THE PERFECT STORM (share), page-21

More thoughts on what price assumption might be useful for valuing MNB's phosphate project considering the recent large fertiliser price rises.

Global MAP prices were rising rapidly even before China put a ban on exports. The chart below shows prices in China were also rising rapidly last year in line with global prices. It's understandable why China then banned exports to ensure enough (affordable) supply for local farmers. The result can be seen on the chart below. The increased supply for local use has managed to reverse the sharp price rise and prices have gradually declined. Of course the opposite applied to the rest of the world. The drop in exports from China caused the global price rises to accelerate higher.



https://www.ceicdata.com/en/china/china-petroleum--chemical-industry-association-petrochemical-price-fertilizer/cn-market-price-monthly-avg-fertilizer-monoammonium-phosphate-55

The current price in China was 3,170 RMB/Ton in Dec 2021 which is US$500. Prices elsewhere vary depending on location but are generally hundreds of dollars above that price. I'm told that the current price in China is around $480.
What can we expect if China ceases export restrictions? I think it's fair to assume that the reduced supply in China would see their up trend resume and the extra supply would ease global prices.
I've seen various prices quoted for MAP lately and it seems the price can vary quite a bit at different ports. My best current estimate for Angola would be something around $835. That's based on the price in Brasil for MAP futures quoted here;
https://www.cmegroup.com/markets/agriculture/fertilizer/map-cfr-brazil.html
That is below the prices I estimated previously based on an article that I read and provided a link for that stated that MAP prices in the US had jumped by over $100 per tonne in the latest month. It would be great to have some reliable pricing for MAP landed in Angola but I think the Brasil price below is a reasonable guide. If anyone has anything better, please share!



The futures contract price is at $835 for this month and $840 for delivery at the end of this year (the last available month on that website).

If China does completely reverse its export ban, and assuming the price there only rose moderately as a result, back up to the price before the ban was put in place, that price was 3520 RMB or US$553/t. That's only a rise of $50/t which might be too conservative on the much lower supply available for China users as exports would be much more attractive to producers there.
If I assume the price elsewhere in the globe falls by $100/t, then the price in Angola might fall to around $730.
Alternatively, I could assume that prices settle somewhere in the middle of the current China price of around $480 and the Brazilian price of $835, which would be US$637. That's a $200 drop on the current price and is almost in line with the $643 used in the table below from the scoping study which gives an AFTER tax NPV for MNB's share of the phosphate project of A$408mill or around 80 cents per share undiluted - or on my assumptions, around 55c per share fully diluted for options and fully diluted for a further $15mill capital raising at 20c. A smaller cap raising would bump my target up to 60c still diluted for all options. Keep in mind the exercise of all options would raise $13.1mill in cash.

55c - 60c would still only be the value for a phosphate blend project as in the scoping study. Since then the company has stated that a complete NPK fertiliser will also be produced. That should add value. I'm looking forward to the DFS due at any time this quarter for an update.
Then there is the green ammonia project which appears to be getting a lot more attention from the company tweets recently (compared to the phosphate) so I'm hoping that the green ammonia project will be adding a lot of further value to the company. Plenty to look forward to this year.