CeN's Two Cents test post content
Tuesday, 25 June 2013
Monday, 1 April 2013
Still no growth in the fallow fertiliser sector
In fact, not really since the heady days of 2008 when phosphate prices soared well past their historical trends and stocks such as the then recently listed Minemakers (MAK) delighted its shareholders by hitting $2.58 in April that year.
The stock now sits at 13.5c, the world-class Wonarah project in the Northern Territory remains undeveloped, its 842 million tonnes grading 18.1 per cent still awaiting the right economics.
Transport costs have been the killer, so now MAK is working on a plan to produce downstream products such as superphosphoric acid rather than load phosphate rock on trucks and trains and haul it to Darwin. At present prices of between $US180 and $US200 a tonne, that simply does not work. SPA commands over $US1000/tonne.
MAK is also partnering with Balamara Resources (BMB) if the latter beats the other two international consortia bidding for a huge deposit in Togo.
Meanwhile, Phosphate Australia (POZ) is contemplating selling its NT deposit as it now prefers gold.
And investors seem to have lost interest in the sector notwithstanding the fundamentals looking as good as ever. Brazilian explorer Aguia Resources (AGR) may recently have announced a new discovery, but that has not prevented its stock price eroding. It fell 16.7 per cent on Thursday, taking it to a 52-week low of 10c. Minbos Resources (MNB) has been making considerable progress in Angola and in Congo-Kinshasa but to little avail so far as investors are concerned, the stock languishing at 3.7c.
The one seeming winner so far is Krucible Metals (KRB) which, if all goes according to plan, will in a few weeks get its hands on $12 million after selling several of its Queensland phosphate tenements to fertiliser manufacturer Daton Group Australia (DTG).
But back to those fundamentals.
Australia is the fifth-largest user in the world (behind China, India, the US and Brazil). Fertiliser is going to become increasingly crucial to the world's ability to feed itself, with global per capita arable land expected to drop from 0.46ha now to 0.21ha by 2039.
In the shorter term, any political eruptions in the zone running from Morocco to Syria could disrupt a large percentage of the world's phosphate production.
Just as gold hovered about the $US40 an ounce mark for decades, so between the mid-1980s and 2006 phosphate rock was stuck at about $US50/tonne. In 2008, phosphate went over $US500/tonne before the GFC pricked that bubble.
But, as Aguia notes in a presentation delivered on Thursday, those high prices opened up the phosphate business to juniors. There were five phosphate juniors globally in 2006; now there are 25. But, as usual, the Canadians value their companies more highly: the 12 phosphate juniors listed in Toronto are worth a total of $759m, while the 10 on the ASX have a combined cap of $180m.
There is a case to be made that big investors and joint-venture partners won't look at any phosphate project with less than one billion tonnes.
Which is the rationale behind Rum Jungle Resources (RUM) last week issuing its bidder's statement in the hostile lunge at Central Australian Phosphate (CEN). The two companies have adjacent projects in the Northern Territory, located just 80km from the rail line running to Darwin.
RUM's case is that, together, the projects have the chance to prove up more than that one billion tonnes, and a merger would mean only one logistics outlay -- either a slurry pipeline, road or spur railway to get the phosphate to the Darwin line.
And it would mean access to capital. RUM's largest shareholder is the deep-pocketed Washington H. Soul Pattinson (SOL). Investor Lion Selection Group (LSX) is also on the register.
But, apparently, there's not much enthusiasm for the plan over at CEN -- which does not suggest an early resolution.
And, surely, some junior is soon going to break out of the ennui engulfing much of our phosphate sector.
The D-word
DIAMONDS have not been an investor's best friend, having been the riskiest of the speculative exploration sectors. Plenty of juniors have ended up on the rocks (and not the diamond ones) looking for the stones.
But Canaccord Genuity's Warwick Grigor -- who more than a decade ago issued a scathing report on the diamond juniors -- thinks he's found a potential gem, and has recommended his clients have a butchers at Goodrich Resources (GRX) which recently bought the Ellendale diamond mine in Western Australia. Well, clearly, some of his clients did just that because after the note went out on email the stock jumped 14.3 per cent to 20c.
Grigor reckons Ellendale is the acquisition of the decade. The mine supplies 50 per cent of the world's fancy yellow diamonds marketed by Tiffany (which recently hiked the price from $US3800 a carat to $US5000). Unlike other new diamond entrants, Goodrich (soon to rename itself Kimberley Diamonds) doesn't face all those years of exploration and development. It is buying an operating mine from its British owner (which deemed Ellendale at near its end).
Grigor thinks they sold too soon: there will be four more years of diamond extraction, possibly more (and he says there are diamonds to be recovered from the tailings dam). The Brits paid $300m for the mine and sold it for $3.2m cash upfront. He sees GRX having net cash flow of between $30m and $40m.
We've also been meaning to draw your attention to Miles Kennedy's Lucapa Diamond Co (LOM) which recently announced its Angola project hosts type IIa diamonds, described as "the world's rarest and most valuable gems".
These type of diamonds account for less than 1 per cent of global supply and all the world's most famous large white flawless diamonds (including the Star of Sierra Leone and the Lesotho Promise) are type IIa, the company says.
