Transcription of Finance News Network Interview with Minbos Resources Limited (ASX:MNB) CEO, Robbie McCrae
Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from emerging phosphate developer Minbos Resources Limited (ASX:MNB) is CEO, Robbie McCrae. Robbie welcome to FNN. First up, can you start by introducing the Company?
Robbie McCrae: Sure. Minbos Resources is an African focused phosphate exploration and development company. We have projects in the northern province of Angola called Cabinda. It’s an enclave separated from mainland Angola by the Congo River and then across the border, a continuous area with Cabinda, in the very far western Democratic Republic of Congo.
Clive Tompkins: Thanks Robbie. So what’s the history of phosphate mining in Africa?
Robbie McCrae: Phosphate mining in Africa is historically in focus in North Africa and to a lesser degree in West Africa. Morocco is very well known to be the dominant player worldwide in the phosphate industry, largest production facilities as well as the largest resources. In West Africa, Togo is very well known for its phosphate production, I believe it’s got probably the third largest resources of phosphate in Africa. In the region where we are, central West Africa, Angola, Democratic Republic of Congo and Republic of Congo, there’s not a lot of historical production, but there’s certainly a lot of exploration and development work happening at the moment.
Clive Tompkins: Now to your Cabinda project in Angola. What is the size and grade of the deposits at Cacata and Chvovo that make up part of the
Robbie McCrae: Sure. Cacata and Chvovo are two out of the five projects that lie within the Cabinda area. They are the focus of Minbos at the moment because they’re very high grade, although they’re probably a bit smaller than the remaining three projects within the licensed area. Cacata is larger than Chvovo, currently sitting at 22.5 million tonnes at a grade of 21.4 per cent. At Chvovo we’ve got just over six million tonnes also at around 21 per cent. And yeah, based on the size of the grade and their locality, they’re our focus for development at the moment.
Clive Tompkins: Thanks and Robbie, for those not familiar with phosphate deposits. How do these rank on a world scale?
Robbie McCrae: They’re not going to like the phosphate industry; they’re not going to make a fundamental change to the phosphate industry at this stage. The other three deposits within the Cabinda licensed area are a lot larger. We’re talking about a couple of hundred million tonnes at around 12 per cent at those deposits. But for a junior company like us, 22.5 million tonnes of direct shipping ore – it’s like a dream, it really is a dream project for us. It means we can get into production for relatively low capital cost being at the location that they are, very close to the coast and close to infrastructure. Operating cost is low, so yeah, key projects for us.
Clive Tompkins: So what stage is the project?
Robbie McCrae: Very excitingly we’ve just completed our scoping study on the Cacata project, and the project is now moving into bankable feasibility study stage. I expect a Board sign-off to commence the bankable feasibility study within the next month.
Clive Tompkins: And Robbie, what’s the next milestone?
Robbie McCrae: Now that we’ve completed our scoping study, we plan to commence our bankable feasibility study immediately. Within that, some key milestones are converting our current exploration license into a mining license, entering into negotiations and finalising the project financing. So at the completion of the bankable feasibility study, we’ve got everything in place to immediately commence construction.
Clive Tompkins: Now Robbie, can you tell us about the economics of the project?
Robbie McCrae: The economics are very robust. We have a capital cost number of $158 million that we believe we can reduce quite significantly, by using contractor mining and contractor transport of the product from the mine to the port. Operating cost number – we have a free on board number of $57 a tonne, FOB Cabinda Province. We have a current revenue number of $180 a tonne, so we’re talking plus $100 a tonne gross revenue for the product. It kicks out at $311 million NPV (net present value) and a 44 per cent IRR (internal rate of return).
Clive Tompkins: Excellent. Now where will the product go?
Robbie McCrae: At the moment we’re investigating. There’s a lot of interest out of India for the import of the product, a lot of interest out of China and a lot of interest out of Brazil. So we’ve got many options open at the moment and we’ve signed confidentiality agreements with a lot of off-
takers, and some of the negotiations that’ll be happening during the course of our bankable feasibility study.
Clive Tompkins: And Robbie what’s the situation with regard to infrastructure?
