Verde AgriTech Limited (TSX:NPK)

Earnings Call: Q3 2020

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Nov 24, 2020

Hi, everyone. My name is Cristiano Veloso. I'm the Founder, President and CEO of Verdi Agritech Plc. I would like to thank you for joining us on this conference call live as well as if you're watching this video on YouTube, I appreciate the interest on our results presentation. Before we begin today's conference call, I will ask for a moment of silence, So we can think about everyone who was impacted on this crisis, who lost lives, their families and people who lost their lives either directly or indirectly as a consequence of everything which is going on in the world. I also would like you to think about everyone who is putting his or her life at risk, including our customers, our farmers, who throughout the crisis have been heroic out in the fields, in contact with exposing themselves to the risk of the disease to make sure, especially in the case of Brazil, to make sure we could carry on feeding the global population. So for all of them, I will ask for this minute of silence starting now. Thank you. Thank you, everyone. So our agenda for today, I will provide a very brief introduction, 5 to 10 minutes. Then our Chief Financial Officer, Filipe Paolucci, will run through the numbers. And then at the end, we will have a Q and A, which will last as long as it is needed, so we can make sure we answer every single one of the questions. How the Q and A will work today is a bit different. So you should be able to see at the bottom of your screen the Q and A symbol. You can type in your question. And at the same time, you're going to be able to type in your question. You're also going to be able to see everyone else's questions. And you will be able to upvote the question you want to be answered first. So when it comes to the Q and A, whichever questions received more votes will be answered first. But that doesn't mean every single question won't be answered. It's just so in the interest of you of managing your time and you will be able to listen if you can't stay all the way through to the end. You're at least going to be able to hear the answers to the questions most people may want to be answered in an order of priority. The first part here of my brief introduction, I will play a short video for you to watch. It's a 2 minutes video. And I hope some of you by now would already be familiar with this video. So some of my screen share. There's so much bad news about our planet. It's so overwhelming. Truth is, I've given up. This is the story of a simple solution, a way to heal our planet. The solution is right under our feet, and it's as old as dirt. All of our soils that are under chemical conventional agriculture are almost completely devoid of microorganisms. Modern agriculture was not designed for the betterment of the soil. Fossil fuels are by no means the only thing that is causing climate change. When we damage soils, carbon goes back to the atmosphere. But when we destroy soil, it releases carbon dioxide. Biosequestration is using plants, trees and techniques of grazing and farming to capture carbon and store it in the soil. We can fix a lot of our climate issues to be bringing the CO2 down into a living plant and put it back into the soil or at the lung. Plants working with soil microorganisms, it seems too simple. Healthy soils lead to a healthy plant, healthy plant, healthy human, healthy climate. There could be a way to eat food that heals the planet. The problem isn't the animal. The problem is where the animals are. How do we take waste and repurpose and reuse it because it's really not waste? The poop has to stay in the loop. Compost is just one of the suite of in the loop. Compost is just one of a suite of soil based carbon capture solutions. We know how to do it. And if we continue to scale over 30 years, we can reverse global warming. We can get the Earth back to the Garden of Eden that it once was. We can get the Earth back to the Garden of Eden that it once was. We can get the Earth back to the Garden of Eden that it once was by regeneration. To see biodiversity return to a place that was completely devastated, that gives me hope. Our health and the health of our planet are connected. If you look over here, my neighbor's land that has been chemical fallow, then you look over at our paddocks, you have a diversity of different plant species. Which model do you want your food to be produced from? The answer is pretty simple to me. So this is a Netflix documentary. I hope many of you have seen the documentary by now. The ones who haven't had an opportunity to watch it yet, I strongly recommend it. Pretty much in line with that documentary is a short video we produced about a year ago about our purpose. It was done in house, and I will also play it here because of the importance this purpose has to what we are doing. Hi. I hope that after each and every one of you watch both the documentary on Netflix and perhaps again the Video of Our Purpose, you get just as excited as we all are, as we're all employees, our customers, people who to certain way connect with Verde and how we truly believe we will be making a difference when by striving to achieve our purpose. So I will now let Filipe Paolochi, our Chief Financial Officer, run through the numbers, and I look forward to addressing all the questions in the Q and A. Thanks very much. Thank you, Frederic. Thank you, Christian. Thank you everyone for joining. Can you see properly the screen Christian? Yes. And your camera is off. Sorry. Just a second. Yes. So hello, everyone. Again, I'm Felipe Paolucci, CFO of the company. And I'm going to run through the presentation about financial. And in the end of the presentation, as Christian has mentioned, I'm going to pass through the Q and A section. So first, you can see here the key topics for the presentation today. I'm going to run through highlights and then Q3 2020 financial statements, operational summary, SG and A expenses, some other highlights, financial summary, Brazil economic scenario and then key metrics. Well, moving on for the chart number 4, the highlights. We can see here in the left side of the screen that we remain with a credit facility with total of €21,800,000 approved by banks in Brazil that Vej could use, if necessary, to, for example, anticipate receivable from customers with an average interest rate of 1.1% per month. And currently, we are not taking any of this credit availability. We are taking 0. The total loan year to date that we have already is BRL 9,000,000. We can use this cash and we will use it for CapEx expenditure and also for working capital to supply our growth and cash requirements. In the end of Q3, we held $2,400,000 cash on hand, which is an increase of 2 20% versus last year. On profitability, our gross margin has increased 16% from 51% to 67% in Q3 2020. Our sales increased by 68% compared to the same period last year, and the company has achieved a net profit of $1,090,000 compared to almost 0 or one less than $100,000 profit last year. About revenue, we increased by 30% compared in Q3, despite a 27% decline in the potash price delivered in Brazil. Considering in Brazil reais, our sales were over 66% in the period. A bit about operations. We had new permits in the trimester. Now we have granted 482,000 metric tons already to mine next year. So that's more than enough for our projection in 2021. Something important to mention also is about the Plant 2. We've started engineering and planning the factory at its capacity. It's close to 1,200,000 tons per year, and we expect the construction to take place in 2nd semester of 2021. About electricity, we are already using our local company to supply energy for us connected to the grid in the food market, which is bringing for us savings of close to $0.80 per ton mined. And before, we used a power generator, which we used to have to rent and also pay for the fuel usage, which now is much, much more efficient. Also, an important project that is going on right now, it's an improvement in the Plant 1 surface. We are putting asphalt on it. It's an investment of over CAD 400,000 and expect to conclude this investment in January 2021, which will bring for us much more operational efficiency and especially in the rainy season like in Q1, 2021, for example. And in the right side of the chart, you can see that regardless the crisis of COVID-nineteen and the 27% drop in the potash price, Veggie has already achieved more than 81% of the full year target in Q3 already, which means that we had to review upwards our target by 10%, and now we expect to sell in 2020 BRL 35,200,000, which represents close to 100% growth. The company target for next year is to achieve BRL 50,000,000 revenue. And then as I've mentioned before, we are fully supported by our 9 permits already to do it. And in the end, we the company is working on new generation of technology, and we're going to hand our presentation that will be on December 15 to present to you our technologies and the new products that we're going to launch in the next period. Moving to Chart 5, Q3 financial statements. We can see Q3 2019 in the left, then Q3 2020, the variation year to date 2019 and year to date 2020. I will highlight a few lines here, and then I have some details in the coming charts like G and A and other key numbers that I will explain a bit better to you. About revenue, as I mentioned before, we grew over close to 30% year on year and the gross profit also over 65% from 1.6% in Q3 2019 to 2.6% in Q3 twenty twenty. SG and A is pretty flat in Q3. However, it's good to mention, I have a chart explain that we are reducing expenses in sales and that we are still achieving and also increasing expenses in transportation, but I will explain it later also. And also to highlight here, it's important to mention the net profit for sure that we had almost 0 in Q3 'nineteen. From now, we are showing EUR 1,000,000,000 in the 3 master. And year to date, on net profit loss, we had a loss last year from January to September of $1,100,000 And now we are showing a profit of $742,000 Moving to chart number 