Verde Agritech PLC

TSX:NPK

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Cristiano Veloso, executive]

Hi, everyone. My name is Cristiano Veloso. I am the Founder and CEO of Verde AgriTech. We will be presenting today the results for our Q3. And at the end, we will be carrying out a questions and answers. [Operator Instructions]. As we begin the presentation in the next slide, I would like to remind you that this presentation contains some forward-looking statements. The actual results might be different. I would remind you about our very consistent disclaimers throughout the last few years. It is and always be a risky investment in terms of being, in terms of being a company developing a market introducing new products, introducing new technologies as usual, so pay attention to our disclaimers. Next slide, please. If you're in North America, if you are in the U.S., if you're in Canada, you have the opportunity to go on Amazon.com and order a bag of our products. If you like it, also please leave a review after you experienced our product. Next slide, please, Lucas.. Next one. So the presentation today, I'm here in Brazil with Lucas Brown, our VP of Corporate Development. I'm here with Felipe, our CFO. We are here in the same room. I will talk a little bit about the market, what's been happening in Brazil, why this has been such a typical year. And then afterwards, Lucas will briefly talk about carbon, carbon opportunity, what we're doing, what we're excited about. And then Felipe will address the details of our financial results. At the end of the presentation, I will carry on with the Q&A. Mark, next slide, Lucas. The reason this year has been very atypical, started happening last year. Last year, we had farmers in Brazil who were very bullish about results, about yields, about everything else. So they're looking, as they were planning to plant in the season last year, they were looking at very strong prices for every single agricultural commodity. So they have very strong prices for soybeans, coffee, corn. And because the price was so strong in a macroeconomic environment suggested those prices were going to either remain strong or potentially go even higher. They took more risk, so there was very little hedging done; by hedging a mean, it's when you sell your future production. Now you bill them in the treasury now, rather than wait until you harvest, to sell a product. So it's commonly available to farmers. And usually, they will hatch to mitigate their risks. But because of what the environment was like last year, there was very little hedging done. And not only there was very little hedging, what they did at those very bullish prices, very strong prices for corn and coffee, soybeans, everything. They're also very confident in buying very expensive fertilizers, herbicides, pesticides, seeds, biologicals, everything was bought last year at record prices. So in the next slide, you can see potash prices at record high prices last year when farmers were buying it. You can see the price for urea equally very high and farmers were buying it. You can see the prices for MAP equally very high and farmers were buying it. So all of that -- all of the commitments made by farmers was at high cost. And we're bullish because equally, the commodity price will have very high, everyone was expecting to make a lot of money last year in the farming space. The year progressed, if we go back to a couple of slides, Lucas, not yes. But as the year progressed, it didn't go as farmers expected. The contrary happened. Instead of an appreciation, there was a steep depreciation in the prices for agricultural commodities. We saw what happened to soybeans what happened to coffee, corn. And that depreciation was even sharper, when it got to the point in time, the farmers had no choice, but to sell what they had harvested, so they could pay for that very expensive debt, they had contracted when the market was very positive, when they were planting. So they had to liquidate or whatever price was being offered. This is obviously the worst combination one can expect, big debt, high prices, the decline in prices and that led to a massive squeeze in their cash position. So when it came for them to plan and develop and plant for the CA. They had very little choice in terms of which inputs they could or could not buy. They had very little purchasing power to decide what they would be buying. For that reason, they ended up buying most of their inputs from one, companies that could offer very, very competitive terms for funding those farmers. Two, a lot of it was traded via traders. So the traders, the grain traders had a phenomenal year because, if you look at this steep decline, the traders, they probably were certainly anticipated that, so they were able to sell coffee at current prices because farmers in the hedge, but the traders were in the market. And then we collapsed, they could offer input at prices, which were very competitive for the reason doing something called Barter, which is when you pay for your, when you accept as payment grains rather than cash, they were bartering, because they had already pre-sold the grains that were getting then at much higher prices. So they also did very well. People could offer those interest rates, very high, good terms. People who could have the good terms from bartering and lighting up grain prices. And then the third group that also managed to sell were the big co-ops or the players that had already some sort of collateral from the debt. So for example, if the farm had already committed, its farmers guarantee with a certain player, that