The Biggest Secret in Cannabis Cultivation?

When Stockhouse Editorial sat down for a conference call with Cristiano Veloso, President and CEO of Verde Agritech PLC (TSX: NPK, OTCQB: AMHPF, Forum), the CEO wasted no time in getting to the point:

"Cannabis growers realize that they need a full range of plant nutrition to ensure optimal growth and flavor. Marketing Supergreensand® is like selling picks and shovels during a gold rush. We are very pleased about how popular our organic approved product has become to cannabis growers both corporate and home growers."

As the emerging cannabis sector starts to mature, new entrants continue to move into this space. More and more, these companies now view themselves in direct competition. To distinguish themselves from their peers, cannabis cultivation companies are generally choosing one of two strategies.

Some of these companies are seeking to position themselves as large-scale cultivators, working to maximize the amount of square feet under cultivation as well as maximizing crop yields. Alternately, some cannabis companies are choosing to position themselves as “craft” producers, aiming to optimize the aesthetics of their crop as they seek to capture market share in the premium end of the industry.

Irrespective of which cultivation strategy a cannabis company pursues, these growers are still bound by a common factor. To maximize crop yields and/or maximize crop quality requires the same ingredient: the best food for these cannabis crops.


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Verde Agritech is in the business of producing the best food for crops – including cannabis. This TSX-listed company is officially a fertilizer corporation. However, that label doesn’t do justice to the premium product its produces for the agriculture industry: Super Greensand®.

How do cannabis cultivators maximize crop yields? Super Greensand®.
How do cannabis cultivators optimize crop quality? Super Greensand®.
How do cannabis cultivators sustain the best yields/quality, harvest after harvest? Super Greensand®.

When most investors think “fertilizer”, they think of potash. This is understandable. Especially in Canada, potash is widely known as a highly useful and versatile fertilizer for most facets of agriculture. The irony here is not lost on CEO Veloso, who also founded Verde.

The Company was formed in 2005. Originally targeting gold exploration upon further research Veloso soon saw greater potential to develop NPK as a potash company. The Company’s flagship property, Cerrado Verde, hosts a huge potash deposit. Cerrado Verde is located in Brazil. This is of considerable strategic importance.


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Brazil is one of the world’s leading agricultural producers, the fifth largest by export value. However, the Achilles Heel in this enormous agriculture industry has been the lack of domestic sources of potash. The original mandate of Verde Agritech was in bringing a domestic potash industry to Brazil.

This mandate changed significantly in 2014, when CEO Veloso met with Dr. Alysson Paolinelli. That name will not ring a bell with a Canadian audience, though perhaps it should. Dr. Paolinelli’s illustrious resume begins with being known as “the father of tropical agriculture”.

This expertise led to Paolinelli being appointed as Brazil’s Minister of Agriculture. While in that position, he founded the Brazilian Agricultural Research Corporation (EMBRAPA), the world’s leading tropical agriculture research institution.

When someone with this type of pedigree speaks, people listen. What Dr. Paolinelli explained to Cristiano Veloso was that Cerrado Verde hosted a resource that was better than potash.

"Traditional sources of potash are not in the same league as Super Greensand® because the latter furnishes a range of macro and micronutrients that ensure not only plant growth but also full nutrition. For the farmer this means higher yields and for the consumer it means an organic and nutritionally richer produce."

Despite the importance of potash in the world of agriculture, it is not a perfect form of fertilizer. Specifically, potash comes with one significantly undesirable trait: high chloride. Over the shorter term, this increased salinity impacts the crop quality. One way to verify this is through a trip to the dentist.

Dentists will point out to patients that heavy consumption of coffee and/or citrus fruits (both heavy users of potash) can lead to serious issues of tooth erosion. Why? Too much potash. The high salinity of potash (potassium chloride) causes chlorine to leach into these crops. When that chlorine enters our mouth, it chemically reacts with calcium – with the result being tooth erosion.

Over the longer term, potash increases the salinity of the soil itself. Over time, this steadily increasing salinity not only affects crop quality but also the crop yield.


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In contrast, Super Greensand® is a low salinity fertilizer, less than 1% of the salinity level of conventional potash. For this reason, Super Greensand is already the plant-food-of-choice for the world of organic agriculture.

Organic agriculture translates into “natural” agriculture, and Super Greensand is natural food for plants. Indeed, when Dr. Paolinelli described Super Greensand to Verde’s CEO, he called it a “direct application” plant food/fertilizer.

No processing is required for Cerrado Verde’s massive resource. This should be music to the ears of investors because it equates to “scoop, crush, and sell.” This makes the production of Super Greensand much less expensive than producing potash, while generating superior results for crops.

While the organic agriculture industry is valued at $75 billion globally, more than half of that total value is generated in the U.S. market alone. Super Greensand® is already registered for use in organic agriculture in both the U.S. and Canada.


