

Now I don’t put Minbos in that category. For a small company to raise US$24m or A$36m with minimal dilution is not an easy task. They probably thought the Chinese syndicate would cover it with the $25m facility included in the MOU. Then the IDC loan took a year and still had further conditions attached. Clearly the finance caused the delays, but then the cap raise was a complete disaster. They were probably a victim of circumstance here, the original $10m with no option would have been ok, another opportunity presented itself and they probably did the right thing suspending the stock while they investigated that opportunity. Unfortunately (I assume) it didn’t work out.

Now the amount they need to raise is down to only US$10m, I have every confidence they will get this money and satisfy the CPs by end of July. They seem to be working a lot of options to achieve this. The overhang from the cap raise will eventually go away & in a years time we’ll probably have forgotten about it.

Long winded I know, just saying we’re at 5.6c because of the cap raise + delays. I think management has to regain the confidence of investors, start by being more realistic with time frames which hopefully they’ve now done with the new schedule.