Plant 3's 2023 construction to be fully funded from
accumulated cashflow
Plant 3's NPV of US$2.91 billion considering US$368.65
Brazil CFR long term potash prices
BELO HORIZONTE, Brazil, May 16, 2022 (GLOBE NEWSWIRE) --
Verde AgriTech Plc
(TSX: “
NPK
”) (OTCQB: “
AMHPF
”) (“
Verde
” or the “
Company
”) is pleased to disclose the conclusions of the Pre-Feasibility Study announced by the Company on March 01, 2021 (the “
PFS
”) for the Cerrado Verde Project (the “
Project
”), which supplants the Pre-Feasibility Study completed in December 2017 (“
2017 PFS
”).
Verde operates Plant 1 with a capacity of 0.6 million tonnes per year (“ Mtpy ”), Plant 2 is on track for commissioning in Q3 2022 with an additional capacity of 2.4Mtpy, and Plant 3 is expected to add 10Mtpy with construction planned for 2023.
Plant 3's capex is estimated by the PFS at US$52.77 million. Plant 3's post-tax net present value (“ NPV ”) is projected at US$2.91 billion (8% discount rate) with an internal rate of return (“ IRR ”) of 427.17%, assuming a potash price at less than a third of current Potassium Chloride (“ KCl ”) prices and those adopted by Verde. The capex for Plant 3 is expected to be covered by accumulated cashflow generated by sales up to Q2 2023, without need for equity or debt financing.
The Company's Special Committee of the Board of Directors is concluding work on the Paid for Growth strategy, as announced in the press releases dated January 24, 2022, and February 22, 2022, respectively. The Committee's findings and recommendations will soon be made publicly available, with the expectation that financing Plant 3 entirely from cashflow will not impact the return of gains to shareholders via dividends, buyback or a combination of both.
PFS Overview
The PFS contemplates three Product compositions:
- The Product as a source of potash (“ K 2 O ”)
- The Product as a source of potash and sulphur (“ K 2 O+S ”)
-
The Product as a source of potash, sulphur, zinc, boron, copper and manganese (“
K
2
O+S+Micronutrients
”)
The PFS contemplates three distinct production scenarios:
- Annual production of 10Mtpy (“ Plant 3 Scenario ”), representing 13.51% of the Brazilian potash market demand projected for 2025.
- Annual production of 23Mtpy (“ 23Mtpy Scenario ”), representing 31.07% of the Brazilian potash market demand projected for 2025.
-
Annual production of 50Mtpy (“
50Mtpy Scenario
”), representing 54.97% of the Brazilian potash market demand projected for 2030.
The PFS relies on a KCl CFR Brazil port price of US$368.65 per tonne, as per the Market Study (the “ Study ”) as detailed in the press release of April 21, 2022. Currently, the KCl CFR Brazil port price is approximately US$1,125 per tonne. The Study underpinned the preparation of the PFS and it comprises information about the Product pricing and market share for each composition.
For further information on the Study, please see the press release issued on April 2022: https://investor.verde.ag/wp-content/uploads/2022/04/Verde-AgriTech-Press-Release-Market-Study-April-21-2022.pdf
Figures referenced in this news release can be viewed through the following link:
PFS Highlights
Tables 01 through 03 show the summary of the financial-economic analysis for the three Scenarios.
Table 01: Summary of the financial-economic analysis for the Plant 3 Scenario
| Plant 3 Scenario | ||||
| Description | Unit | Value | ||
| Proven and probable reserves | million tonnes | 715.67 | ||
| K 2 O grade | % | 10.01 | ||
| Capex | US$ million | 52.77 | ||
| Operating cost | US$/tonne of Product | 12.83 | ||
| Sustaining capital | US$/tonne of Product | 0.50 | ||
| Product composition | Unit | K 2 O | K 2 O + S | K 2 O + S + Micronutrients |
| Product Sale Price | US$/tonne of Product | 80.75 | 91.54 | 100.21 |
| NPV after-tax | US$ billion | 2.91 | 3.41 | 3.97 |
| NPV discount rate | % | 8.00 | 8.00 | 8.00 |
| IRR after-tax | % | 427.17 | 482.93 | 560.86 |
| Cumulative Cash Flow | US$ billion | 17.05 | 19.97 | 23.22 |
Table 02: Summary of the financial-economic analysis for the 23Mtpy Scenario
| 23Mtpy Scenario | ||||
| Description | Unit | Value | ||
| Proven and probable reserves | million tonnes | 715.67 | ||
| K 2 O grade | % | 10.01 | ||
| Capex | US$ million | 129.84 | ||
| Operating cost | US$/tonne of Product | 11.18 | ||
