Minbos Resources Ltd (ASX:MNB) welcomes a sharp increase in global phosphate fertiliser prices and the positive impact on the company’s Cabinda Phosphate Project in Angola.
The company plans to produce Enhanced Phosphate Rock (EPR), the Cabinda Blend, with the product retaining a unique natural economic hedge.
The value of EPR is proportional to the price of competing Water-Soluble Phosphate (WSP) fertilisers, but at the same time around half the production costs of the phosphate rock/WSP Cabinda Blend are attributed to WSP.
As WSP fertiliser prices increase, EPR operating margins are anticipated to increase, however, if the WSP price drops, the production cost of EPR will also fall, delivering some protection against market variation.
Rise in prices
The commonly reported reference price for WSP fertilisers is DAB (Diammonium Phosphate) free on board (fob) Tampa, USA.
In December 2019 DAP fob Tampa was US$248 per tonne as Minbos submitted its winning tender for the Cabinda Phosphate Project.
By August 2020 this had risen to US$328 per tonne as the company published a scoping study for the project.
Prices touched US$497 per tonne in the first week of February 2021, a doubling of prices since Minbos submitted its successful tender.
Phosphate prices are expected to increase after a long period of depressed prices due to production capacity constraints, the US-China trade war and reduced plantings in the US due to adverse weather events.
The price trend has been accelerated by counter veiling duties imposed by the US on other major producers, supply chain disruptions due to COVID and a sharp uptick in many agricultural commodities.
Higher margins
Minbos CEO Lindsay Reed said: “The Cabinda Blend natural hedge means we can set higher margins for increased profitability and lower relative prices for customers.
“COVID has increased awareness of supply chain disruptions and food security.
“Localising agricultural inputs is a great strategy for Angola.”
Plans to capitalise
The Cabinda Phosphate Project plans to granulate a blend of approximately 85% phosphate rock with 15% MAP (Monoammounium Phosphate).
MAP trades near parity with DAP and, at the end of first week of February 2021, was also quoted at US$497 per tonne fob Tampa.
The International Fertiliser Development Centre (IFDC) recommended MAP for the Cabinda Blend based on 40 years of experience.
MAP is the preferred WSP blending ingredient because it not only provides early phosphate availability for root development but because it has a low pH of dissolution (acidic) it promotes the ‘enhancement effect’ to initiate the dissolution of the phosphate rock.
The company is in an important stage of development with significant opportunities in both the near and long-term.
