Government risk addressed - in all opportunities thus far, the Angolan Government have demonstrated strong support of this project with motivation to accelerate it. Country risk addressed - Angola has maintained political stability since the end of the 27-year civil war in 2002, without any attempts of coup or major civil unrest since. 2017 elected João Lourenço has made specific focus to diversify the Angolan economy and crackdown on bureaucratic corruption. Agriculture is the focused area for this diversification. Oil prices above an average of $60usd help the country as a whole recover economically these coming years and accelerate the diversification. You'll notice that wealth through the energy sector has made Luanda one of the most expensive cities in Africa.
There are a few reasons I believe why this stock is so undervalued at this phase of the project:
The projected economics is based on a scoping study, which is very back of the envelope. CEO Lindsay Reed has mentioned the economic outputs from the DFS will not change (they are likely to be more favourable as the fertiliser price has more than doubled, though capex will higher due to increased steel price). The risk profile will be more appealing for institutional investment when there is a DFS to support the investment case. I believe we're looking at a stock that is prior to a surge of ESG-focused ethical institutional investment.
A lot of folks look no further than 'mining in Africa' when they see a company like this, and so it takes more milestones bringing it closer to fertiliser production to garner investor interest. It deters further due diligence. The fact of the matter is that the government and country risk in this case is on the complete other side of the spectrum to diamond mining in Congo. Early adoption into the prospering fertiliser market in Angola and Sub-Saharan Africa is the investment of a contrarian who's done a little more research than the retail cohort.
It's one of the few Next Investors-held stocks that are quite illiquid, and so announcements have historically sent it through high gain fomo days which trapped high volume at high prices. From a technical perspective, the chart had not build much of a base at all at 0.04 before the jump at the start of the year. And before then it was much more so illiquid. Of course it helps people to hear about the stock, but it also attracts impatient traders who are not interested in a long term position and panic when the buy liquidity drops. What I like here is we've spent months basing in this region - developing long term informed holders. When it has left this trading range of $30-40mil market cap, I believe it's gone for good - the value realisation hits and it's no longer weighed down by break-even bagholders.