6, the operational summary. You can see here the numbers per ton, which is quite important for our company. With tons sold, we can see an increase of 68% from 62,000 to more than 105,000 tons. Revenue per ton, we had a reduction of over 24%. That can be explained by the potash price decrease and also that we are steady further away from the factory, which also impact our sales price per tonne. However, we mitigate this revenue reduction by cost reduction as well that could be explained by additional volume that reduce the cost per tonne for sure at fixed cost absorption. And also, you can see here some other improvements that we've made in the factory this year. So as a consequence, gross margin increased from 51% to, say, 67% in the period. And year on year, we increased from 51% to 63%, an improvement of 12% in gross margin. Now a bit of detail on sales and general administrative expenses. You can see that we went from $984,000,000 SG and A in Q3 2019 to $1,000,000,05 in Q3 2020. And two points that I will explain a bit more in the next two charts is sales and marketing expenses and also the distribution expenses. These 2 are the key ones that I'd like to highlight why they are changing. Our other ones are a bit of phasing or some minor change that there is no need to highlight right now. We can see in the chart, still in the chart number 8, in the left side, SG and A expenses. We can see the first one going to be sales and marketing and distribution, the chart. We can see that sales and marketing reduced by 39%, while distribution expenses increased by 142%. The sales and marketing expenses has reduced since we did not have any traveling. Also investments in events, for example, will reduce the COVID-nineteen during this year. And in the other hand, the distribution expenses, for example, we can see that FOB and CIF, the middle chart of this middle table of this chart, that how we are growing on CIF, which is when we deliver the goods to the customers. FOB, of course, is when the customer pick up the product in our factory and CIF is when the company delivers into the farm gate. You can see that CIF came from 1,200 tons last year to over 14,000 tons in Q3 2020, which is over 10 times. And we do expect the strength for 2021 also. And in the right side of the presentation, the chart, you can see the gross margin per quarter. And also on the average gross margin since the production has started, that's above 50%, actually precisely 52% considering our periods together. Now a bit on financial summary. So revenue, as I've mentioned before, but we are we had in Q3 $20,000,000 from the sale of 105,000 tons. And also the product price is based on the U. S. Dollar potassium chloride price. This price has reduced from $3.24 last year to $2.36 per ton in 2020. So also in addition, the company is selling further afield from the factory, which also impacts our sales price per ton. And then in SG and A expenses, just a bit more detail on sales and marketing expense decrease of $200,000 So as I've mentioned, we had 2 points here. First, the devaluation of Brazilian real of 28% in face of Canadian dollar. And in addition, we have a reduction in traveling expenses, staff attending and also third party expenses. And about the distribution expenses, as I mentioned, the difference is 150,000, dollars which is in Q3 compared to Q3 last year. And most of it is due to CIF expenses instead of FOB sales that we had last year. The profitability, so sales increased by 68% compared to last year and operational profit increased by $1,000,000 gross margin by 16%, delivering 67% in Q3 2020 versus 51% in Q3 2019. A bit about cash. Cash held by the company increased by 2 20%, a total of $2,400,000 The net cash generated from operating activities improved $600,000 and also investment activities decreased $300,000 compared to last year. This is mainly related to investment in factory expansion that we've made in Q3 2019. And last row, the forecast shows a closing cash position in the end of June 2021, close to $2,800,000 on hand. In chart number 10, a summary of interest and loans of the company. We have, as I've mentioned, we have additional loan now. You saw in the MD and A as a subsequent event. That is not in this table, but we had an additional loan from Santander Bank of BRL 2,000,000. And the good point of these loans is that most of the loans are from 9.7% to 14%, which is like 4% higher than the Brazilian long term bond, which is close to 7.8% per year. So in the end, we think and believe that this fee that we are in rate interest rate that we are getting our loans are good enough to support our growth investments and also cash flow requirements to support higher sales year on year. Now on chart number 11, we can see the year on year sales growth. This chart is very important. You can see that Vej is delivering a consistent growth. It's very important to highlight that we always we will always compare quarter with quarter, which means that the seasonality in our business impacts a lot. So we need to compare Q1 against Q1, of course, and Q2 with Q2 and so on. So just taken as an example, Q4 2018, we had 20,000 metric tons sold. 2019, we increased to 32,000 tons and now 2020, we expect now to close with 57,000 tons. So it's a total growth, for example, in Q4 2020 versus 2019 of 77%. And total year, our expectation is to close with 244,000 tons, which is 104% growth versus 2019. About guidance, we had the guidance before for BRL 32,000,000 of sales. We've reviewed and started for 10% higher, and now we expect to deliver BRL 35,200,000 of sales in 2020, growing 97% versus 2019. And also about 2021, the Stego's volume projected is 346,000 tons with revenue of BRL 50,000,000. And this is an expected growth of 42% 2021 versus 2020. Well, these are the key information I'd like to share. Now I'll pass it back to Cristiano that can handle the Q and A, and I'm here also to support in any question you might have during the presentation. Thank you, Christian. Thank you, Felipe. I think if you stop sharing the screen now, please, Felipe, we can start answering some of the questions we've received. Just to explain again how the Q and A will work today, you can scroll through the questions which were sent. And if you see any question you like and you want it to be answered first, just click on the little thumbs up and the question will go up. That way, we can have the most relevant questions answered in priority in order for priority. You will notice there are a few questions which were written here by Isabella Martins, our Investor Relations Manager, and those are questions that we received as a company over the last few weeks. So I asked her to write down all the questions here, so everyone could hear the answers at the same time. Philippe, I had a quick look and some of the questions are very specific in terms of calculations. And so if you spot any questions like that and when I get to this question and if I ask you, you can jump in and provide additional information. So starting with the first question, with the recode cash balance, has a record cash balance at September 30th, can you comment on the decision to take out additional loans at 11.1%? What does the current cash balance earning interest while it waits to be deployed? It would seem to make sense to utilize our cash rather than borrow at 11.1%, effectively earning 11.1% on the cash utilized. So what I will ask whenever there are questions, if you have more than one question, if you could split that in different questions, so it makes a little bit easier when it comes to answering them. But the decision to borrow money comes from, 1, an opportunity. Because of COVID, the government provided loans with some very favorable terms. And one of the biggest benefits that was offered by the government was that you would just hang on was that there was no need to provide collateral to borrow the money. So there was it was easier to borrow money that way. Being a growth company, providing collateral for loans has been our ongoing pain. So when the government came up with those different programs and started allowing you to borrow money without providing collateral was some really good news for us. The capital, we will most certainly be using it as we grow. We will most certainly be using it as we build Plant 2, as we provide financing for our customers. So there is definitely a need for that. The other question is what does the current cash balance earn in interest while it waits to be deployed? So it earns very little because the short term interest rate in Brazil at the moment is only about 2%. This is in comparison against the long term interest rate. Let's say, if the government the interest rate the government itself is paying right now to borrow money is around 8%. It would seem to make sense to utilize our cash rather than so. It doesn't make sense for the reasons I have just expressed. The only thing of doing it like that, the questions move around. So now the top question is, the trade receivables at September 30 are almost equal to the entire Q3 sales volume. Can you provide an update on collections in the last 8 weeks? And what is the balance as of today? So we can't provide an update on collections in the last 8 weeks because that would be against the regulations. We will most certainly have an update when we file our Q4 result early next year. And what is the balance today, that would be the same answer. What I can say to help addressing this question is the fact that historically, our default rate, so the percentage of our customers who for some reason failed to pay their debt to us is very small. So historically, it has been less than 1%. The other point, which is behind this question, which is important to say here is that in the agricultural space in Brazil, when you're selling to farmers, be them small or large enterprise, they will expect to pay in up to 12 months. So it's different to when you're selling precious metals or basic materials, copper be it what it is that you can you get paid immediately or of course in other sorts of business. In the agriculture space, there is this expectation that that is the rule of