Verde AgriTech Plc (OTCQB:AMHPF ) Q4 2021 Earnings Conference Call April 6, 2022 9:00 AM ET

Cristiano Veloso - President, CEO and Chairman

Felipe Paolucci - Chief Financial Officer

Hi, everyone, welcome to a very special results call for Verde AgriTech. We're here today on site where Plant 2 is under construction. Full steamer head, everything on track, are stocked up very, very early Q3. Special compliance too also underway way pretty well, very confident about hitting the target we put out at the last press release. So everyone in the company, there's a lot of excitement, there's a lot of joy, there's a lot of hard work going on and we're happy. We're very happy, because we truly believe Verde this year will be able to make a meaningful contribution to a very serious food crisis we all are going to face. And unfortunately, with every food crisis it's the poorer population across the globe that will bear the biggest impact.

We've only unfortunately started witnessing food prices going up. I think the real crisis will begin once we have a declined or expected decline in crop yields, which very importantly, will come from as a result of insufficient fertilizers application. We have approximately 300 people working both on site here for construction of Plant 2, as well as working on improving the infrastructure, roads. We're building a bridge. We enlarging a big portion of the road, so we can be moving the amount of product we expect to be moved this year.

So I'm going to now have a quick tour. Before I do a quick tour, I may as well show some of our team having a discussion. So to the right we have [Daniel], who is our Engineering Construction Manager, behind us we have [Camilla], our Procurement Manager and then we have [Stavo] to the left hand side who is our Operations Director, he oversees all the operations.

So, a little bit of the site tour. This is where you get to the mine, so ore is going to be coming from that direction. We have the mine at the back. So, what you can see on those hills, outcropping is already our potash ore. We cannot get too much closer because of the internet connection, but this is the adjacent mine where we will be extracting ore.

So going back to where we were. So raw material, potash would come from that direction setting up more and more foundation, the work for foundations is nearly finished. So, hundreds of tonnes of concrete has already been injected into the soil to set up foundation. So we’re going to have rock coming from there, this is where we have our feeder. Again, on this line here, we will have the crusher. We will have the secondary crushing circuit. You're going to have a intermittent stock pile where you can see the -- or the structure.

Going all the way down here where the line there where you have the hammer mills. And the project will be taken up, then when you can see more of those foundations, that's where you're going to have the material being stored prior to delivery which is on the other side. All the way at the back, we have the area where all the concrete structure or the metal structure has been assembled. So the way behind you can see it from here, but all the way at the back.

So yes, I will now let Felipe carry on with the formal presentation. He will be talking about our financials. He's going to be talking about the results, our outlook. Then at the end, I'm going to be back answering some of the questions. We've had several questions. We've had over 50 questions sent by email. If anyone wants to send questions as well, please send questions as well on using Zoom. We will answer as many questions as we can. Obviously we've seen some questions they already are in connection with Q1. So there's limited information in that regards, we're going to be able to disclose before the results are out. But to the best of our possibility, we will be answering those questions.

So, very excited. And now it's with you Felipe, please, please go ahead.

Well, thank you, Cristiano. For now, let me share my screen here. Just a second, yes, here you are. And so first, I would like just to share this chart where we show our products that we currently sell at Amazon and also we are offering here today a 5% coupon discount for purchase made up to the end of the month. So take the opportunity, it's available in U.S. and Canada and feel free to get in touch with any details as needed.

So, just a second, let me stop my video to share it better. So on Q4 and full year 2021 highlights. So during this presentation, I am going to share, first, results of the quarter and then in the same paragraph or chart the full year also results that we achieved. So first in the left side of the chart, you can see that the related to cash the company still has an ability to generate significant free cash flow. The cash utilized from investing activities increased by 80% during Q4 and 74% during the year. Total loans for CapEx and working capital by the end of the year was C$5.6 million.

Inside of profitability, revenue on Q4 2021 was $10.8 million from the sales of 134,000 tonnes. And for full year 2021, it was $27.7 million, which is an increase of over 200%, compared to the prior year.

On operation, profit before non-cash events, it was $2.4 million in Q4 2021 and for the year it was $6.4 million. So, it's an increase even higher of over 300% compared to 2020. Also in the net profit was $1.8 million in Q4 compared to prior year in 2020. It had a significant increase closing the year on $3.5 million of net operating profit. And in the end, I can say, trade and other receivables were $15.05 million in the end of the year, which is in line with our growth. And also, the sales volume for Q4 2021 we had 134,000 tonnes and in the year 400,000 tonnes sold, an increase of over 64% compared to 2020.

On operations side, Verde received 2.5 million tonne mining permit in the beginning of this year. So in the end, we are now up to 2.8 million tonnes allowed to be mined. And we expect by Q4 2022 with the plenty of construction to achieve a capacity of over 3 million tonnes per year. By H1 2024, the company expects to have a total capacity of 13 million tonnes per year, which represents 16% of current Brazilian potash market. So Plant 3 is projected to have a production capacity of up to 10 million tonnes per year.

