Coromandel International Limited (COROMANDEL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Coromandel Acquisition of Equities Stake in BMCC Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. Ramesh from Nirmal Bang Equities. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. On behalf of Nirmal Bang Institutional Equities, it is my great pleasure to invite you all to this [indiscernible] conference call with the management of Coromandel International. This is on the company's international acquisition of integral stake in phosphatic mining companies in Senegal, BMCC or Baobab Mining and Chemicals Corporation. We have with us the CEO and Managing Director, Mr. Sameer Goel; and the CFO, Jayashree Satagopan; and [indiscernible] Investor Relations [indiscernible]. So let me hand over the floor to Jayashree Satagopan to take us for the details of the transaction, and then we can have Q&A. Over to you, Jayashree.

Thank you, Ramesh, and good afternoon all for joining the investor conference call this afternoon. We are indeed happy to inform you that Coromandel International Limited is set to acquire a 45% equity stake in Baobab Mining and Chemicals Corporation, BMCC, which is a raw phosphate mining company based at Senegal, Africa. The acquisition is going to be through its wholly-owned subsidiary, Parry Chemicals Limited. This involved a total outflow of INR 225 crores, INR 150 crores for buying the equity stake and further INR 75 crores by way of infusion through shareholders' loan for future capital expenditure and expansion. Talking about the business environment, as you all know, that rock phosphate is a key raw material for manufacturing phosphoric acid and intermediate use for phosphatic fertilizer production. It is indeed a scarce commodity with presence in limited regions globally. India as a country needs a majority of its rock phosphate requirement through imports, mainly from North, West and East of Africa. India's share in overall traded rock is quite high. Overall, globally, the traded rock is about 25%. And India is the largest importer with about 7.2 million tons. Out of the global rock phosphate production of 207 million tons, the rock commitment for trade is only 15%, that is 30 million tons. Major producers of rock are also the captive consumers of phosphoric acid and phosphatic fertilizers. When you look at Coromandel, the advantage is quite obvious. As you may be aware, Coromandel manufactures around 4 to 5 lakh tons of phosphoric acid annually. And rock as a major feedstock for its manufacturing. We are currently sourcing rock from various countries. As part of our strategy to strengthen the value chain, we have been evaluating opportunities in the phosphate mining area to secure our rock phosphate requirements. Key considerations for this includes exploitable resource availability, P2O5 content, infrastructure in terms of roads, ports, compatibility with other rocks and, obviously, the investment requirement. We have been exploring this space for some time now and BMCC base off of the Senegal provides us a good opportunity to enter into the rock phosphate mining space. It has been in commercial production from 2021 and has a resource certainty based on drilling activities and estimates that have been carried out. Further, Senegal is a mining-friendly location. It has established mining industry with phosphates as primary exports. Senegal is well connected with infrastructure and qualified workforce. The state involvement has been constructive and quite transparent. Mining code in Senegal was implemented in 2003, revived in 2016, and is administered by the Ministry of Mines and Geology. The investment in BMCC will help in strengthening Coromandel's backward integration and will ensure long-term supply security of the key raw materials. At full capacity, BMCC can meet up to 1/3 of the company's total rock phosphate requirement based on the current capacity. In the past, we have made strategic investments with leading integrated players like Tifert in Tunisia and Foskor in South Africa for meeting with our phosphoric acid requirements. This is the first investment by Coromandel in a rock phosphate mining project. With this investment, we see multiple opportunities going forward, opportunity to exploit beyond the indicated resource and also look at possibilities for improving the rock recovery efficiencies. Let me now share few details about BMCC. As I mentioned, earlier, BMCC project is based out of Senegal in West Africa, which holds phosphate mineral resources approximately 250 million tons. It's a processing friendly deposit and is well connected through infrastructure [indiscernible]. It has a soft overburden, meaning no explosives are required. The mines can be constructed through excavators and a simple crushing process for further processing the materials that have been mined. This project has been subject to several evaluations and have gone through multiple phases of exploration in the past decade. In 2018, BMCC was granted a 20-year renewable exploitation permit by a presidential decree covering around 75 kilometers square area. BMCC has commenced active operations in 2021. And as far as Coromandel is concerned, when we designed and commissioned our phos acid 2 plant at Vizag, the design was done to have the ability to process multiple grades of rock. And the company has imported [indiscernible] Senegal rocks and our technical and manufacturing teams have confirmed a good level of compatibility using the Senegal rock. With this, I would like to open the call for questions and answers. Thank you.