the game. The other question, by the way, if anyone feels that I didn't properly answer any of the questions, just please go and type in the same question or variation of the question, and we will carry on for as long as needed, even if we have to stay here as long as a Fidel Castro speech would last. The next question is, can you provide a current estimate of the capital cost of the proposed 1,200,000 tonnes per year second production facility? If you break ground in July 2021, when would you anticipate the production capacity would be available for daily operation? The answer to the first part of the question is that we will provide an estimate. This estimate will be made either in the next press release with the results of Q4 or this estimate will be provided via one of our monthly newsletters. So make sure you subscribe to them, make sure you read them. But to have an idea in terms of CapEx, the pre feasibility study we published a few a couple of years ago now, it does offer a very good guidance for you to be able to estimate what would be the CapEx for such a plant. The other question, if you break ground in July 2021, when would you anticipate the production capacity will be available? This plant won't be up and running with added product availability until Q1 next year. And the reason we need to start building it second half next year is because we need to do it in the dry season. It's very painful and expensive trying to build things in the wet season. So that's why we need to begin and then by the time we get to the rainy season, it's pretty much built and ready to go. Next question is how much product remained unsold at end of Q3? Excellent question. George, very little. So what you might see in our balance sheet as inventory is actually the raw material, which we transport from the mine and stockpile in the plant for logistic reasons to try to avoid having to transport it when it rains. So that inventory, that raw material sits in the plant and as it's processed, it's processed into final product. And as far as final product is concerned, it's always a very small amount. The next question, how difficult is it to get farmers to buy into a vision and products? And when do you think the pace of growth will pick up substantially? That's a very good question. You're all investors, that's why you interviewed the call. Let's say you began investing 40 years ago and you managed to buy every single year one very same stock and things always worked out well and now you are worth 100 of 1,000,000 of dollars worth a lot of money. I've seen people who attended it. I know lots of you are worth a lot of money, but I mean like think of yourself also in that situation. That's the same thing for a farmer. So our customers, when they begun, the land they were going to cultivate was worthless. They had loans to start and then they worked very hard to create a very successful business. And for the last 40 years plus, they've only and always used potassium chloride. So now here comes Cristiano Veloza knocking on their door and telling them that there is something better they could be doing, better for the soil, for the environment, for their bottom line, costs the same as KCL. And you can just straightaway expect, if someone came to you and offered a Nauti stock, which would provide better gains to what you're used to. So this is very difficult. It's very difficult to convince farmers to switch from something which has made them very wealthy, successful to something new. And that's why our team, our sales team, our marketing team has been doing a terrific, an absolutely terrific job as far as developing the market as far as growing. And it's natural that as we grow into bigger sizes, it's natural that the growth pace will start potentially reducing. We will try our best to keep up the triple digit growth, but there's no question it will become harder. The next question is, if your product is so good, why aren't farmers knocking down your door? Why isn't the government helping you to help their balance of payments? Why sell so cheap when volume is so low and port price is so high? I think the answer to the prior question also helps addressing this question because they don't need to change. They don't need to come and switch from something that they pay them massive profits over the years to change something new. And even though potash is imported, for them, it's just as if it wasn't imported because they just they're there, they have the sales people from all the multinational companies, from all the gigantic companies you're familiar with Nutrien, Mosaic, Yara, who have been looking after them for several years. And every time they call them up, there's always potassium chloride there for them to buy from. So they don't feel the pain as farmers. Let me see, the downy road always and the government helping or the government can help and it is being very helpful in terms of license, in terms of all the support. But at the end of the day, it's a decision for the farmer what he wants to use on his ground. Why sell so cheap and the volume is so low in port price? Well, we're not selling cheap. I mean, we sell for the same price as potassium chloride. Next question, how many of your customers this quarter or repeat customers? We will have a presentation of those statistics in when we close the year, when we close 2020, we will provide that. So look for it. It will probably be disclosed in the newsletter for January or if not, alongside the results for Q1. But we do appreciate it's an important information for any investor to make up their minds whether things are going the right direction. With going forward permits at 400 to 2000 tons, what additional production capacity do you have in hand due to the unused prior year permitted amounts? I don't have that number from the top of my head. Do you have that number, Felipe? What will you expect to be the unused? I mean, we can put that down in the next press in the next newsletter, but it shouldn't be a problem because or whatever the number is, we won't need to use it because for next year, the plant wouldn't have production capacity to go beyond 403,000 tons, which we already fully licensed. So if it's Yes. I was on mute here, sorry, but it's around 25,000 tons left. So it's 25,000 tons. That will be it will be also in our inventory, most of it in the factory, we expect to have it, yes. Okay. Thank you. Next question, with the current profitability of the company and the going concern assumption being applied to the financial statements, Or are we in a position that we can start to recognize deferred tax assets on the balance sheet? The potential value of the EUR 26,000,000 of current loss carry forwards have not been recognized to date as the company has not had assurance of future taxable income. I believe that has now changed. So we have losses sitting both in the balance sheet of the UK PLC Plc on the top of the structure and losses sitting in the Brazilian company. We will be able to use both. So the one sitting in the UK Plc, when we have the international exports and we generate hopefully some profit at the parent level because of that, we can benefit from those deferred tax assets. And in the Brazilian entity, when it gets to a point where from a tax planning makes sense, we can also benefit from that. But for the obvious reasons, it is a good amount of money there. The next question, could you please give us an idea how is Verde tackling the logistic challenge of transporting its growing production by road? Our growing production is still tiny. It's still maniscal. If you think about all the companies operating in Brazil, for example, in the mining sector, they are actually moving millions and millions of tons on the roads. For example, there's a listed gold company that has trucks transporting from via just normal roads, one of those roads I drive often, to go from the mine down to the beneficiation plant. Iron ore per companies do it all the time, so there is there isn't a challenge. The next question, how come you haven't aimed some of your product towards the marijuana cultivation industry? We have our distributors in the U. S. Who have been doing some work in that market. We understand that some of our products sold on Amazon by reading some of the reviews might have been used for that purpose. But by all means, this is a question that only applies to the jurisdictions where growing cannabis is lawful. So and that's, of course, the only jurisdictions we would expect we would ever expect to have our product being sold to. Do you have any plans in terms of strategic partnerships or even merger with other entities to change the trajectory of progress as it were? We have no interest whatsoever on any sort of strategic partnership, no interest in any merger. We believe we're going to carry on growing. We're going to go our way alone. We're going to become as big as we believe we will. We're very confident about the culture we have in the company. We believe that when we compare the performance of our company against some of those strategic partners who were brought to their knees when the COVID hit, I truly believe on our strategy, on the strength of our team, the growth pace. So I quite frankly cannot see any value added from many strategic partnerships. I think this is more left to companies that struggle with capital expenditures in the 100 of 1,000,000 of dollars and can do very little on their own, either given the constraints of the project itself or the creativity of their management team. So I'm very confident on the trajectory we have for the company. Why doesn't VEGU next question, why doesn't VEGU proceed with TK47 production? Some of you who are new to the story I think I should go a little bit early on. So some of you who are new to the story, when we begun in 2,008, we came across this well, we didn't come across, but we went to look for what would be the best fertilized assets in Brazil. And there was this asset, which had 0 exploration risk because it was at surface, but had a market developmenttechnological risk market development risk because there was no product, which had ever been sold