I thought we could start this thread to discuss what could drive the sp from here and look at both positive and negative possibilities for each project. I'll kick it off. Feel free to add.
Phosphate project.
Possible negative news first.
Funding risk.
There is the regularly discussed risk of another cr. The good news is that management has flagged no intention of doing one and they have said that they are actively pursuing non equity funding. You can never rule it out though, after all that is what equity markets are there for - to fund either exploration or in this case development, or later further growth. We can't rule out the risk that non equity funding falls short. However, if a cr happens, whether it turns out to be a negative for the sp is another matter. E.g., if they raise the majority as a prepayment for off take or as debt but need to bridge any gap with a small cr, then the sp could just as easily take off because it finally locks in the balance of the funding, removing that risk and clearing the way fully to production. No cr would be better and preferred of course and hopefully remains the more likely outcome.
Country risk.
That will always be there but Angola has attracted hundreds of billions of dollars into its oil industry over the last 20 years plus and is definitely making it clear that they want to attract new investments, in particular into agriculture as well as renewables. A perfect fit for us.
Commodity risk.
The phosphate price has remained strong and stable above last year's highs which surprises me so a pull back in the phosphate price won't surprise me and I think probably wouldn't surprise the market. However it remains strong so we might be pleasantly surprised. The TSP price is what our products sell price will be based on and while it has corrected by a significant amount from last year's highs like most other fertiliser prices, at $485/t it remains comfortably above the DFS base case price of $422, which was the 15 year average price up to the time of the DFS. With the inflation we have had over the last few years, it seems more likely than not that the long term average price going forward will remain significantly higher than the previous 15 year average price. So IMO, commodity price risk is always there in the short term but long term looks safer to me. That base case price gives us the DFS After tax NPV of A$300 million which is near three times our current mc. That offers big upside from here when the project commences production later this year. Based on that NPV, any positive news on development should see the sp react strongly. Commodity price risk looks to me to be more likely to increase the project NPV above A$300mill rather than drop it below. The current $102mill mc is far too low IMO. I won't be surprised to see a mc of $400mill next year if the TSP price stays above $460 on average - and that's just based on the phosphate fertiliser project alone.
Green ammonia.
I don't see any significant risk to this project. It is simply too compelling and probably the most economically compelling green ammonia project globally. That has generated strong interest from potential partners and I see the biggest sp catalyst coming from any news on this project, especially on attracting a partner willing to contribute strongly to funding the project. I think Minbos can easily go it alone on 200MW, especially with the strong forecast cash flow from the phosphate project but a partner adds credibility for anyone doubting Minbo's ability to deliver it alone, removes most of the funding risk and above all, might speed up the process to develop the project and I would welcome that. It is clear that there is nothing in the sp for this project which to me makes no sense but any deal to bring in a partner would very likely change that IMO. The project is likely to have a NPV of over a billion dollars, so even half of that would be a much higher valuation than the phosphate project.
It's also important to remember that a project NPV is NET of capex. So if we sold a half of a project with say a US$1billion dollar NPV in exchange for the partner funding the project, MNB's half would be worth half a billion dollars plus half the capex that MNB does not need to fund. I.e. MNB's share would be worth over US$700mill or over A$1bill. That's ten times the current mc - if the NPV is US$1bill. Even a project at half a billion USD would still be worth over A$500mill to MNB in the above scenario. This is why I see any news on a partner for this project as potentially a bigger sp driver than the phosphate project. Put them together and we have A300-400mill on the phosphate depending on commodity price assumption, plus probably well in excess of A$500mill on the green ammonia under a 50:50 JV scenario. So 3-4 fold upside near term from the phosphate and 8-10 fold minimum, conservative upside over the medium term from both projects.
P4 or yellow phosphorous.
This project just makes sense. Very low cost phosphate - some of which is expected to be waste from the fertiliser mine and extremely cheap and reliable green hydro electricity. I feel as confident of this project getting developed as I did the green ammonia when it was first announced.
Earlier stage so I don't know what news from this might be a sp catalyst near term but with the other two projects, we have ample multiples of upside to the sp before we look for upside from this project.
There are some risks but many other risks that many resource companies face are very low. E.g. technical risk and funding risk. Phosphate funding risk is low because capex is very low, especially relative to NPV and because the country (and in particular the government) needs and wants this project. Green ammonia funding risk will be very low because of how economically and socially compelling the project is.The phosphate project uses simple benefication, drying, pelleting and bagging. The green ammonia will use a well established and relatively simple process to produce ammonia.
This company should deliver very large gains over the near term, medium term and long term.
Expand
