Tim Boreham: It’s a fertile market for these ASX stocks

The worldwide power disaster means the price of artificial fertiliser has soared, creating alternatives for a minimum of two ASX-listed minnows.Once they devour their day by day bread, most folks are blissfully unaware that meals manufacturing relies on the gasoline used to provide the underlying fertiliser “components” of urea and ammonia.It doesn’t assist that gas-rich Russia is a significant urea producer.For Fertoz (ASX:FTZ), heady costs have improved the economics of its area of interest pure fertiliser enterprise in US and Canada, the place it’s has entry to a few of North America’s largest rock phosphate sources.For the perfect columnists, join right here without cost Stockhead day by day newslettersBut the corporate has struggled to realize traction.“The basics are there however there may be nonetheless some work to do in constructing it right into a enterprise,” says Daniel Gleeson, a seed firm exec purchased in to pep up efficiency.One downside is scale – or the dearth thereof. Earlier administration focused upping output from 5000 tonnes to fifteen,000t a 12 months, however Gleeson reckons the corporate must get to the focused 300,000t (by 2026).This firm’s December quarter report reveals preliminary orders of 18,000 tonnes, with the corporate on observe for full-year output of 40,000t. An offtake settlement will ship an extra 120,000t over 5 years.The advantage of the Fertoz uncooked materials is that solely must be crushed to powder. A key drawback is that the product takes as much as one and a half years to be efficient within the soil, in contrast with three months for synthetics.MORE FROM STOCKHEAD: Nothing discrete about purchasing spree | How’s that for curry? | Dealer cracks the whipThis makes it unsuitable for high-value, fast-growing crops akin to corn, nevertheless it’s positive for legumes. And at $US220 ($310) a tonne, the product is 4 or 5 instances cheaper than the artificial stuff.Fertoz raised $5 million in a placement final September, however with the 2022-’23 12 months forecast to be money movement optimistic, the corporate ought to be capable to put the begging bowl away.In the meantime, Neurizer (ASX:NRZ) plans to turn into the one home native urea producer, changing Incitec Pivot’s Gibson Island plant, which has simply closed for need of a long-term gasoline contract.Neurizer’s plans centre on the outdated Leigh Creek coal mine, 550 klicks from Adelaide, the place the corporate will deploy underground coal gasification (UCG) to provide gasoline.The corporate expects to provide the gasoline for round $1 a gigajoule – a fraction of the value paid by east coast gasoline customers.Not like explosive ammonia, urea is secure: gardeners should purchase it at Bunnings. When added to water, urea kinds the diesel additive AdBlue, which was in vital quick provide in late 2021.Go to Stockhead, the place ASX small caps are large offers Earlier than Neurizer can stay with the dream, it must give you round $2.5 billion and discussions are in practice with a number of funders.“We now have been engaged on this for seven years and have put a few hundred million into the mission,” Neurizer chief Phil Staveley says.“You’ll be able to’t simply stroll up and get to be strategic accomplice; the one means is to stroll up with cash.”Final July, the corporate inked an $1.5 billion offtake settlement with Korea’s Daelim, which can buy 500,000 tonnes.A bankable feasibility examine is due for launch in April. Stavely describes Queensland’s unlucky UCG legacy – together with the failure of Peter Bond’s Linc Vitality amid claims of environmental contamination – as a “head breeze” relatively than a headwind.“The additional we develop, the much less related what they had been doing. We now have moved the expertise alongside,” Staveley says.Whereas a producing Leigh Creek mission can be price greater than $6 billion on right now’s pricing, the market values Neurizer at a mere $100 million.Not for the primary time, the market assumes that such a big-ticket mission received’t fly. In the event that they’re improper, the true believers will probably be cooking with gasoline and comfortable as a pig in pure fertiliser.Discover extra Tim Boreham knowledge at stockhead.com.auThis story doesn’t represent monetary product recommendation. It’s best to contemplate acquiring impartial recommendation earlier than making any monetary selections.SUBSCRIBEGet the newest Stockhead information delivered free to your inbox. Click on hereOriginally printed as Tim Boreham: It’s a fertile marketplace for these ASX shares