Ten-bagger African Potash up again

The first deal in African Potash's 250,000 tonne (MT) trilogy of supply agreements is starting to firm up. Management has agreed to sell 50,000 metric tonnes (MT) of its fertiliser product each year to Common Market for Eastern and Southern Africa (COMESA) for $500 a tonne, underpinning a thirteen-fold rally in just two months.

As well as looking at other opportunities to develop its Lac Dinga potash project in the Republic of Congo, the group is fixing a $50 million trade finance facility, which will remain in place until its operations become self-funding. We'll hear more when the deal is finalised.

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"We are delighted to have concluded negotiations on pricing relating to our first MOU, which will see delivery of 50,000MT of both NPK and UREA fertilisers in Zambia at a price that supports the growth and development of the African farmer," said executive chairman Chris Cleverly. "With a competitive sale price of US$500 per MT agreed, we are confident that we remain on track to meet the 500,000 tonnes delivery target of NPK and UREA within a year of agreeing our trading MOU with COMESA/ACTESA, which was signed in August 2015."

Details of its first partnership with COMESA and the Mask Africa Crowd Farm Fund Limited (MACFF) surfaced at the beginning of August, with an agreement to deliver 500,000MT of fertiliser annually over three years. The deal will give African Potash, which wants to become a one-stop shop African fertiliser business, a platform to distribute the product across eastern and southern Africa.

The COMESA deal suddenly flicked the spotlight on the AIM-listed tiddler. Buying began a few days before the announcement on 4 August, and the share price rocketed from just 0.28p before peaking at 3.55p earlier this month as management dismissed talk of a deeply discounted placing.

A second 50,000MT MOU agreed with a Malawian firm at the beginning of September was immediately followed by a 150,000MT deal with Zimbabwean supplier. African Potash shares hit a new 12-month high Friday at 3.625p before another round of profit taking.

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