AN INTERVIEW WITH JED RICHARDSON
VP CORPORATE DEVELOPMENT, AMAZON MINING
(As of September 25, 2009)
One of the hottest hands we’ve seen in the investment
business over the last while belongs to John Kaiser, one of
the first to be aware of the value of rare metals; many of his
followers have cashed in there. John has also been pretty
good at picking gold stocks over the last while and a story
that is coming out of left field that he is starting to mention
is a potash story in, of all places, Brazil. We are with Jed
Richardson who is Vice President Corporate Development
with Amazon Mining and he’s a former Sprott Securities ana-
lyst.
David Pescod: Jed, who would have thought that a country
like Brazil, so well-known for agriculture, is lacking in pot-
ash?
Jed Richardson: Potash is one of Brazil’s most important
imports by dollar value. This is something that’s really key
to understand – Brazil has a history of looking at its trade
balance and looking for domestic strategies to reduce its
dependence on imports. Brazil gave birth to the ethanol
and biodiesel industry in response to high dependence on
imported oil in the 1970’s and 80’s. Now, with potash, they
are coming to that same realization that they are dependent
upon Canada and Russia for their potash supplies. We
think we’ve got a solution, that’s well suited for Brazil’s
booming agricultural economy.
D.P: You were giving some specifics about the size of the
agricultural business in Brazil and it’s impressive.
J.R: For Brazil the agribusiness, which includes the actual
planting and selling of the raw produce and the products
that are made from home-grown farm produce, accounts
for 24% of Brazil’s GDP. Agribusiness employs one in
three Brazilians, so this is a huge part of their economy
and it’s a huge part of the social conscience in Brazil. Bra-
zil imports 90% of its potash needs, about 7 million tons of
potash annually. It is the world’s second largest importer
behind China and the fourth largest user of potash interna-
tionally.
Brazilian farmers pay more for potash than most other
farmers around the world, just because of where they are
located. When you are in Brazil, you have to import pot-
ash from a port in Canada or in Russia, it goes all the way
down south of the equator to a port in Sao Paulo and then
has a long overland journey to get to the major growing
areas. Brazilian farmers tend to use suboptimal concen-
trations of potash because it costs so much, and crop
yields suffer.
Our project is located in the Brazilian Cerrado, a vast Sa-
vannah like region, in the interior of southern Brazil away
from the Amazon Rainforest in the North. The Cerrado
accounts for 60% of the world’s potential arable land for
agriculture, so with a growing world population (we are
expected to be 10 billion people by 2020) Brazil has to be
part of the solution. We believe our project is well located
to be a big part of providing the nutrients for this growing
agricultural frontier.
D.P: Now you are also giving some specifics earlier
though about the size of some of their crops like coffee
and eucalyptus trees even.
J.R: Brazil is an agricultural powerhouse it is among the
world’s largest growers in soybeans, corn, wheat, or-
anges, coffee, sugar cane, eucalyptus and cotton. All of
these crops require substantial amounts of potash. Bra-
zilian soils are notoriously poor in nutrients. We have
heard it described as the soil is really “hanger” for roots.
You need to provide everything else and for that reason,
Brazil is very dependent on imported fertilizers.
D.P: Kaiser notes that you need some research and de-
velopment done on your project regarding the potash be-
cause it’s a slightly different kind.
J.R: The potash that we are looking at for our project oc-
curs at surface. It’s locally known as Verdete Slate grad-
ing 10% to 14% potassium by content, but it needs to be
processed to be turned into a fertilizer We can be in pro-
duction in short order, hopefully by 2012, because we can
use open pit mining. For a conventional potash mine, you
would have to sink a shaft that would cost approximately
one billion dollars and the full capital expenditure would
be expected to be two and a half billion dollars or more.
We think we have a product that we could bring to market
for hopefully less than $50 million. So while most conven-
tional projects face a massive capital expenditure hurdle
that will either kill the project or dilute existing sharehold-
ers, we have very modest requirements.
But yes, we needed to do some research and development
to be sure we have a viable product. Over the past few
months, we’ve had the Brazilian Center for Mineral Tech-
nology working alongside our engineers to come up with
a process. We anticipate completing a scoping study by
Q1 of next year. So in the next few months, we will pub-
lish a working process with a firm idea on our operating
costs and capital expenditure. Right now, looking at the
preliminary numbers, we are in really good shape to have
a very profitable product and a plant that we could build in
short order.
D.P: It’s very interesting to notice with so many compa-
nies these days with 100 million shares out plus and no
leverage, that you guys actually have very few shares out
and still have money in the bank.
