Verde Agritech PLC

TSX:NPK

Earnings Call Transcript 2021-Q4

[Cristiano Veloso, executive]

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 steam ahead, everything on track or stocked up very, very early Q3.

[indiscernible] Plant 2 also on the way pretty well, very confident about hitting the target we put out in 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're all 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 already, unfortunately, started witnessing food prices going up. I think the real crisis will begin once we have the decline or the expected decline in crop yields, which very unfortunately will come from -- as a result of insufficient fertilizers applications.

We have approximately 300 people. We're looking both on site here for construction of Plant 2 as well as working on improving the infrastructure, the roads. We're building a bridge. We're enlarging a big portion of the road so we can be moving the amount of product you expect should be moving 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, Opportunity Manager. And then we have Gustavo 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 all 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 [indiscernible] consolidation is [indiscernible] to not get much closer because of the Internet connection but this is the adjacent line where we will be extracting ore. So going back to where we were, so raw material potash will come from that direction. Setting up more and more foundation. The work for foundation is nearly finished. So hundreds of tonnes of concrete has already been injected into the soil to set up the foundation.

So we're going to have work coming from there. This is where we have our [indiscernible]. And then on this line here, we will have the crusher, we will have the secondary crushing [indiscernible]. We're going to have an intermediate stockpile where you can see the [indiscernible] structure going all the way down there. This is the line where they have [indiscernible].

And project will be taken up. Then where 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, all the metal structure is being assembled. So all 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'll 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 that some questions, they already in connection with Q1. So there's limited information in that regard 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, go ahead.

[Felipe Paolucci, executive]

Well, thank you, Cristiano. I will move forward now. Let me share my screen here. Just a second -- yes, here you are. 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 the U.S. and Canada, and feel free to get in touch if anything else is needed.

So -- just a second, let me start my video to share it better. So on Q4 and full year 2021 highlights. So during this presentation, I'm going to share first results of the quarter and then, in the same paragraph or chart, the full year also results that we've achieved.

So first, on the left side of the chart, you can see that related to cash, the company still have has an ability to generate significant free cash flow. The cash utilized from investment activity increased by 80% during Q4 and 74% during the year.

Total loans for CapEx and working capital by the end of the year was CAD 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 operations, profit before noncash events 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, it was $1.8 million in Q4 and compared to prior years and 2020, it had a significant increase, closing the year on $3.5 million of net operating costs.

And in the end, we can say trade off and other receivables were $15.05 million at the end of the year, which is in line with our growth. And also the sales volume Q4 2021, we had 134,000 tonnes, ending 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 Plant 2's construction to achieve the capacity of over 3 million tonnes per year. By the 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, you can see in summary that -- a bit on up to 2021, Verde was producing -- selling a new product. So the company guidance was limited only to volume and revenue. For this year, for the first time, we've announced that also an EBITDA and also earnings per share guidance for this year. So in the previous year, also it's important to mention that the company was only secured financed 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 low ones, so which presents an important milestones in the company expansion plans.

The company has assembled a special committee to evaluate when and how to share profit with shareholders comprised of independent directors of the Board. The special committee status will be the cornerstone for Paid for Growth program elaboration, which is being engineered in detail to enable the company to distribute earnings to shareholders.

And also the Board of Directors approved an investment that totals over BRL 73 million for plants to upgrade local infrastructure to sustain plants to use 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 by 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 less than 10% of the company's total sales as BAKS product. We've achieved a really close number, 9.8% of total volume sold was BAKS.

Second objective, launched a new technology in the second quarter 2021. On June last year, the company launched N Keeper technology. The third one, get ISO 9001 and 14001 certified. We've achieved this objective now in Q1 2022.

Obtain the money 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 2 operating in Q3 2022 and expanded already in Q4 2022.

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

A bit on the right side, in 2022 key objectives that we have, first of all, is to reach Plant 2 commercial production in Q3, still on track. Expand Plant 2's 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 pre-feasibility study expected for the coming weeks.

Launch a new technology Q2, 2022. Also working on that to be ready before July.

And last one, reach 100 cities with the Cultivando Amor project, which is -- which we raised last year BRL 207,000 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 it before about revenue. Now I would like to focus a bit more here on operating profit/loss before non cash events.

