With phosphate prices rising sharply in 2021-22, we expect the upcoming DFS to show improved project economics and eventually re-rate the share price.
Last Price:
Date of Initial Coverage
26-Aug-20
Initial Entry Price
$0.030
Returns from Initial Entry
333%
MNB delivers a 10x return by building a profitable phosphate project AND progressing its green ammonia project.
Opened: 11-Mar-2022
Closed: 19-Dec-2022
Shares Held at Open: 4,895,000
Shares Held at Close: 8,645,000
Reason Memo Closed: Highly Material Announcement - Energy MoU signed with Angolan power network for green hydrogen/ammonia project
Minbos Resources (ASX: MNB) is sitting on a large phosphate resource in Angola that has the potential to dramatically transform the country’s food security and crop yields.
Phosphate is a key ingredient in fertiliser, and MNB will mine the raw phosphate rock, then truck it to a major Angolan port via existing infrastructure.
At the port, it will be enhanced and sold as a blended product to agricultural distribution networks across the country.
Fertilizer prices rose sharply in 2021 and food security is a major issue as supply chains get squeezed in the pandemic. In a broad-based commodities supercycle, phosphate prices are poised to go higher.
[Memo Assessment - 19-Dec-2022]: Grade A
Fertiliser and phosphate prices have continued to rise through 2022 with food security an ongoing global issue.
Phosphate prices rising means better DFS
With phosphate prices rising sharply in 2021-22, we expect the upcoming DFS to show improved project economics and eventually re-rate the share price.
[Memo Assessment - 19-Dec-2022]: Grade B
The DFS showed higher projected project NPV at current spot prices. Rising fertiliser prices helped to improve projected project economics, but given rising inflation, CAPEX figures were also higher than forecast in the earlier Scoping Study (this is the case for every revised DFS we have seen in the last 12 months)
Delivery of the DFS did not markedly re-rate the MNB share price higher, much of which may be attributed to poor wider market sentiment for speculative investments.
Mine construction
The potential for MNB to begin mine construction in late 2022 is a big drawcard. We think that construction commencing would signal to the markets that MNB have gone from explorer to producer which could lead to the market valuing MNB as a far less risky and more established company.
[Memo Assessment - 19-Dec-2022]: Grade B
Mine construction had actually commenced in early-2022, and while this does help in derisking the project, it has not carried over to the company’s market valuation.
Green ammonia optionality
MNB has recently committed to exploring green ammonia production potential in Angola utilising the ample access to cheap hydro power.
[Memo Assessment - 19-Dec-2022]: Grade A
A technical study (the basis for a Scoping Study) has commenced and is expected to be completed in six months from September 2022.
Angola’s electricity network operator, RNT-EP, confirmed its support for a long-term hydro-electricity offtake agreement which would ensure crucial cheap and green electricity supply - a key reason for us calling MNB our Wise Owl Pick of the Year.
Objective #1: Definitive Feasibility Study and Project Financing
We want to see MNB deliver the DFS to better understand the economics of the project and help move MNB into the financing phase
[Memo Assessment - 19-Dec-2022]: Grade = A
The DFS has been delivered. It forecast strong margins with a significant immediate-term sales opportunity. It estimated a project post-tax NPV of US$203M (base case) to US$400M (at current fertiliser prices) at MNB’s 85% ownership.
This compares to MNB’s market cap of just $58M and is an increase on the NPV of US$159-US$260M in the August 2021 Scoping Study.
Objective #2: Plant Construction and first production
[Memo Assessment - 19-Dec-2022]: Grade = B
While construction has commenced, first production is now anticipated late-2023, having been pushed back from mid-2022 as was previously anticipated.
MNB still requires fInal environmental approvals for the project.
Seeing first production in 2022 was a long shot, which was reflected in our language on the second point above.
Objective #3: Offtake Agreements or supply MoUs
[Memo Assessment - 19-Dec-2022]: Grade = C
We await news of offtake agreements and MoUs, but with the phosphate project DFS in hand, MNB is in a much stronger position to sign some deals.
The signing of these deals has now been pushed into our new MNB Investment Memo #2
We gave MNB a “C” grade on this objective however, because it indirectly made progress by bringing on some interesting investors in its last cap raise who are also potential offtakers.
A $15M cornerstone investment into MNB in July was from a syndicate of investors led by the chairman of the world’s largest battery anode producer.
The syndicate is led by Hong Kong based Mr Liang Feng who is also founder and chairman of Shanghai listed “Shanghai Putailai New Energy Technology” which has a market cap of US$18 billion and is the world’s largest anode materials maker for lithium batteries.
In China, lithium-iron-phosphate batteries make up 44% of EV’s, hence the interest from this group in a large stake of MNB’s future phosphate mine.
Objective #4: Green Ammonia progress
We want to see MNB make some more progress with respect to outlining its Green Ammonia strategy. As part of this process we want to see MNB make progress with the sourcing of renewable energy power and to sign technology partnerships for the development of the plant.