On the right side can see on summary that, a bit on 2021 Verde was producing selling new product. So, the company guidance was limited on to volume and revenue. For this year, for the first time, we have announced that also on EBITDA and also earnings per share guidance for this year. So, in the previous years, also it's important to mention that the company was only secure financing by invoicing, discounting or warranted by capital goods. In December last year, the Verde future sales contracts were for the first time accepted as collateral as warranty for loans, so which represents an important milestones in the company expansion plans. The company has assembled a special committee to evaluate, when and how to share profit to shareholders, comprised of our Independent Directors of the Board. The special committee's studies will be the cornerstone for Paid for Growth program elaboration, which is being engineering in detail to enable the company to distribute earning to shareholders.

And also the Board of Directors approved an investment that totals over R$73 million for Plant 2 to upgrade local infrastructure to sustain Plant 2's logistics with added capacity to enable Plant 3. The Group aims to fund the expansion plan through a combination of future cash flow, and debt finance backed future sales contracts. In 2022, Verde will keep working hard on its accelerated growth strategy.

A bit on 2021 key objectives and also 2022 objectives. So the first one was to achieve last year 10% of the company's total sales as BAKS product. We achieved a really close number 9.8% of total volume sold was BAKS. Second objective, launch a new technology in the second quarter 2021. On June last year, the company launched its N Keeper technology. The third one, get ISO 9001 and 14001 certified. We've achieved this objective now in Q1 2022. Obtain the mining concession for 2.5 million tonnes per year. We've also achieved this objective in Q1 2022. Initiate the construction of Plant 2, we've made that and also we keep on track and we expect to have this plant operating in Q3 2022 and expanded already in Q4 2022.

And in the end, started to have last year achieve revenue and sales target for the year. The latest target we had, it was respectively R$110 million of revenue and 400,000 tonnes of sales. We've achieved both results also.

A bit on the right side, 2022 key objectives that we'll have first of all is to reach Plant 2 commercial production into Q3, still on track. Expand Plant 2 operational capacity from 1.2 million to 2.4 million tonnes per year also on track. Upgrade local infrastructure to sustain Plant 2, on track as well. Finish the new prefeasibility study, expected for the coming weeks. Launch a new technology in Q2 2022, also worked on that to be ready before July. And the last one, reach 100 cities with the Cultivando Amor project, which will raise last year R$270,000 for charities across 16 cities in Brazil, where we sold our products.

A bit -- going to next chart, a bit on Q4 and full year financial statements. I’ve mentioned before about revenue. Now, I would like to focus a bit more here on operational profit loss before non-cash events. You can see that in Q4 in spite of the seasonality and rainy season that begins in Brazil normally in November, we had great results and then the growth of over 6,000% here which is a huge number. But taking into consideration full year, we delivered 300% growth in operating profit for non-cash events.

And also on this chart, I'd like to highlight the net profit and loss, which in Q4 for the first time, we had a profitable quarter with C$1.8 million on profits. Considering full year, we had 3.5 million compared to 550,000 in 2020.

Now a bit on the numbers, but per tonne, which is quite good to understand, the first chart. We have the tonnes sold, then revenue per tonne. You can see that the revenue increased significantly over 100%, the revenue per tonne for some reasons that we explained already. But to just highlight again, we had potash price increase, we had more CIF than FOB among Brazilian real devaluation, which also impacted last year revenue in Canadian dollars. But it's important to highlight here that gross margin increased from 59% to 75% in Q4 2021. And in the year also we had a significant increase on gross margins.

In the second table, we have a lot of questions related to impact on freight and logistics costs, expenses. So what we made here is a table that shows what would be our revenue per tonne, production costs per tonne and gross margin per tonne if we exclude the freight impact. So we can see an increase at the end of the day also on revenue and gross margin from 47% to 62% and from 56% to 62%.

The next chart, it's good to have an overview. It shows the development per quarter since 2018, when we started the Plant 1 production Q3. So we can see the green bars on the right side, how we are growing and you can see that's like a quite significant growth quarter-on-quarter and the right side the revenue situation. The revenue grew much more than sales in percentage against last year, mainly due to higher price, CIF and other factors.

The next chart you can see, key metrics yearly on sales and revenue. Now it's the full year consolidated numbers. We came from 29,000 tonens in 2018 to over 400,000 tonnes last year, 2021. And on revenue side we saw growth close to 15 times from 1.5 -- $1.3 million to $27.7 million last year.

A bit on SG&A, on SG&A we -- to support our growth we're still investing in people, in consultancy -- in consultants and other marketing, branding. So with this table here, we can see that we had an increase from $673,000 in Q4 last year to $4.4 million this year and in the total year we had an increase from $2.2 million to $11.2 million.

Yes, a bit on -- mainly you can see here is, it's an increase on products delivery freight expenses. What we've shown in the next chart, how the customers are choosing for CIF sales instead of FOB which is terms of supply chain for us is better because we can schedule with much more accuracy the loads in our factory, avoiding bags with lower loads against higher loads. So we can bring it to an average which is much better for the supply chain perspective.

On general expenses, also you can see here that we had a significant growth, mainly here due to people and other expenses like IT, software that we do pay per user. So we want to grow, we hire more people, we pay more per license. And at the end of the day, that's one of the biggest impact for us in legal, professional consultancy and other costs.

In the next chart you can see FOB against CIF, it's important to see how we are growing especially on CIF. We are selling, just in Q4, for have an idea, we sold over 60% on CIF against prior year on 23%. So it does impact in our revenue per tonne. But at the end of the day, the objective of the company is not to make money through it, but to make sure that we pay the logistics cost of the value we’re charged from the customers, and also to make our supply chain easier once we control the day and the hour that each truck is going to be in our factory to load their product.

