Verde Sandbagging with 2022 Guidance ???
Based on CV's comments in the U-Tube video from 5 days ago, the numbers used were $10/tonne production cost, $30 /tonne average shipping cost = US$40/tonne cost of sales, compared to current potash pricing around US$850/tonne divided by 6 to get Verde pricing of around US$140/tonne (C$175). This is very different than the US$500 used for 2022 guidance in the current Verde presentation.
CV is being very conservative in any financial numbers put forward. 2022 Guidance is 700,000 tonnes sales at average of C$96/tonne. We are already 2 months into the year and March sales are probably already locked in as well. In the curent world environment it seems likely potash prices will be higher, rather than lower for the balance of the year. Adjusting the average price to C$160/tonne (10% below current actual prices) generates additional cash flow of around $64 per tonne or an additional $45 million in EBITDA above the guidance number of C$28.4 million, equivalent to EBITDA per share of C$1.30, compared to the guidance number of $0.50. Unless costs explode for Verde it seems reasonable that a realistic EBITDA number is at least twice the guidance level.
2023 Guidance is for sales to double again to 1.4 million tonnes. At current pricing minus 10% that would generate 2023 EBITDA of around $2.50 per share. That puts current share price at only 3 times 2023 potential EBITDA.
Biggest risk I see to actually achieving this is not whether they can produce the product, but whether they can actually sell and deliver it in the quantities projected for 2022 and 2023.
However, another issue has also emerged. The Chief Executive (CV ) has decamped to England and is trying to run the company from two continents away. This is not encouraging news and I want to see a compentent executive running the day to day operations at the plant.
I hope they will address this issue in the year end shareholder letter or conference call.