[Memo Assessment - 19-Dec-2022]: Grade = B
MNB signed strategic cooperation agreement with a syndicate of investors, Longmarch - led by Hong Kong based Mr Liang Feng - for its green ammonia/hydrogen project to:
- Investigate the availability of hydropower for new green ammonia projects.
- Evaluate/develop potential downstream ammonia products.
- Complete feasibility studies on a large-scale ammonia project.
- Secure financing to fund construction of production facilities and help securing a suitable site
- Secure customers and offtake arrangements for the ammonia products
Geographic risk
Whilst MNB has strong government support, there is always a risk of geopolitical instability in this part of Africa. There have been four coups in the last 4 years in the West Africa region. Geopolitical risks form a significant part of MNB’s overall risk profile.
[Memo Assessment - 19-Dec-2022]: Grade = Unchanged
This risk remains, however MNB has made progress in further developing positive relationships with the Angolan government, particularly in regard to securing hydro-electric power for its green ammonia project.
Funding risk
MNB’s project is located in Angola which may make it difficult to attract financing with investors thinking the geopolitical risk is too high to make large CAPEX investments in the country. MNB is approaching a juncture where it will need to look to raise the full upfront CAPEX required to put its project into production which means this is another big part of the risk profile when investing in MNB.
[Memo Assessment - 19-Dec-2022]: Grade = B
The cost to complete construction of the phosphate project was US$52.6M, but with work already underway the remaining CAPEX is US$48.5M.
Of this, MNB requires further funding of US$40M to complete project construction and provide initial working capital.
MNB’s June share Placement (to raise $25M) was paired with a non-binding debt term sheet for a further US$25 million which it may opt to utilise.
While the DFS will certainly help in attracting and securing financing, the geopolitical risk remains a constant.
Commodity pricing
Fertiliser prices could impact the economic viability of MNB’s project. MNB will also need to produce the fertiliser at a low cost to be able to attract interest from domestic purchasers who have for a long time avoided the usage of fertiliser due to affordability issues.
[Memo Assessment - 19-Dec-2022]: Grade = A
Fertiliser prices were trading at record highs in 2022. MNB’s phosphate project is highly leveraged to fertiliser prices. For this reason the project NPV estimate of US$400M using current phosphate prices is around double the base case NPV estimate of US$203M calculated using historical phosphate prices.
As for farmers facing increasing costs of fertilisers, the simultaneous food inflation does offset their higher costs, meaning demand for fertilisers should continue.
Building costs inflation
With construction costs globally increasing significantly over the last 12-24 months, MNB is at risk of being exposed to large cost overruns as it gets closer towards putting its project into development. Cost inflation may also impact project economics.
[Memo Assessment - 19-Dec-2022]: Grade = B
CAPEX estimates were increased in the DFS (to US$52.6M complete construction capital cost) above those in the earlier scoping study (up from US$22.4–27.9M). We assume that at least part of this increase is related to higher building materials costs. This cost inflation was signalled by MNB management ahead of the release of the DFS so were anticipated.
Yet as building costs inflation goes hand in hand with commodity price and fertiliser price inflation, MNB’s forecast margins remain high.
We note that the DFS was completed during a time of extremely high short term inflation, so would be surprised if CAPEX remains as high as indicated.
Also since the DFS, MNB has said that simplifying the phosphate flowsheet would deliver “significant CAPEX savings”.
We have been invested in MNB since August 2020, and in that time they have delivered many key milestones and the share price has experienced two sustained re-ratings.
MNB has been a very successful investment for us so far - we have a free carried position going into the construct and production phase per our plan with all our investments, and we expect further re-rates
Our plan is to hold our position into first production, if the share price nears our 1000% gain target we will likely sell another 20% of our position to take some profit.
[Memo Assessment - 19-Dec-2022]: Grade = B
We executed a Top Slice (sell to de-risk position) in the first part of 2022, and also increased our Investment as part of the 11 cent capital raise in July.
Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 4,895,000 MNB shares at the time of publication and 1,562,500 MNB options. S3 Consortium Pty Ltd has been engaged by MNB to share our commentary on the progress of our investment in MNB over time.
Opened: 19-Dec-2022
Shares Held at Open: 8,644,973
Minbos Resources (ASX: MNB) is seeking to build high-margin phosphate fertiliser supply business with the potential to dramatically transform Angola’s food security and crop yields.
MNB is also seeking to develop a green hydrogen/ammonia business powered by cheap hydro-electric power that would cut the reliance on natural gas in producing ammonia, also located in Angola.
MNB is targeting phosphate production for fertilisers, as well as green ammonia for use in fertilisers and in explosives.
These two products each have strong tailwinds supporting high prices and ongoing demand. Fertiliser prices are at near record highs and food security is an increasingly important global issue.