In the right side of the chart, you can see the general expenses. Also, we have chosen here three expenses that had a significant growth. Fees paid to sales agents. This is expected to grow year-on-year. We pay a percentage of the sales to the agents, and we do have internal sales, independent sales as well. So -- but once we have exponential growth, we do expect this line also to have additional costs. And also related to general expenses, administrative employees, backup team, procurement, finance and other areas that we had to hire more people to support our growth strategy.

A bit on Q4 and full year financial summary. So, at the end of the day, revenue from sales for Q4 was $10.8 million, as compared to prior year that were much lower than that. And that’s total volume sold of 400,000 tonnes in 2021, and product volume sold as CIF increased, potassium chloride price increased and BAKS sales also supported the revenue increase, since we do charge additional price for [borrow and support] that we are adding to our product, for example.

On profitability, operation profit before non-cash events increased $2.4 million in Q4 2021, to $6.4 million peak and also to $6.4 million for the full year 2021, whereas margin increased to 75% in Q4, compared to 59% in 2020 and to 74% in full year 2021, compared to 62% in 2020. Sales by volume increased 137% in the quarter and increased by 64% in the year. And net profit also increased, as I've mentioned before, by over 540% in the year.

On cash perspectives, December 31st, the Group held a cash of $1.5 million. This was already expected and we had a lot of collects in Q1 2022. Trade and other receivables increased by 375% to $15 million, compared to $3.1 million in 2020.

A bit on summary of interest and loans. We ended up 2021 a $5.5 million on loans. Our loans that the company currently have is on long-term loans of over two years, or at least one, two years or more. Loans have an average of say three years. So, we do not have a lot of payments to be made in the first half of 2021, where our cash flow normally is lower, because of the seasonality of the business, and we expect an increase on cash flow on cash on hands also after June this year.

A bit on Brazilian economic scenario, we can see that the U.S. against the Brazilian reais did have here a variance. Important point to say is that since we -- the conflict in Russia has started I think all over the world, U.S. dollar lost value. And also it's happened in Brazil. Currently we are close to R$4.6 per U.S. dollar, and then compared to the year-end that we had R$5.6. So, this will probably increase our revenue per tonne. This is -- this impact will on price and other points will be created by the additional costs on KCL, probably that will push us to higher prices. And also at the end of the day, you have the potassium chloride price here change from Q4 2020 to Q4 2021, a variance of over 140% and the lowest side of the table and in the right side 160%. So, in the full year at the end of the day, we had an increase during the year of 136% of the potash chloride price as an example for Minas Gerais.

So, in the last chart, we have 2022 and 2023 guidance, as we've already raised in our press release the full year 2022 target is 700,000 tonnes of product to be sold and with earnings per share of C$0.50. At the end of the day, for 2023, we had already shared some guidance with volumes of 1.4 million tonnes and this is already 100% growth against the prior guidance of 2022.

So, these are the key points I'd like to raise during this presentation. I will pass it back to Cristiano, so he can move forward the questions and -- Q&A section. Thank you, Cristiano.

Yes. So for those of you who have joined during the presentation, we are broadcasting live from the mine, from where the plant has been built, Plant 2 is being built and we will now start answering some of the questions to the best of our ability. So we have at the moment 54 questions. We won't be able to answer all of them unfortunately. And if you feel that your question wasn't properly answered, please send the question again, so we can try to answer it a little bit better the second time around.

So starting with the first question, what is the sensitivity in the profitability of Verde of rising fuel prices?

Yes, I mean we use diesel to fill all the trucks, all the mining equipment. Delivery of our product has an impact. So there is an impact. But of course we also have high margins and even higher margins with potash prices. So it impacts us but not materially.

Next question. Thank you, Jeff. Question is, appreciate NPK is an exciting record growth story. Is there a near-term opportunity to pay shareholders dividends, given your growth is largely being financed by debt?

The short answer is, yes, there is the opportunity. We have an independent Board committee working at the moment, trying to determine if now is the best time, trying to determine if it's dividend or if it's buyback or if it's a combination of both. So this is left with an independent Board committee to then advise the Board. And in that regard, we're also very thankful to the several feedbacks we received from shareholders. When we put out our last press release talking about this topic, we sent a form, a link where people could help to share their views. They've all been read, and they were shared of course with the committee. And a lot of it was very, very valuable.

Next question is a very important one. It asks, when we will see the first woman on Verde's Board of Directors?

I hope soon. I am ashamed that we only have -- we don't have any woman in our Board of Directors. If anyone on this call has a recommendation, please do not hesitate to share, send them over and we will be thrilled to meet this potential candidate. Unfortunately, things have been so hectic that we haven't had much time to go out looking for new mandates.

Next question. Will Verde have any problems in delivering 10 million tonnes of product to its customers via Verde? And how does Verde know that there will be enough demand for 10 million tonnes of its product?

There will be problems, there's no doubt. It's a lot of tonnage. But we’re already working on ways to mitigate those problems and to resolve some of the bottlenecks we've identified. And we're doing that with the help of the local government and state government and federal government to find the best ways around, so we can be delivering as much of that 10 million tonnes as soon as possible.