[Operator Instructions] We have the first question from the line of Mr. Akshay Ajmera from [indiscernible] Securities LLP.

Congratulations for taking this big leap in integrating our plants backwardly. So what, in percentage terms, what would be the efficiencies or the improvement in EBITDA -- at EBITDA level that we will get, if you can guide us? And how much is the balance stake is held by which other entities in the BMCC? These are the 2 questions.

Okay. So over a period of time, this should help us in improving the EBITDA. As I said, our investment in BMCC and the mines in Senegal over a period in time should help us to access the rock, which will be more competitive from a pricing standpoint. Currently, the mines can go up to 1.5 lakh to 2 lakh tons per annum. And with additional capital expenditure and expansion, it could go up to 5 lakh tons per annum. So there will be a cost arbitrage of -- as we start using these rocks, and that should reflect in the EBITDA. It is too early for me to comment how much rupees per ton it would mean in the immediate future, but definitely you will see the benefit coming in as we start using the Senegal rock in our PAP 2 and possibly in PAP 1 as well. As regards to your second question, in terms of the shareholding of BMCC, currently BMCC has a shareholding from government of Senegal, which is around 10%. And as per the Senegal's law, local company in Senegal also needs to have a mandatory shareholding that is held by MNR Senegal which is about 20%. Coromandel has 45%, and the balance, 25%, was held by DSA Mauritius, so that adds 200% of the shareholding in BMCC.

So, just if you can just give us a broad guidance as to how much will be -- how much is the management's broad assessment of getting improvement in the EBITDA by using this mine? Just a broad assessment at the initial level.

Akshay, we'll be able to give this to you as we start using the rocks. Currently, we have limited usage of the rock. We have done 3, 4 shipments at this point in time. This will also be a mix along with the other rocks that we are having. So we will be able to quantify and suggest this at a later point in time.

Understood, ma'am. This was really helpful and wish you all the very well.

Akshay, just one more. For others also, this is a net quality rock, [indiscernible] content is over 33%. There are not many mines which give that sort of high-quality rock, so we are quite happy to improve the stock. And therefore, we expect the efficiency to improve both our technical team and also our manufacturing team of working on the early days. But it is a good thing as it a very high quality product.

Is there any other company in India which is currently using that type of rock?

No, again, there are various sources of rock, which are used. Even in Senegal, the other companies who are mining the rock, I can't comment on their quality of rock.

[Operator Instructions] We take the next question from the line of Mr. Tarang from Old Bridge Capital.

Just wanted to check. You said that the permit was given in 2018 to operate for 20 years. So therefore, the remaining life of the permit would be 16 years. Would that be accurate?

Yes. The permit was given in 2018. Depending upon how much of mineral availability is there, these permits could be renewed.

Okay. So I mean, considering that the possible reserves are at about 250 million tons and in a reasonable scenario, we'll be able to excavate only 0.5 million tons. Clearly, there is a potential to sort of renew it. So come 2038, the chances of that happening are high, right?

Yes, you're right. So in the indicated area, easily, we could drill about 25, 30 years. And there are further additional areas, which can also be explored. And if you look at it, our assessment is we will have phosphate for close to about 100 years. And therefore, working with the government, these permits would be renewed for continuous operations.

Got it. I mean, as excavation as you cover more area, is there a potential for this mine to maybe help you backward integrate more than 1/3 of your current requirement as output from the mine increase increases?

Yes, there is definitely a possibility to increase the offtake from the mines for our operations.

Okay. And last, mam, I mean, experience in Africa generally has been mixed. So how are you -- how did you sort of take care of the regulatory and political risk of deploying capital there and managing? I just wanted to hear your thoughts on that.

Okay. If you look at Senegal, it was a little French colony, right, and it has been a democracy for a long time. And there are other large corporates who are also present in Senegal, like IRC has been there for almost 4, 5 decades into phosphatic mining. They also have the [indiscernible] plant there, they do about 6 lakh tons of [indiscernible] as you may be knowing. So phosphate mining exports is a major thrust for the government in Senegal. Given the past experience of the company who have been running it successfully, it also gives confidence for Coromandel to work through in this space.