or developed to be produced commercially from this mineral asset. And there was a technological risk because nowhere else in the world as if it is still the situation nowadays, nowhere else in the world people were beneficiating this mineral into potassium fertilizer. When we begun, we found some papers back from the 70s. And those papers, they suggested that by cooking the rock with calcium carbonate, you could create a fertilizer called thermal potash. The same papers, they would argue that just by crushing and grinding the rock and spreading it to the fields, you wouldn't be able to get the economic yields you needed. So at that point, the evidence we had was, of course, to produce TK47 to produce which is the became the commercial name for thermal potash. We did all the development. We did all the ergonomic trials required for introducing this new product. The results were very successful, and it's a fantastic product. It's a fantastic business. What happened was, at the same time as we were doing all this development for TK47, we were also testing the natural rock. The thing is those tests, field tests, they take a long time. So it took years until we had conclusive results proving that the product as a direct application product was also an efficient fertilizer. So at the time those results came up, we made the decision to switch our focus entirely to K40, to Super Green Sand, and that became our entire focus. Around the same time, we also discontinued or put on standby TK47. For those of you who have been following the story, of course, throughout this timing, we also worked with the University of Cambridge with Professor Derek Frey to be able to develop a new technology to produce potassium chloride out of our rock, which was equally successful. We definitely hit a speed bump when the Russians fought the Belarusians and the price of potassium chloride crashed all the way down to $200 where it has been ever since eroding over $50,000,000,000 of valuation from the other potash players in the public companies. So I hope that answers the question as well as it provides a little bit of background on the history of the company. And very importantly, it helps to demonstrate how historically we've always had technology in our DNA, not myself personally from previous experience, but Verde itself has really always been a technology company. The moment it decided to focus on developing an asset, which had a no technology to convert that into an exploitable product, but also not even a market for that potentially exploitable market. Moving on, the next question. What assumptions on tonnes sold and price per tonne received in your 2021 sales target of BRL 50,000,000? Are you selling to the larger farmers yet? Is it possible any of those farms could buy large quantities from you next year? So starting with these 2 second questions, are you selling to the larger farmers? Yes, we are selling to some very large farmers, very large corporations. Is it possible that only of these farmers could buy large quantities from you next year? Yes, it is possible. The assumptions on tons sold and price per ton received in your 2021 sales target of BRL 50,000,000, We didn't disclose that on the press release. So let me think about it, Marc. And in terms of like the disclosure of the rationale behind the $50,000,000 guidance. And if we decide to offer the guidance in that level of precision, we will do so either on the Q1 press release or on the next newsletter. Christian, we have in the chart in the presentation also saying that the Okay. We've Okay. So do you want to put on the screen what the Yes. So you can see slide number 11. We have BRL 50,000,000 revenue with expectation to sell 346,000 tons, which is a sales price average similar to 20 20 Q3 2020 actually. So that is on the presentation, Mark. And the number is about 340,000 tons of product. What proportion of sales were repeat orders in 2020 so far versus 2019? So we will be compiling that when the year closes and we'll be disclosing that next year. Can you comment on current global potash supply demand and its forecasted price for 2021, 2023 and its impact on VA's gross margin? I really have no idea on the forecasted price. And if there's one thing I learned, Eloy, is that no one really does. We've paid for some of those big name consultancy companies to come up with forecasts when we're doing our pre feasibility studies, our PEAs and it always comes wrong. It truly always comes wrong. So we when it comes to the price, we always hear planning for the worst and hoping for the best. If you look at the pre feasibility study we put out, the last one in 2017, I even refused to pay those big name consultancy companies to come up with a forecast as some other companies do. What I learned that unfortunately happens a lot is that they tend to come up with prices really just on the margin to justify some of the big CapEx projects nowadays. I don't think they've even been able to do that unless they put like 2025 in trying to make 5, 6 years predictions. If you look at what we did at the time, we spoke to the most respected analysts in the space and we asked for their lowest price in terms of expectation. We pick the lowest price, which is very close to the marginal cost of potash delivered in Brazil. So if we pick the price of how much cost you to produce without any profit to ship it down to Brazil and transfer it to where we are, that's pretty much what we've based our assumptions and how we base our assumptions for our growth models. Needless to say that we're also undisputedly the cheapest supplier when you look at the cash cost curve of potash in Brazil, which shouldn't come as a surprise for anyone. Next question, could you produce and sell more than 346,000 tons next year, given you have permits for 482,000 tons? Yes, we could. So the capacity for the plant is 2,000 tons per day. Of course, you need to realize that deliveries fertilizer deliveries in Brazil are very seasonal for because when it starts raining, you're already supposed to have planted and you're already supposed to have applied our fertilizer. So as soon as it starts raining, it's not just that the production in the rain is challenging, it's also that farmers have no incentive or it's very niche applications where one would use our fertilizer when it is raining? It's a very important point. So if any of you missed what I just said and want me to repeat, just ask the question again because it's a very, very important point, especially as we go now in the raining season, so you understand what happens with the market. The next question, are we going to have to wait until 31st March 2021 for another operational update? The answer is no. In our monthly newsletters, we have been providing non material operational updates. If there's ever anything material, of course, we would need to press release it immediately, straight away. So I think that is the answer to that question. Can you give us some guidance on expected gross margin for next year given flat currency? We can expect the gross margin to remain the same as we saw in each one of the different quarters this year. It shouldn't be going it shouldn't be changing dramatically from what it was between 50% 60%. Do you have any projections on when you move to Phase 2? Would you raise funding for that Phase or self funded Phase 3, I guess, will require equity raise? So I think the projection when we move to Phase II being Phase II, we presume from the feasibility study, Phase II is 5,000,000 tonnes of production. We don't know when we will get to 5,000,000 tons given the nature of the business, given the fact it's still a new product on its infancy. It's still a new operating company in terms of structure, its sales process and growing distribution, everything else. The fact we're competing against companies who've been around for 40 plus years and all gigantic $1,000,000,000 companies, it's all very hard to make any projection or any sort of precise projection. Would you need to raise funding for that phase of self funded? So the answer for both Phase 2 and Phase 3 is most definitely, I will do everything I can never ever to raise any new money to the company. I think a few press declared our independence from dependency from capital markets. I'm very proud to have made that declaration of independence from equity capital markets, and I hope I shall never see again Verdiabritech having to issue having to raise on a private placement or a public rate more capital. Another question here. Could you please clarify what is currently the single critical element in Virta's path to increase sales volumes in 2021, increase customer demand, permits, production capacity, logistics, etcetera. No doubt to increase customer demand, no doubt it's market development. It's this is the real challenge for any company, which is bringing a new product to the market. And for the reasons I went on certain detail earlier on, it's not easy. It's not easy. Speaking from experience, I've sold and failed to sell K40 several times, and it's never easy. Could you produce and sell more than 446,000 given you all have permits? Yes, I think this question is in is duplicate, so we can sell more. Next question. Q1 has traditionally been a poor delivery quarter in the calendar year. Your investment of $400 in infrastructure is to allow increased production during this quarter. What do you estimate sales volume will be in Q1 2021? Will this show good value on your investment in infrastructure? Will there be good stock levels at the end of Q4? It's a good question, good question, Jens. All the way from Manchester, the or perhaps Isle of Man. The answer to this question here is that we don't know. We don't know how much we're actually going to be able to deliver in Q1. The answer to the second part of the question, whether it's a good investment, dollars 400,000 on infrastructure, it's a necessary investment. As a matter of fact, it's an investment that should have been made All the way earlier on, when we built the plant, it only wasn't made that investment because we didn't really have the cash at that point, it wasn't prioritized. But to