A couple of different news stories I watched.
One yesterday reported that Australian farmers are doing well now because the higher selling prices are more than offsetting the higher input costs of fuel and fertiliser. I hope that is true for most farmers. Unfortunately many Ukrainian farmers won't be able to take advantage.
The other one suggested that the Ukrainian war could easily drag out over at least a ten year period as gorilla warfare. That is easy to believe because a smaller scale war has been going on for 8 years in the east of Ukraine and now the Ukrainians will likely continue to be supplied by the west with arms, ammunition and supplies indefinitely to fight the Russians. Russia is much larger but Ukraine is large enough to make a gorilla war by western backed rebels unwinable for Russia. It is a very unfortunate situation with Ukrainian citizens cauught in the middle.
This could mean structurally higher food, oil, gas and fertiliser prices for many years, if not a decade or more. Not necessarily at current levels but higher than would otherwise have been the case. New growing regions like Angola are going to be critical now especially for poorer nations like those in Africa. We can get by with higher food costs, others will starve. The IFDC in particular as well as the Angolan government should want to speed up this project as much as possible, both the start of production and especially the growing of the distribution network. I won't be at all surprised if the IFDC decides to put more resources into this Angolan project to speed it up as much as possible. That's for our phosphate project.
The reduced gas supply to Europe from Russia, including the canceling of the new Nord gas pipeline is also going to be long term. The company building the pipeline has gone bankrupt. With higher European gas prices now looking to be long term, it will make Minbos's green ammonia project even more profitable than it already would have been before Russia began to build troop numbers on the Ukraineian border.
As bad as the whole saga is, it clearly is very advantageous for Minbos and us as shareholders. Much more so as a developer set to begin production in less than a year.
A year ago, with much lower fertiliser prices, this was already set to be an excellent 1-2 year investment as it moved into development and towards production. Since then, the company has announced its green ammonia project and that the ammonia project was at that time expected to be viable thanks to the extremely low electricity price in Angola. Now on top of that, we have a very likely scenario of higher phosphate and ammonia prices longer term making both of our projects much more valuable.
I am very eager to see the DFS and what effect it will have on the sp on the day and over the following weeks and months.
Before the Ukrainian situation, I was expecting to see a base case sp of at least 30-40c. That was assuming fertiliser prices were nearing a peak and by late this year would be well below where they are now. I also thought that target had a minimum of 20c upside with a 100MW green ammonia project.
It's now looking like fertiliser prices will be much higher than I previously assumed as we move into production and it's looking very likely that we will move to 200MW of green ammonia. I was previously thinking about whether a $1 share price was possible in around a year. If we get the 200MW, and now with likely higher fertiliser and gas prices for much longer, that $1 plus potential is starting to look a lot more achievable. $1 would give us a market cap of around $700 million. I've recently posted how current fertiliser prices already give our phosphate project a NPV above that value based on the scoping study results. I'm also beginning to expect that the green ammonia project at 200MW is going to be worth more than the phosphate.
So if prices stay elevated longer term and the green ammonia project also becomes reality, is it a potential $1 target or does it become $2 with a 200MW green ammonia project confirmed?
I'll stick to a potential $1 for now and I'll give it two years while knowing it could be much sooner and expecting at least 50c within a year but potentially within 6 months.
Targets are always speculative, especially with their timing but IMO, there's no point in investing without trying to understand what your investment could return and over what period of time. So I keep thinking about my targets and I like to post for feedback which might point out any mistakes I have made or assumptions that might be unrealistic. Any feedback is welcome. I'd also love to see other people's targets and how they arrive at them.
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