Three stocks to watch for the next few weeks
7 minute read
Three stocks in our portfolio are catching our eye this week for various reasons - MNB, GTR and BPM.
Minbos Resources (ASX:MNB)
Minbos Resources (ASX:MNB) is developing a large phosphate resource in Angola that has the potential to dramatically transform the country’s food security and crop yields.
Phosphate is the key ingredient in fertiliser - something Angola desperately needs in local supply so that it can grow its agriculture industry, and eventually export.
We have been invested in MNB for over a year. We invested because MNB’s Scoping Study indicated just US$27M CAPEX will get them an after tax Net Present Value (NPV) of between US$159M and US$260M, and we believe phosphate prices will continue to be strong as global food security comes into play.
The high end Scoping Study NPV of $US260M was using a phosphate price PRIOR to 2021's ongoing phosphate price surge. With prices now hitting 13 year highs and last week China banning phosphate exports to keep a lid on their local prices, it appears that phosphate prices will continue to rise.
The phosphate price is even higher now a few months later...
We think the ongoing fertiliser and phosphate price rises combined with MNB hinting at a green ammonia project has been the cause of the MNB share price run from ~13c to ~18c over the last few days.
We think the MNB share price is running for these reasons:
- Fertiliser prices have been surging. The higher the fertiliser price, the better the economics of MNB’s phosphate project based on its scoping study. Again, Here are our rough calculations of MNBs net present value we did back in July when we first noticed the fertiliser price was running - it’s even higher now.
- News overnight: China is imposing hurdles on fertiliser exports, in an attempt to keep fertiliser in country as it deals with its own surging power prices and concerns over food production. This move could worsen a global fertiliser price shock and food inflation - read it here on Bloomberg.
- MNB is planning a Zero Carbon Green Ammonia project. Last Saturday we wrote about how green hydrogen/ammonia is getting mainstream attention. With a green ammonia project in their back pocket, we think that MNB will be well placed to capitalise on this trend. Here is our commentary from back in April from when we first noticed MNB had announced their green ammonia project. Also check out MNB’s twitter feed for some more interesting info...
Speaking of surging commodities that the world is facing widespread shortages of... it’s time to talk about uranium.
GTi Resources (ASX:GTR)
Our long term uranium investment GTi Resources (ASX:GTR) has two uranium exploration projects in the USA, and is about to start an exploration work program in Utah.
GTR’s share price seems to be tied to the uranium price - and the uranium recent price surge has been good for GTR holders.
We like GTR right now because uranium is inescapable in the news...
Earlier this month, spot prices jumped above the $48 a pound - a mark that was last breached in 2012, and almost double what the price was 12 months ago.
Recent developments have fueled the demand surge:
- The world's first and largest physical uranium exchange-traded fund, Sprott Physical Uranium Trust began trading in July, and has been accumulating uranium ever since. It now holds over 32 million pounds U3O8 (12,300 tU).
- The world's largest uranium miner, Kazatomprom, announced on Monday that it will back a new physical uranium fund similar to the Sprott model.
- In a powerful symbolic moment for the proponents of nuclear power, Japan announced this week that it would restart 30 nuclear reactors in order to reduce its carbon emissions. It’s taken a decade or so for the uranium market to recover from the Fukushima nuclear disaster of 2011, but its time in the sun appears to be now.
- Here is the Canadian Secretary of Energy Jennifer Granholm discussing the future applications of nuclear energy yesterday:
We think that the drums of a macro-level thematic are starting to beat louder for uranium, whereby it is now seen as a key part of the solution to decarbonising the planet.
If nuclear energy can displace more fossil-fuel based energy sources, then less carbon is emitted into the atmosphere. This is crucial when striving for net zero emissions targets that are set to be discussed at the upcoming UN backed Climate Change Summit in Glasgow next month - a big “watch this space”.
We believe that the current positive market sentiment for uranium equities is not a flash in the pan, and so are keen to see how our investment in GTR pays off in the months and years ahead.
On the corporate front, GTR just raised $1.49M via a share purchase plan to existing holders at 1.5c, in addition to $2.6M it raised in August just as it acquired its new Wyoming uranium projects... literally days before the new uranium price run - finally some luck for GTR, read our commentary in our most recent GTR article.
GTR has circa $5M in cash now and is ready to get to work on exploration.
A portion of 1.5c shares are scheduled to come onto the market this week - given the current share price is over 3c, there might be some selling... on the other hand - given the buoyant market for uranium, and upcoming GTR drilling - maybe there won't be.
We continue to watch the uranium spot price every night and uranium in the mainstream media.
BPM Minerals (ASX:BPM)
We invested in BPM because of its exploration projects that are next to (and importantly on the same geology as) Rumble Resources' lead-zinc discovery that spiked its share price in April by 8x. Rumble Resources (ASX:RTR) is currently capped at $316M.
BPM is currently capped at just $13.5M and one of the smallest market cap stocks we own.
Notably in the last week, Strickland Metals (ASX:STK), who are right next door and on the same geology as Rumble (and BPM) ALSO just made a lead zinc strike (and the share price spiked). This bodes very well for BPM’s upcoming first drill in a couple of months.
We are hoping BPM can ALSO make a nice discovery near Rumble and now Strickland in the Earaheedy basin. Given BPM is a tiny stock, it is extremely leveraged to a successful result. But at the same time - it is a risky investment, as the project is at such an early stage..
So two NEW external factors now working in BPM’s favour before drilling are:
- The zinc price is running, reaching a 14-year high of $3,944 per tonne recently. This is on the back of supply cuts from a host of big Asian and European producers dealing with spiking power costs and electricity rationing.
- Just like Rumble, Strickland Metals confirmed a similar Mississippi Valley Type lead-zinc discovery:
That's now two companies that have made a high grade lead-zinc discovery in the Earaheedy Basin.
Strickland’s share price moved from a close of 7.2c the day prior to as high as 12.8c on the day of the news - a 77% gain. Now Strickland is a different beast to BPM - it's much bigger, with a $88M market cap and an established gold resource in WA - on top of the new discovery at its Rumble lead-zinc nearology project.
Remember BPM is capped at $13M... if BPM can get a similar kind of drill hit, we would expect the BPM to react upwards too....
BPM’s third and most advanced Earaheedy Basin Project is scheduled for grant in mid-November. Native Title agreements are well advanced. We would expect BPM to launch a drilling campaign soon after...
Our BPM investment strategy:
Like with all our early stage exploration investments, our plan with BPM is to invest way before the drilling starts (done) and wait patiently while all the pre drilling prep work happens (now), then aim to sell a small portion before the drilling campaign starts once the price starts running, then hold a position for the drill campaign and hope for a lead-zinc hit.
BPM has steadily traced down from its 57.5c highs in May - and is now under 30c - just as it gets closer and closer to actually drilling.