DeepDive
8年前
More DD data and thoughts -
Yesterday Pr, conversation with management, here are some more thoughts:
- One of the KEY risks in Verde has been, in our eyes, Rampup and acceptance by Farmers. While the product's beneficial effects are proven academically, it is a WHOLE different game penetrating the market and CONVINCING farmers to change proven methods - THAT process is Slow and frustrating. This is why we have been carefully looking for proof of acceptance: will farmers realize the benefits (one-time application => less expansive/effort) + less chlorine + more micronutrient are much greater compared to the same cost as imported Potash?
- Today we learned that the company is Fully soled out to the end of the growing season as in 24/7 production, and will deliver 40 tonnes - 10X 2017 quantities.
- It would seem demand is over what the company can produce and they are turning customers away.
- Here is an important bit we dug up: is seems a significant part of 2017 farmers who ordered K Forte (=Super Greensand) Reordered, with some of them ordering as much as 10X their initial order. This spells retention and expansion.
- for 2019, the company thinks about 200K Tonne with a facility expansion of to 800K pa (well above our forecast).
- We like the fact that so far, Cristiano, the owner, CEO, showed great skill in completing the expansion plans underbudget and in time. We are sure the fact that he is such a significant owner with so much skin in the game ensures he will continue to watch expenses and investment like a hawk.
- two factors will impact the ability of the company to make money - price of potash and cost of buildout. The third, Demand, seems, as this point in time, to be assured.
-Potash prices are held down artificially by Russia. If ever they were to jump up to their higher range, this will all but insures Verde makes a lot more money.
- This is a very simple business (if demand exists): scoop up well exposed available dirt. Grind it. bag it. ship it. collect money. rinse. repeat. It's easy to make lots of money operating this type of business. Its hard to compete with the availability and accessibility (unless tomorrow someone finds other similar resources. Harvest minerals (LON) is a competitor, but it is not the same quality materials, and the management is not local (nor friendly to shareholders). We are not concerned about competition at this point in time / Prices (0.5-0.7$ / ~30 mill market cap).
- Cristiano (CEO/Owner) told us his intention is once the company is profitable, he intends to send back most of the profits to shareholders as Dividends. This remains to be seen, but we think there is ground to plan for this investment to be seen as a dividend growth holding, bought very very cheap and very very early.
- Cristiano continues to accept payment in stock rather than cash - signifying deep belief in the prospects. Stock outstanding remains in a very low 40-ish million, even after complex history and a long path taken to get here (meaning investors still hold a significant claim on future cash flows).
Summary:
Today we think about 40% of the risk has just evaporated from the thesis and even after 20% run-up to 0.77$, July 2014 prices (on the back of a steady drop in price over the recent weeks) - the company is cheap relative to the potential. Management has proven itself to be highly competent and aligned with shareholders. Most importantly, the market agrees with the marketing/sales claims. We like the fact that there is little to no chatter about the name.
Yesterday, about 10 percent of the market cap exchanged hands, which we think shows that traders who do not understand the business or are very short-term in their time horizon provide liquidity for sellers who want to join the ride just on time. We continue to use that liquidity to increase our position at what we see as compelling valuations.
DeepDive.
Rocketred
8年前
Verde sold $166,850 of Super Greensand
Verde Agritech releases Q2 results, talks first sales
2018-08-14 19:18 ET - News Release
Shares issued 40,475,000
NPK Close 2018-08-14 C$ 0.91
Mr. Cristiano Veloso reports
VERDE ANNOUNCES SECOND QUARTER 2018 RESULTS
Verde AgriTech PLC has released its second quarter 2018 results.
Highlights:
- In May 2018, the Group secured funding from BNDES (through Santander Bank) of approximately $350,000 (B$1,040,000) to finance the turnkey agreement to build a 45 tons per hour Super Greensandtrademark production facility.
