BHP in the news today - good news for Verde?The National Post ran an article today under the headline "BHP touts potash growth", which adds to the growing tail wind of positive market conditions that are supportive of the Verde opportunity.
In view of these generally favourable conditions BHP "remained on track to take a final investment decision on the Jansen potash project in Saskatchewan around the middle of 2021". It then goes on to point out "the first phase of the development is seen costing between US$5.3 billion and US$5.7 billion, with initial production expected within 5 to 6 years".
I believe the Verde opportunity is blessed with not having to face upfront capital expenditures of this magnitude and 5 year-to-production timelines with the incredibly difficult go/no-go decision making challenges faced by BHP. The raw materials are well deliniated and clearly sufficient for even the most optimistic long term sales growth projections, the extraction process is straight forward and relatively inexpensive, the processing plant has been up and running for 3 years and the production management team is well on its way to optimizing the process from a cost perspective, Plant 2 is in the design phase so is well postion to reflect all that has been learned over a three year "pilot" project, and is likely to be a multi parallel line duplicate of the current 2 x 300,000 tonne per year line Plant 1 design. The Company has the cash in hand to finance the introduction of Plant 2, and is cash flow positive so can address further production growth as and when sales growth permits/demands. It can also settle its salary obligations in cash, rather than by issuing dilutive treasury shares, a practice that was ended this year and will not be reintroduced.
From a shareholder perspective, the one risk remaining is the unaltered 2012 Stock Option Plan that still authorizes the Board the right for an additional 10% of the existing float to be issued by way of favourable 10 year options to insiders of the Company. Shareholders have the opportunity to send this plan back to the Board for reconsideration by voting their shares against the SOP resolution (Number 3 on the proxy form) at the AGM on June 30. Shareholders have until June 28, 2021 to enter their voting wishes online at www.proxyvote.com, using the confidential 16 digit Control Number from the Voting Instruction Form sent to you by your broker or financial institution. I encourage all shareholders to exercise their voting rights during the next 10 days to ensure their voice is heard by the Board members who have been appointed to represent the best long term interests of the Company and its various stakeholders.
Cheers,
S