VERDE WILL SUCCEED... I HAVE BEEN THERE AND DONE THAT !In the late 80s I joined an private international group involved in a global extractive industry bearing many similarities with the potash industry in that the industry mines a raw material which is then transformed by using an over 100 year old capital intensive industrial process in order to produce the final product in bulk form. I eventually rose to become the CEO of the group's international shipping transportation division answering directly to the Chairman.
In addition I am also very familiar with the fertilizer markets because through the international shipping activity we had many relationships with fertilizer companies but also because the basic mineral raw material of our industry (limestone) is also used globally by the agriculture industry on a very large scale, especially in Brazil.
Furthermore my family has been involved in the agricultural commodities sector for more than 4 generations since the late 1800s including selling inputs and buying output directly from farmers.
Last, but perhaps not least, almost 20 years ago, on a private basis, I provided seed capital and worked with university scientists in a mediterranean country over a 5 year period on a project to develop an organic fertilizer through a unique process and became deeply familiar with all the concepts and processes described by Verde in the application of Super Greensand such as soil mineralization, leaching, composting, plant resistance, nutrient uptake, microbial activity, etc...
Importantly the project included commercialization studies and farmer testing and interaction.
The project and my involvment with it ended with the granting of 2 patents.
Oh, and I forgot to mention that my first job in the early 80s was in Venture Capital in California and have been involved on an international basis in startups, financings, turnarounds, buyouts, mergers, acquisitons, IPOs and, of course, many failures.
I am writing all of the above only for you to decide how my background and actual practical hands-on experience qualifies me to judge Verde's chances of potential success and as a preamble to the actual case study I am about to describe below which IMO bears UNCANNY SIMILARITIES to Verde's existing circumstances and likely future developments.
So please read on ...
In the mid 1980s the company I was working for, as described above, decided to enter a major northern European market. That market was basically 100% controlled by an OLIGOPOLISTIC CARTEL charging very HIGH PRICES to its customers who had no alternative source of supply.
Being in the business ourselves in different geographical locations we knew that we could buy the product at much lower prices from international sources that had significant excess capacity due to the of the DEEP RECESSION of the early 1980s and secure low shipping freight rates for the very same reason.
We therefore saw a great arbitrage opportunity and proceeded to set up an import warehouse IN THE HEART OF THE LARGEST CONSUMPTION AREA which happened to have port facilities and managed to complete the relatively simple construction in a VERY SHORT TIME period and at VERY LOW COST.
Our aim was to secure around 5% market share so we decided that in order to achieve this goal our strategy would be to offer a TECHNICALLY SUPERIOR PRODUCT at a 10% DISCOUNT to the prevailing market price. (Note here that Verde's SUPERIOR SGS due to its salt-free, chlorine-free and higher mineral nutrients content, is effectively 10-30% CHEAPER than MOP prices due to leaching losses.)
THE FIRST SALES WERE NOT EASY (does this sound familiar ?) and CONTINUED BE SO FOR THE FIRST YEAR OF OPERATION. Customers were apprehensive and even very negative at first. They were worried about how the quality of the product would affect their own production processes and concerned about the impact on their relationship with their existing supplier.
Who can blame them ? We were a new and unknown company in that market and they did not know if we were going to succeed or close up shop in the middle of the night leaving them high and dry to go back begging to their original suppliers.
The difficult start was compounded by the high seasonality of the sales cycle due to the long cold RAINY SEASON and occasional snow which affected most of the customers' operations.
But for many various reasons such as cost reduction, higher performance, dissatisfaction with existing suppliers, transport costs, diversification, flexibility, personal relationships, etc... we eventually started to see more and more customers wanting to try small quantities of the product at first, and then, having become more comfortable over time, increased the volumes of their purchases. 3 years later, no one questioned our reliability, quality or viability.
People talk, compare notes and the word spreads around quickly within an industry and soon, if you are serious, honest, reliable and offer a decent product, many more and varied customers will come knocking on your door at least for a chat and will give you a try.
Eventually the company managed to well exceed its market share targets but the market as a whole also grew in volume and the business was bought out after about 10 years at a very substantial premium by a multinational company looking to secure a foothold in that market.
Now think of all the disadvantages that that company had to overcome in order to succeed and then consider all the ADVANTAGES that Verde has in its favor: Verde has the HOME TEAM ADVANTAGE with LOCAL PRODUCTION and a MASSIVE LONG TERM RESOURCE. It is THE LOW COST PRODUCER with a HUGE MARGIN. Its product is UNIQUELY SUITABLE TO LOCAL MARKET CONDITIONS i.e. tropical agriculture but it is also HIGHLY SUITABLE to new and FAST GROWING MARKETS such as organic agriculture and specialty coffee .
And it only needs to achieve an almost insignificant 1.5% MARKET SHARE in order to reach its first goal of 600,000 tons.
So even if SGS is not for everybody, I believe Verde will do just fine to multiply its share price.
All it needs is a little patience and persistence.