give you an idea, any sort of rain out of season turns the plant into a mud bath. It's bad and it makes it very hard to operate. When you're not during the rainy season, when you're doing the dry season, it creates a lot of dust. So a lot of dust and suspension, which is also far from ideal for employee well-being, for operational reasons. So that was and is a very essential investment. For plant number 2, for example, this having a paved ground, which is the reason which is the normal, will be done from day 1. The next question, you answered my question by saying that only a little product remained unsold. You therefore could not have sold any more product. Were there any problems with production over the quarter or were you running at maximum capacity relative to your mining license? Okay, let's see the first question. Were there any problems with production over the quarter? Nothing material, so there was never any material issue. Were you running at maximum capacity relative to your mining license? We were at most times running close to the maximum capacity at mining license. But I think the real answer here, George, is We the storage capacity of our plant when it comes to final product is limited. So we pretty much run a nearly just in time type of business when it comes to the final product. The cumulative production in the 2 sheds covered area. We have the cumulative capacity is about 8,000 tons. And when we store product outdoors, it can only be stored outdoors in bag bags, totes, 1 ton totes, and we can store another 5,000,000,000, trade 1,000 tons of product in those totes. So but that's another advantage of having the additional production capacity because it's far cheaper for you to produce more when you need and sit with idle production capacity than it is for you to invest a lot of CapEx on building storage facilities, which is rather expensive. We have done all of those business case simulations and everything else to be able to ascertain that. And because the product is a dust, it's not that easy to be stored in storage facilities. It's not great. So if I still didn't answer it properly, please go back and add something else. Musing is asking, why are permits taking so long, especially with the government support? They have really started to be issued in a very timely manner in the last couple of years since the government implemented some reforms. Permits have never been a bottleneck to stop our production growth. So I don't think they're taking any long to be honest. They're pretty much in line with any other mining jurisdiction in the world. And I would even go beyond and say that we're getting our license issued much faster than most places in the world. So I'm very pleased with how it is progressing. Jeff, thank you. If it's challenging to convince the wealthy farmers to switch, perhaps if they are motivated by money. Could you undercut conventional potash enough to induce these farmers to switch and do so profitable with profitability? That's a question, Jeff. We ask ourselves every single day, morning, day and night. Would we be able to grow faster by offering a cheaper a much cheaper product to what they are paying? The answer the real answer is it's hard to say. What we've witnessed is that very rarely pricing is the real issue. Very rarely, a farmer will not use our product because he isn't getting enough of a discount. Most often, it should do with other reasons, some of those other reasons and that's another important point here, which perhaps if anyone doesn't understand or requires better clarification, you can ask for more details later on. But the question here is the point here is, when you are using, let's say, a conventional fertilizer, conventional fertilizers are granulated, so it's a little granular. It's much easier for you to apply in terms of equipment and equipment efficiency to apply granulated fertilizer than it is to apply a dust, a powder fertilizer like ours. The other very important point here is the fact Verde can only supply potash is a bit of a pain for farmers. A lot of them, they want to have this one dealer or they used to have this one distribution company, be it Nutrien, be it Mosaic, be it Yara, be it whoever it is. And those companies can go and offer all the nutrients for them. So they can deal with only one company and get all the nutrients they need. And often, farmers will want those nutrients to be combined as well with micronutrients. So they will want to have boron, manganese, copper, zinc and other elements. So the fact we offer only potash is also a bit of a problem. So it's not just about offering a very cheap price and really allowing Thomas to question, well, if it's as good as you tell me it is, why are you selling it as cheap as you are? Why aren't more people buying it? Why do you need to sell it as cheap? So those have been the reasons behind our decisions so far. Another question, any chance we'll see thermal potash again or is it that? Really was the reason I invest. I know, Marc, I know, remember that. I truly remember that. It's never dead. At some point, we might see it coming up. As you remember, it has a bigger capital investment required, but we also might be able to look at replicating some of those benefits of thermal potash like so much in certain different ways. And that might be some of the technologies we're also working at the moment. What are your thoughts on building the company where a lucrative takeover could be realized? We're all partners on this. I'm a shareholder as much as each and every one of you are shareholders. And I'm as big of a shareholder as each one of you may or may not want to become. I don't know how many of you want to get a mortgage on your house, sell the house, buy it all in, go and rent a place and come and join me as a big shareholder of the company. It all depends on the risk you want to have. There's no doubt I'm all in. And there's no doubt if there is a lucrative takeover bid, we will all use our respect, our duties to the company and to the shareholders and assess it in the best way possible. Another question, how long before greensand cuts on globally? I don't know. I don't know. The thing about greensand is in Brazil, the product is registered as a fertilizer fertilizer as a source of potassium and other nutrients with 10% K-twelve guaranteed analysis. The historical usage of green sand has been well, right when it begun a few centuries ago, it was widely used because of its potassium content. But after you had the cheaper sources of potassium coming up from especially from Canada, people started using greensand much more because of its oligo elements or trace elements and soil conditioning benefits rather than its potassium content. So I don't know. Next question is, I wonder if you could clear up something for me. On your website, you state that Caffote contains 10% K2O, yet on the bag of super green sand, potassium content is listed at only 0.2 Why is there such a difference between the claimed K2O concentration on website and the potassium content listed on the bags of super green sand? Or aren't they the same thing? Excellent question. If anyone doesn't understand or doesn't wants more clarification in this answer, please say so. The total content of potassium from the rock is 10%. It is registered in Brazil as a potassium fertilizer with a total potassium content of 10%. So when sell it in Brazil, it's 10% KHO, that's the key number. When we sell it in the United States, the regulation in the United States is a bit different when it comes to potassium. So in the United States, they only recognize the amount of potassium in your product, which is water soluble. And when it comes to the amount of potassium in our rock, which is water soluble, it is 0.2%. So for that reason, when we sell it in the United States, it has to come up with a label stating a guaranteed analysis for 0.2% K2O in our micronized version. When it is in Brazil, it is the 10% K2O. Next question. If you assess general and administrative expenditures in the local Brazilian currency, you see a very different year over year change than those shown in Canadian dollars. For example, professional and consulting is up 105% in reais. What consultants have used in Q3 to explain the 100% increase? This come across as a big number. I will let Filipe detail. And Filipe, you can name whatever the consultant or Yes, it's a good question. In Brazilian reais, we spent a bit more. This is a bit due to phasing of expenses. And also we had we hired an additional consultancy lawyers to support us in some questions here like some specific points that we need support. But most of it is due to phasing, expenses, phases that we had higher phases expense in Q3 this year instead of Q4 or Q2. If you take a look in the full year expenses, the amount is not that big. Let me get here the amount. While you look at the number, Filipe, let me just also make a comment. Is it fair to say that some of the engineering costs we had for Plant 2, like the infrastructure and some of those designs, road access, were those classified as consultant professionals? For example, the new road that we are implementing, the new access for Plant 2 is there. Are correct. Just these expenses, it was close to BRL60 1,000. We had also the geometry project to provide to consultants the job. So this is around the $25,000 So just this was $85,000 that we did not have before and we have it now. So but if you take a look in full year, you can see that the total expenses year to date is 10% higher, but we do expect it to be lower in Q4. Thank you. It's a good question because usually and I have the same reaction. Whenever I see like consultancy things going up, I say what the hell is going on with this company. But in this case here, it's all to do with expansion. It's all to do with Phase 2 or the from what Philippe said, nearly 80% of it is to do with this work required for us to improve the access the site where Plant 2 is going to be built. Next question by John Kaisa. Thank you for attending, John. Are there any nutrients not included in other fertilizer blends, phosphate, urea that potential Queforte users