This article is a sponsored feature from Mining.com.au partner Minbos Resources Ltd. It is not financial advice. Talk to a registered financial expert before making investment decisions.
It’s not often that a junior resources company has a vision to cultivate and expand an entire untapped industry in an overseas market.
For years Minbos Resources (ASX:MNB) has been planting the seeds to grow Angola’s agricultural sector by advancing its phosphate and ammonia projects in-country.
Essentially, the $87 million market capitalisation company is building an African nutrient company with sustainable byproduct businesses.
Its vision is to blossom into a primary producer, supply and distribution business that stimulates agricultural production and promotes food security in the Republic and the broader middle African region.
Speaking to Mining.com.au, CEO Lindsay Reed explains that while Minbos has ‘the most compelling’ green ammonia project globally and a ‘high-grade’ phosphate rock fertiliser mine, the company is hungry to achieve much much more.
“This is not a phosphate story – this is a change a whole country story.”
“This is not a phosphate story – this is a change a whole country story”
A mining engineer with 40 years’ experience in exploration, development, operations, and corporate finance, Reed has worked in mineral sands, copper, and tin operations in countries such as Botswana, Kenya, Malawi, Niger, South Africa, and Zambia.
“Ultimately, we’re a nutrient company. So, to the extent that our Capanda green ammonia plant might make ammonium nitrate for mining, or to the extent that the (Cácata) phosphate plant might feed into a yellow phosphorus business, these are complementary businesses.
There will be strategic partnerships that improve our business model, to give project depth that enables Minbos to achieve scale and enhance our IRR. At an early stage, we will look to introduce complementary parties to both of these projects.”
This green ammonia vision began to germinate on 1 August this year, when Minbos inked a 60-year commercial lease for the site of its Capanda Green Ammonia Project, located in Angola’s Malanje Province. The lease was signed at the concessional rate of US$300 per annum.
Based on a Technical Study for the project, future plans are to produce 112,000 tonnes per annum of green ammonia and to produce 255,000 tonnes per annum of high-density Ammonium Nitrate (HDAN) which can be used for both fertiliser and mining explosives as an emulsion product.
The green ammonia site is located in the 411,000 hectare Capanda Agro Industrial Pole, which is serviced by established highways and the Malanje railway line. The Pole will be a ready-made market for nitrogen and already hosts several large farms including the 30,000 hectare Biocom sugar plantation.
The ammonia project is located within the Capanda Agro-Industrial Hub and is just 5km from the Capanda Hydroelectric Dam on the Kwanza River, which generates power from 4 turbines of 130 megawatts each.
Reed says securing the site location for the Capanda Project is a significant milestone, allowing it to start baseline environmental and geotechnical surveys for upcoming feasibility studies.
Ammonia is the second-most-widely produced commodity chemical globally. Some 180 million metric tons of ammonia is produced annually with 120 ports equipped with terminals. Key uses include fertilisers, explosives, and industrial chemicals.
At the forefront of its vision, Minbos is seeking to provide more high-value products from its Cácata phosphate deposit within the Cabinda Project.
The strategy was developed on the back of a $25 million placement completed in July 2022, when a strategic cooperation agreement with a syndicate of investors was signed.
The 2021 Cácata JORC (2012) mineral resource contains a total measured, indicated, and inferred mineral resource of 8.4 million tonnes at 29.6% P205 of which 4.72Mt @ 30.1% P2O5 has been converted into proven and probable ore reserve.
In July 2023, a binding memorandum of understanding (MoU) was signed with privately held Grupo Carrinho – Angola’s largest agro-industrial group – to supply Cabinda Phosphate Rock for use as fertiliser through the Port of Lobito, beginning in the 2023/2024 growing season.
Reed says the MoU includes a fertiliser supply agreement for up to 869,000 tonnes of Cabinda Phosphate Rock over the first 7 years of production (to 2030), representing 66% of stage one production.
Carrinho has a 1Mtpa grain and oil processing facility in Benguela, fed by a network of silos in the Huambo and Huila Provinces. It is backed by a sovereign guarantee to support the development of the Benguela Facility and provides smallholder farmers with fertiliser and training, enabling them to supply grain and oilseed to the facility.
Reed notes the MoU is subject to successful Carrinho-Instituto de Investigação Agronómica (IIA)- Minbos field trials to affirm the suitability of the Cabinda Phosphate Rock as a fertiliser. He says Minbos has already demonstrated the suitability and efficacy of Cabinda phosphate rock as a fertiliser in the field trials.
The company is in Angola for the long haul and as part of that vision, Minbos will be transparent and educational.