Next question, Menachem. Thanks, Menachem. There's a Q&A on our YouTube channel where Menachem was very helpful, asked a lot of questions. If you guys haven't watched it yet, you can go to our YouTube channel and it's there. His question is, can you talk a bit about how it's going with acquiring customers or people finding Verde? Or is Verde needing to market aggressively to reach new people? And can you talk about what kind of incentives new customers are getting? And when those discounts or all the negotiations might roll off?

So several questions here. We'll try to answer most of them as good as I can. Yes, there's a lot of interest, there's a lot of people approaching Verde and it certainly has been much easier to develop the market now than it was back when we began in 2017, 2018. If we are marketing aggressively, I think the definition of aggressively is a bit difficult, but we are certainly doing as much as we can to accelerate market development. The kind of incentives, we have our pricing policy, which follows the price of KCL. And whenever applicable, we also have some discounts we grant investors.

The next question. So, the new tonnes from expansion, are they contracted out yet, and what price? Should we expect those tonnes capture a substantially higher margin than prior contracted tonnes?

We -- it varies. So, we have already pre-sold some of the production for this year for the expansion as well. But there is still a lot of it, which is being negotiated, a lot of it, which is being as we speak.

Next question. So, how does the market situation reflect on Brazilian politics and the permits and process with regards to Verde's future expansions?

There's no doubt. The awareness in Brazil has grown a lot about the strategic importance of potash through production into the Brazilian economy. So there we have seen a reflection of that.

The next question. Can you please speak to the general financial state of Brazilian farmers, after last year's drought and this year's strongly rise in fertilizer prices? This is a very good question. We -- some regions of Brazil struggled with drought, and some farmers in those regions were more impacted. However, because we come from several years of very strong weather, very strong food prices, very strong commodity prices, all farmers are pretty much -- most of the farmers, they are very well capitalized and they didn't struggle with that.

And in the comment, with fertilizer price, yes, they have gone up a lot. Yes, they are now among the most expensive items in their purchase list when you are a farmer. But the economics of growing food are still very strong. So, there is still a lot of incentive for people to farm, and we are not seeing any slowdown whatsoever in terms of consumption, which is also the next question in here, asking farmers can afford? So in general, yes. They can afford, and they are eagerly looking to secure their supply of potash.

Next question. In the Q4 earnings release, you mentioned that part of the quarter's production having been pre-sold in early quarters, can you please give us an idea of how far out production typically gets pre-sold and which price is fixed versus floating price?

It's hard to give you an estimate at this point. But most certainly, we will indeed be able to capture the growing price for potash we're going to be able to see that reflecting in our bottom-line.

How far out on the time horizon and how much has future production being sold? Same question, we can't get into kind of the detail. But I assure you, it's going to be a pretty good year.

Can you please share some thoughts on how you think about pricing the product to actively pursue selling at discount to potash equivalent pricing to drive adoption? The short answer is, no. We -- in addition to potash, we supply all the nutrients, which naturally exists in the product like silicone, very important for crop protection, abiotic stress resistance, manganese, magnesium, it's a gradual release product, improves the soil, help soil microbiome. So we most certainly don't look at heavily discounted. I think it's already very beneficial to farmers. The fact, all of those added benefits, they get them free.

Next question. A question about the strong buildup on trade and other receivables position in the last quarter as it almost doubled versus Q3?

Yes. However, pretty much 80%, 90% of that money was brought into Q1 already.

About 90% of that money is already bought in. It doesn't mean that the 10% was -- couldn't get paid, just because the other 10%, 20% is due later on during the year. Our insolvency rate, so the percentage of farmers that haven't been able to pay us on our trade receivables is 0.2%. So 0.2% is our current, doesn't mean we won't recover that money, it means what is late at the moment, 0.2%.

Are any supply contracts rolling off and being repriced to the current spot prices? No. We own that, our agreements. So if a farmer last year bought the product, delivery this year, he will pay the price he agreed to pay last year.

How many miles is Verde’s second mine in production facility from the first mine?

It's about 12 kilometers and that's one of the roads we have people working right now, improving for a much more increased volume we expect this year.

Next question, does Verde own trucks or lease trucks and trailers? Or does Verde subcontract out their deliveries of their product. It’s subcontract. So subcontract all our delivery, likewise we subcontract our mine fleets.

On a map, can you locate the first manufacturing plant and the second manufacturing plant?

Yes, we can provide that in one of our new public documents. Those of you who missed the tour of the plant, once I'm finished answering those questions, I'll do it again. So we'll allow you guys to have a quick look of what's going on behind me right now, which I think might be far more exciting than my performance is to some of those questions.

Recently, Verde said they would award their stockholders with a 20 -- oh, dividend. Will this dividend be paid out in cash to stockholders or in the form of Verde stock?

I'm not aware of that, so I can't comment here.

The other question. Because potash from Canada has to be transported by ship I would think that the transportation costs from Canada will give Verde a huge advantage, cost advantage. How much cost advantage does that give Verde for each tonne of fertilizers sold?

Yes, I think seaborne trade at the moment is around $50 to $60 per tonne of potassium chloride and that has gone up a lot as we may expect.

Now that Verde is very profitable, when do you project Verde’s stock will split?

There's no expectation, no plan for splitting our stock.

Do you think all time investors will see the split of 5 or 10 for 1 split?