I think just to add to what Jayashree, Senegal has been looked at the entire West Asia and even the [indiscernible] Senegal has been a very stable country, even the independents from the fringe. And it has good relationships with the neighbors. It's got good relationships with markets both in Europe and India and also in U.S. So it is a hub. It's quite there. The airport has very strong flights, which go to U.S. from South Africa stop in Dakar, which is the capital. And it's a very stable economy. People are quite highly educated there. So that way, we must see many structural issues emerge and other West Asia.

We'll take the next question from the line of Mr. Dhruv Muchhal from HDFC Asset Management.

Can you please help us, when can this mine go to this 5 lakh ton if any sense is available for now? So currently, I believe it's producing 1.5 lakh, right?

Yes. Yes. So we're thinking of next couple of years. Okay. So we believe in a time frame of 2 to 3 years. The mine should be in a position to give us 5 lakh tons.

And the amount that...

When you look at the deal, what we are doing is it's not just investing in the current shareholding, we're also inverting to support the expansion program for the mine. So there's an inclusion in terms of investing capital, which will help us to improve, firstly, efficiencies at the mine and then to look at more output. And we also -- the port infrastructure is getting good. So like Jayashree said, in a couple of years, we have a plan for this to expand further.

So the INR 0.70 that is being -- given as shareholder loan will take care of the expansion also to the 5 lakh tons?

For the current efficiencies to come, and we'll inject as and when it comes to that.

But what I was trying to understand, what -- can there be further capital investment requirement as we ramp up with this 5 lakh tons?

So if the mine needs further expansion, Coromandel as a partner, it will be important to look at how we can, along with other partners, how firstly, we can ensure continuous production from the mine and all the work has been done on that level and then to see how we can expand the throughput further. But like Jayashree said, it will take a couple of years, yes.

Got it. Sure. And is it possible to share any sense on what would be the cash cost of production given the mine is now operating for about a year or so? Some sense, because this will help us understand independently what the profitability for us would be.

So I would think we have to look at it in 2 aspects, right? One is the cost of mining per se. Here, because the mining is not at an optimal level, while the mine's capacity is about 5 lakh tons, currently they are doing about 1 lakh ton. When you scale it up, the cost of production will come down. And given the fact that there had been few shareholders who have been trying to operate the mines, now with Coromandel coming in, the whole system is going to get far more professional in terms of its operations. Ensuring efficiency and throughput are also meeting up to the global standard. So the cost of mines will come down and stabilized as the throughput goes up. The current cost will not be an indication of future. And there, we are also having -- looking at our own resources, who will work along with the team at BMCC to scale up operation, run it more efficiently and economically, that's number one. The second thing is while there is a cost of mining, it's primarily the cost at which you will be importing the rock in Coromandel. There will be transfer pricing mechanisms. And based on that, we will be importing the rock into the country. So there could be some amount that will be left at BMCC for their own cash flow management and future expansion opportunities as well. From Coromandel standpoint, I would always look at how does this cost of rock with a high P2O5 content compare with the other rock that I can get. Is there a cost arbitrage? Is there an opportunity for that? And so obviously, it grows. The second one is, how am I able to blend it with the other rocks that I have and improve my throughput in the PA plants? And there also, technically both our engineering R&D team and the manufacturing teams have used the rock and found the compatibility to be cooked. So the answer to your question is, we believe that there is going to be a good amount of cost synergies for Coromandel in the medium-to-long term through this investment because we will get continuous supply of rock and we believe it would be at a better price compared to the other sources from where we could possibly get the rock.

Sorry, just to add to what Jayashree said, two things there. Firstly, we've already mentioned it's a high-quality grade rock. The good thing is the rock is available with a soft overburden, so even when we look at it and get the right equipment, it's going to be -- it's a very -- it's open cost time and the P205 is available at a very narrow depth, so which is a good thing. The other thing which we are looking at is also from a logistics point of view. Currently, a new port is also getting developed apart from Port of Dakar, which will make the logistics look even cheaper. While even the Dakar port is not that far, but comparatively, we are building a new port, which is already coming up through the government, where we'll be able to send the ships out. So all this will help in terms of the cost of the mine and the cost of the rock. And one more thing which it does is when you have own captive rock available, it makes -- like you will understand our own negotiation power firstly to use alternate rocks. And secondly, our negotiation powers with the other rock suppliers is a lot more easier. So that is another benefit which will show up because we are not dependent on it.

