Two main projects which they claim as world-class deposit.
Current Mkt Cap = $123M with 227M shares issued.
1. Namibia Project - 49% ownership by MAK (indirect & direct ownership). Namibia is in Africa and this project is an offshore project, which basically means that they're mining from the seabed. MAK plans to use dredging boats to get the job done. They claim to have Indicated resource of 73.9M tonnes @ 20.57% P2O5 (worth US$2.28B based on price of US$150/tonne) and Inferred Category of 1507M tonnes at 18.7% (worth US$42.2B).
2. Wonarah Project - 100% ownership.
So far, it is hard to find a comparable company to evaluate how much MAK's price would go up to.
So far, it is hard to find a comparable company to evaluate how much MAK's price would go up to.
Phosphate producers in Australia are listed as follows( http://www.australian-phosphate.com/phosphate-stocks.html ) However, there are not any companies in ASX that's actually producing phosphate rock only. Incitec Pivot is the only company that's producing phosphate, but they are an integrated producer (upstream & downstream), i.e. they mine the rock phosphate at Phosphate Hill (producing 2M tonnes/year) and then use sulphuric acid from nearby manufacturing facilities to manufacture fertiliser directly and sell fertilisers directly into the market. Incitec Pivot's mkt cap is A$7.52B with 1.63B share issued. Phosphate Hill has 89.9MTonnes (@24.3% P2O5) back in 2003. They mine 2M tonnes/year, so that means their proved and probable reserves now is probably 74M tonnes now.
Seabed rock phosphate mining is not a common practice, in fact, there's no company that can be found to have done it. Someone however, has thought of doing it in New Zealand:
This seems to be a new way of applying existing technology of dredging. Hence, the Namibia project seems to be still quite innovative and fairly new method of producing phosphate rocks. The environmental application process could be a torturous path as this process involves the release of water back into the sea as the boat dredges the seabed. (If you've watched the dredging methodology shared by the company in a recent presentation, you'll be able to see how much water is pumped straight into the sea as the dredging continues).
MAK seems to have a lot of appetite for new technology. They've bought a stake of 6.67% in FDC, which is a USA Florida-based company that's developing a dry kiln technology and filed for a patent. This technology will allow conversion of rock phosphate to phosphoric acid without much use of sulfuric acid. MAK is keen to get further downstream into processing their rock phosphate into fertilizer just as what Incitec Pivot is doing now. However, due to the unavailability of a sulfuric acid plant nearby to provide feedstock to MAK plant, they've got to import sulfuric acid or to manufacture it themselves by importing sulfur. If FDC's patent works, then MAK will be the 1st plant to be built in this world that's using the newly patented fertilizer production process.
If MAK just sell their ore as DSO (Direct Shipping Ore), then, they'll need to build a 260km railway to link to the Adelaide-Darwin railway. This option is not one that's adopted by the company now as it's not that economical.
Until now, it's not easily verified how much Indicated and how much Inferred resource MAK actually has. They're not releasing reports on "upgrade on resource" kind of statements. There's a statement in the Dec 2010 quarterly activities that say: "Only about 15% has been drilled sufficient densely as yet to enable JORC & NI43-101 resource estimations, but those sub-areas contain an estimated 620Mt @ 18%P2O5 using a 10% cut-off, totalling the Indicated (289Mt @18.5%) and the Inferred categories (331Mt @17% P2O5)." Based on this, it seems that they don't have any JORC-compliant categorization of their resource yet.
Until now, it's not easily verified how much Indicated and how much Inferred resource MAK actually has. They're not releasing reports on "upgrade on resource" kind of statements. There's a statement in the Dec 2010 quarterly activities that say: "Only about 15% has been drilled sufficient densely as yet to enable JORC & NI43-101 resource estimations, but those sub-areas contain an estimated 620Mt @ 18%P2O5 using a 10% cut-off, totalling the Indicated (289Mt @18.5%) and the Inferred categories (331Mt @17% P2O5)." Based on this, it seems that they don't have any JORC-compliant categorization of their resource yet.
Also, MAK seems quite scattered in their focus-area on minerals. They're trying to mine for tin, tungsten & fluorospar in Tasmania through TNT Mines Ltd, gold in Tasmania through BCD, and another project in Namibia which they haven't done any work on it so far. The company ought to focus on a FLAGSHIP project, and it's possible that Namibia is further down the track than the Wonarah Project. This is because the Wonarah Project may need more time to prove the usability of the new dry kiln technology.
Nevertheless, phosphate rocks are something that is really worth looking at. The world is running low on fertilizers soon as population grows and need more food. If you can find another company mining for rock phosphate, please let us know. J
By: Peter Koay
Equity Analyst
Equity Analyst
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