You can see that in Q4, despite of the seasonality and rain season that begins in Brazil normally in November, we had a great result and the growth of over 6,000% here, which is a huge number. But taking into consideration full year, we delivered a 300% growth in operational profit for noncash events.

And also -- and 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 CAD 1.8 million on profit. Considering full year, we had $3.5 million compared to $550,000 in 2020.

Now a bit on the numbers. But per tonne, it's quite good to understand. In the first chart, we have the tonnes sold then revenue per tonne. You can see that the revenue increased significantly over 100% in the revenue per tonne for some reasons that we explained already, but just to highlight again, we had a 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 is made here is a table that shows what would be our revenue per tonne, production cost per tonne and gross margin per tonne, if we exclude the freight impact. So we can see an increase in the end of the day also on revenue and gross margin from 47% to 62% and from 56% to 62%.

The next chart is good to have an overview. It shows the development per quarter since 2018, when we started the Plant 1 production in Q3. So you can see the green bars on the right side, how we are growing and you can see that quite significant growth even the quarter-on-quarter.

And in the right side and 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 tonnes in 2018 to over 400,000 tonnes last year, 2021. And on revenue side, it's a growth close to 15x from $1.3 million to $27.7 million last year.

A bit on SG&A. On SG&A, we support our growth. We're still investing in people with consultants and -- 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 it's an increase on product delivery freight expenses. What I will show in the next chart how the customers are choosing for CIF sales instead of FOB, which in terms of supply chain for us is better because we can schedule with much more accuracy the loads in our factory, avoiding days 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 once we 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 and legal professional consultancy and other costs.

In the next chart, we can see FOB against CIF. It's important to see how we are growing, especially on CIF. We are selling just in Q4 for I 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 object of the company is not to make money through it, but to make sure that we pay the logistics cost of the value we charge 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 products.

On the right side of the chart, you can see the general expenses. Also we chose here 3 expenses that had a significant growth. Fees paid to sales agents 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 financial growth, we do expect this line also to have additional costs. And also related to general expenses, additional administrative employees, [indiscernible], procurement, finance and other areas that we had to hire more people to support our growth strategy.

Based on Q4 and full year financial summary, so at the end of the day, revenue from sales for Q4 was $10.8 million compared to prior year that were much lower than that. And that total sold -- total volume sold of 400,000 tonnes in 2021.

Product volumes sold at CIF increased, potassium chloride price increased and BAKS sales also supported the revenue increase since we do charge additional price for borrowing and so forth that we added to our products, for example.

On profitability, operational profit before non-cash events increased $2.4 million in Q4 for 2021 to $6.4 million -- and also to $6.4 million in full year 2021. Gross 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 perspective, December 31, the group held a cash of $1.5 million. This is -- 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.

This on summary of interest and loans. We've been -- back 2021 with $5.5 million on loans. Our loans that the company currently have this on long-term loans of over 2 years or at least 1, 2 years or more at an average of, say, 3 years. So we did 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 that we expect an increase in cash flow on cash on hand also after June this year.

A bit on Brazilian economic scenario. You can see that U.S. against the Brazilian reals, we did have here a variance. An 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 happened in Brazil. Currently, we are close to BRL 4.6 per USD 1. And then compared to the year-end that we had BRL 5.6. So this will probably increase our revenue per tonne. This is -- this impact will -- on price and other points will be mitigated 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, variance of 140% and the lower side of the table and in the right side 160%. So in the full year, in the end of the day, we had an increase during the year of 136% of the potassium 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 products to be sold and with earning per share of CAD 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 would like to raise in this presentation. I will pass it back to Cristiano so he can move forward the questions and -- Q&A section. Thank you, Cristiano.

[Cristiano Veloso, executive]

Yes. So for those of you who have joined during the presentation, we are broadcasting live from the mine, from where the plant is being 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 fuel all the trucks, all the mining equipment, delivery of our product has an impact. So there is an impact in fact. Of course, we also have high margins and even higher margins with the potash prices. So access but not materially.

Next question. Thank you, Jeff. The question is, I appreciate NPK is an exciting rapid growth story. Is there a near-term opportunity to pay shareholders dividends, given your growth is largely being financed by your 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 it's a combination of both.

So this is why we have an independent Board committee to then advise the Board and that's the cost. We're also very thankful to the several feedback 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 business was very, very valuable.

