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Verde Agritech PLC: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Verde Agritech, the fertilizer firm, has big plans ahead as it reaches production capacity

The company is the maker of the product Super Greensand - a multi -nutritional fertilzer, which contains 70 elements and trace minerals
Verde Agritech, the fertilizer firm, has big plans ahead as it reaches production capacity
INVESTMENT OVERVIEW: NPK The Big Picture
Verde Agritech is hoping to transform the fertilizer landscape

Fertilizer group  Verde Agritech PLC (TSE:NPK) has garnered investor interest of late and shares have added around 36% in the last month or so.

The company is the maker of the product Super Greensand - a multi -nutritional fertilzer, which contains 70 elements and trace minerals including potash, potassium, magnesium, manganese and plant-available silicon.

Last week, shares rocketed as the company told investors it had been operating its plant 24 hours a day, seven days a week, just to fulfil existing orders for the product for this year's planting season.

The company has sold nearly 40,000 tonnes of Super Greensand this season, this is around 10 times' what was sold in 2017.

In August this year, Verde reached a much flagged but significant milestone - namely, the successful start-up of its processing plant in the state of Minas Gerais, Brazil.

The plant can churn out 45 tons per hour (t/h) of the firm's fertilizer product - from  ten t/h previously..

"We are proud to see the culmination of years of research and work in the form of Verde’s own processing plant," Verde president and chief executive Cristiano Veloso had said.

"We are successfully working on the market growth for Super Greensand in Brazil and abroad."

WATCH: Verde Agritech outlines ambitious expansion plans as sales ramp up

And last week, the firm said that in 2019, it aims to continue to use its existing plant to produce 200,000 tonnes a year of the product and, in parallel, will start building a brand new processing facility capable of producing a further 600,000 tonnes a year.

The total of 800,000 tonnes per annum capacity is expected to be reached in early 2020.

Notably, in 2018, more than 150 farmers have purchased the product, which is used for crops including soybeans, corn, sugarcane, coffee, cotton, banana and carrots.

The states supplied now include Minas Gerais, Goias, Sao Paulo, Mato Grosso do Sul and Mato Grosso.

Verde will be producing Super Greensand until late November this year when the planting season ends and the raining season starts.
Improving health..

Veloso has said previously that Super Greensand fertilizer product will not only help investors in his company make money, but can potentially improve the health of humanity.

A bold claim

A bold claim undoubtedly, but one which he can flesh out with details and background.

"Until recently, it was very difficult for science to understand the importance of micro-organisms, not only in agriculture but also for our own bodies," he said.

"Because of this very recent knowledge, agriculture is having to reinvent itself and this reinvention is taking it away from chemical and salt based products towards natural and sustainable products."

So, put simply, these are products, which do less damage to the ground and produce crops with more nutritional value. Included in these, is Verde's Super Greensand.

The fertilizer contains 70 elements and trace minerals including potash, potassium, magnesium, manganese and plant-available silicon.

The latter, explains Veloso, is particularly significant, as it increases protection for crops against pests, diseases and extreme weather.

Currently, farmers are rewarded for the weight and appearance of fruit and vegetables, rather than nutritional content, he says, so years' of using only NPK chemical fertilizers, pesticides and fungicides to produce crops, has left soil and its produce starved of nutrients.

Veloso says Greensand can change this cycle, offering farmers an economical way to fertilize land and give back the nutrients to food and the soil.

And it should benefit the whole food-chain too, because not just humans eat crops, but farmers' arable yields are used in animal feed.

"I'm very pleased about the overall benefit the product will have to the world," says Veloso.

Clearly, Verde's product has advantages over traditional fertilizers, like potassium chloride and sulfate of potash and salt based products like Polyhalite.

Veloso has also said: "For example, if you look at the conventional source of potash, ie, potassium chloride, it also contains chloride. And this chloride creates a lot of problems, not just for certain types of crops but also for the environment and for the soil.

"Applying one pound of potassium chloride to the soil, equals applying about 1 gallon of Clorox to your soil. So you really have a devastating impact on soil microorganisms which were essential for the environment, for the ecosystem, and for your yields if you’re a farmer.

"The other big difference is salinity. So if you look at salinity, which is also a major problem, the best way for you to compare fertilizer salinity is to divide the total product salinity by its potassium content.

"And when you do that, our salinity’s very low, our salinity’s less than 1%. Polyhalite is the worst at over 5!" he added.

Super Greensand is currently being sold in Brazil, the largest food exporter on the planet, and the firm's focus is on commercial agriculture in Brazil and sustainable and organic farming in Canada and USA.

The company owns 100% of the Cerrado Verde project in the South American country, which consists of 30 granted exploration permits covering a total area of 52,274 hectares.

Nice looking PFS..

A November 2017 pre-feasibility report threw up some nice looking numbers.

With the processing plant up and running, output of the product went from ten tonnes per hour (t/h) to 45 t/h.

The project's net present value (NPV) with an 8% discount rate was put at around US$2bn and an IRR (internal rate of return) of 287% after tax.

That valuation is based on a mine life of 36 years, 777 Mt (metric tonnes dry) of product produced with an average operating cost of US$8.16per tonne. Total capital expenditure was put at US$369.6 million

The project will be phased in three stages, with the first seeing output at 600,000 t (tonnes) of final product per year for the first two years, then  phase 2 is five Mt of final product per year, from year three to six.

The third phase is 25 Mt (million tonnes) of final product per year for the remainder of the life of the mine.

Veloso highlights that the PFS was based on the price of the lowest price of potash on the market (potassium chloride) and so all the other nutrients available in Greensand are available for free. He noted that the price in Brazil for a tonne of potash was also notably now higher, US$320 now vs US$250 when the study was made.

He also drew attention to the long life of the Cerrado deposit, which has an  eye-watering total resource of 3bn tonnes (700mln of which is proven and probable reserves.).

The potash resource alone is about 300mln tonnes, which Veloso, says would meet Brazilian annual consumption alone for 50 years.

So Verde Agritech is looking at a huge opportunity and holds a massive deposit so is likely to be a company worth watching.

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