ICP/Yara will supplyan underserved market Current SOP capacity is no more than 7 million tonnes and because most is Mannheim it is shrinking because it is extremely high cost: for example. Look at Migao's recent results where margins are down to 10 per cent and they say they are the world's lowest cost producer.
Therefore this is an underserved market premiums are high: so ICP is in a great spot and will be extremely low cost.
The reason that ICP's industry partners are so interested in ICP is because ICP will be one of the few sources of potential supply who can actually come on line at low cost.
ICP offers excellent value in our opinion trading at less than 4% of the project’s value as per the prefeasibility study and one-fifth the value of its closest peer (LSE:SXX). IC Potash has an enterprise value of only $54 million versus the prefeasibility NPV of $1.3 billion for the base case ($2.0 for the expansion case). Sirius Minerals current enterprise value is $295 million. Valuing IC Potash in line with Sirius Minerals would equate to a $2.02 ICP share price whereas one could argue that ICP is worth even more on a relative basis given its relative strengths.
We reiterate our STRONG BUY rating and C$2.00 target price. We base our target on a 0.5x multiple applied to our NAV calculation using a 12% discount rate. We expect upside to our target as the project is de-risked through the completion of feasibility. We see the potential for a $5.00 to $10.00 share price in the long term.