J.R: We are really fortunate. We just have 28.4 million
shares outstanding and about $8 million in cash. Back
when things really started to melt down in the financial
markets, we made some tough decisions, got rid of a lot
of excess expenses and pared down our projects. In addi-
tion to that, we were able to advance our project with the
help of the government. Potash is a real problem in Bra-
zil, so the government has been extremely helpful be-
cause they see our work as a viable solution for the prob-
lem. With one in three Brazilians in someway employed by
agribusiness, the farming lobby elects governments. So
we’ve been able to do a lot of work with the help of the
Brazilian government and they continue to helping pave
the way to make this project work. As a result, we haven’t
been forced to consume our finances and we still have $8
million in cash and a tiny share structure.
-D.P: If you could give us a run down of what you expect
over the next year as far as major developments for the
company.
J.R: The key development to look for is our mineral re-
source. The 43-101 resource likely in Q1 of 2010, in addi-
tion to that will have a scoping study independently veri-
fied by a reputable internationally recognized engineering
company. In addition to that, we will have releases like we
did just a couple of days ago where we announced an
agreement with ArcelorMittal. ArcelorMittal is a big steel
company that actually grows eucalyptus in Brazil, for con-
version into charcoal to replace mined metallurgical coal
in steel production. They have 170,000 hectares of euca-
lyptus plantations and we have just signed an agreement
for them to start trial running our product with their euca-
lyptus plants.
D.P: If you could give us a run down of what you expect
over the next year as far as major developments for the
company.
J.R: The key development to look for is our mineral re-
source. The 43-101 resource likely in Q1 of 2010, in addi-
tion to that will have a scoping study independently veri-
fied by a reputable internationally recognized engineering
company. In addition to that, we will have releases like we
did just a couple of days ago where we announced an
agreement with ArcelorMittal. ArcelorMittal is a big steel
company that actually grows eucalyptus in Brazil, for con-
version into charcoal to replace mined metallurgical coal
in steel production. They have 170,000 hectares of euca-
lyptus plantations and we have just signed an agreement
for them to start trial running our product with their euca-
lyptus plants.
You should be looking for some more press releases like
that where hopefully we can get some of the sugarcane
growers and some other agricultural groups to start
working with our product. What we want to do is by the
middle of next year, have a clear vision of what our oper-
ating costs are going to be, what our capital costs are
going to be and be well on our way to building a strong
and robust demand for our product. Over the next few
months you will see us putting those steps into place to
make that happen.
D.P: Now you used to be an analyst – so let’s pretend
you still were. How would you analyze the stock and
what kind of target would you give it? I realize there are
legal constraints here, but if you could tell us the way
you see it.
J.R: I am going to refrain from putting numbers out there
so I don’t get myself in trouble, but lets use comparable
equities as a reference. In the next few months we should
have a 43-101 resource and independently verified scop-
ing study, all achievable with the cash we have on hand.
Companies with projects in Saskatchewan with a re-
source and scoping study have capitalizations near
$200MM, our share price would have to be 10x today’s
price to reach that level of capitalization. By comparison
we have a project with a fraction of the capital expendi-
ture requirements located in the heart of the growing
area of the world’s fastest growing consumer. However,
probably worth a lot more than my targets or forecast I
have been purchasing the shares myself in the open mar-
ket as recently as last week.
D.P: Now is one of the problems down the road the
power source for your production?
J.R: Because what we are doing is a heat intensive proc-
ess, power is going to be a big part of our operating
costs. Where we are located – the infrastructure is very
good, we’ve got great transportation, highways that pass
the project, a railway that is about five kilometers away
from our deposit, and we have hydro-lines that cross the
property, but the ideal fuel that we would use is natural
gas. There is significant natural gas exploration going
on in the sedimentary basin where the project is located,
but there is also plans to build a pipeline in that area -
one to tie in the basin, but also to tie in a number of in-
dustries in that area, including the building of a urea
plant for nitrogen fertilizer.
D.P: So natural gas would be very important for the pro-
ject going ahead then?
J.R: Yes it would. Currently Brazil actually has a lot of oil and gas production, however, they haven’t really built a
network to take advantage of that for natural gas. That is something that they are working on as we speak. The clos-
est natural gas pipeline right now is about 200 kilometers away and that’s an option, but likely we will have something
close to us by the time we get to production.
Before I go I wanted to bring to your attention that we are very much a Brazilian company, our CEO is a young Brazil-
ian entrepreneur; our Board boasts two former cabinet ministers and the past CEO of SIDERBRAS the Brazilian steel
corporation. This has given us great advantages in Brazil. On the Canadian side in addition to myself we have Mr. Pe-
ter Gundy as our Chairman who was part of the formation of the Potash Corporation of Canada, and founder of Neo-
Materials Technologies.
D.P: Jed, usually at the end of these interviews, we always ask a person for their favorite stock pick. So what would
be your suggestion?
J.R: Well it is a little bit out of my field (he is a mining engineer) but I like the looks of Wavefront Energy and what it
could do for the oil and gas patch.
D.P: Thank you so much for your time!