Cerrado Verde
Photo by: Verde Potash
TORONTO (miningweekly.com) – In its quest to become fertiliser independent by 2020, Brazil's government had enabled a pathway to production for project developer Verde Potash, entrepreneur Christiano Veloso told Mining Weekly Online on Wednesday.
Veloso, who founded the company in 2005 at the age of 23, said the government’s announcement on Tuesday that it would help fund construction of its flagship Cerrado Verde project, located within the country’s largest agriculture market, embellished the project as a matter of national importance.
“Our project has reached international importance in that it is probably the first new significant project that would be almost entirely funded by a government.
“The selection for the Inova Agro funding is a strong endorsement from the federal government, acknowledging both Verde's competence to bring the project into production and the importance of the project for Brazil's long-term agricultural development,” Veloso said from Brazil.
Verde's business plan to develop the Cerrado Verde potash project consists of building a greenfield 1 000 t/d plant capable of producing the company’s proprietary ThermoPotash product and seeking performance guarantees for a large-scale potassium chloride (KCl) kiln.
Inova Agro approved Verde's business plan that requested funding for approximately 90% of the business plan, which includes investments in market development, pre-construction costs and working capital post commissioning for six months.
Verde submitted its application and support documentation to the Inova Agro programme in August 2013. In September, the company was selected to advance to the programme's next round of evaluation.
For the final selection round, Verde submitted its business plan for developing Cerrado Verde, at a price tag of about $115-million, of which Verde asked for about $105-million from Inova Agro.
This capital would be provided through loans with subsidised interest rates, equity investment and non-reimbursable project investment grants from the Brazilian Development Bank (BNDES) and/or the Financing Agency for Studies and Projects (FINEP), both of which are branches of the Brazilian government that operate Inova Agro.
About $4.2-million could be provided as a non-reimbursable project investment grant.
Starting on March 19, BNDES and FINEP would meet with the selected companies to define a joint support plan, where the funding structure would be defined, including the preconditions and a timeline for fund disbursements.
Veloso said Brazil’s government had set a target to become “fertiliser independent” by 2020, by which time the third phase of the Cerrado Verde mine would have been constructed and the mine would be producing KCl at a rate of three-million tons a year.
“Since no new major potash mine has been constructed in nearly 30 years, we are now fully focused on the permitting process, after which construction would start,” Veloso noted.
Brazil is the world’s third-largest agricultural exporter. Potash is a critical fertiliser for agriculture, yet the country currently has to import about 90% of its potash from distant locations such as Canada's Saskatchewan and Belarus.
Brazil was the largest importer of potash globally in 2012 at 7.5-million tonnes of KCl. Potash consumption in Brazil has posted a ten-year compound annual growth rate of 4.7%, much stronger than 2.3% potash consumption growth globally. Vale currently operates the only potash mine in Brazil, which met only 7% of the country’s needs and is expected to be depleted in 2016.
News of the government funding pushed the company’s TSX-listed stock up C$0.22 to an intraday high of C$1.09.