- In June 2018, the Group confirmed the new processing plant was on budget and schedule. Subsequent Event:
- In July 2018, Verde announced the start-up of its processing plant. The cost of the production facility was US$ 600 thousand, part of which was spent on ground work necessary for an expansion to reach the 600 thousand tons per annum capacity projected for Phase 1 in the pre-feasibility study ("PFS").
Sales update
- Announcement of a broader line of Super Greensandtrademark products, which now has a line of 3 versions: Micronized, Powder and Granular. In May 2018 Verde concluded the first sale of Super Greensandtrademark Granular to its US Distributor. Super Greensandtrademark Micronized has been supplied to Distributor since 2017.
- Verde sold $166,850 of Super Greensandtrademark. In accordance with applicable accounting rules, revenue from delivered sales has been credited against the Cerrado Verde project until commercial production is reached.
Verde's President & CEO, Cristiano Veloso commented: "The first sales of Super Greensandtrademark have not been easy and we expect that will be the case for, at least, the first 50 thousand tons of the product. The pace of sales is accelerating thanks to the sowing season of the second half of 2018 and return costumers who, for the second consecutive harvest, have opted to use Verde's Super Greensandtrademark."
About Verde AgriTech
Verde AgriTech promotes sustainable and profitable agriculture through the development of its Cerrado Verde Project. Cerrado Verde, located in the heart of Brazil's largest agricultural market, is the source of a potassium-rich deposit from which the Company intends to produce solutions for crop nutrition, crop protection, soil improvement and increased sustainability.
We seek Safe Harbor.
DeepDive
8年前
Some more DD notes:
* About 50 farmers are in the Pilot stage - one of them upped his order.
* Pilot farmers use the product on small plots (one to several hectares ~ Hectare = 10 Duman).
* While the building plan on the Most recent investor Dec estimates the Capex for Phase 1 at ~3MillUSD, in practice, 600KUSD Capex was enough to build a 45 ton per hour production facility (~280K ton production). Phase one is 600K ton production. Now, take into account that expansion is always cheaper than initial build up due to the fact that the first development includes some one-time expenses such as roads and general facilities that don't need to be rebuilt in an expansion. So - this leaves us with a much cheaper estimation of the real cost of Phase 1 construction and an Idea as to management's execution and conservatism in estimating costs - all great news to investors.
* we believe the cost per tone in the company slide deck is very generous and allows for some cost slippage and errors, and thus turned somewhat less critical of the actual profit margin the company provides.
* rough estimations (before deep check and model) lead us to believe the business will BE at about 100 Mill Tone, probably CF positive earlier. We would believe investors will push valuations much higher well before this point, as some very smart investors have quietly put their attention on the business and are tracking its progress. Watch XPEL PPS meteoric 300% rise over 4 months once the fundamentals materialize.
*Also, management is on the record with distributing excess cash to investors "ASAP".
After contacting management, we are dilling down our risk rating a notch, and we will be closely waiting for signs of Farmer order pickup.
Subject to acknowledging the thesis still needs to prove itself (farmers acceptance) - is far from a sure thing (as to happening at all, in the expected scale or in the expected time frame), placing a small bet to secure initial good entry prices is a smart thing at this time (0.5-0.7 CAD).
Time will tell.
Do your own DD - management is pretty accessible.
DeepDive
8年前
Investment thesis
* Survivor owner-operator. 40ish mill. Outstanding. After several years of delay. Lots of skin in the game. Endured trial by fire when Potash prices collapsed. Taking compensation in stock... Door opening director.
* Glauconite mined in Brazil near farmer location aka super green sand is better than Potash and could replace Brazilian farmers import from Canada, Russia, at same prices as Potash.
* lots of it there, enough to supply 100% Brazil for 50 years.
* Green, organic, more nutritious compared to salinated, chlorine packed alternative. Simpler to apply (once only compared to several times with Potash).
* 2 billion usd NVP (8%) over ~40is mill m cap, 40 mill outstanding.
