It’s getting real: MNB signs term sheet for a further US$12M to build its mine - construction commencement announced yesterday.

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 11,954,999 MNB shares and 4,069,999 MNB Options and the Company’s staff own 357,144 MNB shares and 357,144 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.

Suddenly, it’s all happening at once for Minbos Resources (ASX:MNB)...

$75M capped MNB’s phosphate mine is forecast to deliver ~US$55M in EBITDA per year (base case, on average) mine, over a 20 year mine life.

(if they can secure the construction finance and then successfully build it...)

MNB has been working on funding to build this mine for over 2 years.

After many delays in financing and construction, the market punished the MNB share price.

But this week the MNB announcement floodgates have opened:

• Monday - The first Sovereign Wealth Fund cash hits MNB bank account (US $6.4M out of US $10M)
• Yesterday - Civil construction contract signed - contractor begins mobilising to site. Completion date for works set as “12 May 2025”
• This morning - US$12M credit facility final term sheet signed with Bancio BAI (Angola’s biggest bank).

A big win for MNB was the grace clauses in the credit facility - MNB don't have to pay interest for 12 months and no principal repayments for 24 months.

That should give MNB heaps of flexibility to focus on ramp up during the critical first few years of production.

After today’s news MNB has only one financing deal left to unlock to be fully financed for the mine build:

1. ✅ (Completed) US$10M from the Angolan Sovereign Wealth Fund
2. 🔄 (Today’s news) US$12M Term loan from Banco BAI
3. 🔄 US$14M loan from the International Development Corporation (IDC) of South Africa

MNB has already executed that loan with the IDC, the only conditions left before MNB can access the cash are:

• Finalised loan with Banco BAI (today’s news)
• Binding offtake agreement (MNB already has an MoU in place... it just needs to convert it into a binding deal)

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)

And today MNB just announced ANOTHER financing milestone.

And the market looks like it's starting to believe again that MNB is actually going to build this US $55M EBITDA per year mine.

So why is MNB only trading at sub 10c? At a ~$75M market cap?

And why has the price been running up the last few weeks?

Back in 2023 MNB used to comfortably trade in the high teens (12c to 20c)

At the time they “were about to commence” securing finance and then quickly build the mine.

But delay after delay shook the market's trust that MNB could get it done, and a botched cap raise in April this year saw MNB trading at some pretty low lows.

The Feb-Apr botched cap raise kicked off a period of lowest ebb in market trust in MNB’s ability to secure financing and commence the build.

Back in July we wrote about what led to the market trust being low and why the MNB share price was trading at ~5c

We predicted that IF MNB could restore market faith with several key financing and construction announcements, the share price would start running back up from the lows.

(Source Next Investors July 2024)

This week MNB has sent a strong message to the market that they are finally getting it done and construction has commenced.

it’s definitely gotten more real this week with:

1. The first serious construction funds landing in MNBs bank account
2. Civil contract being signed and contractor mobilising to site
3. and this morning the $US 12M Banco Bai loan term sheet getting signed

And MNB had been coming off a very low base of expectations after all the previous delays.

And the share price run is showing MNB is winning back the trust of the market by getting it done.

Which is why we think a material re-rate for MNB is finally going to happen.

Here is what MNB’s US$55M in EBITDA per year mine and plant will look like when construction finishes...

It's a pretty simple looking build that we hope can be delivered quickly:

(Source)

Yesterday MNB signed up a civil contractor... Scheduled to complete May next year.

“Concrete foundations now underway”

This week MNB signed civil construction contracts for its Phosphate Fertilizer Plant in Angola.

Mobilisation to MNB’s project “is underway with siteworks commencing this month”.

AND the contract has a “Completion Date” of “12 May 2025”.

That means by May of next year, MNB will have all of the foundations in place to start putting its Phosphate plant together.

It's good to see MNB moving fast only a few days after the initial US$6.4M cash was received from the Angolan Sovereign Wealth Fund as part of its US$10M Investment into MNB’s project.

Today, MNB signed a final Term Sheet for a US$12M working capital facility with Banko BAI - Angola's largest bank.

The loan funds will go toward constructing the plant and getting it ready for first production.

Now we get to see MNB benefit from all of the work that has already been done getting its project to where it is.

MNB’s plant and long lead items are already in Angola which is why the contract completion date is less than six months.

We went and saw it in person back in February last year.

(More on our site visit later in today’s note...)

All of this equipment is in storage and only needs to be transported to site.

(It’s about a 15 minute drive away).

So MNB is a lot closer to being production ready than any other company that would be starting civil construction works...

MNB to move up in the Lassonde Curve and quickly?

With construction now underway, we are hoping MNB can move from development purgatory (waiting for financing) to an operating mine as quickly as possible.

The quicker the company can get into production the quicker the market can start valuing it as a producer:

Moving from development into production is where mining projects typically see the biggest valuation uplift.

(per the Lassonde Curve).

MNB is slowly ticking off financing milestones for the project which we think is the precursor for a move up that 2nd wave on the Lassonde Curve.

Here’s MNB’s share price chart as it stands right now and how it has been reacting to all the news so far:

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.

MNB has ONE more key financing deal left to secure

We mentioned earlier that MNB was working toward locking in three key financing deals:

1. ✅ US$10M from the Angolan Sovereign Wealth Fund - first funds from this have already been received.
2. 🔄 US$12M Term loan from Banco BAI - the news today relates to this one. MNB now have a final term sheet done for this and expect to formalise the agreement over the coming months.
3. 🔄 US$14M loan from the International Development Corporation (IDC) of South Africa - MNB has already executed this loan agreement. Before MNB can begin drawing these funds down it needs to execute the two remaining conditions to the loan (offtake agreement and the US$12M term loan getting finalised).

