NeuRizer [ASX:NRZ] Shares Soar on $1.5 Billion Binding Offtake
NeuRizer [ASX:NRZ] opened 35% higher on Monday after announcing a binding $1.5 billion offtake agreement with Daelim.
While NRZ shares opened 38% higher on Monday, the urea stock’s Monday gains tailed off by the afternoon.
At the time of writing, NRZ shares were up 8%.
Over the past 52 weeks, NeuRizer has gained 35%.
Source: Market Index
NeuRizer’s take-or-pay offtake deal
NeuRizer has signed a $1.5 billion binding offtake deal with Daelim for urea fertiliser, processed by NRZ’s flagship NeuRizer Urea Project.
The deal entails 500,000 tonnes granular urea each year at the index price, over an initial five-year period with the option to extend.
Described as a ‘major milestone’ for NeuRizer’s annual production, it crosses 50% of initial targets and a concrete strategy partner for its first five operational years.
First discussed in November 2021, today’s official signing means Daelim has rights to the project’s engineering, procurement, construction, and commissioning.
Daelim already has a 9.1% stake in the NeuRizer Urea Project, and NeuRizer sees the new agreement strengthening their partnership.
NeuRizer says the agreement will provide the revenue needed for financing construction and all debts that may arise, though further offtake agreements may be later explored.
NeuRizer’s Managing Director Phil Staveley commented:
‘The signing of this binding take or pay agreement with DL Trading secures significant revenue for the NRUP. This guarantee to take up 50% of the project’s initial yearly production allows both NRZ and Daelim to move confidently towards project construction. A further 50% uncontracted urea supply allows us to remain agile to support domestic demand and take advantage of market pricing. The continued global fertiliser crisis made a compelling case for DL Trading to shore up domestic supply from a reliable and cost controlled source.’
Executive Chairman Justyn Peters said the deal with DL Trading was ‘a company maker’.
Peters said both parties have ‘worked tirelessly to achieve this great outcome and I want to take this opportunity to thank them all’.
‘Daelim is the team undertaking the FEED and BFS for NRZ and both the investment by Daelim and now the offtake agreement should give all shareholders complete confidence that they are both progressing well and more importantly positively.’
NRZ share price outlook: ‘right place, right time’
Peters said NeuRizer finds itself in the right place at the right time:
‘Everything points to NRZ being in the right place at the right time.
‘With international gas prices dramatically increasing, with our only domestic production of urea closing down at the end of this year, with food staples in supermarkets continually running short and food security becoming more of an issue daily, and by NRZ providing domestic urea production we go a long way to solving these issues.
‘Our growing relationship with Daelim and their financial commitment simply confirms this.
‘When we started as a company, we stated we had the largest uncontracted gas reserves on the East Coast of Australia. With this agreement that is no longer the case.’
Lately the market has been hit by several factors: rising energy prices, the Russia-Ukraine war, rampant inflation, supply chain disruptions, and the prospect of a global recession.
And rising energy prices have been one of the biggest issues facing businesses and households.
Especially so in Europe.
As Europe shuns Russian energy, it must service its energy needs by other means.
Our resident small-cap expert Ryan Clarkson-Ledward, who is also the editor of Exponential Stock Investor, has found one Aussie small-cap that could help with Europe’s energy transition.
If you’d like to find out more, you can read about it here.
For Money Morning