* already sold “samples” to nearby farmers. Brazilian farmers are large operations, orders could explode if farmers observe same superior performance in studies.
* internal cash flow, existing cash funded plan to ramp up to 100, 160 k; 5 mill; 25 mill ton per year, @ ~ 30ish$ per ton profit.
* comparable trade at x,00,000,000 mil cap,
* risk: Brazil (not exactly role model for governance, politics, labor relations), vested interests (there’s a business around importing Potash and they will not lose sales without a fight), one man show, farmers conservative nature and reluctance to change (oh boy that’s a biggy), speed & execution risk which can lead to more dilution; capital allocation risk: what will the owner do with profits when and if they roll in? We hope to see very large distribution of profits. Sensitive to Potash global prices.
* Catalyst: one pilot farmer already reordered at a significant scale for the next order. First sign of adoption? Social proof will be a strong adoption factor in this market.
What we are watching for: signs of pick up in orders. This is the big fat difficult unexpected variable. The rest should be relatively simple to execute.
We like the exposure to Commodities via the business and if it works it could be a good hedge against inflation.
gsfl
14年前
Progress Report: Environmental and Mine Site Design
Verde Builds Development Team
TORONTO, July 26, 2012 /CNW/ - Verde Potash (TSX: "NPK") ("Verde" or the "Company") is pleased to provide an update of recent Company activities and the appointment of two new management personnel to advance the Cerrado Verde Project: Mr. Rubens Mendonça as VP Mining and Dr. Patricia Radino as VP Engineering.
The Company is currently completing the environmental impact assessment report for the Cerrado Verde KCl project, which has been initially reviewed by the government's environmental agency. The Company is pleased with the report and the initial feedback received from the agency, and plans to submit the report in August 2012. Highlights of the report include an independent survey of communities in the vicinity of the project, showing overwhelming support for the project. When residents were asked to answer "yes" or "no" to whether they were in favour of the mine development, over 85% of residents were in favour. The Company also completed a mine site plan for the environmental report, with emphasis on tailings management. The mine site plan contemplates a dam to contain 1/3 of mine life tailings (160 million cubic metres), which is easily accommodated taking advantage of the hilly landscape, with additional tailings to be contained as backfill in mined out areas.
Exploration work continues. Approximately 60% of the infill drilling for the Definitive Feasibility Study ("DFS") is complete and 50% of the assays have been received. Work is expected to be concluded during Q3/2012.
Cristiano Veloso, President and CEO, said: "Verde Potash, throughout its 5 year history as a publicly listed company, has been a disciplined arbiter of its cash and share capital. The Company enjoys a healthy cash position of approximately $28.8M (as of financial statements dated March 31, 2012). The Company has sufficient capital to conclude the on-going DFS, complete the environmental studies and licensing, and cover project finance costs as well as all overhead costs associated with moving the project forward."
Along with continued development of the Cerrado Verde Project, the Company has appointed Mr. Rubens Mendonça (VP Mining) and Dr. Patricia Radino (VP Engineering) to the management team.
Rubens Mendonça, a mining engineer and geostatistics specialist, has worldwide experience working with mineral commodities in technical and managerial roles. As Vale's Senior Mining Engineer, Mr. Mendonça was responsible for mine planning and design, implementation, engineering and feasibility studies for both of Vale's Southern and Northern integrated mine-railroad-port complexes. Subsequently, as the mining manager of the Brazilian division of Snowden Mining Industry Consultants, Mr. Mendonça was responsible for the technical coordination of several mine projects as well as desktop, scoping and feasibility studies worldwide. There he supervised and mentored geologists and mining engineers, and oversaw legal, social and environmental improvements to operations. At London Mining and Paulo Abib Engenharia S.A. (a leading Brazilian engineering consulting company), Mr. Mendonça gained experience with open pit mines, having held managerial positions in the field of minerals processing and engineering that expanded to extractive metallurgy. Mr. Mendonça completed a B.Sc. in Mining Engineering at UFMG (Federal University of Minas Gerais), and an MBA at FDC and PoliUSP.