We're not looking to split the stock. Perhaps one important comment here is that, if one day we decide to list the company in another stock exchange, in another major stock exchange, those other major stock exchange, they have a minimum share price, so to admit you’re trading on them, so splitting the stock would really be a problem. There's no plan of doing that.

How many plant persons will be added at the second production facility?

So for the second production facility for each shift, we have included in all the operations about 20 people. And of course, we've been -- we operate 24 hours, so you should multiply that by 4, so we have the shifts going around.

Next question. Brazil farmers like using your products, they are cheaper, they are better and yield more per hector and especially they are all beneficial environmentally. However, I noticed from your Q3 2021 report, if I'm not mistaken, the freight cost of your product is 80% of the total sale cost. Is it possible to reduce freight costs?

Well, it depends on where we're shipping the product. So as a rule, we can say, it’s 80% -- oh, the cost, of course yes. Sorry. Yes, sorry. I thought we made like from our margin. So no, okay. Yes, from the cost, absolutely. And as we grow and as we start selling further afield from the mine, it's natural that freight costs will increase. And unfortunately, there's nothing we can do different to what we've done, which is to establish relationship with several different logistical companies. At the moment we have 30 different transportation companies servicing us with thousands of trucks available now to be able to accommodate the timely distribution of the product.

How does the contract typically look like? Do you sell the production at spot price, or do you also pre-sell future production?

Yes, we pre-sell some of our future production.

Next question. What percentage of future quarter's production would you typically pre-sell? Can you give me an idea of how you think about that?

It's a very difficult question to answer, because it really depends on the quarter. So as you saw from Q4 results we put out, because we had already been sold out most of last year, a lot of those sales let to -- the delivery took place during the last quarter, those sales had been made earlier on the year at cheaper prices considering potash prices really spiked at the very end of last year. What has happened though throughout 2022 is that price stayed continued strong from what we saw last year. So, it will be a near of very strong results, as our guidance suggests.

What is the price earnings ratio a share in 2021, '22, estimate for Verde AgriTech?

We can't answer that one.

Next question. Will Verde allocate enough of future profits for R&D development to ensure it's a relevant and competitive industry leader in the future to win up against industry giants, such as Nutrien, and the potential of you joining the budget? We’re already doing a lot. We’re already doing a lot. And as you can see from the technologies we have launched, they have given us significant edge, a significant edge. So, I need to highlight how crucial our Micro S Technology is for our growth and how successful the product has been in Brazil. Sulfur is a very important crop nutrient and we have become now the cheapest -- we have the lowest cost in terms of sulfur fertilizers among any of the other competitors, given our Micro S Technology. And I can only see the sales of that product increasing significantly. It was sold out last year. If you weren't, I'm pretty sure sales would be even stronger.

I should also mention that we have another technology, which is going to be very soon announced. Very soon it's going to be launched, and that technology, which very soon is going to be launched as we put out in a press release. It's going to be, again, as exciting as it was with Micro S. It's something we have been working for about 7 years since we began. There has been a lot trials, a lot of engineering went on and will catapult us in the forefront of high tech specialty fertilizers, far beyond what competitors are currently doing.

Next question. What would you say to this, just Verde maybe sacrificing long-term development of successful innovative and competitive product lines for short-term return to shareholders under the proposed P4G, Profit for Growth program that long-term may diminish and be detrimental to the Verde and its competitive future?

It's a very good question. The independent committee is taking it very serious, those points raised. When we came up with the name, Profit for Growth wasn't taken from nowhere, it was a well thought out name we gave to it. And most certainly I personally wouldn't allow us to sacrifice any sort of growth to choose start returning shareholders. It has really been -- thanks to the partnership with Banco do Brasil that we've been able to conquer this edge in how we can fund our growth. So the short answer to the question is I am positively thinking between both.

Another question. Can you tell me what potash price was implicated in the new 50 million P4G agreement?

I presume that is about 50 million tonnes feasibility study, which is underway, pre-feasibility study is underway. It's a price which is significantly lower than what the spot price is. A bit higher than what we used in the past, that's $250 and below what we see as some bullish estimates for the long-term.

Another question. Is there an opportunity for Verde to develop some sort of soil microorganism repopulation introduction product edition, along the line of microbials, building on Verde's unique competitive future of being microorganisms friendly? Does this needs to come on the upfront or is the recovery of microorganisms so naturally once using Verde's products compared to Kessel of short enough timescale, where this is especially beneficial?

No. This is the future of agriculture. I have said that several times. Future of agriculture, the future of sustainable food production are microorganisms and can’t think of a better vehicle for repopulating soil microorganisms in K40. Given that Verde’s product, set to leach, from then -- from the soils, less being applied, why is it that an equal amount of KCL is needed to be regularly applied. Is there no scope for less product to be used over the long-term, therefore saving the company considerable?

It's a good question. There's some trials, which would show that. However, it's not easy changing too many things at one point. And when we approach farmers, we're already changing the usage of potassium chloride, which is a fertilizer, they've successfully used for decades. So on the top of that, you turn to the farmers and say, by the way, now you also can apply less fertilizers. It's just not -- it's not the right time to be doing that. I think there's also more research, which needs to be undertaken. We need to see more and more consistent use of the product before we can make this disclaim as definitive claim.

Will Verde be able to hit new capacity of 3 million tonnes next year?