Sure. And just one last question, is it possible to, in brief, probably help us understand how does this dynamic in the rock phosphate market works? Because it's not a very liquid market, not very well understood. So I mean, what I'm trying to understand, is there a mechanism like how much of the first asset prices move, it's the ratio, the rock prices are the ratio of that, and hence, it gives you a big advantage when the -- there is a significant inflation in the first asset prices. So just trying to understand how does the mechanism in the rock market work?

Well, there is no great formula here, right. Each country, based on their availability, the supplier based on their supply/demand and negotiation power, also depending on the P2O5 content and the negotiation power with the buyers. That's how the rock prices get settled. People who have their own backward integrated facilities, having their own mines, are able to negotiate slightly better terms. And that's what Sameer was also mentioning. When you have your own source, it helps in securing the raw materials. Not only that, it also helps you in a better position when we are sourcing alternate rocks because you need quite a high quantity of rock to process in your PA plant.

We take the next question from the line of Mr. Resham Jain from DSP Investment Managers.

Congratulations on the acquisition. I have two questions. First is on the overall production, which this company is going to do. Is there an agreement also that the first, whatever quantity or the -- will be sold exclusively to Coromandel or that company will decide because they have different partners as well other than Coromandel? Can they sell to other players as well?

Okay. What is your other question, Resham?

Yes. The other question is a broader question because Coromandel also was planning to set up or further increase the overall manufacturing capacity for NPK. And the thought was that if we have the supply chain security, we can actually increase our manufacturing capacity in India. So does this acquisition give that comfort of adding the manufacturing capacity within India? The NPK capacity, I'm saying.

Okay. So I'll respond to both of them. As far as BMCC is concerned, Coromandel will be acquiring 45% stake. Obviously, as we mentioned, it is subject to fulfillment of the conditions precedent, and we hope this transaction will get completed by Q2 of this fiscal year. Part of this entire agreement is also a produced contract, which will assure Coromandel gets the required rock supply and also has a preference beyond a certain threshold of rock that gets mined from the facilities. So to your question, yes, Coromandel will definitely get a very large share of assured rock from BMCC. To your second question, as we have mentioned in the past, the intent is to see how much we can backward integrate and secure our raw materials. The first step was putting up a PAP 2. The second one is setting up our own sulfur burner, which we hope should be commissioned by June, July of '23. Then the third one now is going further backwards to acquire a stake in the mine to get the rock. As all of these stabilizes, I think it will give us a comfort to evaluate further possibilities for increasing in the NPK capacity. I think that would be a medium-term objective for us. Currently, the focus is clearly on ensuring that we complete our SAP3 plant in time, we get BMCC fully operational, and we will look into, at an appropriate time, for further augmenting capacity in terms of NPK manufacturing.

Okay. And is it fair to assume that this acquisition, obviously it gives the supply security? But from the financial standpoint, should we assume a 4 to 5 years kind of payback period for such investments on a stand-alone basis?

It would be even earlier, Resham.

Okay. And the benefit which Indian company will get will be separate in terms of the overall supply consistency and other things at the plant channel?

Yes. From Coromandel standpoint, we're able to get a few shipments on a continuous basis, that itself will be a payback for the project, right? But in a longer term, it is assured supply, good quality rock. And obviously, as I was mentioning, it also helps you in a better position when we are sourcing from various other parties as well.

We'll take the next question from the line of Trilok Agarwal, [indiscernible].

I only check, is there -- in most of the mines, you obviously have the royalty payment as well. So is there a royalty payment? And if they impose in the future, how does the deal gets impacted for you guys in context of sourcing costs?

Can you please repeat the question? Royalty payment to whom?

So is there any royalty payment, which is on a per ton basis already a part of the deal? And if not, if in the future it gets applied by the government. I mean, is there any provision for that? What you want to understand on that?

Yes, there is a royalty payment to the government, which has been factored in to the investment as we work through these financials and the payback.

And what kind of -- what's the current royalty payout that happened per ton basis if you can share some numbers?

It's a percentage in terms of royalty, it's not per ton. It's 5 percentage to be paid to the government of Senegal.

Sure. And that's subject to any change or it's absolutely flat over a period of [indiscernible] 2038 as you mentioned earlier?

Currently, this is 5% here. We don't see this changing.

Okay, understood. And the major benefit would be obviously be able to see only next year, right? By the end of September only, you guys will be able to conclude this transaction. Is that correct understanding?