Angola is a potential agricultural powerhouse and MNB is positioning itself as one of the very few local fertiliser product producers in the region.
Green ammonia, used in fertilisers and explosives for mining companies, is to be made with hyro-electric power, reducing the reliance on high priced natural gas and without the carbon footprint.
Short timeline to high-margin phosphate production
Armed with a robust DFS, and with construction underway, we look ahead to first production at MNB’s phosphate project in late 2023. The project is leveraged to fertiliser prices, so the forecast high fertiliser prices and supportive supply-demand dynamics should support the years ahead will work to benefit the project.
Capanda green ammonia project
MNB is exploring green hydrogen / green ammonia production potential in Angola. It is leveraging its support from the Angolan government to ensure access to the country’s local hydro-electric power at what may be the world’s cheapest energy rates.
Objective #1: Finalise plant construction and first production
Milestones
Secure financing to fund construction completion
Complete construction of phosphate project - targeting late-2023
First production
Objective #2: Offtake Agreements or supply MoUs
We want to see offtake agreements and MoUs signed ahead of initial production - should occur no later than later 2023. A great result would be having an offtake agreement signed/underwritten by the Angolan government. As the project is considered of “National Importance to Angola”, we think this is a possibility.
Milestones
Enter sales and offtake agreement discussions with Angola’s largest commercial farms
Offtake agreement 1 signed
Offtake agreement 2 signed
Agreements regarding phosphate battery offtakes
Objective #3: Green Ammonia Project progress
Milestones
Completion of technical study
Sign binding agreement for hydro electricity with Angolan power network operator
Sign technical, offtake, and investment development partners
Sovereign risk
MNB has strong and demonstrated Angolan government support — the government wants to make Angola self-sufficient in fertilisers and to increase agricultural production to ensure food security.
However, investing in Africa does bring additional sovereign risk. The country suffers from high levels of bureaucracy and an underdeveloped financial system, as well as corruption, poor infrastructure, ineffective ports, abundant but unskilled labour and high costs on the ground for businesses.
Therefore, being in this part of Africa means that geopolitical risks form a significant part of MNB’s overall risk profile.
Funding risk
While Angola is not appealing to some investors, completion of the DFS should assist in securing any further financing required to complete construction.
In the 24 months leading to the DFS, anticipated construction costs increased significantly with CAPEX estimates of US$52.6M (complete construction capital costs in the DFS) being well above those in the earlier scoping study (US$22.4–27.9M). Yet building costs inflation goes hand in hand with commodity price and fertiliser price inflation, so MNB’s forecast margins remain high.
The DFS estimated CAPEX remaining of US$40M, but MNB has since said that simplifying the flowsheet would deliver “significant CAPEX savings”, while inflation has also moderated since the peak inflation seen at the time of the DFS release.
Commodity pricing
MNB’s phosphate project is highly leveraged to fertiliser prices. As per the DFS, a ~20% increase in fertiliser prices increases the project’s NPV by $60M (current NPV base case is US$203.4M)
The fertiliser spot price has more than doubled in a year and the supply/demand imbalance could still be further stretched. We expect any further fertiliser price rises to further increase the project NPV.
As for farmers facing increasing costs of fertilisers, the simultaneous food inflation does offset their higher costs, meaning demand for fertilisers should continue.
We have been Invested in MNB since taking a position at 3c in August 2020. Since then, MNB hit a peak of 18.5c in March 2022 before the share price began to trend back to its current 8c level after a material 11c capital raise was completed in July.
We executed a Top Slice in the first part of the 2022, but also increased our Investment as part of the 11 cent capital raise.
While the share price is off its peak, we are holding for further re-rates as mine construction is completed, offtakes are signed, phosphate production begins, and progress is made on the green hydrogen/ammonia side of the business.
Our investment plan in MNB Investment Memo #2 is to hold a significant position into first production, if the share price nears our 1,000% gain target we will likely sell another ~25% of our position to take some profit and achieve Free Carry.
Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 8,645,000 MNB shares and 1,562,500 options at the time of publishing this memo. The Company has been engaged by MBN to share our commentary on the progress of our Investment in MNB over time.
✅ Initial Investment: @3c
✅ Top Slice
✅ Free Carry
✅ Increase Investment: @8c
✅ Free Carry
✅ Increase Investment: @11c
🔲 Free Carry
🔲 Take Profit
✅ Price increases 300% from initial entry
✅ Price increases 500% from initial entry
🔲 Price increases 1000% from initial entry
✅ 12 Month Capital Gain Discount
🔲 Hold remaining Position for next 2+ years
Dec 01, 2022
Announcement
Our Angola-based phosphate fertiliser and green ammonia Investment Minbos Resources (ASX:MNB) has reported successful trials of its phosphate rock product.
We see this as important validation of MNB’s product - and this should contribute to the overall economic case for the project.
