PhosCo (ASX:PHO) is advancing its Gasaat Phosphate Project in Tunisia with the support of government, local communities, and the European Bank for Reconstruction & Development. The company is well primed to become a cost-competitive, globally significant fertiliser producer, at a time of mounting supply concerns for phosphate, further underscored by its recent inclusion on the US Critical Minerals list.

Gasaat could deliver 67.6Mt over nearly 50 years

PhosCo’s flagship Gasaat project has 146 million tonnes at 20.6% P2O5. A December 2022 Scoping Study found an NPV of US$657m, using a 10% discount rate and US$150/t phosphate price. It found the potential for a near 5-decade operation that could see a total of 67.6Mt produced over the project’s lifetime with 1.5Mtpa in the first decade. This resource only includes 2 of 9 prospects at Gasaat and the potential for PhosCo’s regional projects in Tunisia could eventually result in the formation of a broader phosphate hub. Phosphate is an important fertiliser, and demand is expected to grow in the coming years. The challenge for Western countries is that there are few countries with abundant supply, and even fewer that are friendly to the West.

What is next?

The most important catalyst in the near-term will be the growth of the Resource with a maiden MRE from its SAB and KM prospects. These prospects are not only expected to add tonnes to Gasaat’s global resource but also expected to improve the project’s economics due to their lower strip ratio and proximity to the proposed plant site. The Scoping Study update will be released next year ahead of commencement of the Bankable Feasibility Study. There is a broader Exploration Target across Gasaat of 110-165Mt. PhosCo’s goal is to become a major supplier of phosphate.

Valuation range of $0.35-0.56 per share

We value PhosCo at $0.35 per share in our base case scenario and $0.56 per share in our optimistic (or bull) case scenario. This is based on a DCF basis, modelling the Gasaat project using similar inputs to the 2022 Scoping Study, and accounting for financial dilution that will be required to fund the project. Please see page 19 for further details on our valuation rationale and page 22 for the key risks.