African Development Bank considering $1b funding for agriculture
The African Development Bank is working on a $1 billion emergency facility to support governments and farmers who are facing challenges brought about by rising fertiliser prices.
The funding was covered in the following news piece, “AfDB mulls $1bn emergency facility to tackle rising prices of fertiliser“.
African Development Bank’s director Mr Martin Fregene explained in the article that, “Rural infrastructure like storage and rural roads is what we need our countries to fix. The reason why Africa turns to Russia and Ukraine to buy cheap wheat and maize, is that our local production is not competitive”.
Fregene also told the media that the African Development Bank was considering tapping ~$1 billion in emergency funding facilities to ease the pressure on rising fertiliser prices by supporting governments and farmers.
Our African food security investment Minbos Resources (ASX: MNB) is sitting on a large phosphate resource in Angola that has the potential to dramatically transform the African continent's food security and crop yields.
MNB is currently completing a Definitive Feasibility Study that is expected to be completed in Q3 of this year. This will include updated figures from its 2020 Scoping Study, which already demonstrated that MNB’s project economics were robust enough to move forward with development.
The 2020 Scoping Study used a US$357-482 per tonne phosphate price (MAP price), which gave the following project economics:
- Post-tax NPV of US$191-308M (A$260-420M).
- Low upfront CAPEX of US$22-28M (A$30-38M).
- 21 year mine life.
Fertiliser prices are now trading at multiples of the US$357-482/t figures MNB used in its Scoping Study.
Prices are now above US$1,200/t, which we suspect will increase the attractiveness of the project for financiers.
Given the CAPEX requirements are not high, MNB is moving forward with the development of the project, concurrently with the DFS. MNB’s plant commissioning is still on track for H1 2023.
With the African Development Bank now recognising something needs to be done to secure African food supplies, the macro tailwinds for MNB continue to get stronger.
To see all of the reasons why we continue to hold MNB in our portfolio, what we want to see the company achieve for the rest of 2022 and the key risks to our investment thesis, check out our 2022 MNB Investment Memo here.