Dr. Patricia Radino-Rouse has extensive experience as a senior consultant in extractive metallurgy for a wide variety of non-ferrous metals projects in Brazil where she specialized in process development and improvement for companies such as Paranapanema, Itaoeste, Votorantim, Carbocloro and Unisais. As Senior Process Engineer and Project Manager for Paulo Abib Engenharia, Dr. Radino-Rouse was responsible for project development and process engineering. Specifically, she supervised the process of the feasibility study for a 1.5 million tonnes per year potassium chloride project for Petrobras. At Unisais, Dr. Radino- Rouse developed projects for the solar evaporation of residual brines from salt production to obtain potassium chloride and sodium sulphates. She holds a B.Sc. in Chemistry from EQ-UFRJ (Chemical School of the Federal University of Rio de Janeiro) and a Ph.D. in Hydro Metallurgy from the Royal School of Mines, Imperial College, London.
Peter Gundy, Chairman, said: "In terms of risk and reward the Company is stronger than ever. Despite challenging investment markets, project development continues unabated."
About Verde Potash
Verde Potash, a Brazilian fertilizer exploration and development company, is focused on advancing the Cerrado Verde Project located in the heart of Brazil's largest agriculture market. Cerrado Verde is the source of a potash-rich deposit from which the Company intends to produce potassium chloride (KCl). In addition, the Company is developing its Calcario limestone project, limestone being a key raw material in the production of KCl.
About the Cerrado Verde Potash Project
Cerrado Verde is a unique project: 1) its high grade potash rock outcrops and is amenable to strip mining, allowing fast construction of a scalable operation; 2) it is located in the midst of the world's third largest and fastest growing fertilizer market; 3) it connects to Brazil's largest fertilizer distribution districts via existing and high quality infrastructure.; 4) it has the potential to supply KCl to Brazil's local agriculture market from its large potash-rich deposit.
value1008
14年前
Someone posted at Stockhouse yesterday the essential part of the Mackie Research update note by Jaret Anderson.... What i found most tantalizing was the excerpt i've boldfaced in red type, suggesting a MUCH faster ramp-up in production with the help of a financing partner:
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From Mackie Research:
- Verde Potash (NPK) has completed the Preliminary Economic Analysis for its verdete slate to KCl (ie, Cambridge) process and has published a press release this morning with key highlights.
- Based on the work of SRK, this process looks very attractive, with an operating cost during the early years of production of US$274 per tonne, ramping up to US$291 per tonne over the 30 year life of mine as the stripping ratio increases.
- These opex numbers would appear to make Verde the lowest cost producer on a delivered cost basis to the Cerrado region of Brazil. Recall that Brazil was the largest importer of potash globally in 2011 at 7.5 million tonnes.
- These opex figures also compare favourably to the US$300 per tonne figure we had used as a base case in our earlier work evaluating the value of the Cambridge process to NPK shareholders.
- The scoping study proposes an initial plant with 600,000 tonnes per year of KCl capacity coming online in 2015, which would ultimately ramp up to 3.0 million tonnes of capacity per year.
- Capex for the initial 600k tonnes of capacity is estimated at $654 million (US$1,090 per tonne of capacity), while capex for the full 3.0 million tonne facility is estimated by SRK at US$2.4 billion (US $800 per tonne). The US$800 per tonne figure is right in line with our published assumptions and materially below the cost of greenfield solution mining projects in Saskatchewan which tend to average closer to US$1,081 per tonne (KRN: $928/t; Legacy:$1,136/t; WPX: $1,178/t; Average = $1,081/t).
