underlying commodity nearly doubles in 3 month

MAK is looking to mine Rock Phosphate from the NT. It is the first new mine of RP in Australia in decades and possibly one of the few new mines in the last 5 years.

Rock Phosphate is used to produce the phosphate fertilizer DAP. DAP prices have risen from $280 to $467 since November (ok not quite double but a significant rise nevertheless).

As the DAP prices rise, the precursor component RP increases also. The ratio of prices of RP to DAP has ranged as a multiple of 2.6-2.8 over the last 2 years. The equivalent RP price at the moment should be $166-179 US.

RP prices depend on the quality of the underlying product. Grades and percentages of impurities vary from mine to mine. The oft quoted RP price is based on one company OCP in Morocco which produces a large amount of RP but at a lower grade than the MAK RP (and with higher impurities).

Bulk commodity prices also depend on transport costs also. MAK has a $30 per tonne freight advantage to India and a much higher advantage to NZ (one company in NZ, Ballance, uses 0.5 mil tonnes per year).

MAKs share price depends on the contracts that it is able to sign with a customer in a market where transparency is harder to come by compared with Iron Ore or wheat prices. MAK is currently looking to sign up Indian and NZ buyers for RP, when tentative contracts and prices are announced to the market, the SP will quickly reflect this new price for the company.

MAK is looking to ship 1 mil tonnes in its first year starting in June/July. Based on the conservative estimated FOB Darwin price above of $166 US per tonne and HC posters conservative OPEX of $110 per tonne then MAK would be looking at a very rough profit of $50 mil in the first year.

The share price will reflect this possible profit if/when contracts with a buyer are decided so DYOR.