Robbie McCrae: It’s a question that we get asked very often. We are a bulk commodity in West Africa and a lot of bulk commodity projects get stopped, because they don’t have access to infrastructure. And this is really one of the areas that set Minbos apart. All of our projects are within 50 kilometres of the coast and all of our projects lie within five kilometres of a brand new constructed highway, within the Cabinda Province. The Cabinda Province is a very wealthy province because of all the oil production. And there’s a massive investment from the Anglian Government in the oil companies into infrastructure within the province, which we benefit from.
So infrastructure wise, being power, water and road logistics, we’ve got it all - the only thing we have to build is our ship loading facility. It’s also important to note, we’re not a massive iron ore project; we’re not talking five to 25 million tonne a year. Cacata we’re just talking 800,000 to a million tonne a year, so this facility that we’re talking about really in bulk project terms, is pretty small. But for a company like ourselves, it’s realistic and achievable. So we’re blessed with very good infrastructure.
Clive Tompkins: Now to the million dollar question. Assuming the project passes all the necessary hurdles, when do you expect first production?
Robbie McCrae: We’re targeting production during the first quarter of 2014. It’s an aggressive program but we believe we can achieve it.
Clive Tompkins: And what’s Minbos’ stake in the project?
Robbie McCrae: Minbos own 50 per cent of the project and the remaining 50 per cent belongs to a large private Israeli multinational company.
Clive Tompkins: Now Robbie, I see you also have a number of exploration licenses and applications in the DRC (Democratic Republic of
Congo). What stage are these?
Robbie McCrae: We have a very exciting project in the DRC called the Kanzi project, which we hold under license at the moment already. We did some work and have some resource estimates already on Kanzi, and its stacking up to be as exciting as Cacata. We’ve got 31 million tonnes at 20.4 per cent at Kanzi, so it’s a very exciting project. And the next step for us is another season of drilling and then into feasibility study, so running sort of about six months behind the Cacata project.
In addition to Kanzi we’ve got seven applications in, in the DRC for additional license areas, areas that have got known historical work on them and known phosphate resources. We should have some good news out on that in the next couple of months and we’ve had very good negotiations in the Democratic Republic of Congo. So we should have some very good news on that very soon.
Clive Tompkins: And is the area similar in geology to that at Cacata and Chvovo?
Robbie McCrae: Absolutely it’s the same sedimentary, old sedimentary seabed that we’re drilling. Geology doesn’t understand borders and so yeah, the geology continues from the Angola side through to the Democratic Republic of Congo site.
Clive Tompkins: So I guess the goal is that they will feed into the Cabinda project. Is that right?
Robbie McCrae: No, it’ll be a stand-alone project. Kanzi is blessed with as good infrastructure as Cacata, in fact it’s a lot closer to an operating port than the Cacata project. So Kanzi is 35 kilometres from the Port of Boma, which is the second largest port in the DRC. It’s connected to the Port of Boma by a 35 kilometre, recently constructed, tar road. So no, Kanzi will be developed as a stand-alone project and I believe, it will come in certainly similar capex and operating costs to what we’ve got at Cacata – very exciting.
Clive Tompkins: Now to your financials and strategy. What is your cash position and are you funded for the rest of the year?
Robbie McCrae: We’ve got $3 million in the bank and we’re funded through till the end of the first quarter of next year.
Clive Tompkins: And Robbie tell me, is it the Company’s intention to become a producer in its own right?
Robbie McCrae: Yeah, the Company’s stated goal is to become a low capital cost and low operating cost developer of phosphate rock export operations, out of central Africa.
Clive Tompkins: Now to your stock price Robbie. Where has it traded over the last 12 months and where is it now?
Robbie McCrae: The stock is trading at an all-time low, trading at 16 cents and we have traded as high as 65 cents in the last 12 months. Our goal is to get it back above 65 cents before the end of the year.
Clive Tompkins: And what market cap does that put on the Company?
Robbie McCrae: Current market cap is just north of $21 million.
Clive Tompkins: Last question Robbie. Where would you like to see Minbos Resources by year’s end?
Robbie McCrae: Cacata bankable feasibility study completed, Kanzi bankable feasibility study underway and the stock north of a dollar.
Clive Tompkins: Robbie McCrae, thanks for the introduction.
Robbie McCrae: Thank you.