| Sustaining capital | US$/tonne of Product | 0.50 | ||
| Product composition | Unit | K 2 O | K 2 O + S | K 2 O + S + Micronutrients |
| Product sale price | US$/tonne of Product | 80.72 | 91.66 | 99.90 |
| NPV after-tax | US$ billion | 5.81 | 6.84 | 7.95 |
| NPV discount rate | % | 8.00 | 8.00 | 8.00 |
| IRR after-tax | % | 387.11 | 437.95 | 505.02 |
| Cumulative Cash Flow | US$ billion | 16.14 | 19.02 | 22.07 |
Table 03: Summary of the financial-economic analysis for the 50Mtpy Scenario
| 50Mtpy Scenario | ||||
| Description | Unit | Value | ||
| Proven and probable reserves | million tonnes | 1,297.66 | ||
| K 2 O grade | % | 9.19 | ||
| Capex | US$ million | 553.99 | ||
| Operating cost | US$/tonne of Product | 10.07 | ||
| Sustaining capital | US$/tonne of Product | 0.50 | ||
| Product composition | Unit | K 2 O | K 2 O + S | K 2 O + S + Micronutrients |
| Product Sale Price | US$/tonne of Product | 74.05 | 84.79 | 92.05 |
| NPV after-tax | US$ billion | 9.34 | 11.50 | 13.54 |
| NPV discount rate | % | 8.00 | 8.00 | 8.00 |
| IRR after-tax | % | 167.86 | 196.19 | 227.08 |
| Cumulative Cash Flow | US$ billion | 22.74 | 28.04 | 32.98 |
The mineral resource for the PFS remains unchanged from the 2017 PFS (effective date March 2014). The 2017 PFS mineral resource estimate was completed by Bradley Ackroyd (MAIG), an independent “Qualified Person,” in accordance with NI 43-101. The 2017 PFS mining plan was modified, considering the three independent production scenarios of and Product compositions.
The PFS is based on the following assumptions:
- Contract mining.
- A projected mine life of 72 years for the Plant 3 Scenario, 31 years for the 23Mtpy Scenario and 26 years for the 50Mtpy Scenario.
- Expected mass recovery of 98%.
- A 15% contingency applied to Capex.
- US Dollar-Brazilian Real exchange rate of US$1 = R$5.30.
- KCl long term price of US$368.65 per tonne CFR Brazil, which is the price reference for Product pricing in terms of K 2 O equivalent content.
- S-bentonite long term price of US$410.40 per tonne, which is the price reference for Product pricing in terms of Sulphur content.
- Zinc fertilizer (10%) long-term price of US$400.00 per tonne, which is the price reference for the Product pricing in terms of Zinc content.
- Boron fertilizer (10%) long term price of US$1,130.00 per tonne, which is the price reference for the Product pricing in terms of Boron content.
- Copper fertilizer (20%) long term price of US$2,700.00 per tonne, which is the price reference for the Product pricing in terms of Copper content.
-
Manganese fertilizer (10%) long term price of US$120.00 per tonne, which is the price reference for the Product pricing in terms of Manganese content.
Mineral Resource Estimate
A combined measured and indicated mineral resource of 1.47 billion tonnes at 9.28% K 2 O (using a 7.5% K 2 O cut-off) and an inferred mineral resource of 1.85 billion tonnes at 8.60% K 2 O (using a 7.5% K 2 O cut-off grade) are reported for the Project.
The Mineral Resources estimated by the PFS are:
Table 04: Mineral Resources Summary 1
| Total | Volume (million tonnes) | Average Grade (% K 2 O) |
| Measured Resource | 83 | 10.13 |
| Indicated Resource | 1,389 | 9.23 |
| Measured & Indicated | 1,472 | 9.28 |
| Inferred | 1,850 | 8.60 |
Capital Cost Estimate
A summary of expected capital costs for each Scenario is presented as follows:
Table 07: Capital Costs Summary
|
Investments (US$ million)
|
|||
| Description | Plant 3 Scenario | 23Mtpy Scenario | 50Mtpy Scenario |
| Processing plant | |||
| Plants | 29.38 | 70.60 | 111.17 |
| Conveyor belt and loading wagons | N/A | N/A | 28.49 |
| Unloading of wagons | N/A | N/A | 19.12 |
| Processing subtotal | 29.38 | 70.60 | 158.78 |
| Roads improvement | 10.57 | 30.88 | 6.80 |
| Railway branch line 2 | N/A | N/A | 283.02 |
| Owner’s cost 3 | 5.93 | 11.42 | 33.13 |
| Subtotal | 45.89 | 112.90 | 481.73 |
| Contingencies (15%) | 6.88 | 16.93 | 72.26 |
| Total | 52.77 | 129.84 | 553.99 |
Operating Cost Estimate
Table 08: Operating Costs Summary
| Operating Costs (US$/tonne of Product) | |||
| Description | Plant 3 Scenario | 23Mtpy Scenario | 50Mtpy Scenario |
| Mining 4 | 4.55 | 4.24 | 4.48 |
| Processing | 2.07 | 2.38 | 2.01 |
| General and Administrative | 4.20 | 2.81 | 2.01 |
| Others 5 | 0.34 | 0.29 | 0.26 |
| Contingency |
×
| ||