New results from three years of field trials in Angola and five years of greenhouse trials at the International Fertilizer Development Center (IFDC) have delivered a phosphate fertiliser product that is fit for purpose for the local agricultural market — MNB’s primary target market.
The product was shown to be suitable for use as a phosphate nutrient in Angola’s acidic soils and high rainfall environment, and at an attractive price point.
The field trials across more than ten locations in Angola trialling maize, wheat and potatoes delivered large yield increases.
In the IFDC greenhouse trials in Alabama on wheat, maize, soy, sorghum, it was demonstrated that a single application of MNB’s phosphate fertiliser before the first crop can improve yields in two successive crops.
The trials have confirmed that MNB’s phosphate rock is suitable as a direct application fertiliser product in soils with acidity of pH <5.5. Importantly, this includes much of the area of interest of the Angola Fertilizer and Farm Productivity Program (AFFPP) which has lodged an MOU for 120,000tpa of MNB’s phosphate fertiliser.
The findings of these trials are an important development that underpin the recently announced Definitive Feasibility Study (DFS) for MNB’s Cabinda Phosphate Project in Angola where construction is now underway.
The results further confirm the simplicity of the production flowsheet that is required to create the phosphate product.
MNB confirms that a review is now underway on a simplified flowsheet, which is expected to deliver “significant CAPEX savings”.
Lower capital costs is always good news, but this is significant for MNB because the CAPEX estimate that was used in the DFS was notably higher than the figure used in the earlier Pre-Feasibility Study due to the exceptionally high rate of global inflation at that time.
Nov 10, 2022
Announcement
Investment Memo:
MNB IM-1
Objective
3
:
Plant Construction and first production
Today, our fertiliser and green ammonia/green hydrogen Investment Minbos Resources (ASX:MNB) executed the land acquisition contract for its fertiliser plant in Angola.
We’re pleased with development as it gives added certainty to the project, and evidences MNB’s extensive work on stakeholder relations in-country.
The selected site is located in an ideal spot, close to both the port at Cabinda and the mine at Cácata:
This Subantando site is different to Futila — the previous site that MNB was looking at, and which the DFS was based on — providing significant OPEX and production advantages.
Click here for our full rundown of the DFS.
With the new site secured, studies are underway to secure environmental and construction licenses.
We see this as good progress against Objective #2 from our MNB Investment Memo:
What’s next for MNB? MNB to advance further along into the financing phase for its phosphate project as well as progress on offtakes, with a technical study is underway for the green ammonia project.
Aug 05, 2022
Investment Memo:
MNB IM-1
This morning we saw the following interview between macro analyst Tony Greer and a digital chicken (Doomberg).
With reference to a Wall Street Journal article titled "Russian gas cuts threaten world's largest chemical hub", Greer made the following comments.
Tony's comments come as a result of the impacts the European energy crisis is having on the German industrial sector, with a lack of access to affordable gas threatening to shut down supply chain critical manufacturing facilities.
The specific focus is on the BA SF (European chemicals conglomerate) owned chemicals plant in Germany, the biggest of its kind in the world and home to one of Europe's largest ammonia plants.
Globally, more than 90% of ammonia is produced from fossil fuels and, more specifically, natural gas.
So the specific issues being discussed are energy scarcity and a lack of gas supply threatening ammonia supply.
These are areas where we think our Investment in Minbos Resources (ASX: MNB) will succeed.
MNB is currently progressing towards the development of a phosphate (fertiliser) project while at the same time putting together a plan to build from the ground up a zero carbon ammonia plant.
The zero carbon factor is its primary positive differentiating factor as part of a move away from a reliance on fossil fuels and, more specifically, gas.
Having already secured cheap affordable zero carbon hydropower for its plant, we think MNB is positioning itself uniquely in a part of the economy where supply chain issues are only starting to bubble up to the surface.
We think that as the supply chain issues become more obvious, MNB's project will start to have implications globally and not just regionally in Africa.
Jul 19, 2022
Announcement
Investment Memo:
MNB IM-1
Objective
1
:
Definitive Feasibility Study and Project Financing
Risk
3
:
Funding risk
Our fertiliser and green ammonia/hydrogen Investment Minbos Resources (ASX:MNB) just settled the first tranche of its recent $25M placement.
Today, we noticed that the company issued the first tranche of the placement with 131,414,473 shares issued to the investors who participated in the $25M placement at 11c per share.
The amount of shares issued today represents 25% of all of the company’s shares on issue (pre placement).
In the short term we expect this to increase the supply of shares on market as some of the investors who participated in the placement look to sell for a small profit, or simply decide to pull their cash out of the market.
With general market conditions being tough, investors may look to take some cash out of the markets due to changes to their personal circumstances, add to this the MNB share price trading above the level where these investors purchased at and the temptation to sell becomes stronger.
As with most share placements, we expect the share price to settle around or slightly below where the new shares where issued as some investors look to sell out of their positions.
We are also mindful of the second tranche of the placement (95,858,255 shares) which will be issued at some stage in August after shareholder approvals.