also apply to their fields that could be blended into K40 to boost its attractiveness to farmers? Yes, John, that is spot on, spot on. There are There are some synergies that come out of it. There are some crazy cost reductions that can come up from that. So given a little bit of a spoiler, seeing John asked such a good question, For example, when farmers buy NPK blends, those of you who remember TK47 will remember a little bit of the story behind it. But when you're buying an NPK blend, let's say, 20, 0, 0, 20, it's 20 nitrogen, 00 phosphate and 20 potash, very, very common blend. The cheapest way for the blender, for the distributor to sell this product to a farmer would be to sell urea, which is the cheapest source of nitrogen mixed with potassium chlorides, both granules, both the cheapest source of potassium. The problem is urea has 46% nitrogen, potassium chloride has 60% K2O. So you can't build this formula, so the combination gets to that precise number, 20,000,000, 20, which is what the pharma wants. So in order to come up with 200,000,020, the pharma what the blender, what the distribution company will do is to replace some of that urea with another source of nitrogen, which is less concentrated in nitrogen and much more expensive per point of nitrogen than urea is, which is, for example, ammonium sulfate. That way, they can make sure you close the gap with the 20,020. But the problem is the farmer ends up paying more for the fertilizer than if he was getting the same nutrients, for example, from us, which would have some more flexibility by adding that directly to our product. The other very interesting point behind your question here, John, is, for example, Brazilian soils are extraordinarily poor in sulfur. Sulfur is an essential macronutrient alongside nitrogen, phosphate, potash, calcium, magnesium and the other one is sulfur. Those are the 6 essential macronutrients. But to apply sulfur to soils is a bit tricky and potentially very expensive or currently very expensive for farmers in Brazil. So to get their fix of sulfur, they usually will buy a or will ask to include in their NPK blends, 2 fertilizers, which are source of the micronutrient and a source of sulfur. They will ask to add super simple phosphate or they will ask to include ammonium sulfate. But the problem is, when you look at the cost of doing so, it's huge, it's crazy, crazy. But this is the inefficiency of the current space, and we like to use technology to resolve inefficiencies and make things better for farmers. So next question, and I hope to see all of you on the 15th December. Next question from Ian. The valued domestic currency should make your product cheaper for exports. What are you doing to drive exports? Was the trial shipment to China successful? I'm aware that Series Minerals have memorandum of understandings, a lot of intents with China of in excess of 10,000,000 tonnes. We made the ship our focus in terms of exports is close to 0. The focus is Brazil. When we look at exports, there are 2 different situations. One situation is the North American market, where it's really a niche product, where you're looking at soil conditioning, where you're looking at trace elements. When you're looking at the export we made to China, they weren't looking at niche, they were looking at the product to be a direct potassium project. There was a they received it. We understand they tested it. We had a feedback. They had some problems with the weather in China, and we understand there is some trials going on or some economic evaluations as well going on in terms of what's going on in China. You mentioned here a company, very interesting here, Series Minerals, not very interesting unfortunately for shareholders, given the catastrophe, which happened with the share price and dilutions and everything else. But when you think about the rationale for them to justify the pricing they had for polyhalide, you might remember that, Ian, anyone who followed this story closely and analysts understood how it was because of the sulfur content and because of the expectation of replacing all the sulfur containing fertilizers, such as 2 placebo phosphate and such as ammonium sulfate that Series Minerals was able to justify some very lofty pricing for their polyhalide proposed product. So again, sulfur seems a name that seems to have become a big challenge for farmers across the globe to have reliable, cost effective, efficient sources. And I stress the word efficiency, because the common source of sulfur is sulfate. And sulfate is extremely water soluble, leach very fast. And although this isn't necessarily a big problem in countries in the Northern Hemisphere, temperate climate agriculture, it is a major issue for tropical climate agriculture where you have some very wetted soils where you end up losing a lot of nutrients. So that's sulfate. Next question, why is it so difficult to get mining permits and what was the length of time it takes in years? It's very difficult because the regulatory process is very extensive. So first of all, you need to apply for the exploration permit, then you need to do and carry on several rounds of drilling. After you've done it, you need to come up with a resource and reserve calculations. You need to submit that to the government. The government will go on-site, will see the work you did. We will tell the government you've done drilling. The government will go on the site where you told there was drilling. There should be a little bit of concrete slab there showing there was a hole that was drilled there. They will go to your where you store the drill cores. They will have a look at them. They will analyze your assays. And then if they're satisfied, they will approve your exploration report. After they've approved your exploration report, you need to present a feasibility study proving to the government that this is a feasible project. If you have a commodity, it's easier to do. If you have something like us where it's a new product, it's a little bit harder. But then you present your feasibility study, the government will have to evaluate it, undertake all the site visits if required and then make a judgment whether this feasibility study is favorable or not. Once it has deemed the feasibility study to be approved, you still need to present your environmental license, your final environmental license. And then after you present your final environmental license, the government will issue finally a mining permit. So that is the process and it's hard in most jurisdictions in the world. It's even harder in all the jurisdictions with especially countries with common law and other contacts. Okay, next question? Brought 2 glasses of water today. It wasn't like last time. One of the risks I see will be around market adoption of a new product. I understand greensand is onesix of the concentration of regular potash. So I'm wondering how it impacts the farmers' workflow, their machinery to spread the fertilizer now needs to output 6 times throughput on their fields, takes more time, more fuel to move around with tractors. This is all correct. It's all one of the reasons or objections we face on a regular basis. The way we address this objection, which is absolutely true, is, for example, when you're looking at coffee, because KCL is a salt and it's very water soluble, if you apply it all at once, all the amount of potassium a coffee tree needs all at once, 2 things might happen. If it doesn't rain and potassium that salinity still stays there, very likely you're going to kill the plant. If you're lucky enough and if it rains, the water is going to take all of that potassium pretty much all of that potassium away before the tree can uptake nutrients. So they have to split up to make up to 4 applications instead of, in the case of our product, being able to make only one application. But as you wrote, some farmers will prefer to do that or the farmers won't. So it is the situation. For example, when you look at grains, you need to apply potassium when you're growing soybeans. And then when you harvest soybeans, when you go to grow corn, you need to apply potassium again. If you're using our product, you can apply it only once. But there's no doubt that by having a smarter and more customized mix of nutrients in the product, we can make it much faster, much easier for the farmers in terms of reducing objections. Next question, can you elaborate on the pricing and client charging of costs generated in delivery transportation? Excellent question here from Adi. The how it works is that we sell our products for the same cost as potassium chloride, adjusted for our lower potassium content on a delivered basis. So if the farmer buys the product from us on a CIF basis, cost and insurance, he will pay exactly potassium chloride divided by 6. That's their cost. If they prefer to buy FOB, they will pay potassium chloride divided by 6 minuteus the transportation cost from the farm to our plant site. So that is how it works. Can you elaborate on that? And on the current feedback you are getting from customers, excellent feedback in the vast majority of cases? Next question. Can you provide color on the rate of repeat sales picking up demand by farmers who bought first time? We will make a full disclosure at some point next year, either on the newsletter or on the press release. The next question is, I've had some experience with selling sustainability in another field and have learned that this argument will only work with the customer as an additional reason to support the key selling point, which many times price. Wonder what feedback you're getting from your customers on that. Just farmers don't get paid for sustainability. They and it's a very high risk business. Every year, when you're and I ask that from personal experience, every year, you are really risking losing everything. So you make all your investment on fertilizer, pesticides, land of preparation, labor, seeds. But then if the weather isn't right or if it rains too much out of time or it rains too little, you can lose everything you've invested. If you're depending on the sort of leverage you have, you can go