Next question is a very important one. When 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 women 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 members.

Next question, will Verde have any problems in delivering 10 million tonnes of products to customers via roads? 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 are already working on ways to mitigate those problems and to solve some of the bottlenecks we've identified, and we're doing that with the help of the local government, the state government and the federal government to find the best roads around so we can be delivering as much of that 10 million tonnes as soon as possible.

Next question, [indiscernible], there is a Q&A on our YouTube channel where [indiscernible] was very helpful. I asked a lot of questions. If you guys haven't watched it yet, you can go to our YouTube channel and it's there.

This question is, can you talk a bit about how it's going with acquiring new customers? Are people finding Verde or is Verde needing to market aggressively to reach 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're marketing aggressively, I think the definition of aggressively is a bit difficult, but we're 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 brought investors.

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

We -- it varies. So we have already presold some of the production for this year for the expansion as well. And -- but there's still a lot of it, which is being negotiated, a lot of it, which has been sold as we speak.

Next question, so how does the market situation reflect on Brazilian politics and the permitting 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 to food production into the Brazilian economy. So there we've 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 risen in fertilizer prices?

It's a very good question. We -- some regions of Brazil struggled with drought. And some farmers in those regions were more impacted. However, because we've 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're very well-capitalized. And they didn't struggle with that. And in the comment with fertilizer price, yes, they've gone up a lot. Yes, they are now among the most expensive items in their purchase list when you're a farmer. But the economics of growing food is still very strong. So there's still a lot of incentive for people to farm, and we're not seeing any slowdown whatsoever in terms of consumption, which is also the next question in here asking if farmers can afford?

So in general, yes, they can afford and they're 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 presold in earlier quarters. Can you please give us an idea how far out production typically gets presold 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 greater 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 project you actively pursue selling at a discounted potash equivalent pricing to drive adoption?

The short answer is no. We -- in addition to potash, we supply all the nutrients which naturally exist in the product like silicon, very important for crop protection, abiotic stress resistance, manganese, magnesium, it's a gradual release project, improves the soil, helps 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 for 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 brought 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 0.3%. So 0.3% is our current -- does it mean we won't to recover that money? It means what is late at the moment, 0.3%.

Are any supply contracts rolling off and being repriced to the current spot prices?

No. We honor our agreements. So if the farmer last year bought the projects for delivery this year, he will pay the price he agreed to pay last year.

How many miles is Verde's second mine and 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 its own trucks or lease trucks and trailers or does Verde subcontract out the deliveries of their project?

We subcontract. So subcontract all our delivery. Likewise, we subcontract our mine fleet.

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 here with those questions, I will do it again. So we'll allow you guys to have a quick look at what's going on behind me right now, which I think might be far more exciting than my performance is with some of those questions. Recently, Verde said they would award their stockholders with a [ 20 ] of dividend. Will this dividend be paid out in cash to stockholders or in the form of Verde's stock?

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

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

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

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

There is no expectation, no plan for splitting our stock.

Do you think old-time investors will see a 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 new trading on them, so splitting the stock would really be a problem. There's no plan of doing that.

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

So on the second production facility for each shift, we have, including all the operations, about 20 people. And of course, we're going to -- we operate 24 hours so you need to multiply that by 4, so we have the shifts going around.

Next question. Brazil farmers like using your products. You're cheaper, you're better and use more in the hectare and especially you're beneficial environmentally. However, I noticed from your Q3 2021 report, if I'm not mistaken, the freight costs of the product is 80% of the total sale costs. Is it possible to reduce freight costs?

Well, it depends on where we are shipping the product. So as a rule, you can say it's 80% -- the cost, cost? Yes, sorry. Yes. Yes. Sorry, I thought you meant like from our margins.

So -- no. Yes, from the cost absolutely. And as we grow and as we start selling further afield from the mine, it's natural that our freight costs will increase. And unfortunately, there's nothing we can do different to what we've done, which is to establish a relationship with several different logistical companies. At the moment, we have 30 different transportation companies serving us with thousands of trucks available in order today, which accommodate the timely distribution of the product.

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

Yes, we presell some of our future production.

Next question, what percentage of future quarters production would you typically presell? Can you give me an idea of how do 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 that took -- that delivery took place during the last quarter, those sales have been made earlier on in 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 strengthened, stayed continued strong from what we saw last year. So it will be a year of very strong results as our guidance suggests.