- SRK estimates an IRR for the project of 23.7% and a NAV at 10% of US$2.3 billion for the full 3.0 million tonne facility. This works out to an NAV of $64.76 per share. Note that this is an SRK figure --we will need to update our own model with the data released today in order to publish our own estimate (note that we have been using more conservative assumptions Re: discount rate (12%) and potash price (US $500 per tonne FOB Vancouver) than SRK seems to have employed.
- Recall that the company is hosting a demonstration of its verdete slate to KCl process on Wednesday in Allentown, PA. We understand there are 20 participants from the buy side and the sell side signed up.
Bottom line: This PEA is a very positive event for NPK and implies more value for NPK from the Cambridge process than we had been baking into our $12.00 target previously. We need to update our model, but at first glance, we expect the Street to begin valuing NPK on the basis of its Cambridge process, as opposed to just the value of the ThermoPotash process (which produces a low grade, slow-release potash product). With a capex of $800 per tonne (ie, ~26% cheaper than a greenfield solution mine), an opex at startup of US$263 per tonne (and US$291 per tonne life of mine), and SRK's estimate of a $64,76 per share NAV, the shares are likely to react very positively today.
It’s also worth noting that this PEA seems to focus on a slow ramp-up schedule in order to fund expansion of the project from cash flow generated by the initial phase of 600k toones of production. This allows the company to minimize dilution. We expect that a well-capitalized corporate buyer of this project though, could employ a much quicker ramp-up, which delivers more cash flow sooner, thereby having a material positive impact on the NAV.
value1008
14年前
Two interesting articles on NPK yesterday late in day.... Kip Keen, author of the first one, has reported in-depth on NPK before. He gives a balanced view here from the two analysts.
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http://www.mineweb.com/mineweb/view/mineweb/en/page72102?oid=144534&sn=Detail&pid=102055
In major course change Verde goes all-in on conventional potash
Verde Potash looks to take on conventional potash giants in Brazil with its Cerrado Verde project.
Author: Kip Keen
Posted: Wednesday , 01 Feb 2012
For now, Verde Potash (TSX-V: NPK), long a junior explorer bent on bringing to market an unconventional potash product from its atypical potash deposit in Brazil, is going mainstream.
Until today, the course Verde had plotted was twofold. First, it was to develop a slow-release potash product, "ThermoPotash", at its Cerrado Verde project for the Brazilian fertilizer market. Then, based on a new technique called the "Cambridge Process", Verde was to try to milk conventional potash from its unusual source of potassium, converting water insoluble potassium silicate in its Cerrado Verde deposit into one of the main potash fertilizers sold and shipped around the world: potassium chloride or KCl.
Now consider those phases reversed. On Tuesday Verde released the results of a scoping study detailing the outlines of a conventional potash producing operation based on successful pilot-testing of the Cambridge process on a non-industrial scale. News of the big change in direction for Verde came in a short note near the end of the press release about the scoping study results. Verde stated it was putting development of its heretofore chief program, ThermoPotash, on hold in favour of going after conventional potash.
"In view of the results of the PEA (scoping study) for KCl, Verde intends to focus its efforts on a KCl product and has therefore decided to temporarily suspend its ongoing feasibility study work on ThermoPotash," Verde said.
While Verde did not expand much on the rationale for shelving ThermoPotash for the time being - a major shift in strategy for the junior - the reasoning appears to be a case of pursuing the path of least resistance and, arguably, maximum reward. With ThermoPotash Verde faces the task of pushing an unfamiliar fertilizer product on Brazilian farmers. But with conventional KCl - a product used by the million of tonnes per year in Brazil - no such marketing dilemma would come to bear. It would only be a question of beating or meeting the competition - chiefly Belarussian and Canadian producers - on price.
In its scoping study Verde proposes to ramp up a KCl operation from 600,000 tonnes to 3 million tonnes per year (and also look at 1 million and 4 million tonne per year scenarios) at a 30-year mine that would initially cost $654 million to build. According to Verde the first 600,000 tonne stage could come online in 2015. Then the operation would jump to 1.6 million tonnes per year in 2019 and then to 3 million tonne per year in 2024, with the final capital cost tally coming in at $2.4 billion.
