RE: Sliced a few4 May 2022 19:01
Griffin, then you have an eye for long term investing. I bought in the 7s - ok with that - and saw today as a much needed retrace toward now steepening trend line approaching 9p. Market is bullish potash / EML so expect candlestick to float above as buyers take advantage. Alas this is trader talk. Tomorrow most likely EU will ban potash from Belarus, which combined with Russia, takes out 40% of global supply. With MOP at $1,100/t on last update, logically its gone/going higher still. Nigeria has just bought emergency supply from Canada and they're getting alot of interest for new projects. EML has a huge mining simplicity and geographic cost advantage vs Canada as you know. What's interesting is using a spot price of $800 potash (MOP) as opposed to the FS done using only $400, the NPV8 is $3.9bn. Investors can see the outsized impact of spot price increase on NPV - every extra $ increase in potash tonne is effectively a "super tonne". eg $400 MOP = NPV8 $1.4bn and $800 MOP leads to 2.8x NPV. Assuming we are now $1,100 (perhaps much higher today especially on tomorrow's news), crudely that adds another $2bn to the NPV to roughly $6bn or £4.8bn vs mcap somewhere around £80m. The payback would be 6 months in such a case and IRR over 90%. EML presentation states juniors typically should trade 20-25% NPV when quality shareholders are on board, so you have target of £1-1.2bn mcap. The ESIA looks like it's been well thought out and one might expect the environmental permit to come in short order. There has been a tick up in M&A in the potash sector with Nutrien leading and obviously BHP finally, after years of agonising pressing the button on Jansen (many years from production). Base level valuations for t/os are 30% of NPV. I'm no trader, I take a position and leave it one. I do believe fundamentals will increasingly shape the share price and for awhile, I believe EML has been showboating this for sale as any good pre-development junior should. The conditions for a re-rate and sale now seem to be coming together. The "unsexy" life critical mineral potash has suddenly attracted mass attention.