Another 3 reasons to add Harvest Minerals #HMI to your Watchlist

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Another 3 reasons to add Harvest Minerals #HMI to your Watchlist

The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.

Harvest Minerals (HMI)
Share Price: 9.75p
Market Capitalisation: £11.4m

What Do They Do?
Harvest Minerals is a potash and phosphate exploration and development company with projects located in Brazil.

I have written a previous blog about Harvest Minerals, which is worth reading if you haven’t previously. You can access by clicking here.

Another 3 reasons to add Harvest Minerals #HMI to your Watchlist

1. KPfértil – THE PRODUCT

This week, Harvest Minerals provided an update on the latest results from ongoing agronomic test work at its Arapua Fertiliser project, on its product, KPfértil. They seemed very positive, it confirmed 3 important points:

  • That KPfértil had positive agronomic efficiency, increasing the potassium, phosphate, silicate, calcium and magnesium in the pH of the soil and correcting the soil acidity.
  • Visual comparisons of the recently harvested rice crop show that larger, healthier plants develop when KPfértil was applied.
  • Results indicate that KPfértil works effectively as a multi-nutrient, slow release remineraliser and that the proportion of product applied could be increased with each application until it replaces other sources of P and K such as fertilisers and soil improvers.

Chairman, Brian McMaster:

“The agronomic efficiency results for KPfértil, our multi-nutrient, direct application natural fertiliser, are excellent, especially considering KPfértil can be a replacement for conventional sources of phosphate and potassium.

We are excited about the prospects of KPfértil due to the many distinct advantages over imported products: it is a multi-nutrient, direct application, natural fertiliser composed of weathered potassium and phosphate-rich lava; and it is excavated at surface and processed on site, translating into a low cost, low capex operation.”

In short their product, KPfértil is:

  • Natural
  • Not an import
  • Works better than imports
  • Is cheaper

It’s a win for the Brazillian environment, economy, for the farmers who will pay less for a better product and for Harvest Minerals who should be able to sell as much of this product as they can produce, when they receive certification for it, which should be before the end of the year.

Worth noting is that Harvest Minerals have a 13 million tonne resource, based on drilling only 6.7% of the known mineralisation, and can mine up to around 450,000 tonnes per annum, which translates into a current mine life of over 100 years.

 

2. REVENUE


Harvest Minerals are now focused on achieving first sales in Q3 2017, before KPfértil certification.

The Company actively continues to explore off-take agreements and aims to strengthen its product sales team as the year progresses. Notwithstanding that certification is still pending, based on discussions to date, the Company anticipates recording first product sales in Q3 2017 as customers start to incorporate KPfértil into their cropping programmes. The Company has significant scope to meet customer demand, having recently stockpiled a total of 50,000 tonnes of product.

Chairman, Brian McMaster:

“Going forward, with the test data flowing in, we are starting the process of registering KPfértil with MAPA in Q3, and once officially certified, we can better market and distribute the product; this should enable us to achieve first product sales in Q3 this year.”

HMI intend to ramp up production to 400,000 – 500,000 tonnes worth of sales every year, over the next 3 – 5 years.

 

HMI’s all in cost of producing this fertilizer is around $7.34 per tonne, so based on a sale price of $60, this is $52.66 profit per tonne. For simplicity sake, let call it $50.

$50 x 400,000 tonnes = $20m profit per year.
$50 x 500,000 tonnes = $25m profit per year.

Based on these earnings, if we use a price earnings ratio of 10 then HMI’s market cap would be:

$200m (£162m) for 400,000 tonnes of sales.
$250m (£203m) for 500,000 tonnes of sales.

Harvest Minerals current marrket cap is £11.4m.

 

3. RIGHT PLACE, RIGHT TIME

Brazil is among the world’s five largest agricultural producers and exporters.

They are the world’s largest exporter of sugar, coffee and orange juice and the second largest exporter of soybeans.

As a result they require a lot of fertilizer.

The fertilizer sector in Brazil is one of the fastest growing in the world. Over the last 15 years Brazil’s crop revenue has increased from US$23 billion to US$126 billion.

They are currently the world’s fifth largest fertilizer consumer and demand in Brazil is forecast to grow twice as fast as overall global demand until 2025.

Approximately 90% of the country’s potash demand is met through imports, with the remaining 10% produced by Vale’s Taquari-Vassouras Potash mine that is located adjacent to the Group’s Capela Potash Project (approximately 13 km away) and the Sergi Potash Project (approximately 40 km away).

The Taquari-Vassouras mine is expected to close from 2017 onwards leaving both the Group’s Sergi Potash Project and Capela Potash Project ideally positioned for a low capex development, if the Group is able to take advantage of the existing infrastructure at Taquari-Vassouras.

The Government aims to be self-sufficient in fertilisers by 2020.

 

The fertilizer sector in Brazil is one of the fastest growing in the world and even though they import 90% of it, the government want the country to be self sufficient by 2020. Add to this, the fact that, one of Brazil’s biggest producers, Vale’s Taquari-Vassouras Potash mine, is going out of production in the next few years, just when Harvest Minerals will be ramping up their production and you have some compelling reasons as to why you should add Harvest Minerals to your watchlist.

If all goes to plan for Harvest Minerals, they could be a major supplier of Brazil’s feritilser needs for years to come, especially as they have 13 million tonne resource, based on drilling only 6.7% of the known mineralisation. This, on it’s own, means they can comfortably mine around 450,000 tonnes per annum for of over 100 years.

To add Harvest Minerals (HMI) to your Vox Markets Watchlist click here and tap the, “Follow”, button.

You can listen to my last interview with Brian McMaster below:

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The content of this blog (or content associated with it) is not intended as investment advice. The author holds an interest in the company mentioned. Please do your own research.