Yes. before September, we think we should be in a position to complete the transaction.

We'll take the next question from the line of Vishnu Kumar from Spark Capital Advisors India Private Limited.

So my understanding is we need about 1.2 million to 1.5 million in terms of total rock requirement. So this -- as we speak, this acquisition would help us close to 10% of our requirement. Is that a correct understanding?

We will need about 15 lakh tons of rock. And at full capacity, we're expecting the mines to give a 5 lakh tons. It will meet 1/3 of our requirement.

Understood. So do we have a 100% agreement with the company that everything can be shipped to India? Or is it that, that entity will decide that the best price will be taken or any of that sort? Do we have a -- I mean does Coromandel long-term agreement with that entity to bring everything to India?

Yes, we do have a long-term contract signed with the entity. Major portion of the rock that is mined out of PLCC will be shipped to Coromandel in India. There will be a small portion, which could be shipped to any other company based on the requirement. And beyond a certain quantity, Coromandel also has a right of first refusal.

Okay. So can it be said that 75%, 80% would probably come to India?

Yes.

Okay. Got it. And secondly, just amongst all the NPK raw materials that does require these relatively the most either P or even the derivatives of P. So at some point, would you want to take this 5 lakhs or rather you want to, at some point, take the fast rock security to at least 80%, 90%. Let's say even if you want to expand the plant and, let's say, our total requirement goes to 20 lakh. So at some point, would you want to have it much higher? Would that mean we would go for more such assets? I mean, given it -- I mean if not just for Coromandel, at least country level securities could take place.

Well, Vishnu, this is a very good question. As I was mentioning earlier, this current mine in the indicated area itself has enough mineral ore which can last for 25 to 30 years. There is possibility to explore around this area, which I think can help us go for a longer period or secure more mineral fund out of the area. So we can take 5 lakh for, say, for instance, 100 years or you can take 10 lakhs if possible over a much shorter period. All these possibilities are there, definitely, after a couple of years, getting the comfort working in Senegal increasing the throughput, improving on the efficiency, Coromandel will definitely look at seeing how we can get more mining and more for our capital consumption. That will be the first there. I'm not too sure whether at some point in time we'll have enough to mine and curb the needs of the country. If it is possible, why not. But I think our own requirement itself is quite high. And in most of the cases, in the PA plant, we also look at mix of rocks. At least in all our plants, we use 2 to 3 grades of rocks while we get the processing. So this will hopefully meet with most of our requirements. And if there is opportunity to export to others or even thinking allowed to further backward integrate in terms of a PA plant, those opportunities could also be looked into.

I actually had a different question. Would we go to an 80% requirement you need to have this kind of structures or you need to indirectly own. That is something that we will look for maybe over 3- to 5-year target, which would mean, let's say, at least 1 lakh or rather say, 10 to 12 lakh tons of supply security we need to have. That means we will look for similar assets over the next 3, 4 years. Is that the understanding or we'll probably just stick with this acquisition?

No. All opportunities are open, Vishnu. We will be looking at opportunities if there is a way to tie up, either through strategic sourcing for a longer period or through an equity participation, Coromandel will explore both these options.

I think, Vishnu, the main thing here to look at is we are looking at the flexibility of supply chain. So depending on how availability is and how pricing is, it gives our plants the flexibility of choosing what makes to you. So I think that is critical, finding [indiscernible] and strategically that becomes important.

And sorry if I'm digressing a little bit. Would we consider probably an ammonia plant or anything? Would that be something that we will really consider because that also is oscillating a lot and would we consider anything on that? Any thoughts that at least whatever current thinking on that, if there is.

So the way we are looking at it is more on sustainability. So definitely, we are looking on, when I say medium term and long term. And even the government has talked about looking at not just green ammonia and other things. Those are projects which we are working on.

Okay. And anything on Tifert and Foskor, if you could just help us understand. Anything is coming from them or is it like...

We are getting -- 37% of our Foskor's requirement came from Tunisia last year, both from Tifert and also from partner company, GCT. And same thing is there in Foskor. What we are planning to do is that we have sent our teams across and in entire Tifert, even GSFC who is also our partner at investment [indiscernible] teams basically to look at how we can improve the throughput and efficiencies of the plant. So the teams are working on it. There is also -- we are talking to both the governments in terms of supply security, including transportation and other things. And given the fact that phosphate mining has been good for countries and especially when tourism goes down, it's a good foreign exchange or and the governments are also very actively engaging with the for industry.

