PhosCo Investment Summary

PhosCo summary

Phosphate Market

Phosphatestands as a crucial fertilizer, serving as the backbone of global foodproduction. The market for rock phosphate has experienced a significantupswing, escalating from US$88 per metric ton in February 2021 to as high as US$348per metric ton in 2023. Worldwide, phosphate rock production is notablefor its reliance on key players, with approximately a third sourced fromChina, a third from Morocco, and the balance coming from other countriesincluding Uzbekistan and Russia.

Recognizingthe finite nature of phosphate, concerns about political and geographic controlhave prompted the realization that relying on only a handful of nations forsupply is precarious. This is where Tunisia emerges as a pivotal player, beinga global top-10 producer of phosphate with ambitions to bolster productionfurther. The government is actively advocating for the revival ofthis industry, and its success could not only reshape Tunisia's role in theglobal phosphate landscape but also address broader concerns about concentratedsupply in a few nations.

PhosCo’s Assets Overview:

ChaketmaPhosphate Project

TheChaketma project stands as one of the most substantial undeveloped phosphateprojects globally, with a JORC resource of 146.4 million metric tons at aconcentration of 20.6% P₂O₅. Boasting a Net Present Value (NPV) of US$657million, resolving joint venture (JV) issues and securing the re-granting ofthis asset could establish the necessary foundation for potentiallytransforming the company into a major industry player.

Sekarna Phosphate Project

Theprospective acquisition of the Sekarna Phosphate project has the potential tocomplement the Chaketma project, expanding PhosCo's position in Tunisia’sNorthern Phosphate basin. According to a geological paper from 2011 focusing onlead-zinc mineralization at Sekarna, phosphate grades ranging from 19.7% to27.8% P2O5 were reported in five core samples, indicating a notably high-gradenature.

AmoudPhosphate Project

In June 2023, PhosCo submitted anExploration Permit application to the Tunisian Ministry for the Amoud projectarea, strategically located to the east of the globally renowned Sra OuertaneProject—one of the largest phosphate projects on a global scale.

SimituCopper-Gold

This permit encompasses anexceptionally promising mineralized corridor that spans over 30 kilometers,featuring multiple targets and historical workings. A soil sampling program hasbeen completed at the priority Bey prospect, with those results due to bereleased soon. What captivates my interest in this project is the historical work that has been carried out along this corridor with minimal modern day follow-up. Similar to the success observed in high-grade copper discoveries among junior mining companies, this aspect adds to the project's appeal, parallel to the favorable trends witnessed in the phosphate sector.

Peer Analysis

Owingto entry barriers in the Chinese, Moroccan, and Russian markets, the ASX haslimited representation of listed phosphate companies. Besides PhosCo, CentrexLimited (ASX:CXM) and Avenira Limited (AEV) are notable contenders that offervaluable insights into the sector.

Startingwith AEV, the company possesses a substantial deposit; however, its remotelocation comes with its own challenges.

Conversely,CXM boasts a commendable project but maintains a relatively modest JORCresource of 10.1 million metric tons at 30.2% phosphorous pentoxide. Havingtransitioned into a small-scale producer, CXM caters to a different investorbase compared to junior mining explorers. Consequently, CXM may not beconsidered a suitable direct comparison to PhosCo, especially as PhosCo aims todevelop one of the largest phosphate projects globally.

Insummary, PhosCo appears to be a singular presence on the ASX, uniquelypositioned to compete with major players in China, Russia, and Morocco. Thecompany's focus on developing one of the largest phosphate projects globallysets it apart within the ASX landscape.

Risk Factors:

·PhosCoholds a majority (51%) interest in CPSA, the operating company that hasre-applied for an exploration permit over Chaketma. PhosCo is currentlyentangled in legal proceedings with its joint venture partner in CPSA, TMS (49%owner of CPSA) for failing to pay PhosCo TND14M (~A$6.7M). The outcome of thisdispute remains uncertain.

·Theapplication for a new exploration permit for Chaketma, mirroring the originalboundaries, is subject to approval by the Tunisian Ministry of Industry, Mines& Energy. There is no assurance that this permit, or the other permitsunder application, will be granted, introducing regulatory approval risk.

·Funding Risk: Similar to other junior mining explorers,PhosCo faces the challenge of raising capital for the development of itsphosphate project. The price at which funds are raised depends on the company'sprogress, achievements, and the prevailing market conditions, introducingfinancial uncertainty.

In the interest offull transparency, PhosCo is a client of Phoenix Global Investments &Phoenix is paid a fee by all stocks mentioned. No information is personalfinancial advice & all information is general in nature. Please rememberall content is intended to be used and must be used for informational purposesonly. It is very important to do your own analysis before making any investmentbased on your own personal circumstances. You should take independent financialadvice from a professional in connection with, or independently research andverify, any information that you find on this Website and wish to rely upon,whether for the purpose of making an investment decision. The research providedin this article is considered to be reliable and is accurate as of thepublication date.