Analyst Actions: Salman Partners Initiates Coverage on MBAC Fertilizer; Gives "Buy" Rating, TP at $5.40

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Salman Partners has initiated coverage on MBAC Fertilizer, with a "Buy" recommendation and $5.40 per share target price. It said:

The Brazil Advantage: "Brazil is one of the world's fastest growing consumers and a leading importer of phosphate and potash; it is one of the few countries in the world with an under-utilized land base and a favorable climate to facilitate continued expansion of cultivated land. The country currently imports 50% of its annual phosphate needs and is estimated to have the largest demand growth profile of any major phosphate consumer."

Experienced Management Team: "MBAC Fertilizer Corp. has a very knowledgeable management team with over 150 years of combined experience in development and financing of fertilizer projects in Brazil. MBAC's CEO helped develop an innovative phosphate metallurgical process, which led to highly profitable development and growth of phosphate fertilizer production in Brazil."

Near Term Production: "The company's flagship Itafos phosphate project, located in the center of Brazilâ€â"¢s largest agricultural region, is currently under construction, with an expected early 2013 start-up for eventual production of 500,000 tonnes of Superphosphate ( SSP ) annually. Management is also actively investigating the potential for a second phase of development at Itafos, where further drilling could double production by 2016."

Full Development Pipeline: "Alongside Itafos, MBAC also has a portfolio of other fertilizer projects in Brazil; the company is developing its high grade Santana phosphate project in an area near the country's largest consumer of fertilizer, and conducting development work at its Araxa phosphate, rare earth and niobium advanced exploration project, which is surrounded by 2 large scale operations and a number of blenders and fertilizer distributors."

Catalyst Rich: "Catalysts in the next 12 months should include: Initial production from Itafos in early 2013, Bankable Feasibility Study from Santana expected in Q1 2013, Pre-Feasibility Study from Araxa expected in Q2 2013."

Valuation: "We are initiating research coverage of MBAC Fertilizer Corp. with a BUY recommendation and a 12-month target price of C$5.40 per share. To reach our target price, we are applying a 1.0x multiple to our NAV estimate for the Itafos and Santana projects and do not attribute any value to the company's Araxa project or increased production from Itafos or Santana at this time, and plan to revisit these as further development work is conducted."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Commodities

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