After today’s news, the only real hurdle left for MNB to start drawing down the IDC loan is the offtake agreement with Grupo Carrinho.

MNB already has an offtake MoU with Grupo Carrinho - we just need to see that MoU get converted into a binding offtake deal.

Once complete, MNB should have more than enough cash available to draw down to get its project built, and in production.

MNB moving into production is a big part of our Big Bet for the company 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.

Biden heads to Angola in the final days of his US Presidency

With just 50 days left of Joe Biden’s presidency he has decided to make his first trip to Africa in his four years in office.

There is not much time left for Biden to get things done.

So this trip highlights just how important the relationship is for the US and Angola that Biden made the visit in his last remaining days in office.

On the last day of his visit the presidents of Angola, Congo and Zambia and the vice president of Tanzania joined Biden for a summit in Lobito - the site of the giant railway project funded by the US Government.

The purpose of the trip was to strengthen ties between the African nations and show support for the Lobito rail link that the US has funded to build.

This is a major infrastructure project that links the Port of Lobito through to the mines in DRC and Zambia along the Copperbelt.

We visited that Port and it was a BIG shipping hub:

So far the US has provided US$550M in funding to support the railway project, and it highlights the importance of these critical minerals to the US.

We think that MNB’s second project, for Green Ammonia project will benefit greatly from this project.

This is because the railway link provides a direct line from Angola to the mines in Zambia where MNB is likely to sell its ammonia explosives product.

MNB’s green ammonia project has access to some of the cheapest renewable energy in the world...

At just US$0.004 per kilowatt hour...

The focus for MNB has been on securing the funding for the phosphate/fertilizer project for the last six months, but we expect things to move quicker on the ammonia project now that construction has begun.

Why this railway project is so important to MNB is that it gives the company direct access to potential end product users by train.

Also, it allows the company to capture the “Africa Inland Premium” on its products sold within Africa.

This rail infrastructure project significantly improves the economics for MNB’s ammonia project, we discuss this more in our deep dive on the Technical Study published by MNB last year: MNB reveals first glimpse of green ammonia project - Financiers now circling

Our visit to MNBs phosphate project.

Given the US president was in Angola and MNB has delivered so many key announcements this week, we wanted to re-share the section of our MNB site visit that focused on MNB’s phosphate project and the Lobito corridor.

Now that its all getting very real - Here is the excerpt from our MNB site visit (February 2023) focusing on the phosphate project:

On our first day we saw MNB’s actual phosphate deposit and drove the well maintained roads to get there. Building work has already commenced:

Here is the access bridge getting built to allow heavy machinery to access the phosphate deposit.

The bridge needed to be strengthened so trucks carrying loads of mined phosphate can access the main road, which is literally about 100m from the phosphate deposit:

We drove to the site where MNB’s phosphate processing plant will be built - confirmed it is near roads and power, plus just 16km to the existing port and 34km from the phosphate deposit:

Phosphate processing plant - coming soon:

We drove past the existing port, it took 15 minutes on well-maintained roads, we also saw other trucks - which is a good sign of nearby industry:

We also visited the new higher capacity Porto de Caio that was being constructed. This port is a lot bigger and able to handle larger ships, which could increase the size of individual phosphate shipments made by MNB:

We saw the warehouse that stored parts of the phosphate processing plant that had already arrived in the country, and also saw MNB’s new fleet of cars that will work on the project, allowing the growing in-country team to move around project sites.

Seeing the plant parts and new fleet of cars in the warehouse made the project progress feel very real:

We did not have clearance to enter the port where the other recently arrived plant parts had just arrived on a ship, but one of the MNB in-country team called in a favour to the ship's captain to send some photos of parts of the phosphate processing plant in the port:

(Note: these are not our photos. We did not sight these components with our own eyes)

This is as close as we got to seeing the parts that were still on the ship when it arrived at port:

You can see how all of these plant parts are going to be stitched together in the flow diagram image from MNB’s latest announcement:

Source: MNB Announcement

The next day we flew 500km south to the Benguela Corridor and the Port of Lobito. Here we saw the port where fertiliser shipments will be received for distribution into inner Angola and surrounding countries via the Benguela rail line.

It was a timely visit with the announcement that Angola together with its regional neighbours Zambia, and Democratic Republic of Congo (DRC) had taken major steps to create a trade corridor that could transform how the region’s resources are exported.

Transport ministers for the three countries signed an agreement to facilitate transport through the Lobito Corridor, which will connect the port of Lobito in Angola with regions that contain many active mining operations in Angola, Zambia and DRC.

Source: Bloomberg

Basically this means MNB could have access to new markets in new countries via this newly established trade and resource shipment corridor.

That same day we drove past Angola’s largest grain co-operative, an example of the type of organisation that could be the end buyer and distributor of MNB’s fertiliser:

Finally, we visited a “test farm” where samples of MNB’s phosphate are being trialled to optimise growing and crop yields for various crop types in the local region:

Batch 14 looks like a winner:

So in summary, we saw the phosphate deposit itself, drove the roads to the processing plant and then on to the port - the roads and power infrastructure looked excellent and well maintained.

Seeing the processing plant components at the warehouse and the work commenced at the site of the deposit was very encouraging to our hope that MNB will deliver first production in 2023.

You can read the full site visit article here.

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