“You can’t just go to the farmers (in Angola) and say ‘grow more’ because they’re already growing enough to eat. There’s no point growing more if they can’t profit out of it. And to do that they need training and knowledge. They’ll need good quality seeds and they’ll need fertiliser and weed control strategies things like that.
Then it comes back into their market. This is where this Carrinho plays such an important role as the market for farm surplus, but also providing fertiliser and seeds and training to the farmers.
“This is where this Carrinho plays such an important role as the market for farm surplus, but also providing fertiliser and seeds and training to the farmers“
We’re trying to get the IFDC (International Fertilizer Development Center) to come in and assist with that. And we’re also talking with government organisations who are already doing that with 2000, 3000 people on the ground, and then we provide the inputs.
But we’ve effectively done a deal to sell to Carrinho. They’ll lend it to the farmers, the farmers will grow the product, it’ll come back and go into this factory. Then they will pay the farmers for the product, deducting off the fertiliser and things like that.”
Meanwhile, following strong expressions of interest from global investors Minbos is investigating the feasibility of pursuing the production of yellow phosphorus (also known as P4) from both its existing phosphate resource at the Cácata mine in Angola and new licences under application.
P4 is required to produce specialist phosphorus chemicals needed by a very wide range of high-value end-uses, including electronics, fire safety, industrial water and process treatment, technical plastics, pharmaceuticals, lubricants, and metal treatments, but is increasingly in demand for the production of LiFeP batteries.
Angola’s agricultural potential
The CEO tells Mining.com.au that while these assets and verticals are attractive investment propositions in and of themselves, the inherent value is driven by the part of the world in which they are situated.
He says Angola is the ideal country for an ASX-listed junior company like Minbos to sow the seeds of opportunity. It is the second-largest Lusophone (Portuguese-speaking) country in both total area and population (behind Brazil) and is the seventh-largest country in Africa with a population of 31 million.
Agriculture accounts for about 9.5% of Angola’s GDP while providing employment to just under half (46%) of the country’s population. Yet despite having 57 million hectares of arable land (suitable for growing crops) and 5 million hectares of cultivated land, 95% of this landmass is comprised of smallholder farming.
With high rainfall, Angola remains one of the world’s great untapped agricultural regions. Perplexingly, the country has some of the lowest rates of fertiliser use globally and 100% of nitrogen, phosphate, and potassium (NPK) is imported.
The CEO says: “It was once ravaged by civil war but Angola is rich in natural resources including metals, precious gems, and petroleum and ranks among the highest of the oil-producing countries in sub-Saharan Africa.
In 1970 Angola was actually a leading farming nation and has been a global producer of coffee and an exporter of sugarcane, bananas, cotton. But when the Portuguese rushed out the door (and Angola gained independence in 1974) it was all left behind.”
“It was once ravaged by civil war but Angola is rich in natural resources including metals, precious gems, and petroleum and ranks among the highest of the oil-producing countries in sub-Saharan Africa“
The Portuguese Colonial War (also known as the Angolan, Guinea-Bissau and Mozambican War of Independence) was a 13-year-long conflict fought between Portugal’s military and the emerging nationalist movements in Portugal’s African colonies between 1961 and 1974. The Portuguese regime at the time was overthrown by a military coup in 1974 and the change in power brought an end to the conflict.
Devastating civil war followed in Angola, which lasted from 1975 until 2002. However, in recent times República de Angola has been making moves to accelerate economic diversification, entice private investment and local development, and has sought to create a more favourable business environment to transform the country.
Despite these trials and tribulations Angola is rich in natural resources and hosts spectacular mineral deposits of all shapes and sizes. The presence of mining majors such as Anglo American (LON:AAL), De Beers (NYSE:DE), and Rio Tinto (ASX:RIO) illustrates how Angola is emerging as a leading mining region in Africa.
Importantly for Minbos, the country offers vast tracts of unoccupied arable land that has little to no local manufacturing but an insatiable appetite for fertilisers. And the country is seeking to expand its agricultural sector, which will require fertilisers, including nitrogen fertilisers.
Boasting a diverse and fertile ecology, Angola holds the potential to become one of the leading agricultural producers on the continent. Reed says the country has analogous soil and climate to the cerrado in Brazil, which has increased its land under planting by 25 million hectares in the past 30 years.
Demand for nitrogenous fertilisers in Angola will depend on the land area under cultivation and the crop selection.
Given the available land and the analogy to Brazil, Angola is targeting at least 2 million hectares under commercial cultivation.
Historical crops require significantly different nitrogen fertilisation rates – for example up to 200kg/Ha for maize and up to 300kg/Ha for cotton. At an average consumption of 100kg/Ha Angola is expected to require about 200,000tpa of nitrogen equivalent to 600,000tpa of ammonium nitrate.