That second tranche is being issued to a syndicate of investors led by Hong Kong based Mr. Liang Feng who is the founder of Shanghai listed “Shanghai Putailai New Energy Technology” which has a market cap of US$18 billion and is the world’s largest anode materials maker for lithium batteries
We suspect that this investment is a lot more strategic and expect there to be far less churn on that second batch of shares.
Nevertheless over the short term we expect to see more selling pressure after today’s share issue.
Jul 18, 2022
Investment Memo:
MNB IM-1
Phosphate is a key ingredient used in fertiliser production. Without phosphate fertilisers, crop yields worldwide would be unable to keep up with agricultural demand.
To put it bluntly, global food supply chains need phosphate.
And China is moving quickly to curtail the supply of phosphate as an export product - with potentially far reaching consequences. The following Reuters article details how China makes up ~30% of global exports, and the move could have significant implications for the world's agriculture industry.
Read the full article here.
Below are our key takeaways:
Our view is that with the world's biggest exporter of phosphate fertiliser products cutting back on exports, the need to diversify supply chains and seek alternate supply sources will become much more important.
China currently accounts for ~30% of global supply, so any reduction in exports will make the market even tighter than it already is and will increase prices.
The fallout from this is a potential global food security crisis.
We think the markets will eventually catch onto this, and capital will pour into potential new supply sources.
Our food security and green hydrogen/ammonia investment Minbos Resources (ASX: MNB) is developing its phosphate (fertiliser) project in Angola, alongside a green hydrogen/ammonia plant.
To see all of the key reasons we are Invested in MNB, what we want to see the company achieve in 2022, and the key risks to our Investment thesis, check out our 2022 MNB Investment Memo here.
Jul 18, 2022
Investment Memo:
MNB IM-1
The world's biggest fund manager thinks it's food, not petrol, that is in for a real supply shock.
This Financial Times article shines a spotlight on the impacts of the fertiliser crunch on food prices around the world and the potential impact food price inflation could have on emerging market economies like those in Africa.
Read the full article here.
Below are our key takeaways:
Putting aside all of the energy independence issues the world is facing right now, we think the markets are yet to catch onto just how significant the impacts of a global food crisis could be.
We are starting to see capital rotate into the energy industry.
The same can't be said of the world's food supply chains. With the Russia/Ukraine conflict contributing to a food security issue, the Financial Times article highlights just how big of an impact it is having on African food security.
The article highlights the need to look to alternate countries to fill the emerging food supply chain gaps.
This is where our Portfolio company Minbos Resources (ASX: MNB), fits in.
With its shovel ready phosphate (a key ingredient fertiliser ingredient) project in Angola and a proposed green hydrogen/ammonia project, MNB is looking to develop two projects that could help build out an agricultural industry in Angola and the broader Southern Africa region.
MNB is currently working towards a final investment decision on its phosphate (fertiliser) project, with the aim of having the project operational in 2023.
To see all the key reasons we are Invested in MNB, what we want to see the company achieve in 2022, and the key risks to our Investment thesis, check out our 2022 MNB Investment Memo here.
Jul 12, 2022
Announcement
Investment Memo:
MNB IM-1
Investment Thesis
2
:
Green ammonia optionality
Objective
2
:
Green Ammonia progress
This morning our fertiliser and green ammonia/hydrogen Investment Minbos Resources (ASX:MNB) announced the signing of a strategic cooperation agreement.
The strategic cooperation agreement has been signed with the same group of investors that made a $15M cornerstone investment in MNB and the term sheet signed for a potential US$25M debt facility.
The syndicate is led by Hong Kong based Mr. Liang Feng who is also founder and chairman of Shanghai listed “Shanghai Putailai New Energy Technology” which has a market cap of US$18 billion and is the world’s largest anode materials maker for lithium batteries.
The strategic cooperation agreement covers MNB’s green ammonia/hydrogen project as well as a commitment to explore opportunities in the “ferro phosphate” and “lithium ferro phosphate” space. The key details across both are as follows:
Green ammonia/hydrogen project:
“Ferro phosphate” and “lithium ferro phosphate” (LFP Projects):
The significance of this agreement is that it has been signed with the same group of investors who will soon become major shareholders in MNB (after the $15M cornerstone investment shares are issued).
With a major shareholding in MNB, we think the group of investors will be incentivised to create shareholder value by bringing added downstream capabilities to MNB, both at its phosphate (fertiliser) project and its green ammonia/hydrogen project.
Jul 12, 2022
Announcement
Investment Memo:
MNB IM-1
Objective
1
:
Definitive Feasibility Study and Project Financing
Risk
3
:
Funding risk
This morning, our fertiliser and green ammonia/hydrogen Investment Minbos Resources (ASX:MNB) made more progress towards financing the development of its Angolan fertiliser & green ammonia/hydrogen projects.