bankrupt. So no pharma will buy anything because it's sustainable. This doesn't exist. It will only exist when consumers start final consumers like us, like yourselves, start paying more for sustainably grown food versus conventional foods. One can argue that, that has started happening with the sort of certificates like UTZ, Rainforest Alliance, but it's still niche in comparison to the overall market or even organics or biodynamics. Next question, what percentage of the latest quarter's tonnage was sold to repeat customers. Again, we will disclose that next year. We weren't thinking about doing it on a per quarter basis. The idea was to do it on an annual basis. When will be positive cash flow? I hope very soon. Can you comment on Brazil's potash plans with specific reference to their planned fund raising in December and their target market value of over $500,000,000 So the question here from Mark is a there's a company called Brazil Potash. It's a company that has been around for just near literally for as long as we have been around. At one point in Brazil, we even shared the same building, not the same floor, but the same building. They have a potash project, which is in the Amazon. In the heart of the Amazon, either in or next to a very important Indian reserve, Indian tribe reserve. And when you when they first started talking about the project or a bit on potassium chloride, so potassium chloride is a salt and it occurs in nature associated with another salt, sodium chloride, which in those deposits come in a much higher concentration than potassium chloride itself. So in other countries where you extract potassium chloride, this residue of salt is either sold or given to be spread on roads for deicing like in Saskatchewan, like in Germany, like in Russia or is put in massive ponds. You have a bunch of those big ponds of salt in Saskatchewan, for instance, or even in Russia. You can even find on YouTube some dramatic scenes of some of those points collapsing in to do with earthmoving in from those deep underground mines in Russia, some very interesting documentaries on the Internet. So when they first started developing it, when people asked them about the salt, they said they were going to put that salt into the Amazon River. And they're talking about millions and millions and millions and millions of tons of salt. As you may expect, that didn't create many friends. There was a lot of pushback. And then they started saying that they will dig a hole and put that potash, that salt back into inside a hole or something like that, which also carries a lot of skepticism at the moment because nowhere else in the world apparently people do that. And most certainly, nowhere else in the world with the same sort of climate and water tables and the amount of water as you have in the Amazon jungle. Every single potash mine you have operating in the world is operating in either operating in arctic, near arctic conditions from the deep underground mines. So it's up in Saskatchewan. I'm sure people from Saskatchewan might agree it shows a bit like Arctic conditions in the winter. Northern Russia or even when you have some other places, it is it is to do with just hang on. Yes, we just had a message about the time for the connection. So that is the main problem in terms of the feasibility, the environmental feasibility. And the other point is, to the best of my knowledge, the latest feasibility study they had, had the price study done by a local Brazilian company, which put an estimate on potassium chloride of around $300 which was required for generating a very small IRR. So the other question is how economic the if environmentally sustainable, how economic the project is. And even if it gets so I mean, that's one. I tell you, that's one question I've been answering since 2008 as well, nearly 12 years. The next question, in your question. In your unaudited interim consolidated financial statement for Q3 released on 16th November, Page 4, notes exchange difference on translating foreign operations for the 9 months to end September has been a loss of EUR5 1,000,000. Can you explain this number? I believe, Filipe will correct me if I'm wrong, this is the money that we have invested from the PLC, from the UK parent company into the Brazilian company. And because of the exchange rate fluctuations, that number varies widely. Is that correct, Felipe? Yes. 100% correct, exactly, yes. Okay. That's the money invested by PLC in Brazil, Viasco de Lisaint. Since Brazilian real has devaluated, if we convert it back to Canadian dollars, it's what we would have lowered, dollars 5,000,000. Given your answer to my question about undercutting on price, we only offer potash solution while it should offer complete package. Could you team up with a dealer that offers the other nutrients? This might eliminate a farmer's block and complicate their supply chain by having multiple suppliers. That's certainly a possibility. It's certainly a possibility. We're always talking and always exploring. We went as far as to think that we could help selling and get a commission from those other dealers when it comes to offering a full solution. What that doesn't resolve though, Jeff, is the fact that in a lot of circumstances, the farmers would prefer having all nutrients in one same product. So for example, micronutrients, most of the farmers apply micronutrients nowadays. And they usually buy, let's say, an NPK blend, which already comes with an added Nutrien. Well, for example, we don't need to go that far. If you look at 2 of our competitors, I would encourage you guys to go and have a look at the websites. If you look at Nutrien, world's largest potash company, Nutrien launched a product, which is a combination of potassium chloride and boron. It's called Aspire. So that's a product they've been marketing very aggressively. It's very expensive, but comes from a need. Another company that has another product, which is heavily marketed in Brazil is Mosaic. Mosaic has a product called MicroEssentials, which comes with sulfur and is again one of the key products they're working to develop the market in Brazil. So it's that sort of nutrient combination that a lot of the farmers are looking for and makes our life not necessarily very easy when it comes to selling our product. In some circumstances, it's a bit like you're not even resolving the real problem for your customer. You're resolving your own problem, which is to sell potash. We are not really resolving the problem for your customer, which is to get the best crop nutrition technology possible, which will both reduce costs and increase profitability and increase production, productivity and sustainability. But because you lack the other nutrients in a number of ways that ends up restricting our or making our lives much harder when it comes to selling. Will this Q and A be available for replay? Yes. So this will be available on our YouTube channel. I hope all of you have already subscribed to our YouTube channel and it will be there. What I will suggest, Isabella, for us to do is to have it posted both as just the Q and A bit and the full version of it. Thank you. Ian, if the cash cost of imported potash has dropped by 27%, but the Brazilian currency has also devalued against the Canadian dollars, then surely the imported cost has remained quite stable. It remained relatively stable in local currency. That's why when you look at our average pricing, local currency doesn't change a lot, but it has fluctuated a lot when you then translate that back into Canadian dollars, which is the currency we report. That's where the big drop comes. Another question. Once you have done all the work to finally get a mine permit, how long is the permit good for? I have heard it's only 3 years, which does not seem to make sense when a deposit has a project life of mine of 30 years or more. How do you mitigate the risk of having the mine permit taken over by another owner? Starting from the last question, there has never been the case in Brazil where there has been expropriation of mining rights. The answering the first part of the question, there are 2 different types of mining permits. 1 is something called guir ducilesasone, which I think we translate as mining permit and something else, which is a potaria de labre, which we translate as mining concession. A guir ducilizacion is the one you have a shorter time frame up to 3 years, but you can carry on reapplying and asking for it to be renewed. The permanent one, which is, for example, the one we were issued a few months ago, that one is essentially good for life. It's a different type of title to the Guilherme Utilizer. So it's a permanent one. And it's the one I described when I went through over in some detail on the process of applying or getting a mining concession. That was the one I was always describing for you to get to a full valid mining concession. To get to a gear due to the Zassa or a mining permit, I don't know how each one is being translated in the glossary, which comes in the newsletter or in the MD and A, it has the breakdown, but it's much easier. Next question. Or your plants disposable in that when you get higher permits, we will end up with a new plant. They are not disposable. When we have new plants, we will carry on building additional lines on different sites. What is the dynamics of the global potash industry and how this is likely to affect our business during the coming decades? The dynamics of the global potash industry are there's no shortage of potash in the world, lots and lots and lots potash in Russia, lots of potash in Canada. There is at the moment excess capacity sorry, yes, excess capacity for potash. There's a proposed project by BHP in Canada called Jensen, which would increase this added increase to this capacity. And essentially, what seems to be the case is that the current players, they are making sure they keep potash prices low enough that they can make money and they do make some very attractive profits even at the current level of around $200 So low enough, so they have decent profits and never high enough that it would trigger a new wave of interest in this