Muga DFS shines, price target lifted (By GMP Securities)

Muga DFS shows NPV10% of US$1.4bn and 52% IRR

Compared to the PFS, the Muga DFS sees production up 31%, capital intensity down 12%, and 20% drop in FOB cash cost to a very impressive US$111/t FOB, the lowest of any potash producer globally. Despite the expansion to 1.1Mtpa, capex only lifted to US$354m, under our US$400m forecast, with staged development giving US$256m pre-production. Our own valuation of US$800m at spot un-escalated potash and 1.1EUR/USD lifts to US$1.2bn in production, or US$1.5bn at 8% discount. We think this is a real exit range, with peer EV/EBITDA multiples of 7.0x implying a US$1.7bn valuation, and the EV/production multiple of lower-margin peer Intrepid implying US$1.2bn.

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