What is the price earnings ratio share in 2020, '21, '22 estimates for Verde AgriTech?

We can't answer that one.

Next question, will Verde allocate enough of future profits for an R&D development to ensure it's a relevant and competitive industry leader. In the future went up against is giant such as New Trend with potential huge R&D budget?

We're already doing a lot. We're already doing a lot. And as you can see from the technologies we've launched, they've 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've 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. We're sold out last year to [indiscernible], I'm pretty sure the 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 with that new technology, which very soon is going to be launched as we put out in our press release, it's going to be, again, as exciting as it was with Micro S. It's something we've been working for about 7 years since we began. There's been a lot of 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 the suggestion that there may be sacrificing long-term development of successfully innovative and competitive product lines for short-term returns to shareholders under the proposed P4G, Profit for Growth, program that long-term may diminish and be detrimental to the Verde its competitive future?

It's a very good question. The independent committee, we took it very serious. Those points raised. When we came up with the name, Profit for Growth wasn't taken from nowhere, 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 start returning shareholders. Have 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 I think the short answer to the question is I'm positive we [indiscernible].

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 on the way, pretty soon -- it's on the way. 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 addition along the line of microbios, building on Verde unique competitive future of being microorganism friendly?

This used to come on that front? As the recovery of microorganisms in the soil, naturally [ ones ] using Verde's products from [ KCl ] of a shorter time scale where this especially beneficial notes. This is the future of our contracts, I've said that several times. Future of [indiscernible], future of sustainable food production are microorganisms. And I can't think of a better vehicle for repopulating the soil microorganisms than K Forte.

Given that Verde's product set to leach from them -- from the soils, less will be 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 freight costs? A good question. There are some trials would show that. However, it's not easy to 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, say 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 from the product before we can make this claim as a definitive claim.

Will Verde be able to hit new capacity of [ 3 million ] tonnes next year? It will certainly have production capacity because [ we move in ] 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.

We have said 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 are several questions on that front, yes, we will also hope to very soon be revising upwards our guidance for this year.

Next question, when will Verde list on a major exchange? I'd like to think TSX. It's 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 make 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, and the mine life debt 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.

The next question. If this is a production of 50 million tonnes, this means that rail capacity is necessary. How will this be built? Does Verde get help from the government? Yes. When you get 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 on some of the local roads, some bottlenecks, which can be resolved. So we expect the feasibility study that a significant, a far greater amount of product than originally anticipated will now be able to be moved by road.

Next question, Is 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 see in the coming weeks, we're not setting a due date for this PFS because we're working with it.

We're being very careful and there are some moving parts in that feasibility still which only make it look even more exciting, that perhaps if we had put it out at the end of last year, would have missed those upsides, which we are working and 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, there is a lot. It varies a lot. So we have people put in 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 regard.

Next question. If Russia and/or Belarus is removed from the market, would that make a shortage at any price likely, and meaning that Verde will realize significant volume at a price that reflects that reality? To an extent, this has already happened. So Belarus isn't being able to export potash because of the West's sanctions. We understand that Russia has been able to shift some product that was already either on its way, on its ports or 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 the potassium chloride for delivery in the second half of the year, at the moment, there is no delivery. There's no availability for price. Some of them have some product in stock for immediate delivery but there is already a shortage. If you call one of the local distributors, you ask for products for next year, for later on this year. There's another question here about truck shortage, and if we had any inquiries about truck shortage. Absolutely not. There's no worry about truck shortage whatsoever. There's a -- it's a big, big part of the Brazilian economy. There's 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, soybeans grown in the state of Goias, Mato Grosso, Minas Gerais and then to bring it down to the ports.

So by volume, fertilizer represents far less than what Brazil produced in terms of grains. So there's 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 of that.

How much a step-down in costs are you targeting with Plant 2, if any? There will be a -- there will most certainly be a reduction costs. So on Plant 2 -- so if you 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 in the plant. There's another pit all the way to farther back where there's a lot of work going on as well, preparing the mechanical structure, preparing the still to go up and start.

All the foundation has been built or is in the final stage of being built. This is the process that takes the longest. Force -- first of all, moving all this [ earth ] to level up and create the different levels you need for the plant. Then there's a lot of concrete, a lot of steel going on to those walls, both here and behind this temporary shed you can see.