But can it make money as modeled? Mackie Research analyst Jaret Anderson last told Mineweb that he was intent on $300 per tonne operating costs as the magic number for Verde, what he reckons as the cost of producing and getting conventional potash to Brazil from typical producers, such as those in Canada. According to Verde's scoping study, it has that number beat.
Verde says it can produce KCl at an operating cost of $274 per tonne during the first five years of operation. Life of mine, the figure climbs somewhat to $292 per tonne. All told, assuming granular potash goes for $540 per tonne, Verde estimates a 24 percent after-tax internal rate of return and a $2.3 billion net present value, also after-tax and discounted at ten percent, on the KCl project.
For Anderson, who characterized the scoping study as positive in a note to clients, the impact was clear. He called it a "major de-risking event for NPK (Verde)."
In building his thesis Anderson noted on Tuesday that Verde's estimated capital costs per tonne of potash produced were in line with development projects in Saskatchewan - the centre of the potash universe: $1,081 per tonne in Saskatchewan versus $1,090 per tonne Verde gets based on a 600,000 tonne per year project.
As for Verde's operating costs Anderson was particularly bullish: "These opex numbers would appear to make Verde the lowest cost producer on a delivered cost basis to the Cerrado region of Brazil." To emphasize just what kind of market Verde might access, Anderson then noted, "Recall that Brazil was the largest importer of potash globally in 2011 at 7.5 million tonnes."
Given the scoping study findings, Anderson suggests Verde will be re-rated on the upside, implying "more value for NPK (Verde) from the Cambridge process than we had been baking into our $12.00/share target previously.
"We will be reviewing our valuation, but at first glance, we expect the Street to begin valuing NPK on the basis of its Cambridge process, as opposed to just the value of the ThermoPotash process."
Octagon Capital analyst Max Vichniakov, however, was less rosy about the scoping study's impact. Vichniakov remained neutral on news of the scoping study, and changed his buy rating on Verde to a speculative buy ($10 target) based on what he argued was increased risk for the junior now that ThermoPotash - a more advanced project - had been put on the back burner.
Notable perhaps, Verde's shareprice dropped heavily on news of the scoping study - down 19 percent to C$6.90 as of presstime - after a solid run-up in recent weeks. In an email to Mineweb Tuesday afternoon Vichniakov said that after some anticipation for positive news there might have been "disappointment in fact that (Verde) is re-focusing its strategy on KCI production and away from its previous strategy on ThermoPotash."
Vichniakov also argued that the change in course "basically questions the whole viability of the ThermoPotash as a real commercial-level revenue generating opportunity for Verde going forward."
Verde's KCl testing is still in the early stages, Vichniakov pointed out, "and all questions regarding costs of production and scalability of the process still remain. So, while the company announced (a scoping study) on a KCI production scenario, we think the risks actually increased at this point."
But Verde's President and CEO Cristiano Veloso does not see it that way. In answer to an emailed question about divergent analyst views on the impact of the scoping study, Veloso said: "It is a choice between two excellent projects." He continued, saying, "KCl is a better option for our shareholders as it is a larger project that best allows us to monetize our large, at surface potash deposit in Minas Gerais. We still intend to develop our ThermoPotash project, but will do so once we have brought our first 600k tonnes of KCl capacity."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
http://www.mining.com/2012/01/31/black-day-for-verde-as-investors-see-red-over-brazil-potash-project-preliminary-economic-assessment/
Black day for Verde as investors see red over Brazil potash project preliminary economic assessment
Frik Els | January 31, 2012
Verde Potash shares fell $1.66 or 19.4% to $6.90 on Tuesday, recovering from even steeper losses earlier in the day, after the company released a preliminary economic assessment report for its Brazil project.