It will certainly have production capacity for this 3 million tonnes. We hope to soon be announcing our guidance for 2023 when we put out our guidance for 2022. The reason we didn’t put out the guidance for 2023 was because there were still too many moving parts in terms of permits and in terms of expansion. This has now been resolved. So we hope to very soon be announcing what our guidance and what our EBITDA and our EPS, what we expect them to look like for 2023. And before there's several questions on that front, yes, we also hope to very soon be revising upwards our guidance for this year.

Next question. When will Verde list on a major exchange?

I like to think TSX. Is that a major exchange? But in addition to TSX, I see the merits of going to perhaps the world's biggest stock exchange at some point in the future. I think it's ultimately where we will move our way towards.

Next question. What's the new mine life at 50 million tonnes production?

So at 50 million tonnes production, we can supply about 63% of Brazil's potash market. In the mine life, that scenario will be disclosed on our upcoming feasibility study which as you may have seen, there's a lot to come. Stay tuned. Keep following us. Thank you for these.

Next question. If this is a production of 50 million tonnes, this means a rail capacity is necessary. How will this be built, does Verde gets help from the government?

Yes. What you’re up to 50 million tonnes you need rail. From the work we've done over the years, we've been able to identify some work we can do and some local roads, some bottlenecks which can be resolved. So we expect the feasibility study, that a significant -- far greater amount of product than originally anticipated will now be able to be moved by road.

Next question. Did I hear Felipe correct that the PFS is planned to be released in the coming weeks?

Well coming weeks is pretty vague and broad. So yes, we can say the coming weeks. We’ve not set a due date for this PFS because we're working with it. They're careful and there are some moving parts wit that feasibility still which only making it look even more exciting that perhaps if we had put it out at the end of last year, we'd have missed those upsides which we will work in being able to identify.

What would be a typical or average length of time between a sale being agreed to and being delivered? How long is the average lag on price?

Zach, it varies a lot. It varies a lot. So we have people putting orders now for delivery Q4 this year and already for delivery the following year. We have orders being placed by customers, who want to get the product delivered the same day or the next day. So it's hard to help you in that regards.

Next question. If Russia and/or Belarus is removed from the market, would that make a shortage at any price likely and mean that Verde will realize significant volume at the price that reflects that reality?

To an extent, this has already happened. So Belarus isn't being able to export potash, because of the U.S. sanctions. We understand that Russia has been able to ship some products that was already either on its way or on its port, so the logistic was resolved. But we start hearing of problems mounting. As a curiosity, if you go to a local potash dealer here in Brazil and you try to buy potassium chloride for delivery in the second half of the year, at the moment, there is no delivery. There is availability for price. Some of them have some products stocked for immediate delivery, but there is already a shortage, if you call one of the locals distributors and ask for product for next year, for later on this year.

There is another question here about truck shortage. And if we had any worries about the truck shortage?

Absolutely not. There is no worry about truck shortage whatsoever. There is a -- it's a big, big part of Brazilian economy. There is several industries that rely heavily on trucks and when you look at bulk transportation, like our product, needless to say, grains, you have millions of trucks in Brazil, which are required to be able to move all grains. So it’s soybeans, growing the states of Goiás, Mato Grosso, Minas Gerais and then you bring it down to the ports. So by volume, fertilizers represent far less than what Brazil produces in terms of grains. So there is no shortage whatsoever. The government has some very strong lines of credit incentives for farmers, independent farmers, transportation companies to be in this market. So there is no worry at all.

How much of a step down costs are you targeting with the Plant 2, if any?

There will be most certainly a reduction in costs. So, on Plant 2, so you can see the back where the mine is located and how little or how close it is now to move raw material, to feed our plant, in comparison to what the situation is nowadays. For the ones of you who haven't seen it yet, this is part of the construction going on the plant. There is another bit, all the way farther back where there is a lot of work going on as well. Preparing the mechanical structure, preparing steel to go up and start. All the foundation has been built or is in the final state of being built. This is the process that takes the longest for first of all moving all this ore to level up and create the different levels we need for the plant, then there's a lot of concrete, a lot of steel going on to those holes, both here and behind this temporary shed you can see.

And then we have the mechanical company arriving to start directing those structures very soon. Where you can see back then is some of the equipment that has already arrived. So underneath this black plastic, you have our crusher, you have some of our hammer mills, you have some of the equipment that has already been delivered, more equipment arriving as well.

So going back now to the questions.

Next question here is, how do you see your pricing power in the future years? Will there be a premium in price versus potash prices?

It's very hard to say, a lot of it I think will depend on consumer power. As we know, potassium chloride is half potash and half chloride, that chloride has some negative impacts on soil microorganisms. And unfortunately for the conventional industry, if consumers start questioning this impact and there's more awareness about how important soil microorganisms are for growing [monetary] food, for capturing carbon into soils and system start demanding some strong change, I think we might see some very radical change in this industry.

The next question. How about monetizing your patents and the pending ones if successful -- success in granted?

It is a possibility, but it's not our focus right now. We have some very creative people at Verde. We have some good ideas. We've been able to apply for 8 patents. We've had one patent granted. But this is all to do with our own operations rather than looking to monetize. It doesn't mean we won't, it's just not our focus right now.

Next question. Could we assume that Brazilian government could be interested incentivizing, otherwise paying the needed railway or part of it in the future, any negotiations above that taking place?