player had a lot of leverage over the farmer, to be able to sell everything the farmer needed back that year. So it was a very atypical year. And the situation kept and kept deteriorating as they progressed. This obviously has impacted Verde, as we can see, but it has impacted most of the companies operate in the same space, most of the company is selling inputs. And it wasn't -- certainly wasn't something that has only impacted this. If we move to the next slide, Lucas. So next one. Next one. And this is, again, another slide that illustrates how the cost of lending was very -- had a massive impact on farmers. Because when they came back, when they had that cash flow squeeze and they came back to fund this year's planting season, they were hit at very high interest rates, much higher than what had been in the last 5 years. So that gives, that made the situation even worse for them. Next slide. Okay. So those were the bad news. And a lot of it, we have already been talking about throughout the year. A lot of it, everyone could see happening from monitoring commodity prices, fertilizer prices, activities, looking at all the company's results as well. And so I'm sure to a lot of you, is this is the new information. What we're seeing now, which can make us cautiously optimistic. And the reason I say cautiously optimistic, is because there's some weather issues going on, which might have a negative impact as well. But at the moment, we've seen a stabilization of fertilizer prices after the very sharp decline, ready reports from other analysts from this state by the other market commentators I haven't come across saying prices will continue dropping next year. Agricultural commodity prices are leveling as well. And very importantly, farmers hedged way more this year than they did last year. We're far more conservative in terms of speculating it, and we will expect better balance sheets for next year from farmers in comparison to this year. This year, there were several customers who just wouldn't be able to sell to them again, because their credit risks went up a lot. The decrease in the Brazilian interest rate has been accelerating, and the current governance of the Brazilian Central Bank has already made a public declaration saying he expects for the next 2 upcoming meetings for you to have another 1% drop among the 2 of them. And we see a growing interest on sustainability. We see growing interest on climate change. So our product is, when you compare it against conventional potash, it's something that is for those reasons which we're very familiar with, it's much more in line with the new times we live in. So I think that's a little bit of the update in the market [indiscernible] for, and some of you who have been familiar with all those presentations over the years and all those conversations, obviously, it has hit me. You would expect me to be jumping here, just giving a full and bullish presentation because it's been a tough year for everyone. And we just expect that things will look much better, and we will carry on working very hard. So despite of all the negatives, we can carry on growing the company to its fullest potential. We have a new senior management team. We have Lucas here because Newton Nagumo, our Chief Marketing Officer, is in the field. We have Yusuf, likewise, working very hard with our sales team to make the most of this year. When we look at our guidance, we're working to try to get as close to it as possible. But there's no doubt to it's going to be difficult hitting that guidance. We had strong hopes that Q3, we had strong hopes that Q4 with a new team and perhaps the stabilization of fertilizer prices, very strong hope things could recover, but it's always same. And that doesn't mean we will give up. We won't let the team give up. We want to let our new senior management team, give up, and we will carry on working as hard as we've always been to try to get at this point in time as close to it as possible. So I will stop here, and I will let Lucas Brown talk about the carbon capture. A little bit of an update what we're seeing, what the opportunities are in terms of monetization. And it's something that whenever I talk to investors in this space, whenever was in a conference in New York last week, which was an AgriTech conference, there was a lot of interest in this in the carbon. And you see some raises going on, and you see some pitches going on and you see some companies showing up and it's something -- there's no doubt what we're witnessing here when it comes to permanent carbon removal, i.e., technology that can permanently remove carbon from the atmosphere, difference to the first wave of carbon credits, which was focused on temporary removal or carbon removal with a very high risk of what the industry calls leakage, for example, planting trees with the risk of wildfires transforming that ore back into carbon. So we see this whole carbon removal, permanent carbon removal, birth of an industry direct capture with Bio revolution, is what we're doing is something very promising, especially when you see the back of Microsoft. So it's something very exciting as well, and we're very happy that we hope to be benefiting from this new industry in the years to come. It's a very interesting article by the economist a few months ago talking about the carbon removal industry being worth $1 trillion and with the fundamentals why that is the case, struggle recommended we will have a look at that paper. So I'll stop here and let Lucas carry on. Thank you, and I look forward to answering all the questions at the end after Lucas and Felipe have spoken.