And then we have the mechanical company arriving to start erecting those structures very soon. What you can see back there is some of the equipment that has already arrived. So underneath this black plastic, you have our crusher, you have some of our [ raw hummer ] mills, as some of the equipment that has already been delivered. There's more equipment arriving as well.

So going back now to big question. So going back now to the questions. Next question here is, how do you see your pricing power in the future is? 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 impact on soild 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 more nutritious foods, for capturing carbon, [ choice ] soils and [ expressly ] start demanding some strong change. I think we might see some very radical change in this industry. The next question. How about monetizing your patent, and depending if one is successful -- success is 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 1 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 in incentivizing or otherwise paying the needed railway or parts of it in the future? Any negotiations about 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 should be taking up a work like that. The good news, though, is that if you look on our results, our 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 presentation, very excited, very, very, very, excited about what we will unveil in the coming weeks.

You have currently at least 3 currencies to play with. Considering your business, have you hedged some portion of those exchange rates? Or how do you handle them? We don't hedge because our sales, they follow U.S. dollars in terms of the price of potash. And in terms of our costs, they are in a weaker currency, Brazilian reals.

So there hasn't ever been the need to be hedging this position. And there's a cost, it's something you need to worry about in -- for the foreseeable future given our strong margins.

Is the potash -- next question. Is the potash mine that you have the rights to in-mine an exclusive mine when it comes to its content? Do you have some comparable -- does people have comparable product?

Yes, there are some comparable projects. But yes, what we own is exclusive. What we own, we have patent applications and plant of mining rights. But there are some comparable products. So for example, there are the chloride-free fertilizers. One chloride-free fertilizer is produced by Mosaic.

It's called [ K Mag ], like potash. Like our product, it's very low in chloride. There's another company called Intrepid Potash that sells something called Trio, which also lacks chloride. There is ICL and in some point in the future, Anglo America that sells some another chloride-free fertilizer called polyhalite. And then, of course, there's potassium sulfate, which is another source.

Next question, what reactions have you had from the Minister, the cochair, the vice president, are they're 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 we've given to everyone who's watching this presentation live. And then once recorded, we hope it will change with all your support.

I hope you are going to be fine, super [ green ] sand. I hope we're all going to be giving that as gift, friends and family. It's a phenomenal project. You can use it on a garden, you can use it if you have a small organic farm as well. You can take all the benefits. But at the moment, our international sales do account for less than 1% of sales.

Next question. When will the new PFFs be released? I've commented on that.

Next question, have you socialized NPK's growth trajectory? All the key political parties, in particular, seems like the incumbents are going to lose the upcoming election. Any noticeable difference in philosophy regarding your plans between parties?

No, there's no notable change. Everyone in Brazil recognizes the importance of agriculture to 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 all imports into Brazil. And they've also become aware now that the second item in Brazil [ holds ] less by value in this potash. So there is a consensus about the importance to address this crippling issue in our economy and society there is 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. I don't know. It's down to the independent committee that's deciding on dividends whether they'll come up. So I don't control that time line, so I don't have that question.

Next question. What's the current breakeven price of potash given that your production and transport costs are about $50 a tonne of the project 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 markets for Minas Gerais' take alone would be approximate 5 million tonnes of K Forte, of all projects and the delivery cost to about 80% of that massive market would be approximately -- on average, would be approximately $15 per tonne. So there's a lot of flexibility here for the remote possibility of prices increasing in the foreseeable future to scenario as depressed as $300.

Next question. Is there a plan to soon or advance 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 a bigger pool of capital? I think that's a no brainer as you keep growing and [indiscernible].

Next question. Does the jump in global price of potash increase the distance that the your product can travel from [ promptly ]? Absolutely, it does. So as I mentioned before, some regions of Brazil, where in the past, we wouldn't bother selling just because the transportation cost was so high, with the jump in price of potash, we are shipping product as far away as 2,500 kilometers, and with that -- with very decent margins.

Given the situation in Ukraine, how do you think of the long-term effects in worldwide? How sanctions in Belarus and Russia will impact overall supply going forward? It's a very good question. It's a very good question, and it's a very hard one to answer. It will all depend on how the U.S. plays geopolitics after the war is over. There is a good article in The Economist, where they were talking about what they call 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 2 Koreas, and that's context. I think there is scope here for a very complicated markets buying 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 an invested global shortage.

