Verde Cerrado Project Evolving HistoryHello fellow Verde Shareholders,
I have been looking at the updated NI 43-01 Pre-feasibility Study published in 2017, which was derived from the former studies published in 2014 and 2012, in order to compare our current actual experience with the figures and metrics used as assumptions in the study. My goal is to come up with an adjusted estimate of the resource NPV as indicated by current values today - is the 2017 estimate of US $1.99 billion still valid, and if it has changed due to some material movement in the critical assumptions, how much has it moved?
While I am still adjusting my spresdsheet models and so do not as yet have a conclusion, I thought I would share an insight that this review brought again to mind. While I have at one time or another read every Amazon Mining/Verde Potash/Verde Agritech document on SEDAR since 2007, and have binders of hard copy prints of the more critical financials and NI 43-01 complient studies, you do tend to forget some of the earlier details.
The one in my head this morning is the fact that the initial explotation of the glauconitic deposits was to produce Thermopotash - a non chloride water soluable slow release potassium fertilizer. Thermopotash was a manufactured product requiring grinding and mixing of the glauconitic material with limestone which then required calcination under carefully controlled buring conditions with continuous monitoring of temperature profiles. This required a costly and complex processing facility which limited throughput and eventual output of finished product.
The 2014 pre-feasibility study proposed a 330,000 tonne per year production, and concluded a Net Present Value of US $146 million.
Three yaers later, the 2017 study had dropped the Thermopotash product and substituted K-Forte (Supe Greensand) instead. The production process had devolved to a simple crushing and grinding of the glauconitic material, with no complex mixing with limestone and high temperature burning. Upfront capital expenditures and ongoing production costs were substantially reduced as a consequence, and the production volumes and subsequent product sales increased exponentially. From a 2014 study 330,000 tons per year steady state production facility, we were now looking at a Phase 1 plant of 600,000 tonnes per year, a Phase 2 production rate of 5,000,000 tones per year, and a Phase 3 20 plus year LOM production rate of 25,000,000 tonnes per year.
All of this produced a NPV calculation of US $1,990,000,0000 as opposed to the 2014 figure of just US $143,000,000. That is quite a change, and one wonders why the simple crush and grind process was not tried as a first alternative back in 2012.
Anyway, we now have the 600,000 tonnes per year phase 1 production capacity plant built and running, and the permits and accumulated extraction allowances to meet the 600,000 tonne Phase 1 sales target. What we are still working on is the actually getting customers to purchase the 600,000 tonnes a year we can mine, process and deliver, and to do so at a price that is close to the levels assumed in the NPV calculations.
More on that analysis in a future post.
I hope you all have a great weekend.
Cheers,
S