In addition to a $25M capital raise, MNB also confirmed that a non-binding term sheet had been signed for a $25M debt facility.
The term sheet was signed with the same group of investors who cornerstoned the capital raise for a total of $15M (syndicate of investors led by the chairman of the world’s largest battery anode producer).
The term sheet is non-binding meaning the debt facility hasn’t been put in place as yet, this just means that MNB have interest from a group of financiers and should the company wish to take out the facility they can go back and negotiate a final agreement with them.
The specifics of the term sheet are set out in the announcement as follows:
The significance of this term sheet is that it encompasses most of the CAPEX requirements that MNB had estimated in its 2020 scoping study.
The 2020 scoping study had estimated that MNB’s phosphate (fertiliser) project could be put into production at a low upfront CAPEX cost of only US$22-28M.
Given that the debt facility covers US$25M and potential equity participation in the future, MNB now have a non-binding commitment from a group of investors.
With the non-binding term sheet backstopping its project, MNB confirmed in today’s announcement that MNB that a DFS is to be delivered and construction expected to begin Q3-2022.
Jul 12, 2022
Announcement
Investment Memo:
MNB IM-1
Objective
1
:
Definitive Feasibility Study and Project Financing
Risk
3
:
Funding risk
This morning our fertiliser and green ammonia/hydrogen Investment Minbos Resources (ASX:MNB) came out of a trading halt after completing a capital raise.
MNB managed to raise $25M via a placement at 11c per share with a $15M cornerstone investment from a syndicate of investors led by the chairman of the world’s largest battery anode producer.
The syndicate is led by Hong Kong based Mr. Liang Feng who is also founder and chairman of Shanghai listed “Shanghai Putailai New Energy Technology” which has a market cap of US$18 billion and is the world’s largest anode materials maker for lithium batteries.
We also noticed that MNB’s directors and management team are also participating in the capital raise for a total of $845k.
We like seeing management teams that have skin in the game and see this as a vote of confidence from the managers leading our Investment in MNB.
The capital raise will see MNB issue a total of 227,272,728 shares split as follows:
In the short term, we expect to see the share price hold around the 11c per share level as some of the investors who participated in the capital raise are likely to sell on market and take their profits.
With the market looking a little fragile, we suspect there will be more of these type investors than we are otherwise used to seeing.
That being said, we think the big glowing positive from today’s announcement is that MNB was able to raise this much capital in an otherwise tough market.
For us, this level of funding underlines the serious potential that MNB’s fertiliser and green ammonia/hydrogen projects have.
Jul 06, 2022
Macro: Hydrogen
The following Bloomberg article looks at a Bill Gates backed investment in the hydrogen mobility space.
Read the full article here.
Below are our key takeaways from the article:
In summary, the article speaks to the volume of capital pouring into the downstream technologies that are required to build up a sound and efficient hydrogen supply chain.
For hydrogen to become a part of the energy mix the infrastructure required to produce, transport and then consume it all needs to be developed to the standards of current energy technologies.
With institutional capital and big names like Bill Gates now making investments into the hydrogen space we think it is a matter of WHEN not IF for the hydrogen sector.
Historically, our best performing Investments have come from industries where we have Invested well ahead of institutional capital arriving on the scene. Our Investments in the green hydrogen space are no different.
The following companies held in our Portfolio provide exposure to an industry that we think is on the cusp of exponential growth:
Province Resources (ASX: PRL)
Elixir Energy (ASX: EXR)
Minbos Resources (ASX: MNB)
Jul 04, 2022
Investment Memo:
MNB IM-1
The following Bloomberg article highlights the impacts of the Russia/Ukraine conflict on the food crisis issue across Africa.
Read the full article here.
Key takeaways:
The article discusses the political viewpoint on the food crisis and brings home just how big of an issue is facing Africa when it comes to food security.
This is where our Portfolio company Minbos Resources (ASX: MNB) fits in.
With its shovel ready phosphate (a key ingredient in producing the fertilisers) project in Angola, MNB could bring into production a project that helps build out an agricultural industry that can alleviate the reliance on agricultural imports across Africa.
MNB is currently working towards a final Investment decision on its project, with the aim of having the project operational in 2023.
To see all of the key reasons we are Invested in MNB, what we want to see the company achieve in 2022, and the key risks to our Investment thesis, check out our 2022 MNB Investment Memo here.
Jul 04, 2022
Macro: Hydrogen
Investment Memo: PRL 2022, EXR 2022, MNB 2022
General: Macro
The following LinkedIn post from Bill Gates shines the spotlight on green hydrogen as a technology solution for a transition towards cleaner fuel sources.
Read the LinkedIn post here.
When major investors start to talk up a particular technology it is generally a leading indicator for massive institutional capital flows into the sector. And Gates is not just a commentator, but an investor in renewable energy and the transition towards lower emission fuel sources.