The company, founded as Amazon Mining in 2005, reported capex of US$654 million and opex of US$263 per tonne for 600,000 tonnes of the soil nutrient a year during its Cerrado Verde project’s first five years. Starting in 2015 production is expected to be ramped up to 3 million tonnes annually by 2024 at a cost of $291/tonne.
Investors didn’t like the numbers deeming them on expensive side and beat the stock down 20% on massive volumes of almost 9 times the daily average. Verde is worth $223 million on the venture exchange in Toronto.
Cristiano Veloso, Verde CEO defended the report saying: “We believe that the estimated operating expenses presented in the PEA are competitive with the world’s lowest cost potash producers for buyers in Brazil when importation and distribution costs are included.”
The fertilizer market – worth some $150 billion a year – seems to be heading for an uncertain 2012. Current pricing is around the $500/tonne level after strong gains the past two years. Prices ran up from $100/tonne in 2004 to almost $900/tonne before the 2008 recession when the boom went bust and prices rapidly fell back to $350/tonne.
Earlier in January the Globe & Mail quoted Canada’s National Bank Financial analyst Robert B. Winslow as forecasting that global potash supply will increase more than demand through 2020, which will put a damper on “medium-term” potash prices.
alvik
14年前
01/31/2012 Initial Capex of US$ 654.1 million and initial Opex of US$ 263.23 per tonne for 0.6 million tonnes per year
TORONTO, Jan. 31, 2012 /CNW/ - Verde Potash Plc (TSX-V: NPK) ("Verde" or the "Company") is pleased to announce the results of a Preliminary Economic Assessment ("PEA") for the production of conventional potash: potassium chloride ("KCl"). The PEA was prepared by SRK Consulting ("SRK") on Verde's wholly-owned Cerrado Verde project ("Cerrado Verde" or the "Project") located in Minas Gerais State, Brazil.
The PEA evaluated the technical and financial aspects of two different scenarios. The first scenario has an initial production of 0.6 million tonnes per year ("mtpy") increasing to 3 mtpy of KCl, with production growth financed largely from anticipated internal cash flow. The second scenario has an initial production of 1 mtpy increasing to 4 mtpy, with production growth also financed largely from anticipated internal cash flow. Each scenario was scheduled into three phases, assuming significant cash accumulation and anticipated construction times. This announcement presents the results for the 3 mtpy scenario while results for the 4 mtpy scenario are expected to be available in the coming weeks.
"We believe that the estimated operating expenses ("Opex") presented in the PEA are competitive with the world's lowest cost potash producers for buyers in Brazil when importation and distribution costs are included. According to the PEA, estimated capital expenditures ("Capex") and expected time to production are lower and shorter than most KCl greenfield projects and many brownfield expansions in the pipeline. The proprietary production process we have developed relies entirely on existing proven commercial processes applied successfully to our potash rock, which we believe provides greater certainty in the capital costs and equipment efficiencies," said Cristiano Veloso, President & CEO.
Key Economic Highlights:
• Capex for the initial 0.6 mtpy phase is estimated at US$ 654.1 million.
• Capex for the 3 mtpy phase is estimated at US$ 2,369.3 million (including Capex for the initial 0.6 mtpy plant).
• Life of Mine sustaining capital is US$ 738.4 million.
• Opex for the initial 5 years of operation is estimated to be US$ 273.70 per tonne KCl, starting at US$ 263.23 per tonne in 2015. The weighted average OPEX for 3 mtpy operation is US$ 291.74 per tonne KCl.
• Estimated after tax Internal Rate of Return ("IRR") of approximately 23.7%.
• Estimated after tax Net Present Value ("NPV"), using a 10% discount rate, of US$ 2,258.7 million for the 3 mtpy operation.
