MNB project financing update
Our fertiliser and green ammonia Investment Minbos Resources (ASX: MNB) just put out a project financing update on its fertiliser project in Angola.
MNB is currently building its phosphate fertiliser project, working toward first production.
At the same time MNB is progressing its Green Ammonia project toward a Pre Feasibility Study.
We have been Invested in MNB since August 2020 and we are hoping to see first production from the phosphate project in Angola in Q2 2025.
(yes, an actual producing mine, it will be our first ever Investment that reaches production)
The only hurdle between now and then is for MNB to lock in financing for the remaining project CAPEX.
In today’s announcement MNB confirmed that to date ~US$12.5M has been spent on the project and a further US$24M is needed to get the project into production.
After a couple of false starts MNB is starting to get closer to getting that financing nailed.
Today, MNB put out an update on the US$14M loan due to be received from the Industrial Development Corporation of South Africa Ltd (“IDC”).
The loan was conditional on MNB completing a set of conditions (see below), and today’s announcement gave us a small update on all of those conditions.
Update on the conditions to the US$14M loan:
- Project security - MNB said the securitisation process is expected to be completed in the coming weeks. This looks like a relatively straightforward legal exercise and we think is one of the easier to complete conditions MNB needs to satisfy.
- Evidence of the US$11M funding - MNB mentioned today that it was in discussions with the The Angolan Sovereign Fund (“FSDEA”) for a US$10-15M equity Investment. That on its own would be enough to satisfy this condition of the loan. MNB said site visits and due diligence were ongoing and that an update on this is expected in mid-July.
- Evidence of a US$10M term loan facility - MNB confirmed it had approached several banks in Angola and that the company was “well advanced in a loan application process with Banco BAI (“BAI”), one of Angola’s largest banks”. MNB expects to hear back from the bank “shortly”.
- Converting the offtake MOU into a signed offtake - MNB previously announced an MOU for offtake with Grupo Carrinho (we covered that news here). MNB confirmed that it expected to have that MOU converted into a formal offtake agreement in the coming weeks.
Overall to us, it looks like MNB is expecting to have most of these conditions largely complete within the next few months.
Our view is that the way the conditions are structured, MNB will probably have to finalise one before any of the others get done, i.e without a signed offtake the banks might be unwilling to lend etc.
So, once we get news regarding one of the above, the rest should all start to fall in order slowly…
We think the offtake and the potential investment by the Sovereign Wealth Fund of Angola will be the two key catalysts to unlock the rest of the financing deals…
Hopefully we see an update on those in the coming weeks.
How today’s news impacts our MNB Investment Memo:
Objective #1: Finalise plant construction and first production
With construction underway at MNB’s phosphate project, we look ahead to first production of its phosphate product by the late 2023 target.
We want to see MNB secure the required $40M in financing to complete construction.
Milestones
🔄 Secure financing to fund construction completion
🔄 Complete construction of phosphate project - targeting late-2023
🔲 First production
Source: “What do we expect MNB to achieve” Section - MNB Investment Memo 19 Dec 2022
Today’s funding update is the last hurdle for MNB to get its project into production.
We had initially targeted for late 2023 for first production, but as is always the case, late stage, development projects can take a lot longer to put into production than anyone expects.
Final financing is usually the trickiest bit of the development/ramp-up stage for these projects.
After today’s update we can see a clear pathway for MNB getting financing sorted and continuing development toward first production (fingers crossed) in 2025.
Objective #2: Offtake Agreements or supply MoUs
We want to see offtake agreements and MoUs signed ahead of initial production - should occur no later than later 2023. A great result would be having an offtake agreement signed/underwritten by the Angolan government. As the project is considered of “National Importance to Angola”, we think this is a possibility.
Milestones
🔄 Enter sales and offtake agreement discussions with Angola’s largest commercial farms
✅ Offtake agreement 1 signed - Grupo Carrinho
🔲 Offtake agreement 2 signed
🔲 Agreements regarding phosphate battery offtakes
Source: “What do we expect MNB to achieve” Section - MNB Investment Memo 19 Dec 2022
MNB also clearly mentioned that the offtake is a key hurdle for its financing facilities.
We are hoping to see MNB’s offtake MOU converted into a signed agreement in the coming weeks.
What’s next for MNB?
🔄 Funding for the remainder of CAPEX on the project
🔄 First production from phosphate fertiliser project
🔄 Converting offtake MOU into a binding offtake agreement