(Here is an article on one of Gates’ latest ventures in the space: Bill Gates-Led Fund Backs Startup With Cheaper Way to Move Hydrogen)
For a long time institutional investors have avoided making large scale investments into the green hydrogen space, but that now looks to be changing extremely rapidly.
Historically, our best performing Investments have come from industries where we have Invested well ahead of institutional capital arriving on the scene.
Our Investments in the green hydrogen space are no different. We tend to agree with Bill Gates, that green hydrogen has a place in the transition towards clean energy technologies.
The following companies held in our Portfolio provide exposure to an industry that we think is on the cusp of exponential growth:
Province Resources (ASX: PRL)
Elixir Energy (ASX: EXR)
Minbos Resources (ASX: MNB)
Jun 15, 2022
Announcement
Investment Memo: MNB 2022
General: Investor presentation
Yesterday our long term Investment Minbos Resources (ASX:MNB) released a fresh new investor presentation based solely on its green hydrogen-ammonia project.
We still feel the market is yet to fully catch on to the potential here especially given that Angola is known to have the second cheapest energy costs in the world with an abundance of zero carbon Hydroelectric power capacity.
We feel this uniquely positions MNB in the right place at the right time to get a project like this off the ground.
We did a deep dive into MNB’s green hydrogen-ammonia ambitions in our last MNB note, which can be read here: Green-Hydrogen Ammonia is coming
Also check out the investor presentation released yesterday by clicking on the image below.
May 19, 2022
Investment Memo: MNB 2022
Macro Theme: Food Security
The Economist put out this video which looks at the impacts the Russia/Ukraine conflict is having on food supply chains globally.
Key takeaways from the Economist video:
It’s clear that securing food supply chains is not something that is likely to be fixed in the next few weeks. The world needs to look to alternate countries to fill in the gaps that are emerging in food supply chains.
This is where our food security Investment Minbos Resources (ASX: MNB) fits in.
With its shovel ready phosphate (a key ingredient in producing the fertilisers) project in Angola our Investment is working towards a final Investment decision on its project, with the aim of having the project operational in 2023.
To see all of the key reasons we are Invested in MNB, what we want to see the company achieve in 2022, and the key risks to our Investment thesis, check out our 2022 MNB Investment Memo here.
May 16, 2022
Investment Memo: MNB 2022
Macro Theme: Global Food Security
Over the weekend Bloomberg reported that India had banned wheat exports. Here are our key takeaways from the article and how it relates to our food security Investment Minbos Resources (ASX: MNB):
Read full article here
Key takeaways:
All of this means that the world needs to invest in food security projects ranging from fertiliser to direct agriculture all around the world in different locations. This is where MNB fits in.
Apr 22, 2022
The African Development Bank is working on a $1 billion emergency facility to support governments and farmers who are facing challenges brought about by rising fertiliser prices.
The funding was covered in the following news piece, “AfDB mulls $1bn emergency facility to tackle rising prices of fertiliser“.
African Development Bank’s director Mr Martin Fregene explained in the article that, “Rural infrastructure like storage and rural roads is what we need our countries to fix. The reason why Africa turns to Russia and Ukraine to buy cheap wheat and maize, is that our local production is not competitive”.
Fregene also told the media that the African Development Bank was considering tapping ~$1 billion in emergency funding facilities to ease the pressure on rising fertiliser prices by supporting governments and farmers.
Our African food security investment Minbos Resources (ASX: MNB) is sitting on a large phosphate resource in Angola that has the potential to dramatically transform the African continent's food security and crop yields.
MNB is currently completing a Definitive Feasibility Study that is expected to be completed in Q3 of this year. This will include updated figures from its 2020 Scoping Study, which already demonstrated that MNB’s project economics were robust enough to move forward with development.
The 2020 Scoping Study used a US$357-482 per tonne phosphate price (MAP price), which gave the following project economics:
Fertiliser prices are now trading at multiples of the US$357-482/t figures MNB used in its Scoping Study.
Prices are now above US$1,200/t, which we suspect will increase the attractiveness of the project for financiers.
Given the CAPEX requirements are not high, MNB is moving forward with the development of the project, concurrently with the DFS. MNB’s plant commissioning is still on track for H1 2023.
With the African Development Bank now recognising something needs to be done to secure African food supplies, the macro tailwinds for MNB continue to get stronger.
To see all of the reasons why we continue to hold MNB in our portfolio, what we want to see the company achieve for the rest of 2022 and the key risks to our investment thesis, check out our 2022 MNB Investment Memo here.
Apr 04, 2022
Our fertiliser and food security investment, Minbos Resources (ASX:MNB) is poised to benefit from elevated fertiliser prices.
CEO of MNB, Lindsay Reed, commented on the price moves and what that means for the company on LinkedIn:
Like many other commodities, fertiliser has seen prices rise on the back of supply chain disruptions caused by the war in Ukraine. Russia was the world’s top exporter of fertilisers in 2019 and is a key supplier of urea and potash.