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Why is Super Greensand® considered plant food, and not merely fertilizer? As a raw, natural product; Super Greensand® contains over 60 nutrients essential to plant health. It doesn’t simply fertilize crops, it nourishes them.

Meanwhile, the cannabis investors who have been patiently reading this article are asking themselves, “What about cannabis?”

Whether growing cannabis to derive particular therapeutic properties for medicinal users or the most-pleasing aesthetic qualities for recreational consumers, better plant food equals better crops. You are what you eat. It’s true for people; it’s true for plants.

That logic makes intuitive sense, but the agriculture industry is highly regulated. To bring Super Greensand® to North America’s emerging cannabis industry requires that the product be approved – and registered – for agricultural use in the cannabis industry.

By no means, however, does this mean that Verde Agritech is standing still. While management has been working to open up new markets for Super Greensand®, the Company has already been pushing ahead on bringing Cerrado Verde into production – with virtually no dilution.

Lots of companies talk about “minimizing dilution” in their operations. NPK is a Company that also walks the walk. In the 13 years since Verde was formed, it has accumulated a total of 45 million shares (fully diluted), no roll-backs.

This is a management team that is at least as focused on minimizing dilution as investors are themselves. They have a very strong incentive: senior officers presently receive their compensation entirely in shares. Preserving a low share count for investors helps management to preserve the fruits of their own labours.

However, shareholder profits don’t emerge from minimizing dilution alone. The low operating costs and robust margins that Cerrado Verde can yield will allow the Company to dramatically ramp up operations while funding expansion almost entirely from operating revenues – an investor’s dream.

Verde’s CEO elaborated on the marketing strategy for SuperGreensand®:

"In marketing, the most persuasive advertisement is word of mouth endorsement. In agriculture it is not much different, that is why Verde has heavily invested in agronomic tests to foster customer relations with farmers that are leaders in their fields. As harvest yields come in, the promotion of Super Greensand® is echoed among these farmers. Such feedback will be Verde's main marketing catalyst." [emphasis mine]

Crop-growers will conclude that they can’t afford not to incorporate the advantages of SuperGreensand®. Meanwhile, the economics of this production are robust, and with this being a bulk product the numbers get even better with respect to supplying Verde’s domestic market in Brazil. FOB net sales prices are estimated to be roughly 50% higher.

Even at the initial production level of 600,000 tonnes per year, cash costs for producing Super Greensand are estimated at only US$14.53 per tonne.This equates to gross margins in excess of 60%.

This leads back to Brazil, and its enormous domestic agriculture industry. Originally, Verde Agritech was formed to deliver potash to Brazil. That need still exists, what has changed is that Super Greensand® offers even more advantages for Brazilian agriculture than it does for the cannabis industry.

Organic agriculture is a $39 billion/year industry in the U.S. alone. The North American cannabis market was estimated to generate $53 billion in revenues in 2016. While much of this comes from the illicit blackmarket, cynics will point out that nothing stops blackmarket cannabis cultivators from using Super Greensand® to feed their own crops. As legal/licensed cultivation crowds out this illicit sector, Super Greensand® is waiting.

At present, however, these economic opportunities are still overshadowed by the opportunity in Brazil itself. Used solely for crop protection and crop resistance alone, management estimates the current size of these markets to be a combined $13.6 billion opportunity.


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Helping to increase penetration and build awareness for SuperGreensand® is a new initiative announced by the Company on November 6, 2018: “the first B2B marketplace” to provide a global platform for farmers to market their harvests directly to corporate buyers. Open to all farmers (whether or not they are Verde customers), this B2B platform should significantly boost the visibility of Verde Agritech.

Perhaps the number upon which investors should focus the most is market cap. The Company’s prefeasibility study pegs current post-tax NPV at US$1.99 billion (domestic operations only), with its present expansion expected to generate an extremely robust IRR of 287%. Yet Verde’s market cap is a microscopic $35.6 million (as of this writing).

This is a Company positioned to feed the North American cannabis industry (at high margins). As Verde ramps up production of Super Greensand®, investors can expect a steady stream of news heading into 2019. For investors looking for an “undiscovered niche” in the cannabis space, NPK looms large.

The normalization of cannabis laws is now well-advanced across North America and Europe, and is advancing in many other nations as well. As the cannabis industry ramps up to meet this enormous demand and competition in the sector intensifies, cannabis cultivators looking for a competitive edge will see Super Greensand® as a cost-effective input to greatly enhance their cultivation operations.

Verde Agritech PLC: come for the cannabis opportunity. Stay for the Brazilian blue sky.


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FULL DISCLOSURE: Verde Agritech PLC is a paid client of Stockhouse Publishing.