Minbos Resources - Low CapEx AgTech Targets Booming Angola Fertilizer Market

Developing High-Return Phosphate Fertilizer Project in Angola

Minbos Resources (ASX:MNB) is an Australian company focused on developing a promising phosphate fertiliser project in the Cabinda province of Angola. With a large high-grade phosphate resource, low projected operating costs, and strong in-country demand, Minbos presents an interesting opportunity in the African agricultural sector.

Cabinda Phosphate Project Overview

Minbos' key asset is the Cabinda phosphate project in Angola, which hosts a JORC resource of 8 million tonnes grading 30% P2O5. The company plans to produce a phosphate rock concentrate containing 30% P2O5, which is well-suited for use as a direct-application fertilizer for the Angolan market.

As Minbos' Managing Director Lindsay Reed explains, "Our phosphate rock product has a very high proportion of citrate soluble phosphate, which means it is readily available for plant uptake. This characteristic makes it ideal for Angola's phosphate-deficient soils."

The project has a relatively low initial capex requirement with US$16 million already spent, with a further US$24 million left to spend. There is also a projected quick payback period of 2 years based on the company's discounted cash flow modelling. Forecast operating costs are estimated at a competitive $117/tonne, providing robust operating margins at current phosphate rock prices of over $300/tonne. Minbos is finalising an EPCM contract and expects to commence construction in July 2024, targeting the first production for the 2025/26 cropping season.

Interview with Managing Director, Lindsay Reed

Serving the Angolan Market

Minbos' focus on supplying the domestic Angolan fertiliser market is a key differentiator for the Cabinda phosphate project. Angola has significant agricultural potential as a large country with 35 million hectares of arable land. However, it imports over 80% of its food and nearly 100% of its fertiliser requirements. The government has stated food security and agricultural productivity as key economic development priorities.

Policies have been put in place to incentivise domestic fertiliser production and consumption, including:

• A requirement that all phosphate fertiliser used in Angola must contain at least 24% P2O5 content
• An import tariff on phosphate rock starting in 2025
• A sales tax exemption for domestically produced phosphate rock

Against this backdrop, Minbos has signed a memorandum of understanding with Grupo Carrinho, a major Angolan food production company, to supply phosphate rock from Cabinda. According to Minbos, this off-take agreement will account for around 80% of the Cabinda project's initial planned production of nearly 200,000 tonnes annually.

Minbos has undertaken an extensive field trial program in Angola over the past five years, demonstrating that applying 1 tonne per hectare of its phosphate rock product can increase crop yields by up to 300%. With Angola home to 2 million smallholder farmers and an additional 2 million hectares of farmable land yet to be developed, fertiliser demand is projected to increase substantially in the coming decades.

Government & Strategic Investor Support

The Angolan government has been highly supportive of the Cabinda phosphate project, viewing the development of domestic fertiliser supply as critically important for the country's food security and agricultural sector growth. A key aspect of the government's support is that the Cabinda project receives a preferential 6.1% corporate tax rate, compared to the normal 25% rate.

At the corporate level, Minbos has attracted financing and strategic support from the South African Industrial Development Corporation (IDC). The IDC has committed to provide $14 million in debt funding to the Cabinda project, conditional on the company meeting certain permitting and offtake milestones. The IDC has a positive long-term view of Angola's economic trajectory and sees the Cabinda project aligned with its mandate of promoting regional economic development.

Expansion & Green Ammonia Upside

While the initial project scope will establish a plant with 200,000 tonnes per annum of phosphate rock capacity, the processing facilities are being designed to enable a low-cost doubling of output to 400,000 tpa. Minbos discusses expanding production to serve African export markets beyond Angola with potential strategic partners and customers.

The company is also studying the potential development of green ammonia production in Angola. The country has some of the lowest hydroelectric power costs globally at just 1c/kWh. Ammonia production would naturally complement phosphate, enabling Minbos to offer a more complete fertiliser product suite. The company engages with third parties to structure the ammonia development on a build-own-operate model to minimise upfront capital requirements.

Peer Comparison & Competitive Positioning

Minbos is among the few junior companies globally with an advanced-stage phosphate project targeting the African market. Peers and relevant comparable companies include:

• Avenira (ASX:AEV): Developing the Wonarah phosphate project in Australia, to supply high-grade phosphate ore . One of Australia's largest undeveloped phosphate resources with 66 Mt @ 30% P2O5.
• Kropz Plc (AIM:KRPZ): Owns the Elandsfontein phosphate project in South Africa, designed to process 1 Mtpa of phosphate rock concentrate. The company has an offtake agreement with South African fertiliser producer Foskor.

Compared to these peers, Minbos' key points of differentiation are its exclusively Angolan market focus, very low estimated operating costs, and partnership with a major in-country off-taker in Grupo Carrinho. Minbos' capex requirement is also the lowest among its peers, translating to a shorter estimated payback timeline.

The Investment Thesis for Minbos Resources

• Direct exposure to the growth in fertiliser demand in Angola and sub-Saharan Africa more broadly
• Phosphate project with low capex intensity, high operating margin, and short payback period (2 years)
• Binding offtake agreement covering approximately 80% of initial production, significantly de-risking the project
• Strong alignment with Angolan government development objectives and backing from South African strategic investor
• Meaningful expansion potential, with the opportunity to double phosphate rock production and downstream into green ammonia
• Significant valuation upside potential as Minbos makes the transition from developer to producer in the next 12-18 months

Minbos Resources offers a differentiated, pure-play exposure to the African agricultural sector growth thematic. The company's Cabinda phosphate project in Angola is well-timed to capitalise on the country's growing fertiliser demand profile, and is supported by highly favorable policy tailwinds and strategic partnerships. With industry-low capex requirements, quick payback potential, and multiple expansion options, Minbos is well-positioned to deliver an attractive return profile as it moves into production by 2025. The green ammonia production opportunity offers a further avenue for long-term growth. As a small-cap company in a single-asset jurisdiction, an investment in Minbos is best suited for investors with a higher risk tolerance.

Macro Thematic: Feeding Africa's Growing Population

The long-term, secular investment case for companies leveraged in African agriculture's growth is highly compelling. Sub-Saharan Africa is projected to account for most global population growth through 2050. Yet, the continent currently has very low fertiliser application rates, at an average of just 20kg/hectare compared to a global mean of 140kg/ha. With African governments' increasing focus on food security, the region could require an additional 7-10 million tonnes of fertilizer annually by 2030.

As Minbos CEO Lindsay Reed summarises: "If you look at fertilizer consumption growth anywhere in the world, it's closely tied to population growth. We see sub-Saharan Africa as the biggest long-term growth opportunity in the global fertiliser sector, starting with Angola."