Salt And Fertilizer Demand Will Drive Long Term Value From Mardie Development

Catalysts

About BCI Minerals

BCI Minerals is developing the large scale Mardie salt and sulfate of potash project, supported by its Cape Preston West export port.

What are the underlying business or industry changes driving this perspective?

• Advancing construction at Mardie with 93 percent pond inundation, crystallizer sealing underway and key marine works at 93 percent completion positions BCI for first salt on ship in late 2026. This is expected to support a step change in revenue as production ramps toward nameplate volumes.
• The use of a fully integrated digital twin to optimize pond management, crystallizer performance and sealing decisions is intended to reduce seepage losses and increase early ramp up tonnes, improving operating efficiency and net margins over the life of the project.
• Structural growth in Asian demand for industrial salt, combined with stable FOB pricing and BCI’s proximity to customers such as Indonesia, Japan and Korea, supports long term volume and pricing resilience that can improve revenue and earnings visibility.
• Development of the SOP byproduct stream, informed by global benchmarking and pilot plant trials, provides exposure to demand for high quality potash fertilizers, adding a second diversified revenue pillar and supporting margin expansion once commercialised.
• Cape Preston West, as a multi user port with around 14.5 million tonnes per annum of surplus capacity and reference pricing near nine dollars per tonne for comparable ports, creates an infrastructure earnings stream that can supplement salt cash flows and help smooth overall earnings volatility.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming BCI Minerals's revenue will grow by 263.7% annually over the next 3 years.
• Analysts are not forecasting that BCI Minerals will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BCI Minerals's profit margin will increase from -1037.6% to the average AU Metals and Mining industry of 18.5% in 3 years.
• If BCI Minerals's profit margin were to converge on the industry average, you could expect earnings to reach A$51.5 million (and earnings per share of A$0.02) by about December 2028, up from A$-60.2 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 35.0x on those 2028 earnings, up from -19.4x today. This future PE is greater than the current PE for the AU Metals and Mining industry at 21.9x.
• Analysts expect the number of shares outstanding to decline by 0.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.35%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long lead nature of the project, with first salt on ship only targeted for late 2026, exposes BCI to the risk that global industrial salt or SOP demand and pricing weaken by the time production ramps up. This would pressure future revenue and limit the upside embedded in current expectations for structural Asian demand growth.
• Although management currently expects to remain on budget, remaining high value packages such as dredging, crystallizer sealing and the salt wash plant are still being executed in an inflationary construction environment. This creates a risk of cost overruns that would erode project returns and compress long term net margins.
• The business plan depends heavily on precise pond density management, crystallizer performance and the success of the digital twin. Any operational underperformance, weather variability or higher than expected seepage could slow ramp up volumes and reduce early production tonnes, delaying cash generation and weighing on earnings.
• The SOP byproduct strategy is still at the pilot and design benchmarking stage. If capital costs for the eventual plant exceed the expected 150 million to 200 million range or the market for premium potash fertilizers underperforms, the second revenue pillar may not materialize as planned, limiting diversification and long term earnings growth.
• The Cape Preston West Port thesis assumes ongoing third party demand for export capacity at reference prices near those seen at Ashburton. If competing infrastructure, weaker bulk commodity exports or regulatory constraints reduce throughput or achievable tariffs, the anticipated infrastructure income stream would be lower, constraining both revenue and future margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of A$0.5 for BCI Minerals based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be A$279.0 million, earnings will come to A$51.5 million, and it would be trading on a PE ratio of 35.0x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of A$0.41, the analyst price target of A$0.5 is 19.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.