[Lucas Brown, executive]

Thanks, Cristiano. And so it's a pleasure to be speaking to you again today. I've already participated in one conference so far, which was on the Investors Day in last month. And so it's great to be speaking to you again. Just a reminder that within my scope of work, I'm also responsible for Investor Relations as well. So I'd love to be able to speak to you individually. The e-mail is [e-mail]. And so if you have any further down after this session, we'd like to have joint conference call with me. It would be a pleasure -- so just continuing from Cristiano speech beforehand and allow me to be a bit more excited and bullish in terms of this specific projects because we have been communicating quite consistently and giving a lot of clarity in terms of our plans in terms of carbon that we capture. So as we've been discussing before and showing before, the potential of carbon capture with our product, K Forte, is 120 kilograms. But now that we have launched and published our LCA, our Life Cycle Assessment from cradle-to-gate, the calculation of our incredibly low emissions of our mine and production plants, makes it that the potential for carbon capture from our product is 112 kilograms. And this is mainly due to the sustainable processes and incredibly efficient processes within our plants. So an example of this is clearly 100% renewable energy from hydroelectric sources. So going into a bit of detail, specifically of the outlook for what we can -- we're working on this year. So up until Q3, we've applied 323,000 tons of our product, and this gives us the carbon capture potential of 38,000 tons of CO2e. However, given our LCA publication, we're using specific data on our production, our energy and our transport and shipping in with the application. This gives us the opportunity of monetizing 20,000 tons or almost 21,000 tons of CO2e, and given the difference quite varying prices within the market or a range from $138 to what we've seen also in terms of both 550. We are working with those sectors in terms of understanding exactly what the quality is and how we will be able to market our farmer credits to potential buyers and offtakes. And so this is clearly one of the key priorities of the company at the moment. And in terms of next steps, quite happy to be able to let you know, give you a bit of a slip preview at the moment, but we'll be sharing very soon in our press releases, our updates in terms of our MRV, so that's Measurement, Reporting and Verification. We have already started, not only controlled tests, but also in-field tests with a recent visit from our scientific adviser Dr. Manning from the University of Newcastle. And then furthermore, we will be very pleased to share very soon a new study that compares the carbon footprint, potassium chloride, the real carbon footprint potassium chloride, compared to our products, which, of course, is produced in Brazil, in miniseries, very close to the majority of the main locations of agriculture in Brazil, where we will be able to offer our clients, as presenters saying just before, these clients that have much stronger commitments in terms of sustainability in terms of their own carbon footprint, we can offer our product in terms of being a much lower emission product and being able to support our in commitments in terms of decarbonization, whilst also delivering much better quality product without chloride and salinity as well. So we have very bullish about the next steps. And hopefully, we'll have some very interesting news to be able to share with you soon. The other thing that I'd like to share also is that we're planning to hold a specific conference call on the carbon project, the carbon capture project in the beginning of the next year in the new year. So I hope that anyone who has specific questions on this, and we like to go deal into a bit more detail in terms of our timeline, in terms of all the actions that we're taking on the carbon project. We'll be able to have a specific call potentially already in Q1 2024. We will be able to take all of your questions and delve into a bit more detail in terms of what the plans are and of course, any updates that we might have by then. So, I'll stop there. And if there are any questions at the end, I'll be glad to further taken them too -- and I'll pass on to now, Felipe, our CFO.

