NH3 - Ammonia Infrastructure Project

NH3 has had a great run this week & it's been a long time coming. But it's very interesting to gaze into a crystal Ball & see where NH3 could get to in the future, and not a very distant one at that..

First off it we must understand that this is an infrastructure project. I have been a mining investor where it's all about drilling results & jorc estimates. NH3 has nothing of this. We buy the raw material, natural gas, from multinational suppliers, It is delivered by an independently constructed pipeline. When we produce the finished Ammonia we will deliver it by another pipeline to the port for shipping. The waste from production, in this case carbon emissions, will be piped via another 3rd party pipeline to external Carbon Sequestration providers who will store it in their off shore facility.

NH3 will build & manage The Ammonia manufacturing plant. An infrastructure project. The plant will be constructed by a world class international company experienced in constructing this type of projects using a production proven design. It will work.

It would be reasonable to expect that a major infrastructure project of this magnitude would be trading close to 15 or 20% of it's NPV at this stage.

NH3 is trading at 3% of NPV for stage 1.

That is the project. Now lets move to the potential for offtakes.

For the past 12/18 months the information I have heard from the company is the use of Ammonia as feedstock to reduce carbon emissions in Japanese & South Korean power generation plants. This is a real customer supply chain. Japan has legislated for its electricity generators to implement the use of Ammonia to replace 20% of their coal feedstock in order to achieve Japan's 2030 emission targets. The Japanese have proven the process in a trial on a major Japanese plant so it is happening, not a maybe.

Then, suddenly, out of left field, comes this latest potential supply to power bulk ore carriers via the bunkering proposal.And this bunkering proposal has the potential to take our full first stage projected output of 600,000 tonnes Ammonia.

How real is this bunkering proposal.

Well first the International Maritime Organisation has set stringent targets for ships to reduce geenhouse gas emissions & issued interim guidelines for the safety of Ammonia fueled vessels. There are around 20 large bulk carriers under construction or on order designed to use Ammonia as fuel. Australia, with it's huge export of iron Ore from WA to Asia being one of the worlds largest trade routes for bulk carriers, is a natural potential supplier of this service. And we all know the biggest users of this iron ore trade route, RIO & BHP & they also have their own greenhouse gas emission targets to achieve.

Singapore have also seen the huge potential for bunkering to supply these Ammonia fueled bulk carriers & have initiated their own project to provide this service.

https://www.mpa.gov.sg/media-centre/details/ema-and-mpa-shortlist-two-consortia-to-further-study-viability-of-ammonia-for-power-generation-and-bunkering

The bunkering project for Port Dampier for which Pilbara Ports, Oceania & NH3 have entered a joint development agreement, is being pushed by the WA government in opposition to the Singapore plan. And WA has the advantage of the supply of feedstock for the plant (natural gas) & the iron ore which brings the carriers in the first place. Singapore has no natural resources & is would require a dog leg deviation for the carriers to get to.

Also, in NH3's favour, if this bunkering proposal finds implementation, is that NH3 are the only current viable proposal to manufacture Ammonia of any large quantities in Australia at present.

So there are now 2 proven lines of offtake & both are genuine. Japanese & Korean Electrical Generation companies & the WA bulk carrier bunkering proposal. You don't need to draw a long bow to bring a couple of major players into the possibility of entering their support to the bunkering proposal with financial help or project partnership for developing the new port infrastructure, partly funding the bunkering vessels or 'assisting' with the ammonia creation infrastructure build - NH3. They would be RIO and/or BHP.

And it could also be said that if the Japanese or South Koreans came forward & took up the stage 1 production target of 600k tonnes and the bunkering proposal took flight & one of the 2 major iron ore exporters became involved requiring a further 600k tonnes, NH3 may just proceed with stages 1 & 2 together.

Sure, that's all crystal ball gazing but the facts are there & maybe 2 + 2 will equal 4 in the near future. Suddenly NH3 trading at 3% of NPV for stage 1 looks very cheap.

Very interesting times ahead.

All just my opinion .......

DYOR