So just to get a clarity, you get 37% of your phos asset...

Because we have a diversified source, it keeps changing depending on availability. Last year, we got 37% of our requirement from Tunisia, which includes GCT first assets.

Sir, anything on Foskor? Anything you're getting from South Africa?

No. This is from Tunisia, which is Tifert and GCT.

So Foskor also we -- Vishnu, we also import from Foskor. We had a couple of shipments from Foskor last year for phos acid. But we're also importing rock from Foskor. So it's both acid and rock.

Okay. Okay. Got it. And this rock would be slightly lower quality, if I'm not wrong?

Foskor rock is very good quality.

It's a [indiscernible] rock, so it has got high quality.

[Operator Instructions] We take the next question from the line of Vidit Shah from IIFL.

Just a quick clarification on the accounting statement of the acquisition. So is this going to be a subsidiary? Or are we treating it as a subsidiary?

So we have a 45% stake. So we will be consolidating the financials.

Okay. So how much of [indiscernible] would this be, so like what can we assume to be the average level of the [indiscernible]?

So Vidit, this is the -- 2021 is the first year of operation for BMCC. I was mentioning a little earlier that given the fact that we are talking about 1 lakh and 1.5 lakh tons of phosphoric rock production, we'll have to work on the efficiencies on the cost, which is what Coromandel team in India will also be supporting them on. So it may take a couple of years for the entity to become hugely cash positive. There will be scaling up in the next 2 years to get it to 5 lakh tons of capacity, which is when we will see a good level of profitability in BMCC.

Okay. So currently, is it -- like is it going to be breaking even at PAT or losses?

No, not yet. Not yet. So we've just started its operations, right, 1, 1.5 years back. So you'd have to get to a certain level of scale for it to be positive.

Okay. Understood. And so as you said, you have around 15 lakh tons of rock requirement of which 5 can be procured from BMCC. Just want to understand about the rest of the 10, how much of it is tied up by a long-term agreement, how much is secured at spot prices?

See several of them are through 2 to 3 years. That's how the industry has been operating. Most of the raw contracts are for a period of, say, up to 3 years. And it is renewed. However, as I was mentioning, we are also open to look into a slightly longer-term contracts as well as any strategic stake, which can help us to give long-term fertility and stability. So as far as we have been increasing our PAP production capacities, that should not be able to face any shortage in terms of rock availability. One, thanks to the smart sourcing by commercial team. The second is the flexibility that our manufacturing teams have in terms of processing multiple grades of rock. So there are contracts which are 1 year or 3 years. We are open to looking into longer term. And this stake in BMCC will sort of help us sort of solidify as we go along in negotiating and fixing some of these contracts.

Got it. So majority of the contracts including BMCC are long term, so they make a very little amount of rock is what -- at the spot base. Is that...

Yes, we -- exactly.

As soon as -- we think BMCC contracts are long term.

Okay.

I don't know what your question was.

My question is, the rest of the 10 lakh tons that we need, are these long-term contracts or those...

So we have contracts available for them, which can be renegotiated. Yes, we have contracts.

Got it. And just the last one for me was around -- are there likely to be further acquisitions? I mean, you had indicated on the call that you'll be definitely acquiring something that you -- and you have acquired BMCC. So can we expect more acquisitions this year? And if so, are they -- I mean, is the strategy to consolidate supply chain first and make acquisitions and investments in sulfuric acid or BMCC type of investments or are acquisitions also going to be revenue positive?

Like we have said in our last call also, we keep looking at various investments opportunity, both organic and inorganic. Some of it could be backward integration, some could also be looking at area. We are definitely looking at everything and definitely something would come up if the proposal is right this year. So that's nothing, which prevents us from doing things. It's just that it has to be the right thing.

[Operator Instructions] As there are no further questions, I would now like to hand over the conference to Mr. S. Ramesh for closing comments. Over to you, sir.

This is Ramesh here. I congratulate both Sameer and Jayashree for going over this transaction. I just have a couple of thoughts. One is, so when you look at this transaction, what is the kind of price for rock phosphate, there has gone a financial evaluation. And secondly, in terms of the shareholding structure, this is 45% with you full management control in terms of the sales for operations and future investments in the target company?

