- Joined
- 10 May 2008
- Posts
- 201
- Reactions
- 1
Re: MAK - Minemakers
The announcement read pretty much the way I expected and the market reacted in a similarly predictable fashion. The announcement obviously rattled some holders in to panic selling but given the red ink across much of the market this week, I think we can consider the sp drop a reasonably mild response. The faint of heart have probably been shaken out and we can now consolidate and build in a more orderly fashion...
As Kennas and Pat rightly point out the tonnes beyond 72 million are nice to have but not terribly important at this stage. The risks with this project are the future price of rock phosphate, and the cost of getting the product to market.
On future price trends, we can all speculate about increased demand due to bio-fuels (I wouldn't want to build my retirement plans around that), many more mouths to feed (I live in China - I'm a believer), increasing meat consumption in developing countries (I eat in China - I'm a believer), diminished crop outputs due to climatic events (I'm a believer).
Against these demand factors we have to weigh up the supply side factors - mines nearing end of life (haven't heard anything on this score), brownfield expansions (proceeding like crazy, one would imagine, and will be first to market), and greenfield projects (remember when MAK was the only major undeveloped phosphate deposit in the Universe or whatever the hype was - how many are there now?).
I'm inclined to think the RP price will ease in the medium term. This will have little impact on the well funded brownfield expansions but it will put the squeeze on many of the greenfield projects. Will MAK make it? Personally, I think it all boils down to time getting the project up and running. Maybe there is room for everyone who thinks they have a bit of phosphate lying around but that would be wishful thinking. When the prices start easing, a lot of these projects will struggle for funding even if their economics turn out to be marginally better than MAK. First in, best dressed... In this respect MAK are in an enviable position. With so much data and groundwork behind them, they lead the Australian pack (with the possible exception of GCR). If they can quickly prove up a DSO resource then we will all be smiling...
Then of course there is the logistics question as posed by by TB. Part road, part rail is considerably better than the all road scenario that Rio faced. That is a positive for the project as the previous "economic above 100USD/T" comments probably reflected road transport costs. It could be argued that everyone is facing energy cost increases and therefore it is a neutral argument, however some of the brownfield expansions will no doubt be exploiting existing slurry pieplines and/or conveyor systems - we can only hope they are capacity constrained already. Once agin the brownfield developments will have the edge over greenfield. If MAK can just get this project started while RP prices are high, then they can work on proving up the other 1.9 billion tonnes to justify spending a bit of that lovely cashflow on a slurry pipeline, conveyor system or rail branch to avoid TBs trucking woes ...
I still feel very positive about MAK but time to production is critical...
The announcement read pretty much the way I expected and the market reacted in a similarly predictable fashion. The announcement obviously rattled some holders in to panic selling but given the red ink across much of the market this week, I think we can consider the sp drop a reasonably mild response. The faint of heart have probably been shaken out and we can now consolidate and build in a more orderly fashion...
As Kennas and Pat rightly point out the tonnes beyond 72 million are nice to have but not terribly important at this stage. The risks with this project are the future price of rock phosphate, and the cost of getting the product to market.
On future price trends, we can all speculate about increased demand due to bio-fuels (I wouldn't want to build my retirement plans around that), many more mouths to feed (I live in China - I'm a believer), increasing meat consumption in developing countries (I eat in China - I'm a believer), diminished crop outputs due to climatic events (I'm a believer).
Against these demand factors we have to weigh up the supply side factors - mines nearing end of life (haven't heard anything on this score), brownfield expansions (proceeding like crazy, one would imagine, and will be first to market), and greenfield projects (remember when MAK was the only major undeveloped phosphate deposit in the Universe or whatever the hype was - how many are there now?).
I'm inclined to think the RP price will ease in the medium term. This will have little impact on the well funded brownfield expansions but it will put the squeeze on many of the greenfield projects. Will MAK make it? Personally, I think it all boils down to time getting the project up and running. Maybe there is room for everyone who thinks they have a bit of phosphate lying around but that would be wishful thinking. When the prices start easing, a lot of these projects will struggle for funding even if their economics turn out to be marginally better than MAK. First in, best dressed... In this respect MAK are in an enviable position. With so much data and groundwork behind them, they lead the Australian pack (with the possible exception of GCR). If they can quickly prove up a DSO resource then we will all be smiling...
Then of course there is the logistics question as posed by by TB. Part road, part rail is considerably better than the all road scenario that Rio faced. That is a positive for the project as the previous "economic above 100USD/T" comments probably reflected road transport costs. It could be argued that everyone is facing energy cost increases and therefore it is a neutral argument, however some of the brownfield expansions will no doubt be exploiting existing slurry pieplines and/or conveyor systems - we can only hope they are capacity constrained already. Once agin the brownfield developments will have the edge over greenfield. If MAK can just get this project started while RP prices are high, then they can work on proving up the other 1.9 billion tonnes to justify spending a bit of that lovely cashflow on a slurry pipeline, conveyor system or rail branch to avoid TBs trucking woes ...
I still feel very positive about MAK but time to production is critical...