The Brazilian government is a very liberal government which focus on creating the best environment for business to take risks, for business to develop projects, to entrepreneurs to go on with their business. It's against the nature of this business, of this government really to be taking up a work like that. The good news, though, is that if you look on our results, on a feasibility study, on our growth profile, it's -- we don't even need that.

A question about the new technologies. I commented in the beginning of the presentation. I'm very excited, very, very, very, very excited about what we will unveil in the coming weeks, it’s big.

You have currently at least three currencies to play with considering your business. Have you hedged some portion of those exchange ranges or how do you handle them?

We don't hedge because our sales we follow U.S. dollars in terms of the price of potash. And in terms of our costs, they are in a weaker currency, Brazilian reais. So there hasn't been -- ever been the need to be hedging this position. And there's a cost in hedging as well which we don't think it's something which we're about to circle in future given our strong margins.

Is the potash -- next question. Is the potash mine that had the rights to and mine an exclusive mine when it comes to its contents? Do you have some comparable? Does people have comparable products?

Yes, there are some comparable products. But yes, what we own is exclusive, what we own we have patents applications and plenty of mining rights. But there are some comparable products. So for example, they are the chloride-free fertilizers. One chloride-free fertilizer is produced by Mosaic, it's called K-Mag, it's like potash. Like our product it’s very low on chloride. There’s another company called Intrepid Potash that sells something called Trio, which also lacks chlorides. There is ICL. And some point in the future Anglo America that sells some another chloride-free fertilizer called the polyhalite. And then, of course, there's potassium sulfate which is another source.

Next question, what reactions have you had from the Minister of Agriculture, the Vice President? Are they willing to help speed up growth, quick approved?

Yes, the government is doing literally everything they can, fully committed, in all levels trying to avert or minimize the unavoidable food crisis we will all witness.

How much of the sales come from outside from Brazil?

Well, before this call, a very small percentage of our sales came from outside Brazil. However, given the 5% generous discount given to everyone who's watching this presentation live and then what's recorded, we hope it will change, with all your support, I hope you're going to be buying Super Greensand. I hope you’re all going to be given that as gifts for friends and family. It's a phenomenal product. You can use it in your garden. You can use it if you have a small organic farm as well where you can take all the benefits. But at the moment, our international sales, they account for less than 1% of sales.

Next question, when will the new PFS be released?

I have commented on that.

Next question, have you socialized NPK’s growth trajectory?

All the key political parties, in particular, it seems like the incumbents are going to lose the upcoming election.

Any noticeable difference in philosophy regarding your plans between parties?

No. There is no a notable change. Everyone in Brazil recognizes the importance of agriculture through the country's economy. Everyone in Brazil recognizes the need to work with farmers to retake back control. People are aware now that potash imports, they represent 2% of the all imports into Brazil. And they have also become aware now that the second item in Brazil imported less by value is potash. So, there is a consensus of about the importance to address this crippling issue in our economy and society at the moment.

Next question. Should shareholders expect the findings of the Capital Allocation Committee to proceed or follow the updated PFS?

I don't know. It's down to the independent committee that's deciding on dividend, when they are going to come up. So I don't control that timeline. So, I don't have that question.

Next question. What's the current breakeven price of potash, given that your production and transport costs for about $50 a tonne of the product in Q4, presumably about $300 a tonne for KCL, i.e. $50 multiplied by 6. Is this broadly correct?

This is broadly correct. If you consider sales to the same distance as we were selling, the flexibility we have, if potash prices were to decrease drastically, we have the flexibility to focus sales in markets where distribution cost is far lower. So that's why it's hard to talk about the breakeven price, because it really depends on our strategy. If you take, for example, just the market for potash in the State of Minas Gerais where we are located, our market for Minas Gerais State alone would be approximately 5 million tonnes of K Forte, of our product, and the delivery cost to about 80% of that massive market would be approximately -- on average approximately would be approximately $15 per tonne. So, there's a lot of flexibility here for the remote possibility of prices for the foreseeable future to scenarios depressed at $300.

Next question. Is there a plan to soon or ever list NPK on one of the American exchange, such as New York Stock Exchange to get more interest in the company and provide access to make up for the capital?

I think that's a no-brainer as you keep growing and perhaps sooner the better.

Next question. Does the jump in global price of potash increases the distance that your product can travel profitably?

Absolutely, it does. So, as I mentioned before, some regions of Brazil where in the past you bother selling just because the transportation cost was so high. With the jumping in price of potash, we are shipping product as far away as 2,500 kilometers and that with very decent margins.

Given the situation in Ukraine, how do you think of the long-term effects involve supply? How sanctions in Russia, Belarus and Russia will impact overall supply going forwards?

It's a very good question. And it's a very hard one to answer. It will all depend on how the U.S. lays geopolitics after the war is over. There's a good article in The Economist, where they were talking about what they called forever wars, wars that have never been come to an end, like the one Japan still has ongoing with Russia, like the one you have between the two Koreas and that’s context.

I think the scope here for a very complicated market supply of potash for the foreseeable future, but we will find out more about that in the coming months, I guess. This year, unfortunately, I think there will be a massive global shortage. What's the expected release day of the mid-term and long-term feasibility study?

Again, at some point in the near future. I'm sorry, we're not committing to any timeline here.