[Felipe Paolucci, executive]

Thank you, Lucas. I'm presenting now our Q2 results and a few numbers, P&L and for analysis to help you to understand the update on the results that we've delivered. And first, we -- related to cash position, the group held a cash position in Q3 of $9.3 million compared to $5.1 million last year. And cash utilized from investment activities decreased from 104%. And also, we had a very high expenses last year related to Factory 2.2. And this year, of course, we did not have on these investments. So the key point now is to hold a bit of cash on hand and try to improve our financial availability. In terms on bank loans, the group has successfully secured a bank loan of $12.4 million in Q3 2023 and also $5.4 million in October and $4 million in November. So this fund raises will be basically used to replace existing debt that we have higher interest rates and also provides the group with more favorable terms and also related to profitability. We sold 108,000 tons in Q3 2023 compared to 189,000 tons last year. Revenue was $9.4 million compared to $27.3 million in Q3 2022, EBITDA before non-cash events was minus $600,000 against $8.1 million last year. Net profit was $3.5 million compared to $6.5 million last year negative. So total non-current assets of the company were $67.3 million compared to $55.8 million Q3 2022. Please go ahead, Lucas. On the financial statements, you can see first chart here, we have the P&L and also we started to revenue. I can say that the decrease was significantly, basically because of a lower price and also lower volume as was already presented by Cristiano related to market outlook scenarios. Related on gross margin remains in a high level, but basically and mainly you can see in the next chart later that is mainly driven by freight expenses that has an impact here as well. But on a positive way, we can see some reduction on expenses. It also is something that we've been working on in the last 5 to 6 months or beginning of the year, trying to cut some costs at spaces, everything that's not necessary to leverage our profitability. We can see as well, what this is also impacting us a lot this year, is that we have a $2.6 million of depreciation that we've removed from this analysis, but in the financial statements of the company, it's included as no cash and depreciation. Well, then at the end of the day, we had a negative net profit of $3.4 million compared to a profitability of $6.4 million last year 2022. Year-to-date basis analysis, we are also negative net profit of $3.3 million compared to a profit of $19.1 million last year. The next chart Lucas, please. We can see here divided the information per ton. You can see in the first table, the information, including freight. And since freight expenses or revenue is quite relevant. We had in the second table, the numbers excluding this impact. So you can see that gross profit went down from 78%, including freights to 67% this year. And then excluding credit also went down from 66% to 44%. But on other hand, you can see that we had a production cost also lower than the prior year. This is mainly driven by lower bag sales and also it on big bag sales. And of course, including Plant 2, which is a key part here since Plant 2 is much more cheaper to produce than Plant 1 and other product that is considered, both products is being sold throughout the Plant 2 at this moment. Next one, please. On sales, general and administrative expenses, we can see that the total sales expenses had a relevant decrease to have an impact that was the fee paid to sales agents that we have decided lower volume, lower price. We had also a provision reversion last quarter. But also, we had a relevant reduction on sales and market expenses in the period. Those are the actions we've said before. On general administrative expenses, the key point I'd like to highlight here is the bad debt provision that for the first time, it's impacting us with a relevant number, about $563,000 in the period. So once we exclude this from general admin, we can see that the costs were a bit higher, but not much higher than the last year. On other expenses as well, we can see that there was a significant decrease in legal professional consulting expenses. Due to last year, we had the relocation of our headquarters from U.K. to Singapore, that increased also some expenses last year. That did not happen this year again. And next one, please. A bit on logistics and sales mix. You can see as well that the volumes sold at CIF remained stable year-on-year with 78% in both periods, but on the other hand, the product freight per ton sold reduced significantly. This was mainly due to mix of sales. We sold more product closer to the factory, which has a lower cost per ton is impacting less expenses. On the right side, you can see the sales channels. We've lost a lot of percentage in distributors pointing down to 2% this year only compared to last year. On the other hand, we had an increase in our direct sales, which are sales made by our employees full-time employees. And the next one, please, Lucas. On the loan side, as I've mentioned before, you can see that in Q3, we recorded a cash of $9.2 million. Also on the trade receivables totaling over $16 million, and this will provide available support to the company's cash flow. The total net loans in Q3 was $41.6 million, and the company has obtained less $12.1 million in additional loans and another $9.4 million already in Q4, replacing as mentioned before, more expensive and shorter-term debt to long term and cheaper ones. We can see also that the cost for the loans is close to 16.5%, which we expect to decrease in the coming quarters. We do expect for the next couple of weeks another reduction in the interest rate in Brazil of 0.5% and next year another 2% around. And this will provide us a very relevant savings in interest expenses. And then on the right side of the chart, you can see the decrease projected for the next 3 years on the debt profile of the company and also the amortization and the total loans year-on-year at the end of each period. That's it from my side. Now I will pass back to Cristiano to hold the Q&A section and anything we needed in result support. Thank you.

