Anticipating Updated Feasibility Study-NPV/Share Increase ++
The long awaited updated Feasibility Study may be just around the corner (or not). I suspect they are having some issues with determining an appropriate potash price to use as the base for revenue estimates. The original Pre-Feasibility Study used a potash price around US$250/tonne as a base. With the current price over $800 and probably higher in the months to come as a result of global shortages, it is unlikely the base price used for the updated feasibility study will be much below $400-500/tone
Potash prices will fall back from current levels at some stage. However, since fertilizer prices are correlated with energy prices, and my opinion is we are in a permanently higher energy price world, then potash prices are not likely to go back anywhere near the $250 level. My guess is oil prices will go much higher ($150 +) before falling back. I doubt we will see oil below $100 for very much of the next decade and a lot higher 10 years or more out.
Assuming the base pricing used for the updated feasibilty study is in the order of $400+ per tonne, the new NPV (8% discount rate) will likely be two to three times the US$1.99 bn from the previous pre-feasibility study. The current Verde presentation indicates the NPV per share at C$50.17 based on the old 2017 pre-feasibilty study. Higher prices = higher margins, so I think the new NPV per share will come in somewhere close to or above C$100 per share.
No way the share price will ever get anywhere near the NPV. At today's $7 per share price we are at 14% of the old NPV. Not unreasonable to expect the share price to double from here over a few years if the new NPV doubles to around $100.
To get to 25 million tonnes per year is likely impossible without a rail line to get the product to market and that will not be cheap. I doubt Verde can finance anything beyond a series of modest expansions like the one it is currently undertaking and would need an infrastructure partner to build a rail line.
Just my thoughts as I wait patiently for the updated feasibility study.