Reed adds: “The Capanda Green Ammonia project would be able to meet half of this demand.”
Sowing the seeds
When Minbos started pitching its vision to the government, it became clear that the real value proposition would be cultivated by making its phosphate products in Angola for Angola.
“What’s the point of exporting it, making 20 cents in the export coffers when we could be changing the lives of millions of farmers? That’s what they (the government) wanted us to do when we took it on and that’s why we’ve got pretty good traction over there, because of what we’re going to do.
Similarly with the green ammonia – we took the same story with the green ammonia and said, ‘look, we might export half of it to try and get to scale, drive partnerships, strategic partnerships to bring us to scale’. We’re talking about something similar with phosphate as well, but it’s primarily made in Angola for Angola, and that’s what’s getting us our traction.”
Angola’s vulnerability to climate change has exacerbated the need to adapt its agricultural sector to support resilience and adopt new approaches. The government has launched the Angola Commercial Agriculture Project, which is co-financed through the World Bank, as well as public financial institution the French Development Agency, to mobilise more than US$230 million to increase agricultural productivity and market access for more commercial farms in the country.
The World Bank in 2022 also approved the US$300 million Smallholder Agricultural Transformation Project, which is designed to expand Angola’s efforts to transition towards climate-resilient farming.
Reed says the country is basically divided into 3 regions that he has termed grow to eat, grow to sell, and grow to export.
“There are about 5 million hectares hosting 3 million families, and there’s probably around 9 million people in the area where we are focused.
You’ll find sophisticated farms that have pivot irrigation and these guys are setting up to supply basically Luanda, the main big city, and the supermarkets there. But these farms make up less than 10% of cultivated land… for now.
There’s still a lot of vacant land north of the Kwanza river – it’s just not touched. There are millions of hectares that could service the export market out through the port near the end of the Malange railway line.”
The CEO says Angola’s 57 million hectares of land that can be farmed is well-suited to a variety of crops yet despite this potential it cultivates a mere 10% of this land. With similar latitude, rainfall, and soils to Brazil, Angola has scope to grow its agricultural economy to a similar size, he says.
Ultimately, it’s not very often you come across any company, let alone a resources company, whose ultimate goal is to change the dynamic structure of a country and its economy by seeking to grow a whole local industry.
However, Minbos has a strong foundation to achieve this vision.
In the coming weeks, the company will be launching its product bagging branding for its fertiliser, which will reference how prosperous the venture is for Minbos, as well as its second brand for the company’s soil technology and laboratory.
Minbos is now well advanced in its offtake discussions regarding the Cabinda Phosphate Project with most of the stage one production expected to be covered within current negotiations. Significant progress has also been made on non-dilutionary funding (debt and/or prepayment) for a significant proportion of the outstanding capex for the project, with negotiations expected to be finalised in September.
The company has started the construction process and will soon sign contracts for the civil and concrete works. In June 2023, Minbos signed a $4.25 million Engineering, Procurement and Construction Management (EPCM) contract with EPC Engenharia and its Angolan subsidiary EPX Angola for the construction of the Cabinda Phosphate Fertiliser Plant.
“Our fertiliser product will be there for the long haul and it works for the majority of their farmers now“
Later in the year, contracts will be signed for the mechanical, structural, electrical, and instrumentation work, and it will undertake a desktop study to better understand the yellow phosphorus.
Minbos will also soon announce that it has started environmental surveys as the first step of the Prefeasibility Study (PFS) for the green ammonia. It will also launch its product in September having already signed agreements with all landholders on the mine.
Reed adds: “Our fertiliser product will be there for the long haul and it works for the majority of their farmers now. In 10 years’ time they’ll all have matured, just like Australia 50 years ago. Australia just used superphosphate. Now we’re using more sophisticated fertilisers and the farming is more sophisticated. Same thing will happen here (in Angola) but for now, just a simple phosphate product is what they need to get it going.”
Minbos is on the cusp of flourishing given it has exposure to 3 global megatrends leveraging Angola’s unique global position.
The first is nutrients with its Cabinda Phosphate Project, which has an NPV US$203 million, an IRR of 39%, and will cost just US$23 million to complete construction. Second is green nitrogen where its Capanda Green Ammonia Project has access to cheap renewable power and a PFS is due to start. Thirdly, Minbos has exposure to high purity phosphorus where the company is seeking a partnership.
The CEO adds: “The Cabinda Phosphate Project however is the first step in developing a high impact self-sustaining agricultural sector throughout Angola and middle Africa and the first step in alleviating poverty for millions of subsistence farmers who use no soil nutrients.”
Write to Adam Orlando at Mining.com.au
Images: Minbos Resources