[Cristiano Veloso, executive]

Thank you, Felipe. Thank you, Lucas. I can already see here from the question is there will be some technical questions here for you to answer, Felipe. The question here as well on carbon, Lucas, which is directed to you. First question, any share buyback program in mind in view of such price. For that the answer is no. What's the expected debt costs for 2024, 2025 maturities? I believe Felipe addressed that throughout his presentation. Next question, how does Verde plan to overcome the cost of transportation? Lucas, if you share the screen again, there's a slide there in the appendix where it shows the -- if you keep going down, which shows the 2 slides there, which I think are very important to understand the important, like the location and where it's more competitive and the size of that local more competitive market -- there you go. So of course, we can see from that darker greenish color, that's where we can get the best credit rates. Historically, we've been less targeted in terms of sales and more focused on national expansion. So if you look at the distribution of our customers, there was a growth which was pretty much in line with where most of the demand was coming from. This map shows the size of the market depending on potash prices as well, gives you a good idea. And one thing we will be doing for next year have already kind of like started doing that, is to focus more where we're more competitive to focus more where we have better margins if it was more we can make more money per ton of product delivered. So that's something -- and equally to where we can generate even more carbon credits. So if you look at that finish zone, that's where you should see more of the focus of our new VP sales and hopefully, this should translate into better net sales price for next year. The next slide, Lucas, I think it's also important to show - next slide. All right. So that's fine. So you're going to have access to this presentation, but the next slide shows the net sales price on each one of those regions. And I think that is quite helpful as well. Moving on to the next question. It's a technical question here for you. Felipe, I'm going to read the question and then you can answer. Can you please explain what the $249,000 provision booked in Q2 to fees paid to independent agents comprised? First part of the question. Then the second question is, why was it needed? And why was it reversed in Q3 to generate a $195,000 credit in this expense line?

[Felipe Paolucci, executive]

Yes. I think I can address 2 questions in just one. I can see that there is another question later on here that asks how we book or how we expect and pay these commissions. We normally pay it as FOB basis, which means, if we sell further from the factory, the FOB price -- the final price should be deducted from the logistics cost. So we booked the provision for the sales agents as of FOB-base. So if the margin is lower, of course, the commission is lower. And what happened here is that it was not adjusted exclusive for the Q2 that provision that was reversed in Q3, but some provisions that were made in the prior periods that were overstated and then we inverted part of it, and this was made in Q3 2023. For this reason, we can see this impact.

[Cristiano Veloso, executive]

[Operator Instructions] Next question is, when will Verde see the carbon credits for ERW? We don't know. We're working as hard as possible to get it as soon as possible. And the estimated price, we don't know we've given a range, which is what we're seeing in the market. But at this point, we don't know. There's another technical question here for you, Felipe. So you are depreciating plant 1 and plant 2 capital costs on a straight-line basis over 10 years. This assumes a new use of the plant capacity each year for 10 years. When you only use a fraction of the plant capacity, this methodology generates a very high depreciation per ton. In Q3, this was $9.01 per ton versus $0.44 per ton in Q3 2022. Will you consider a change for the basis for plant depreciation to address this accounting issue?

