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 Brazilââ¬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."