The PEA is based on the following assumptions:
• 100% equity
• Phase 1 production of 0.6 mtpy of KCl, start up 2015
• Phase 2 production of 1.6 mtpy of KCl, to be achieved in 2019
• Phase 3 production of 3.0 mtpy of KCl, to be achieved in 2024
• A total 30 years planned production life
• US Dollar-Brazilian Real exchange rate of $1USD=$1.8 BRL
• A 25% Contingency applied to the Capex
• The PEA assumes an average granular KCl price of US$ 539.97 per tonne free on board ("FOB") Vancouver, Canada, based on market research done by CRU International (2012). The net sales price per tonne realized by Verde has been adjusted for the final costs of delivered product in the Brazilian Cerrado, approximately US$ 120 to US$ 180 per tonne.
In 2008, the Company initiated KCl production studies and has since then undertaken over 300 tests in order to develop a simple production flow sheet relying on proven production technology. To such end, the Company established a partnership with Professor Dr. Derek Fray, at the University of Cambridge, and under the leadership of Verde's in house engineers and its now COO, Pedro Ladeira, assembled an Engineering Consortium focused on process scaling and economic optimization of the Project, details of which were disclosed in a news release on November 30, 2011.
"The PEA was focused on developing a construction and production schedule that Verde could finance and execute as a development company gearing towards production. As a consequence, while the PEA does not maximize its NPV or IRR, it takes full advantage of the project's scalability to minimize dilution and shorten timeline to cash flow," said Cristiano Veloso, President & CEO.
Next Steps
Verde will advance a definitive feasibility study for KCl production which is expected to be completed by the end of the year.
ThermoPotash Feasibility Study
In view of the results of the PEA for KCl, Verde intends to focus its efforts on a KCl product and has therefore decided to temporarily suspend its ongoing feasibility study work on ThermoPotash. Verde currently expects that it would resume the feasibility study on ThermoPotash once it completed the proposed Phase 1 of KCl production, anticipated to be in 2015. ThermoPotash registration with the Ministry of Agriculture will continue and is expected to be achieved in the coming months.
Technical Report
A copy of the PEA will be filed on SEDAR at www.sedar.com within a maximum of 45 days of this news release.
The scenarios presented in the PEA are preliminary in nature and make use of Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Mineral Resources which are not mineral reserves do not have demonstrated economic viability. There is no certainty that the preliminary economic assessment will be realized.
Qualified Person
All scientific and technical disclosures in this press release have been prepared under the supervision of Neal Rigby and Robert Bowell of SRK Consulting who are Qualified Persons within the meaning of National Instrument 43-101.
About SRK Consulting
SRK Consulting ("SRK") is an independent, global consulting practice that provides focused advice and solutions to clients, mainly from earth and water resource industries. For mining projects, SRK offers services from exploration through feasibility, mine planning, and production to mine closure. Formed in 1974, SRK now employs more than 1,000 professionals internationally in 38 permanent staffed offices on 6 continents.
Other Matters
Verde has issued a total of 45,000 stock options exercisable at $8.56 per share, expiring January 31, 2016 to consultants and staff.
About Verde Potash
Verde is a fertilizer exploration and development company; it was founded and is led by Brazilians. Verde is developing the Cerrado Verde project in Brazil, a source of potash-rich rock from which the Company plans to produce a potash fertilizer product. Founded as Amazon Mining Holding Plc in 2005, the Company changed its name to Verde Potash Plc in April 2011 to better reflect its core business.
About the Cerrado Verde Potash Project
Cerrado Verde is a unique project: 1) its high grade potash rock outcrops and is amenable to strip mining, allowing fast construction of a scalable operation; 2) it is located in the midst of the world's third largest and fastest growing fertilizer market; 3) it connects to Brazil's largest fertilizer distribution districts via existing and high quality infrastructure.
On behalf of the Board of Directors of Verde Potash, Cristiano Veloso, President and CEO.
http://www.verdepotash.com/Investors/media-centre/news-releases/news-release-details/2012/Verde-Announces-Preliminary-Economic-Assessment-for-the-Production-of-Conventional-Potash1128081/default.aspx
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