Based in Angola, Minbos Resources is putting the pieces in place for a low cost, high return (IRR) phosphate project.
With production slated to begin in the first half of 2023, we think MNB could play a critical role in food security for southern Africa.
Below is breakdown of the economics of MNB’s phosphate project:
For a quick high level summary of why we invested in MNB, key objectives, risks and our investment plan - here’s our MNB Investment Memo.
What’s next: Rising fertiliser prices will improve the economics of MNB’s project, and we are expecting a definitive feasibility study (DFS) and a final investment decision in the coming months.
Mar 23, 2022
Overnight we saw reports from the Guardian and CNBC highlighting the impact the Russia/Ukraine conflict is having on the prices for the raw materials that are used in the supply chain for fertiliser markets.
The three types of fertilisers are:
The standout for us was the impact the conflicts in Ukraine/Russia is having on nitrogen fertiliser prices which is an ammonia based fertiliser. With almost all of the ammonia used in nitrogen fertilisers being produced using natural gas, the recent increases in the price of gas (mostly because of supply chain scares out of Russia) has put some serious tailwinds behind the price of nitrogen fertilisers.
This is a key reason for our investment in MNB. MNB’s phosphate fertiliser project is nearing development and this is complemented by plans to build a hydro-powered ammonia plant to produce zero carbon ammonia (used to produce nitrogen fertiliser) in Angola (which has the second cheapest source of of energy because of an abundance of underutilised hydropower).
MNB is in the final stages of developing its project at just the right time, with the potential to supply competitive, zero carbon fertiliser products to both Africa and the rest of the world.
To see all of the reasons why we invested in MNB, and what we want the company to achieve in 2022, check out our 2022 Investment Memo here.
Mar 21, 2022
The latest episode of one of our favourite podcasts dropped over the weekend (All-in podcast E72: Impact of sanctions, deglobalization, food shortage risks, macroeconomic outlook and more).
Discussed from ~15:21 onwards is how the sanctions on Russia and disruption to the global agricultural supply chain is placing the world at risk of food shortages in the coming years.
The key takeaway was the heightened risks to the food supply chains. And as investors in MNB, we found the podcast particularly interesting.
Scientist and investor David Friedberg lays out the three types of fertiliser needed to grow the world’s food and how supply chains for all three are being impacted by geopolitical tensions/sanctions. The three types of fertiliser are:
He also touches on how the prices of all three of these have shot up in recent months with Russia being a key supplier and placing restrictions on exports to the rest of the world as it tries to safeguard its food supplies.
What really stood out to us was Friedberg’s take on the price of nitrogen fertilisers. He mentioned that with almost all of the world’s nitrogen fertilisers being produced using natural gas, and the price of gas now almost double where it was last year, the costs of these nitrogen based fertilisers have become out of reach for some farmers.
This is why we are invested in MNB. Its phosphate fertiliser project is nearing development and it has plans to build a hydro-powered ammonia plant to produce zero carbon ammonia (used to produce nitrogen fertiliser).
Angola has the world’s second cheapest source of energy so our investment MNB is perfectly positioned to establish alternative sources of supply when the world most desperately needs it.
To see all of the reasons why we invested in MNB, and what we want the company to achieve in 2022, check out our 2022 Investment Memo here.
Mar 08, 2022
On Tuesday, MNB announced the divestment of its interests in its Madagascan rare earths project.
MNB’s interests in the project at the moment is an exclusive option agreement that was signed in 2018 which gave MNB the right to acquire up to a 90% interest in the project.
MNB’s divestment comes as the sale of this option (exclusive right to acquire that 90%) for a total consideration of $2.48M contingent on due diligence being completed.
The acquirer (ALS Hong Kong) has ~8 months to complete this due diligence and needs to exercise the option before the 7th of November 2022.
The payments to MNB will be $10,000 per month for that 8 month period and a $2.4M cash payment if the option is exercised by ALS Hong Kong.
This divestment means MNB can focus more capital towards the development of its Angolan fertiliser project. We will be releasing our 2022 Investment Memo for MNB very soon where we will set some expectations for what we want to see MNB achieve in 2022.
Mar 07, 2022
Another fallout from the Russia/Ukraine conflict is with respect to global food supplies as covered by major news outlet Al Jazeera.
Russia and Ukraine supply a third of the world's wheat, which is now trading at 14-year high prices. More importantly though, countries are realising that food supplies are now just as susceptible to supply chain disruptions.
The key takeaway from the coverage in this news report was that the Middle East and Africa were most susceptible to these shortfalls as other exporters look to protect domestic supplies.
This is where MNB fits in, with its phosphate project in Angola, MNB is building a nutrient supply and distribution business that stimulates food security in Angola and the broader Congo Basin.
MNB’s project in August was considered a ‘Project of National Importance to Angola” by the Angolan government, with all of the developments of late we think the project is now significantly more important.
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