[Felipe Paolucci, executive]

Yes, we are working on it. We are evaluating assets according to the production together with EY's provision, and we expect to reduce this amount of depreciation in Q4 now. So this will be a positive impact and maybe not very relevant. But yes, it will have a relation or you are right. We are doing this now because we understand that the effect will be less more than 10 years to the current production.

[Cristiano Veloso, executive]

The next one, Are your sales commissions and bonus calculations adjusted to take into account the sales that are eventually written off as bad debt. So that's the first question Felipe, are your sales commission and bonus calculations, it 2 answers in one for the sales commissions, [indiscernible] adjusted to take into account the sales that were eventually written off as bad debt. The second part of the question is, do they take into account the net profitability of each sales, a sale made to a customer within 500 [indiscernible]. So the second question is the one you answered already. So the second question you answered. So when an agent gets his commission, if the agent is based next to the mine and our FOB price is higher, it makes more money than an agent who is located, let's say, in Mato Grosso state and the FOB price is significantly lower than the one based next to the mine, then that or the state agent gets paid significantly less than the one who is paid. So this is the answer to the second part of the question. So you have the first part of the question, which is split between sales commissions to dependent agents and both calculations which you presume is to executives.

[Felipe Paolucci, executive]

Yes. The first part of it, we just pay sales commission after we received from the client. So once we have a sales made by agent, for example, November and payment terms after months. We had a provision now for the sales agents and to pay this commission. However, if next year or February or January or whatever, it's do we do not receive , we do not pay and we reverse this commission. So this is also one impact that we have. And of course, from now on, since we do not have last year-end type of bad debt provision. We did not have a historical to book this, but from now on and from 2024 onwards, for sure, we're going to do this provision on a monthly basis according to the prior year losses. So for example, if you noting 1.5% loss on that debt provision, ideally and according to the guidance and account of guidance, we will book this provision on a monthly basis from January 1, for example.

[Cristiano Veloso, executive]

Thank you, Felipe. The next question is to Lucas about ERW. Is there any hint about how long selling carbon credits should take -- so you can see if you can give a different answer to mine. Do you intend to sell to bulk credit carbon resellers or carbon credit buyers directly, for example, Petrobras.

[Lucas Brown, executive]

So I don't know if I can give exactly a different answer to Cristiano before in terms of not really having a clear picture in terms of exactly how long it's going to take for us to be able to sell there are many different moving parts. And of course, we have started our Measurement Reporting Verification. But regarding the second part of the question in terms of who we want to sell to. There are 3 main points here. Firstly, is that of course, we want to sell as quickly as possible. The second one is obviously that we need to take into account that what we're developing are very high-quality carbon credits. So not only, as Cristiano mentioned before, we're talking about carbon sequestration is permanent. The permanence, the units of measurement that it's used in enhanced rock weathering is 100,000 years, but also in terms of the quality of our reporting, quality in terms of our product. And so of course, we are in contact and negotiation with everyone and everyone. And so whether it's both sellers or even specific companies, but really we want to find not only the best partner on this journey, but also the best prices for the quality of carbon credits that we're offering.

[Cristiano Veloso, executive]

The next question is, do you expect provision for bad debt to increase significantly in the next semester. It's difficult one, it is a difficult one to answer, especially because significantly it's quite broad, isn't it? I think at the moment, the bad debt provision we have, is what percentage Felipe of last year's sales. So the $500,000 in bad debt is about 1%.

