Construction commencing as first US$6.4M in cash hits MNB bank account from Sovereign Wealth Fund.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 11,954,999 MNB shares and 4,069,999 MNB Options at the time of publishing this article. The Company has been engaged by MNB to share our commentary on the progress of our Investment in MNB over time.

US$6.4M in Sovereign Wealth Fund cash has just landed in MNB’s bank account.

MNB can now sign the civil construction contract.

Contractors are expected on site this month.

A second tranche of US$2.43M will be coming to MNB once the civil contractor is mobilised (this month)... and then a third tranche of US$1.17M shortly after.

Hints of a US $12M loan "close to being finalised" last week.

And the MNB Managing Director and former directors recently invested at 5c per share.

So it's finally starting.

The fun part...

$52M capped Minbos Resources (ASX:MNB)’s phosphate mine is forecast to deliver a ~US$55M in EBITDA per year (base case, on average) mine, over a 20 year mine life.

We expect the next batch of announcements from MNB should include construction progress...

Photos of earth being moved.

Concrete being poured.

Plant equipment (already purchased, delivered and sitting in a nearby warehouse) arriving to site.

The plant being assembled.

As a company moves out of the boring and difficult “secure project financing stage” into the “wow they might actually build this thing” phase, a company generally attracts more investor interest.

The only thing standing between them and a profitable mining operation is a construction and commissioning phase, and product sales.

(with their own sets of unique risks)

But it’s definitely gotten more real this morning with the first serious construction funds landing in MNBs bank account.

For a US$55M EBITDA per year mine and plant, its a pretty simple looking build that we hope can be delivered quickly:

(MNB’s proposed plant - Source)

MNB is planning to get its project into production by the middle of next year.

As we noted above, long lead items and key processing equipment have already been purchased and are waiting in a warehouse for the earthworks to be completed so they can be transported and assembled on site.

We went and it all for ourselves back in February of last year:

We also saw key plant parts arriving at port:

Once construction starts, there are no lead times for all these parts and equipment.

All the pictured plant equipment is currently in country and awaiting civils construction to be completed before moving into commissioning.

(they are stored in a facility less than 15 minute drive from where the construction site is).

The market has been waiting to see if MNB can get the funds secured to finish the build.

Delays in the funding and MNB running low on cash has seen MNB’s share price get beaten down to sub 6c...

But it looks like we are finally on now.

The funding package MNB has been working on is real and the first tranche of it has just hit MNB’s bank account.

As soon as that civil construction work starts, the rest of the cash from the Sovereign Wealth Fund starts rolling in:

(Source)

Now with the first tranche (US$6.4M) received we want to see the civils contract executed as soon as possible.

We are looking forward to seeing photos of the construction work commencing this month.

MNB to move up in the Lassonde Curve?

Lets face it, securing project financing is hard.

(and boring for investors and spectators)

But when financing starts coming in and a mine construction commences, the final prize becomes “more real” in the eyes of the market.

This is the basis of the “second wave” of interest into a small resource stock in the Lassonde Curve, invested by famous mining investor Pierre Lassonde.

The Lassonde Curve demonstrates the typical ‘value cycle’ for a mining discovery transforming into an actual mine.

The first peak is usually post discovery, however the “all-time highs” tend to occur when the project is put into production (assuming it makes it through the trough - developing projects is hard, even after an amazing discovery, and a lot don't make it).

We think MNB went through that first peak phase in 2021-2022.

The later stages of the Lassonde Curve is where valuations for projects typically get a second wind and are re-rated to be valued based on project cashflows.

As MNB starts construction and as the project gets closer to first production we expect to see MNB move up into the later stages of the Lassode Curve.

This is where we are hoping MNB moves into as construction progresses:

We think MNB’s project is moving into the phase where the Lassonde Curve signals a second run in a company’s valuation.

(MNB will be a interesting to watch if they can deliver this full finance package)

Here’s MNB’s share price chart as it stands right now:

The past performance is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Two weeks ago MNB Managing Director and Former Board Members invested at 5c per share.

A good sign for MNB two weeks ago was an investment of $300,000 from Managing Director Lindsay Read...

Former MNB chairman Peter Wall invested $325,000.

And former Director Bill Oliver invested $90,000.

At 5c per share.

This was through the exercise of director options that were granted years ago on successful tender of the phosphate project.

We always like to see directors buying stock...

and there is an old saying that ‘directors only buy shares in their company for one reason”.

MNB has two more key financing deals being worked on:

Today’s announcement related to one of three key deals that MNB is working on to unlock a US$14M loan from the Industrial Development Corporation of South Africa Ltd (“IDC”).

1. ✅ Secure US$10M equity funding (COMPLETED)

2. 🔄 Finalise a US$10M term loan (IN PROGRESS) - MNB is well advanced with Banco BAI, one of Angola’s largest banks.

Last week we noticed MNB released “preliminary terms” for the Banco BAI loan in a recent “cleansing prospectus”.

The announcement mentioned that a US $12M loan was close to being finalised and that it would be a 7 year loan with an interest rate of 7.5%.

Interestingly MNB wouldn't have to pay any principal for 24 months after production starts and no interest for the first 12 months of the loan.

That would be big for MNB during the ramp-up phase of the project.

We are hoping to see the loan finalised soon and think that the market will like the terms if they end up as they were shown in the cleansing prospectus released last week.

(Source)

3. 🔄 Convert an existing offtake MoU into a formal offtake agreement (IN PROGRESS) - MNB now has two MoU’s in play to convert into a binding offtake.

MNB just needs to deliver items (2) and (3) from above to unlock the $14M IDC funding and be fully funded to build their mine and processing plant.

The next big news events we are waiting for from MNB are:

• Civils contract executed and construction commenced
• Finalise the US$10M (or maybe US$12M as suggested above) Banco Bai loan.
• Formalised offtake agreement
• Completion of the US$14M IDC loan pre-conditions and finalisation of IDC loan

Ultimately, we want to see funding secured and MNB’s asset move into production which forms the basis for our Big Bet which is as follows:

Our MNB Big Bet:

“MNB delivers a 10x return by building a profitable phosphate project AND progressing its green ammonia project to construction phase.”

NOTE: our “Big Bet” is what we HOPE the ultimate success scenario looks like for this particular Investment over the long term (3+ years). There is a lot of work to be done, many risks involved - just some of which we list in our MNB Investment Memo . Success will require a significant amount of luck. There is no guarantee that our Big Bet will ever come true.

What are the short term risks to MNB?

The main risks right now are “project financing risk” and “delay risk”.

Financing risk

MNB needs to complete the entire funding package and IDC loan to build its mine and processing plant.

There is a risk that the final funding package takes longer than expected to finalise OR it isn't secured at all.

Any delays from a funding perspective could impact the time it takes for MNB to get to first production (and revenues) from the project.

Delays with construction could also further hurt the MNB share price. MNB has faced delays before and the market may punish MNB if further delays happen.

Construction Delays

Meeting construction timelines is hard.

If there are any unforeseen issues during the construction phase it may cause delays which we think could impact the company’s share price in the short term.

Later on once the plant is built, commissioning risk will start to become a factor here - but lets see MNB build its plant first.

Our MNB Investment Memo

Our Investment Memo provides a short, high-level summary of our reasons for Investing. We use this memo to track the progress of all our Investments over time.

Below is our MNB Investment Memo , where you can find the following:

• What does MNB do?
• The macro theme for MNB
• Our MNB Big Bet
• What we want to see MNB achieve
• Why we are Invested in MNB
• The key risks to our Investment Thesis
• Our Investment Plan