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Bullboard - Stock Discussion Forum Verde AgriTech Ltd. T.NPK

Alternate Symbol(s):  VNPKF

Verde AgriTech Ltd is an agricultural technology company that produces potash fertilizers. The principal activity of the Company is the production and sale of a multi-nutrient potassium fertilizer marketed in Brazil under the brands K Forte and BAKS, Silicio Forte, and internationally as Super Greensand (the Product). K Forte is a potash fertilizer that is a source of potassium, silicon, and... see more

TSX:NPK - Post Discussion

Verde AgriTech Ltd. > Sales volume versus Production volume
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Post by 15Stanmore on Nov 15, 2020 2:06pm

Sales volume versus Production volume

This is turning out to be an interesting Sunday stuck at home because of Covid 19 second wave restrictions - thanks to all who have posted today and provided much food for thought and discussion on the unfolding Verde story.

Had Verde's former activity as Amazon Mining (launched by 24 year old Cristiano Veloso while he was at school in the UK) been successful in finding and developing a gold deposit in Brazil, then its focus could be on production at the lowest cost. Every ounce of gold it produced would have an immediate buyer with no need for costly marketing and distribution resources.

The failure of any of the potential gold deposit targets to prove worthy of exploitation saw the company turn instead to an interesting potassium rich deposit that represented a different "pot of gold". This was a domestically produced and distributed low cost alternative to the significant volumes of potash being imported from around the world at significant expense to enable Brazilian farmers to maintain and grow their annual crop output and exports. Given the existing demand, it seemed logical to assume that once in production, every tonne of product the newly named Verde Agritech could extract, process and have available for shipping would immediately be taken up as a replacement for an unwanted US $ denominated import.

In reality, this does not appear to have been the case.

While mine operational and production permitting has been slower than hoped, the annual production quotas have to date been well in excess of what it seems the Company can actually sell. I understand that a quota granted in a prior year that is not fully utilized can be carried forward to the next year. On that basis, even with annual approved quota just under 500,000 tonnes, the Company could mine and process well beyond that figure in the next 12 months, and certainly well beyond the current 220,000 tonne target.

My concern has been the apparent challenge to convince the local market that substituting the Verde product is no only a cost effective change to a locally produced and assured supply product, but also has significant additional long term benefits and advantages over the current chloride based potash used across Brazil. It appears to be a lot more work to sell theK-Forte product than it now takes to mine and process the material. No point in cost effectively producing 500,000 tonnes a year if you cannot sell this modest volume out of your growing stockpile. And fighting hard to get permitting for 2.5 million tonnes or 5.0 million tonnes per year (Phase 2 target) or 25 million tonnes per year (Phase 3 target) seems to be a bit redundant if you cannot sell any more than 220,000 tones with 15 sales staff working full time to do so. At that utilization you would need a crew of over 1,700 sales staff to meet the 25 million tonne annual sales level.

I believe we are well beyond year one of the Feasibility Study as far as time goes, we have just not yet been able to generate the sales volume the plan assumes will naturally occur as soon as the end product is available in the market. I for one will receive the Q3 results with great interest and then revist the details of the feasibility report to gain a better assessment as to where we are at and what the coming months and years might hold. Maybe time for a puase and reassessment of the current project assumptions, timelines and volumes.

I am keen to hear what other investors have in their thoughts as we wait patiently for Tuesday's announcements.
Comment by Sugoioi on Nov 16, 2020 8:54pm
Looking forward to your comments on MD&A. I was going to reply to that newer post, but thought it better to reply to this one. I have a tendency towards optimism, but I've also been told I find the cloud in any silver lining, so go figure. That bias stated I am happy with the third quarter results, primarily because they continued to increase sales of a new product, a new brand. Using ...more  
Comment by Benedictus on Nov 16, 2020 11:55pm
My initial thoughts on Q3 results and a few responses to the many good points being made here: - meh indeed! I agree Pedro, the Q2 results really had me looking for far better Q3 results. As you say maybe there were many front loaded orders. Still, with such a ramped up sales team, a 68% improvement over very disappointing Q3 2019 results is not in my opinion a great quarter  -I found the ...more  
Comment by PedroPistacio on Nov 17, 2020 2:48am
A good summary of my feelings too Bene. And a good point raised re. the lack of target in terms of tonnes. I'll let them off a CAD target given the wild moves in currencies, although if I had to bet I'd say the BrReal should do better this year vs CAD and USD but who knows. Nevertheless I think we should have a sales target in tonnes. Maybe they will give one at year end. 
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