[Felipe Paolucci, executive]

Yes, it was 1.5%,

[Cristiano Veloso, executive]

It was about 1% of our sales from last year. So I don't know if we're up 2%, it's 100%. So I presume this would be something significant. But I don't -- would likely have anything to add, Felipe about what you're seeing in terms of increase and how material that increase could be.

[Felipe Paolucci, executive]

Yes. Since the current situation from our farmers are not that well just explained. But we are renegotiating some of them and extending payment receivables over the next couple of months or next quarters. But yes, I do expect an increase in Q4 now, but not in Q1 next year or Q2 next year. But yes, I would expect something in Q4 this year.

[Cristiano Veloso, executive]

So there's an expectation in Q4 and that expectation in Q4? How significant is that?

[Felipe Paolucci, executive]

Well, it will be similar to Q3.

[Cristiano Veloso, executive]

Something similar to Q3, not much worse than Q3. [indiscernible] financially. Felipe and I was standing the other day with some farmer who came to us and say, "Can I pay you back in 5 years" -- so it's a different market at the moment. But it's cyclical. I think that's what we need to remember, it's cyclical. I spoke a few years ago to a farmer, -- and he was telling me this gentleman who's in maybe late '70s, very wealthy, a very successful farmer, and he was telling me how whenever you think about [ Indiscernible ], you think about cycles about several years, you can't just look at the one year, either the one year when it goes really good, but equally, you cannot just look at the 1 or 2 years, it might be going really bad, look meet you look at it over time. And what he told me was that that's healthy management and that should become so wealthy. That's how he made so much money over his life, -- because earlier on, he's like he understood the cycle. So he was not bullish when things were too good. He was always careful. But at the same time, whenever he saw this situation being one of those prices, that was when he was greedy, that was when he was buying land and investing. And it was a very enlightening conversation I had with him and I can't think of a better way to describe what agriculture is than what this farmer told me a few years ago. The other question here is, are you factoring into long-term growth plans, the likely down with pressure on Brazilian MOP prices from the entrance of a large scale or low-cost Brazilian producers, being given the go-ahead that come online in the next few years. How critical do you think carbon credits could be in competing for major Brazilian market share with this producer. Even though it isn't named here, he's talking about a project in the Amazon rain forest, that has had some regulatory advances and it's a project which I've shared my view on that project so many times, but I wouldn't mind doing it again from a factual perspective. From what I've seen, the price required for potash spreads to be economic, given its capital expenditure is greater or potentially materially greater than what we see at the moment. There are some construction hurdles, which, to the best of my knowledge, no one has been able to come up with a solution, which includes cutting through the world's largest equator in a forest in a tropical environment, something which has never been done in potash, which will be the first time, and also how millions of tons we will be managed above ground in one of the wettest areas in the world, the Amazon Rain forest until a point in time when there's an expectation for it to be used to backfill a mine, which is also something no one has been doing from a potash exploration perspective. So there's several question marks there. And even if it comes to production and even if it is, what is projected and what the size of the market is, if and how I see very limited impact on what we're doing. So that's my view. And if I had $0.01 every time I answered this question or mentioned about that since 2008 when that project begun, I probably wouldn't have needed to sell some shares in NBK as I did recently. The second part of the question, which I will answer, but I will answer in a completely different context to the first part of the question. The second part is how critical do you think carbon credits could be in competing for major Brazilian market share with this producer, I wouldn't specifically say with this producer, I would say as a whole. When you think about carbon removal, when you think about the need for the world to incentivize the removal of gigatons of carbon. When you look at the potential market this need can generate, and here I quote again, this publication by the economist which suggests, it could create a market worth $1 trillion. When you look at that size of that market worth $1 trillion in carbon removals, that's significantly greater than the market for potash. Market for potash globally is about $30 billion, $40 billion, so $30 billion, $40 billion from Potash versus $1 trillion in terms of carbon credits. So it's not too aggressive to say that it could be if the economist is right it could be that the potash industry or the potash market will just be collateral damage in the fight