Ian Harebottle has only just returned to the public markets, but already he’s talking long term and aiming high. Kropz (KRPZ), the phosphate mining company he heads, and which began trading on the Alternative Investment Market on 30 November, “should be a ten-bagger at least, in five years” he tells the Investors Chronicle.
Such ambition is commonplace among resources executives on London’s junior market, even if the paucity of mining fundraisings in 2018 suggests a less bullish outlook among investors.
But in fairness to Mr Harebottle, he has a track record to point to, most notably with Gemfields. In the seven years after he was appointed chief executive of the coloured gemstone group in 2009, the company’s annual revenues increased from £0.8m to £190m, before a decline in grades and prices precipitated an acrimonious nil-premium takeover by 47 per cent investor Pallinghurst in 2017. Mr Harebottle resigned following the deal, but remains a shareholder.
The new venture certainly shares several parallels with his previous one. Like Gemfields, Kropz is a multi-project miner spanning sub-Saharan Africa and focused on a market where pricing can be opaque and volatile. And while the end markets couldn’t be more different – what sells in the world of jewellery doesn’t obviously translate to the agricultural industry – both companies share a broader social mission that many miners are either wary to talk about, struggle to communicate, or disregard entirely.
At Gemfields, this mission was to provide a kitemark for responsibly-sourced gems in an industry notorious for its exploitation and violence. For Kropz, it is no less grand than to “set a new standard in the green mining of fertilizer feed minerals”.
“I’ve always said any business operating today needs to have a triple bottom line – one that considers shareholders, people and the environment,” says Mr Harebottle.
Is this also a marketing ploy? It’s possible: while Kropz’ corporate literature includes a target to “meaningfully contribute towards feeding sub-Saharan Africa for generations to come”, Mr Harebottle acknowledges that for the time being, the vast majority of Kropz’ product will be sold to global buyers.
Still, the goal is laudable, and might bear fruit should plans to simultaneously develop from a phosphate rock miner into “an integrated, mine-to-market plant nutrient company” also pan out.
To have a chance of doing so, not to mention bagging that 10-fold increase in the share price, Kropz will need success on multiple fronts. The most immediate is the final commissioning of the Elandsfontein project in South Africa, which will hoover up $16m (£12.7m) of the $35m raised in last month’s initial public offering. Production of as much as 1.2m tonnes per year of 31 per cent-purity phosphate rock concentrate could begin by the end of 2019.
At the same time, the company will develop the Hinda project in the Republic of Congo, which it just acquired through the all-share takeover of Cominco Resources. To date, $60m has been spent drilling the high-grade prospect, establishing what Kropz claims is “one of the largest undeveloped phosphate reserves in the world”. A feasibility study is expected within a year.
All the while, new investors are betting that prices for phosphate rock, which is used in the production of fertilisers, has finally turned a corner after falling to as low as $80 per tonne a year ago. Backed by growing global food demand and shrinking farm land per capita, consultancy CRU Group expects long-term demand to increase by an average of 3.9 per cent a year, and for “continued recovery in prices in the medium term”.
