Pacific Lime & Cement (ASX:PLA) - 'Undervalued?' Investment Series, with Paul Mulder

Why It Matters

The project could transform PNG's construction‑materials market, delivering a high‑margin, government‑backed asset that offers investors a unique upside in a traditionally import‑dependent economy.

Key Takeaways

• Project on schedule, first production expected February next year
• Secured cornerstone offtake with Newmont for one-third sales
• PNG government holds up to 30% equity, granting tax‑free zone
• No debt financing; equity‑only capital improves cash‑flow resilience
• Vertical integration will replace all imported lime and cement in PNG

Summary

Pacific Lime & Cement (ASX:PLA) outlined its flagship Central Cement and Lime project, a vertically integrated facility that aims to supply all of Papua New Guinea's lime and cement needs while also targeting export markets such as Australia. The company highlighted that the project remains on time and on budget, with first production slated for February next year, and that a cornerstone off‑take agreement with Newmont will secure roughly a third of the initial order book.

Key data points include a government‑backed project development agreement that gives the PNG state up to 30% equity in both the lime and cement special‑purpose vehicles, effectively valuing the business at about A$700 million. The firm operates from a private wharf just 700 m from a high‑grade limestone deposit, eliminating the costly logistics that competitors face. With a market cap of roughly A$250 million, the company projects EBITDA multiples of 11‑15×, comparable to global building‑materials peers, and it carries no debt, benefiting from a ten‑year tax‑free special economic zone.

Mulder emphasized the strategic advantage of domestic supply, noting that "we will provide all of the lime and cement for PNG" and that the SEZ status removes import, export, corporate and payroll taxes for a decade. He also pointed to secure land tenure—mining licence, SEZ licence and a 99‑year state lease—providing a foundation for long‑term stability and community partnership.

The implications are significant: investors are presented with a rare pure‑play industrial asset in a market dominated by imports, offering high‑margin domestic sales and export upside. The debt‑free capital structure, government equity participation, and tax incentives lower financial risk, suggesting the stock may be materially undervalued relative to its growth potential and strategic importance for PNG's infrastructure development.

Original Description

Interview with Paul Mulder, Managing Director of Pacific Lime & Cement Ltd.

Our previous interview: https://www.cruxinvestor.com/posts/pacific-lime-cement-asxpla-pngs-first-lime-producer-targets-50m-import-replacement-market-7827

Recording date: 18th March 2026

Pacific Lime & Cement (ASX:PLA) is advancing toward February 2027 production as Papua New Guinea's first domestically-based lime and cement manufacturer. In a recent interview, managing director Paul Mulder outlined the company's progress on a project that will eliminate PNG's complete reliance on Chinese and Japanese imports while establishing a vertically integrated building materials platform with substantial government backing.

The project's competitive foundation rests on geographic advantages that significantly undercut existing supply chains. The coastal limestone deposit requires zero stripping and sits just 700 meters from the company's private wharf facility within a special economic zone. Current suppliers operate mines 100 to 200 kilometers inland in Southeast Asia, requiring land transport to public ports before international shipping. This positioning, combined with 10-year tax exemptions covering corporate tax and import-export duties, creates meaningful cost advantages for serving PNG's protected domestic market.

Financial structure represents another differentiating element. Pacific Lime & Cement funded initial development entirely through equity rather than debt, eliminating covenant restrictions and interest obligations that would reduce cash conversion. The PNG government's direct equity participation of 18% to 30% in both lime and cement special purpose vehicles values the company at approximately $700 million AUD, nearly triple the current $250 million market capitalization. This investment, formalized through a March 2018 project development agreement, signals government commitment while providing expansion capital for additional lime kilns.

Near-term revenue visibility comes from Newmont, PNG's largest gold producer, which has committed to purchasing approximately one-third of initial production capacity. The two-kiln phase one targets domestic mining operations, water treatment facilities, and road stabilization projects currently served by imports from distant sources including Israel. Surplus production will flow to Western Australian markets where the company already demonstrates supply chain capabilities.

Expansion plans encompass additional lime capacity, cement production facilities with International Finance Corporation partnership, and downstream concrete products including batch plants and cast construction materials. Management is simultaneously monetizing non-core assets, with Power China fully funding iron sands development and advisors pursuing value realization for a copper-gold exploration asset adjacent to the Frieda River operation.

View Pacific Lime & Cement's company profile: https://www.cruxinvestor.com/companies/pacific-lime-and-cement

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