What's the expected release day of the midterm and long-term visibility study? Again, at some point in the future. I'm sorry, we're not committing to any time line here.

Next question. What is Verde's interactions with blenders like? That's a good question. On most sales direct with [indiscernible], and how do you see that balance evolving? Is there an economy of scale advantage to targeting 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 3 nutrients and sell it to farmers.

Our interaction is excellent. But considering our product is a powdered project, 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 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 proven should 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 we're accomplishing and how they become better and better every day, that I find it difficult to find in this space in the industry, any other company with the team as what we've been able accomplish. Please don't share that with other fertilizer companies. We've already had fight some of them off trying to poach our people.

Next question. If there's no current price for [ piece sell ] delivery in H2 due to uncertainty about supply, how is NTK pricing pay for particular H2 deliveries? We're pricing NPK for H2 deliveries based on current spot prices, which at the moment are $1,250 [ CFR ] of Brazil.

Next question. Once Verde actually 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 that this improved feasibility study took into account 36, 40 years.

However, if you look at our resource, and then I have to be careful here not to break any rules. The resource -- the difference between a resource and a reserve is that a resource has to be proven economic. However, from a geological point of rest, it's vast what we 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 it expansion to 3 million tonnes.? There's absolutely no problem. We operate in thanks to just gentlemen 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 is on track.

And as a matter of fact, as we're talking today with one of the big contractors here, given all the support everything he puts together with the contractor, which is one of the leading Brazilian companies saying how they were able to even reach their own records in terms of setting up foundations. So we -- it's been pretty good.

The next question. To what extent could the technologies be applied to enhance the lower grade glauconite deposits elsewhere in the world.? There is a 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

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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 [ Green Sand ] sold in the U.S. as [ agro lift ].

So that no longer happens. So the other deposits we saw were in media, the grade was too low to make it interesting, to make it work even with high potash prices, given the reality of reculture in India.

When we looked at another deposit in Estonia, was equally very challenging. There was a massive overburden, which made mine a very challenge as well, it 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've been looking at stuff in the United Kingdom where they have some recent formations. They have some [ multi shales rich hint ]. And then at [ the recent bridge ] they've extracted some construction stone or bread stone, which essentially is [ glauconitic ] limestone, are much lower concentration of potash but used as brick for construction, including very important buildings in the United Kingdom, including Mole House in Kent.

Next question. Will some of potash plan be revived in 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 [indiscernible], the results, everything is very good. Everything we accomplished [ we get back]. So necessarily wouldn't be a priority. So this terminates the questions which we received here via the Q&A.

Let me see if you were questions sent from somewhere else. I don't think there were. So before we end the call, I will just take you guys to have another quick lot at the operations here.

I understand, I can see some poor people joining the call. We had about 100 people participate in today. So it's a new record in terms of attendance on the shareholders' meeting. I'm very thankful. Let's [ put a hat ] here, lead by example.

We have our engineering team discussing some of the projects. People working. So to go back, we can see where the nearest mine is to Plant 2. Currently, the mine which has been

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this hill here. So you can see the trucks carrying off, they come from that entrance, look to the -- hence, the beginning of the structure.

This is where Potash will come from the mine. So I'll try to zoom, but all the way to the back, there's a lot of work as well going on. We're preparing some of the some of the structure which will be built here.

There's a plant for concrete production. You can see at the very back. This is where you will have your feeder, then going down, you have your pressure, the bottom there, you have your secondary crushing system. Then at the bottom end of it, you have the [ hummer ] mills, the production, then you have some conveyor belts to take the material, where you have this provisional shed, this is where you're going to have a [ stake ] shed where you can store about 15,000 tonnes of product.

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 had started following us.

And I look forward to you very soon be talking to you guys again with our Q1 results, which should be very exciting. That's all. So good day, and if you like it, if you're watching it on YouTube, please share it, please click the like button.

By clicking that like button, there you tell YouTube you like [indiscernible], you like our pay show and that's how YouTube can help share this video to other shareholders or to the investors or to other parties in this space. And we'll also be looking at it. Thank you very much. See you soon. Bye-bye.