PNG commodity play could get juicy – perhaps even sub-lime

What commodity is used in many consumer products and most mining processes and is also a “battery mineral”?

Stop guessing – the correct answer is lime.

The humble calciferous material is used to produce ink, paper, plastics, rubber, sugar, cement and in steelmaking and is crucial for soil conditioning and stabilising.

Lime’s biggest application is in processing metals from concentrates, so it thus plays an unheralded role in batteries and electrification.

Currently, most of Australia’s lime needs are serviced by faraway Thai, Malaysian and Vietnamese suppliers.

But Mayur Resources (MRL) is about to change all that with its Central Lime Project (CLP) near the Papua New Guinea capital of Port Moresby.

Mayur this week secured a $US115m ($235m) debt package from UK private equity firm Appian Capital Advisory, thus fully funding the first stanza of the twophase venture. Last year, the Sir Mick Davis-led Vision Blue Resources chipped in $US40m of equity for a 49 per cent stake in the project.

In the first phase, CLP is expected to produce 400,000 tonnes per annum of lowemissions quick and hydrated lime, as well as 500,000tpa of raw limestone. The funding includes $US22m for two additional kilns to double production – with concomitant economies of scale.

Half of the output will supply PNG, which has a large metals-processing sector.

The rest will be shipped to Australia at a considerable freight advantage relative to the far-flung Asian suppliers.

“I don’t think anyone has invested in a lime kiln on the east coast for over 30 years,” Mayur executive director Tim Crossley says.

“There is huge demand and the lime market needs to be filled by someone, somehow.”

The project is expected to be carbon neutral in a sector that has a heavy carbon footprint, with this status achieved by measures such as renewables and the use of on-site hybrid vehicles. Costed at around $US90m, phase one is forecast to deliver revenue of $US1.518bn and underlying earnings of $771m over a 30year life.

Initial work is under way, with first production expected in about 18 months. In the second phase, costed at $US250m, the project turns to cement and clinker making.

According to Mayur CEO Paul Mulder, the company will benefit from having control of the production and distribution chain. Resource consultancy Wood Mackenzie forecasts a 6.8 million tonne regional lime supply shortfall by 2031, when demand is projected to reach about 32 million tonnes, compared with 22mt currently. Meanwhile, the quicklime price jumped from $US90-$100/t pre-Covid, to $140-$160/t (excluding freight costs). This is above Mayur’s long-term assumption of $US100/t.

Mayur will be the only ASXlisted lime exposure after the expected takeovers of both AdBri (ABC) and Boral (BLD).

Import pressures are mounting: in July 2020, AdBri shares slumped 25 per cent after customer Alcoa changed to a Thai supplier.

“We are comfortable we can match it with the best-quality product coming out of Asia,” Crossley says. He adds the 200 million tonne-plus resource should underpin a long life.

Mayur stock did little in the wake of Monday’s funding announcement, but the stock has surged a “sub-lime” 25 per cent over the past six months. This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.