Jayashree, you got the question.

So the line wasn't too clear for me, Sameer.

Yes, Ramesh, could you just repeat it, please. Go one question at a time.

Yes. So I was asking in terms of the consideration of the economics of rock phosphate mining, what is the underlying price assumption for rock phosphate that you have assumed, say, over the mid-cycle to do the financial evaluation for this investment because rock has gone all the way from $700 to more than $200 today. So will you give us -- there's an indication in terms of the financial viability of the project if the rock prices settle down to the historic averages? The second question is in terms of the equity shareholder structure this company at 45% stake, and there is another partner with 25% stake. Does this is 45% stake give you management control in terms of investment decisions and supply contracts? Or would you have to increase the stake further to get that management control in terms of the objective of securities of supplies?

Okay, Ramesh. Let me address your first question. As we went through the financial evaluation, we have done different scenario planning with rock prices being at record low to current levels, which are quite high. With all the sensitivities, we find that this investment is quite variable and would be helpful and accretive to Coromandel in the long term and the medium term. Secondly, in terms of our investment where we have 45% stake, we have already entered into a long-term contract for purchase of rock from BMCC. The next one is in terms of management control. As per the shareholder agreement that's been signed, there are reserve matters which will definitely require majority stake holder, which is Coromandel's buying. And we will also be having our own resources in Senegal, who will support the operating team and help them run the operations far more efficiently. So we are looking at strengthening the operations. We are looking at strengthening finance there. All of these, we believe, will be very helpful right from the short term to long term.

Okay. That was helpful. So on that note, I wish to thank all the participants for joining this call.

We have one question from one of the participants, that is Mr. Bharath Subramanian, Sundaram Mutual Fund.

Just one quick question. In terms of reserves and resources, you mentioned 250 million tons. Is it the indicated results or the inferred resources? And what cutoff are you referring to when it's 250?

This is on the inferred resource. The inferred resource is about close to 65 square kilometers, which will help us to mine up to, say, 100 years, 5 lakh tons is what we are looking at, right? And then in the indicated area, we should be getting about 50 million tons at a 10% cutoff.

10% cutoffs? Okay. And just on the profit side, once the situation and everything are revamped, how easy is it to scale up, say, 2 million tons in terms of process or does it work at the reason over there?

Please repeat. I'm not able to get your question.

So one, in terms of setting up the circuits for a 0.5 million ton production and if you need to have a right mining plan, how much easy is it or how is the time line typically if that is the reason in case we go with the revised management.

I think we need to see those, Bharath. Currently, I think it will take 2 to 3 years for us to go to 5 lakh tons. Obviously, wanted stabilizes and our teams feel far more comfortable than there is quite a lot of areas that can be explored nearby or we can also expand within the indicated area to get more output. Well, these possibilities are there. But I think we'll take one step at a time, stabilize the operation, get from 1.5 lakh to 3 lakh, 3 lakh to 5 lakh, ensure it is stable and we are able to mine continuously and then look for further increase in the production there.

There are no further questions. I would now like to hand over to Mr. S. Ramesh for closing comments. Over to you, sir.

Yes. Let me thank all the participants for joining this session and making it interactive and interesting. And I would like to hand over the call to the management for their closing comments. Over to you, Sameer and Jayashree.

Yes. Thanks. I think, first, what we are doing is it's part of the [indiscernible] one of the things which we've seen, especially with the higher raw material prices is we need to work towards achieving self-sufficiency, especially in terms of the raw material and the process in fertilizer production. And given the fact that there is a high dependency on rock phosphate, therefore, the strength is in the right direction to look at achieving long-term sustainability and supply. And we are committed with this common vision on working on that. And that's why we are strengthening our backward integration and got further like Jayashree to ensure that our sales capacity is augmented and also leveraging all our overseas ventures. So this is in line with that. And we are very happy to partner and invest in this particular mine because it will help us and the country in terms of achieving what we call in securing phosphatic fertilizer and also improving the [indiscernible] and productivity towards the [indiscernible], especially given these times, this is absolutely important. So we are rightly investing in those directions. So that's it. So thank you very much for joining the call. I appreciate all the investors who have asked a very good question and also congratulating the entire team. We're very vigilantly on this project, and we have been able to come across. We've been able to make this acquisition in a very short period of time. Thank you very much.

Thank you all.

Thank you. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.