I read something this weekend which I expect will be very positive for our DFS.
The Martison Phosphate Project PEA (preliminary economic assessment) was released ten days ago. What I found very interesting and encouraging for MNB's DFS was the Base case MAP used in their PEA. The base case price used was US$800! Importantly, the accompanying note on that base case price stated that;
"The “Base Case” is a weighted average of three market forecast scenarios for the years 2022 to 2047."
If the average of three market forecasts over the period of the next 25 years is $800, then it is likely that MNB will use a similar price assumption. In MNB's scoping study, the maximum MAP price considered was US$643. That is a long way below $800. Based on the information in the Martison Phosphate Project PEA, I'd now expect our DFS to also assume the much higher MAP price of $800 to calculate a NPV. Importantly, the $800 was for North America. The price in Angola would likely be at least $50-$100 higher or $850-900/t so assuming $800 for MNB's DFS might be too conservative. From MNB's scoping study, the after tax NPV10 at a MAP price of $345 was US$113 million and at a MAP price of $643, NPV was $343 million. I.e. an 86% increase in MAP led to 203% increase in NPV. Similarly in the PEA numbers above, a relatively small increase in fertiliser price has a larger impact on the NPV.
So if MNB uses a price of $800, which is 24% higher than the $643 in the scoping study. I'd estimate that the NPV would increase by at least 35% over the $343mill NPV that resulted from the $643 MAP price. So at $800 MAP, NPV would likely come in at around US$464mill or A$635mill. The DFS would also offer upside cases using spot prices and above. The PEA above actually offered NPV estimates for prices 30% above current. At the current price of US$1300 MAP, I can't see how the MNB DFS would not estimate a NPV in excess of A$1 billion.
I know that the new product mixes things up a bit but it's important to remember that a DFS looks at the life of mine (LOM) cash flow, not just the first few years. MNB is currently planning on selling a different product for at least the first year or two but they have made it clear that they can switch back to the originally planned EPR with only a 24 hour shutdown to make the switch when the market allows - i.e when MAP becomes available again to purchase in Angola and possibly, if prices remain high for several years, when the market gets used to the higher prices and accepts and pays them, Especially so if the MAP price does pull back and settle at around $800.
I wonder how the market and the sp would react to a DFS showing a base case NPV of over A$640 million or a NPV of over A$1 billion at current MAP prices if that is what it does come up with.
Keep in mind that this is our "small project as Lindsay puts it. The green ammonia project should be worth significantly more.
MNB Price at posting:
13.0¢ Sentiment: Buy Disclosure: Held
