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*See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.
Located in the potash-rich Congo Evaporite basin in Gabon, which hosts several large potash deposits
Gabon’s hosts several majors such as Fortescue (ASX: FMG), Eramet (ENXTPA: ERA), Total (NYSE:TTE), and Shell (NYSE: SHEL)
Based on a 25-year mine life, the PEA returned an AT-NPV10% of US$1.1B, and a high AT-IRR of 33%, using US$387/t MOP vs the spot price of US$305/t
Compared to our estimates, the PEA used higher annual production, CAPEX, and product prices, but lower OPEX .
We note that OPEX/CAPEX are relatively low as the deposit is amenable to solution mining
Per the PEA, enriched brine extracted through solution mining will be transported via pipelines to a processing plant in Mayumba, located 50 km north of the Banio project. The processing plant transforms brine into granular fertilizer through evaporation, crystallization, drying, and compaction. The final product will be shipped to market from a deep-water port in Mayumba. The PEA assumes MLP will build its own independent power station.
The Gabonese government, in collaboration with its partners, is advancing plans to construct a deep-water port in Mayumba. We believe that unforeseen delays or cancellations could prompt MLP to seek alternative transportation solutions for potash exports to international markets.
Banio hosts a large-tonnage/low-grade potash deposit
The deposit is dominated by low-grade carnallite mineralization. The resource envelope measures 5 km (length) x 3 km (width) x 0.2 km (thickness)
Mineralization has been identified at depths ranging between 230 m and 520 m below surface; we note that Banio’s potash beds are shallow compared to projects in Saskatechwan (800-1,500 m deep)
We believe there is potential for resource expansion as the current resource accounts for only 1.5% of the project area
Management aims to complete a resource update in H2-2024, followed by engineering studies for a feasibility study
$1.25M in working capital at the end of February 2024 .We anticipate an equity financing shortly
After incorporating inputs from the PEA, our DCF valuation increased from $1.02 to $1.52/share, primarily driven by higher annual production
Source: FRC
Our valuation is more conservative, with lower long-term product prices, and higher discount rates (unchanged)
Our valuation is highly sensitive to key inputs
We are reiterating our BUY rating, and raising our fair value estimate from $1.02 to $1.52/share. We believe the robust PEA, driven by low CAPEX/OPEX, has significantly enhanced the project's attractiveness, and ability to secure project financing.
We believe the company is subject to the following key risks:
Maintaining our risk rating of 5 (Highly Speculative)