against climate change when there is significant incentive for as much of our 3.2 million tons of mineral resources to be deployed to field as soon as possible if we are indeed tackle the crisis with the urgency it requires. So that would be my comment about carbon credits. The next question here is what is happening with a railway line really needs it. It's crucial for further growth and competitiveness. There isn't any update on the railway line. If you see from that appendix, that Slide have mentioned, the nearby market, which is independent from the rail is a significant multiple to what our production capacity is at the moment. And that is where we can focus. That is where we can get the best net price, and that is where we can get significant economics. One slide, we don't didn't- we don't have this presentation, but we have our new investor presentation, and we use that one as well on the Investors Day, is that slide where we showed the economics in a very conservative scenario of how much money we can make, how much money we can generate by achieving full production capacity at plant 1 and plant 2. It's a very significant number. It's a number, we don't need to raise any CapEx. It's a number that only depends on us executing and growing the market. It's a number that, if achieved, can fund any further expansion exclusively from accumulated cash flow. So this is our target. This is where we're going to be working very hard to get that 3 million tons to production capacity as soon as possible. There's no doubt that, that 3 million tons, you have the upside of carbon credits, which isn't taken into account on that financial model, you can see on the presentation, which is really our focus. We're looking at 3 million tons production of capacity, which can be capturing 300,000 thousand tons of carbon, 300,000 tons of carbon, you should pick $150 as an average sales of carbon credit, you're looking at $45 million of profits from carbon credits alone on the top of the numbers, which are there. And it's interesting because the current view from scholars, from experts in Brazil is that any income generated from the sale of carbon credit is exempt from income tax, is exempt from any other sort of taxation. So it's $45 million potentially that gets added straight to the bottom line or the top, of course, those are the numbers there. So this is our focus. You will hear from us less about building Plant 3 in the coming months and much more about how our new senior team, is executing as fast as possible towards making that 3 million tons full capacity, a reality. So that show will be our focus. There is one other question here, which is about me selling share. So the question as it reads is, can you please comment on the reasons why you are selling shares of the company at these discounted prices. I'm not. So the automatic sales share is it program, whatever it's called, stopped as soon as the share price came below $150, which was a few weeks ago. So there hasn't been any shares sold at those very discounted prices. It doesn't mean that $150 isn't its discounted price. I'm just saying that there hasn't been any sale underneath that $150 price mark. The reasons I'm selling, I don't have a problem going over it again, it will sell over 3 years. It will sell a very small amount. Now it's public, above $150, very small amount, anyone who did the math, so it was 5% of the deal volume. And it's something that is expected to take place over 3 years, and it's up to about 40% of my shares. And there is a situation there with shares. So I can't see any other questions here. If anyone feels like once his or her question should be answered again, we will answer it. Felipe or Lucas would you like to add anything else?

[Felipe Paolucci, executive]

No.

[Cristiano Veloso, executive]

Okay. I would like to thank everyone for joining our conference call today. It's been a very difficult year. We're here on the 22nd of November. It's been a very tough year for everyone. It's good. It's a new team, full of beans, full of energy, which freshly joined the company not so long ago, and it is everything they possibly can to keep our business growing. So thank you again, and I look forward to talking to you again in the new year with this exciting event Lucas will be putting together exclusively on carbon capture. And even though we want to be talking here on our conference call, as Lucas has expressed, there's some interesting news we're working on in terms of carbon credit, which we hope to be updating the market soon. The carbon awarded product credentials, Lucas, as mentioned, it's something very important nowadays and companies are under a lot of pressure to reduce their own emissions. So by proving how much carbon can be avoided by replacing KCL with our product, that is something very important, something we will be working on in parallel to our ERW and there are other ones we mentioned in terms of the measuring reporting verification, something very third, which was conceived and implemented with the assistance of [indiscernible] many. So thank you very much again, and I look forward to talking to you again with the results in the next quarter or earlier in the Q in the carbon event. Thank you. Bye-bye.