Permitting Status UpdateThe welcome announcement of the latest environmental permit approval warrants a quick review of the current status of the overall permitting process, which CEO Cristiano Veloso sets out in his latest news release.
Mine site 1, which provides the raw materials for the Phase 1 processing facility located in Sao Gotardo, is now fully permitted (mining and environmental) for the extraction of 233,000 tonnes per year. There are no in-process pending applications. I have been attempting to determine the life of this pit, but have yet to get confirmation of the "proven" reserves located at this site and covered by thw permits.
Mine site 2, location of the bulk of the "proven" reserves, now has full permits for the extraction of 150,000 tonnes per year. There is a pending mining permit in process, seeking the approval to extract 25,000,000 tonnes per year. This appears to be matched by a pending environmental permit to allow 2,500,000 tonnes to be extracted - it is not clear to me why you would apply for a mining permit 10 times larger than the environmental permit limit, when I would have expected these limits to match. I also note that while we have been granted a permit to mine 150,000 tonnes per year from Mine site 2, we also have an environmental permit to extract 200,000 tonnes per year. Might an additional permit application to mine 50,000 tonnes per year pass through the approval process faster than the current application for 25,000,000 tonnes. This would at least ensure we can extract the maximum under current approvals?
Mine site 3. This site is approved for 49,800 tonnes (mining and environmental) and has a mining application in process for 2,500,000 tonnes per year. Interestingly, it has no current environmental application filed. This means that any approval of the mining permit cannot be acted upon until the required envirnmental permit has been prepared, filed, assessed and approve. Perhaps there is a good reason for this two step process - like most Verde shareholders I have no experience with the compexities of the Brazilian permit approval process - perhaps it would be helpful if Mr. Veloso could explain the logic of the timing of permit submissions to help fill this gap in most shareholder's knowledge.
So in conclusion, in Phase 1 of its develoment plan, Verde is currently operating a 2,000 tonne per day processing facility or about 500,000 to 600,000 tonnes per year depending of the number of operating days (I believe it cannot operate in the rainy season). The raw material to feed the processing facility can now be sourced from 3 separate mine pits at an annual rate of 432,800 tonnes, albeit with some excess capacity represented in permitted but unused capacity from prior years.
Phase 2 contemplates a significant expansion in both processing capacity and annual extraction volumes. Clearly these will need additional permitting approvals beyond those currently obtained. So far the permitting process has not been an impediment to meeting customer demand for product, and after the fall of 2018, production processing capacity has also not been a limiting factor. Lets hope we can stay ahead of the demand curve on both counts as Verde's successful expansion continues.
Cheers,
S