But can the once-bitten diamond stock investors out there become enthusiastic yet again about diamond stories? Are shoulders drooping just at the mention of the D-word?
The stock now sits at 13.5c, the world-class Wonarah project in the Northern Territory remains undeveloped, its 842 million tonnes grading 18.1 per cent still awaiting the right economics.
Transport costs have been the killer, so now MAK is working on a plan to produce downstream products such as superphosphoric acid rather than load phosphate rock on trucks and trains and haul it to Darwin. At present prices of between $US180 and $US200 a tonne, that simply does not work. SPA commands over $US1000/tonne.
MAK is also partnering with Balamara Resources (BMB) if the latter beats the other two international consortia bidding for a huge deposit in Togo.
Meanwhile, Phosphate Australia (POZ) is contemplating selling its NT deposit as it now prefers gold.
And investors seem to have lost interest in the sector notwithstanding the fundamentals looking as good as ever. Brazilian explorer Aguia Resources (AGR) may recently have announced a new discovery, but that has not prevented its stock price eroding. It fell 16.7 per cent on Thursday, taking it to a 52-week low of 10c. Minbos Resources (MNB) has been making considerable progress in Angola and in Congo-Kinshasa but to little avail so far as investors are concerned, the stock languishing at 3.7c.
The one seeming winner so far is Krucible Metals (KRB) which, if all goes according to plan, will in a few weeks get its hands on $12 million after selling several of its Queensland phosphate tenements to fertiliser manufacturer Daton Group Australia (DTG).
But back to those fundamentals.
Australia is the fifth-largest user in the world (behind China, India, the US and Brazil). Fertiliser is going to become increasingly crucial to the world's ability to feed itself, with global per capita arable land expected to drop from 0.46ha now to 0.21ha by 2039.
In the shorter term, any political eruptions in the zone running from Morocco to Syria could disrupt a large percentage of the world's phosphate production.
Just as gold hovered about the $US40 an ounce mark for decades, so between the mid-1980s and 2006 phosphate rock was stuck at about $US50/tonne. In 2008, phosphate went over $US500/tonne before the GFC pricked that bubble.
But, as Aguia notes in a presentation delivered on Thursday, those high prices opened up the phosphate business to juniors. There were five phosphate juniors globally in 2006; now there are 25. But, as usual, the Canadians value their companies more highly: the 12 phosphate juniors listed in Toronto are worth a total of $759m, while the 10 on the ASX have a combined cap of $180m.
There is a case to be made that big investors and joint-venture partners won't look at any phosphate project with less than one billion tonnes.
Which is the rationale behind Rum Jungle Resources (RUM) last week issuing its bidder's statement in the hostile lunge at Central Australian Phosphate (CEN). The two companies have adjacent projects in the Northern Territory, located just 80km from the rail line running to Darwin.
RUM's case is that, together, the projects have the chance to prove up more than that one billion tonnes, and a merger would mean only one logistics outlay -- either a slurry pipeline, road or spur railway to get the phosphate to the Darwin line.
And it would mean access to capital. RUM's largest shareholder is the deep-pocketed Washington H. Soul Pattinson (SOL). Investor Lion Selection Group (LSX) is also on the register.
But, apparently, there's not much enthusiasm for the plan over at CEN -- which does not suggest an early resolution.
And, surely, some junior is soon going to break out of the ennui engulfing much of our phosphate sector.
The D-word
DIAMONDS have not been an investor's best friend, having been the riskiest of the speculative exploration sectors. Plenty of juniors have ended up on the rocks (and not the diamond ones) looking for the stones.
But Canaccord Genuity's Warwick Grigor -- who more than a decade ago issued a scathing report on the diamond juniors -- thinks he's found a potential gem, and has recommended his clients have a butchers at Goodrich Resources (GRX) which recently bought the Ellendale diamond mine in Western Australia. Well, clearly, some of his clients did just that because after the note went out on email the stock jumped 14.3 per cent to 20c.
Grigor reckons Ellendale is the acquisition of the decade. The mine supplies 50 per cent of the world's fancy yellow diamonds marketed by Tiffany (which recently hiked the price from $US3800 a carat to $US5000). Unlike other new diamond entrants, Goodrich (soon to rename itself Kimberley Diamonds) doesn't face all those years of exploration and development. It is buying an operating mine from its British owner (which deemed Ellendale at near its end).
Grigor thinks they sold too soon: there will be four more years of diamond extraction, possibly more (and he says there are diamonds to be recovered from the tailings dam). The Brits paid $300m for the mine and sold it for $3.2m cash upfront. He sees GRX having net cash flow of between $30m and $40m.
We've also been meaning to draw your attention to Miles Kennedy's Lucapa Diamond Co (LOM) which recently announced its Angola project hosts type IIa diamonds, described as "the world's rarest and most valuable gems".
These type of diamonds account for less than 1 per cent of global supply and all the world's most famous large white flawless diamonds (including the Star of Sierra Leone and the Lesotho Promise) are type IIa, the company says.
But can the once-bitten diamond stock investors out there become enthusiastic yet again about diamond stories? Are shoulders drooping just at the mention of the D-word?
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