Next question. What is -- Verde’s interactions with blenders is like? Are most sales direct with farmers? And how do you see that balance evolving? Is there an economy of scale with frontage to target in sales to blenders or as partnerships with them?

Blenders, they buy granulated nitrogen, they buy granulated phosphate, and they buy granulated potash from different suppliers. Then they combine those three nutrients and sell it to the farmers. Our interaction is excellent. But considering our product is a powdered product, they can't buy the product from us. They need to buy granulated fertilizer. In the future, as we start granulating our product, yes, there will be more scope for also supplying blenders directly. Yes, there are some economies of scale supplying directly to blenders and allowing them to access to farmers. However, in the last years, we've been very successful developing our own direct sales channel with -- on the top of some very process-driven approach and this has proven to be very successful. So we don't need them. I think that would be the short answer. And I have such an enormous -- proud of our sales team and everything they accomplishing and how they become better and better every day that I find it difficult to find in this space of the industry any other company with the team as we have and what we've been able to accomplish. Please don't share that with other fertilizer companies. We've already had to fight, some of them are trying to poach our people.

Next question. If there is no current price for KCL delivery in H2 due to uncertainty about supply, how is NPK pricing for H2 deliveries?

We're pricing NPK for H2 deliveries based on current spot prices, which at the moment are $1,250 CFR Brazil.

Next question. Once Verde eventually reaches 25 million tonnes per year capacity, for how many years can Verde keep selling its products at that capacity in terms of total mine life?

If we look at the feasibility study which supports that production scale, I think the pre-feasibility study took into account 36, 40 years. However, if you look at our resource, then I have to be careful here not breaking the rules, the resource, the difference between a resource and reserve is that a resource has an improving economic. However, from a geological point of risk, it's vast what you own and I hope that the upcoming feasibility study will help people understanding how much of an impact Verde can make in Brazil from global supply and for generations.

The next question. Are there any logistic problems getting all the materials and equipment necessary to complete expansion to 3 million tonnes?

There's absolutely no problem, we're operating. Thanks to just this gentleman in front of me, [Daniel] who has been doing a phenomenal job here, overseeing 300 people working over 10 different contractors, he’s been doing an amazing job. So everything's on track. And as a matter of fact, as we're talking today with one of the different contractors here, given all his support, everything he puts together with the contractors which is one of the leading Brazilian companies to say how they were able to even reach their own records in terms of setting up foundation. So it's been pretty good.

The next question. To what extent could the technologies be implied to enhance all the lower grade glauconite deposits elsewhere in the world?

There is the possibility however from everything we've looked at that. In the past nothing was truly interesting. So we've looked at deposits in Russia. Now [Audio Gap] export our products to United States, as we said, we have a competitor or we had a competitor in the United States which was Russian. Greensand sold in U.S. as AGROLIFT. So, that no longer happens. So the other deposits we saw were in India, but the grade was too low to make it interesting, to make it work, even with higher potash prices given the reality of agriculture in India. When we looked at another deposit in Estonia, was equally very challenging that there was a massive overburden, which made mine very challenged as well, wasn’t economic. We looked at stuff in Australia. We looked at stuff in New Zealand, which again, the grades were very low. And we then looked at stuff in the United Kingdom where they have some Greensand formations. They have some Greensand-rich hint, and they’re probably Greensand-rich, they have extracted some construction stone called ragstone, which essentially a glauconitic limestone of much lower concentration of potash but used as brick for construction, including very important buildings in the United Kingdom, including Knole House in Kent.

Next question. Will ThermoPotash plant be revived in the future? There’s one thing I've learned in the last 17 years since I started the company is, never to say never. But for now, the economics for potash are very -- K Forte, the results, everything is very good, everything we accomplished with BAKS. So, more certainly it is going to be a priority.

So, this terminates the questions, which received via the Q&A.

Let me see if there were questions sent from somewhere else. I don't think there were.

So, before we end the call, I would just take you guys to have another quick look at the operations here. I understand I could see some four people joining the call. We had about a 100 people participating today. So it's a new record in terms of attendance on this shareholders meeting. I'm very thankful to the hat here, leading by example. So, we have our engineering team discussing some of the projects, people are working. So to go back, we can see where the mine is to Plant 2, currently the mine, which is being [Audio Gap]

This hill here. So, can see the trucks carrying the ore. They come from that entrance, both to the -- and to the beginning of the structure. This is where potash should come from the mine. So, I'll try to zoom, but all the way at the back, there's a lot of work as well going on. They are preparing some of the structure, which will be built here. There’s plant for concrete production you can see at the very back there. This is where you will have your feeder. Then going down, you have your crusher. The bottom there, you have your secondary crushing system. Then at the bottom to the end of it, you have the hammer mills, the production. Then you have some conveyor belts take your material right here, there’s divisional share, this is where you are going to have a big share where you can store for 50,000 tonnes of products.

So, thanks, everyone. It has been a joy to hold our call from the site today. Thanks for all your interest. Thanks for everyone who has started following us. And I look forward to very soon be talking to you guys again with our Q1 results, which should be very, very exciting. So good day. And if you like it, if you're watching it on YouTube, please share it, please hit the like button, by clicking that like button you tell YouTube you like what we do, you like our trade show and that’s how YouTube will help show this video to other shareholders, for investors and for the partners interested in the space, who are also be looking at it. Thanks very much. See you. Bye, bye.