space, which is what happened back in 2,008. Filipe, do you mind sharing the presentation and going down to that slide, which has a chart on the price of potassium chloride over the last 3 decades, I think it will be a good one to Sorry, just a second. So if you see the graphic at the bottom, you can see the FOB potash price, FOB Vancouver over the last 30 years. So when you see that spike back in 2,008, that's when guys like us show up. Before that, all I knew about potash was every time I went to buy fertilizer, what that pink granule was, that was potash. I didn't knew anything other than that. As soon as it went up to near to $1,000 in Brazil, it went as high as $1100 hey, that's when Verdi started looking for potash deposits, not just Verdi, but other companies around the world. That's when BHP tries to come and acquire a potash corporation of Saskatchewan in what was at the time the largest M and A deal history. The second time ever, Canada blocked the foreign takeover. So for this reason here, the industry has learned that whatever happened, they ought never to allow the price to go up out of control. They're always going to keep it, as you see here, something within the range, dollars 200 getting as this is the CFR Brazil, perhaps in Brazil as high as $300 but that is in my view what will be the price range for potash. The other interesting thing which happened here was our valuation. So if in 2,008, there was the interest, we went and we took the asset. If you look at then, of course, there was the crisis, Lehman Brothers and everything else associated with that, There was a little bit of a crash and then prices started recovering. Prices started recovering all the way up to $500 which was still like crazy high. We are doing feasibility study at that point with NPVs and there were all sorts of huge valuations and all the excitement, all the analysts only could only care about potash on Bay Street. We had 11 analysts covering us. People would be calling me all day long to talk about what and I would ask about what Verde was doing. Everyone wanted to invest in potash. And unfortunately, that's also when some of you invested at share prices, which are significantly higher than where we are trading right now. Well, this is when I could personally have sold my stake in the company for about $20,000,000 It was crazy, absolutely crazy time. I look at all this craziness about tech at the moment and stay at home tech cases, Zoom and the other companies. And I look back in 2010, 2011, and that's exactly how we felt. That's exactly what was going on with Verde. Unfortunately, things have completely changed for this space. And at least as far as pricing is concerned for potash, I find it very difficult to believe that an increase in potash price would be the trigger to create another situation like this one. I sense there might be another I sense there might be another spark that might trigger another renewed interest in Verde, AgriTech, but I don't think that spark will have anything to do with potash. I would risk to say that, that spark will be something much more to do with the way we've been evolving the company towards as an agri tech company, sustainability focused. It's something that will be much more connected with that video we watched at the beginning of this presentation than a price spike like the one we saw here. Next question, Philippe, if you want to please stop sharing the screen. 16, Hagar, would you consider to allocate some of your company's cash to Bitcoin like MicroStrategy Square? This is in order to avoid losses on the falling Brazilian reais and U. S. Dollars. Not at this point in time, we wouldn't. I don't understand anything about Bitcoin and so it isn't the strategy at the moment. George, whilst sales are seasonal, why are they less seasonal this year versus last year? They are still seasonal. I think what you're referring to is perhaps the fact we sold a little bit more in Q1, which we will. We will sell product in Q1 and Q2, but it's just only purely from a climate reason. When you get rains, it's always going to be peak demand between the end of Q2 and Q3. So if you don't intend to issue equity to fund expansion, is there obvious answer a debt financing? If so, then would you expect it to come from the private or government sector? The answer is both, both and we're working with both routes. And what you see a lot of times as well and pretty much, say, all but one of the lines of credit we accessed, for all of those lines, the funds were provided by the government and were sold, let's put it this way, by private banks. So that's a lot how the government works in Brazil. They will make available the funds available for specific purpose with specific or subsidized interest rates or reduced interest rates and then it will use private sector banks to distribute those lines of credit. Another question, does this just in time production system hinder your ability to meet the demands of customers? No, it hasn't been the case yet. It's not a truly just in time production system. We do have some storage. We do store some product in big bags. We do store those about 6,000 tonnes. So up to this point, it hasn't been a reason for us not to fulfill any sale commitments. Having this as a replayable video is excellent. Thank you for the level of transparency. It's very helpful. Will this be the model going forward, that future quarterly release presentations? Yes, it will be. As a matter of fact, it has been exactly like that for the last three quarters. And we have the Q and A for the presentation done at Q1, Q2 available on our YouTube channel, the same way this one will be available. I believe and some of you followed our restructuring in terms of Investor Relations, but I think it's worth it taking this moment here to thank and congratulate Isabela, our recruited Investor Relations Manager, who began working this year and has been doing a fantastic job. So some of you might remember how we had to completely focus on operations, construction, doing our homework for several years, at which point in time we completely scrapped Investor Relations activities. We hired Isabela very early on this year. Our first step was to carry out a bunch of surveys with our investors, asked a bunch of questions, went deep to understand how we could best structure our communication. Based on all of that feedback, we came up with the monthly newsletter. We came up with the video Zoom presentations and everything recorded. And we have a lot more planned for next year. So stay tuned that there should be a lot more coming up on next year in terms of how we're approaching Investor Relations communication. We have a new website. So when you go on the Internet and type in investor. Verde. Ag, you will see a brand new website, which was launched today. And thanks to Isabella's hard work over the weekend and over the last few days, she made it possible, should be launched on time for this presentation. There's still a few bits and bobs. We're going to be adjusting and bringing on more information to that website, but it's still for those of you who remember our previous website, it will be it's far better. And for next year, we will also be doing some interesting stuff as far as investor outreach is concerned. So everything we've been learning here in Brazil, all the platforms we've been using here in Brazil to do with marketing, to do our consumers' engagement, a lot of that we will also be applying towards investor relations, which I'm quite excited to see what the results will be. That's the final question. Unless someone else wants to ask someone. So there it comes. Does this just in time production system in your ability oh, hang on, I hadn't answered that one. So but another one came up. Any plan to develop additional products so that revenue would be less dependent on the dry season, for example, synergies between Verde and Must Grow. I'm not familiar with Must Grow, but Mark, you're absolutely correct. This is something which we've been working on and we've been developing some stuff and I would expect it to be definitely a source of revenue. As important as our mine, as important as the quality of our product, as valuable as our mine and as valuable as our product is, is the team and the culture we're creating when it comes to marketing and sales. We're still in its infancy, but I can assure you that it will bring as much happiness to us all as the actual product does. I truly believe we will have the best sales team in Brazil among any other agriculture company operating. And I go far beyond that, And to some of you, I've gone into a little bit more detail in terms of our strategies, some of the resources, some of the tools we're using to build a team and motivate and franchise them and to detail the procedures and the technologies. So I'm very confident that we're building here not just in the agriculture space, but in Brazil as a whole, one of the most effective sales teams, one of the most effective sales and marketing platforms in the country. Any more questions? Okay. I look forward I thank you all who participated. I think I should share that from when we began this presentation about 2 hours ago until now, we've only lost about half of people who originally joined, which I think is pretty good. So congratulations to all of you who sat on with us for nearly 2 hours throughout this presentation. Thank you for the interest. Thank you for all the questions. And thank you for you who is watching this Q and A on YouTube. Please make sure you go on our website and subscribe to our newsletter so you'll keep up to date. Make sure you subscribe to our YouTube channel so you can see all the updates. Make sure you follow us on the other relevant social media and stay safe. Stay safe in this what we hope will be the very end of this tragic pandemic. And I very much look forward to being again with all of you on the 15th December for our first technology launch. We're all very excited, and I hope you all will be equally excited with this new technology we've developed and we will be presenting to you in a few weeks. Thanks a lot. Stay safe. Bye bye.

• Earnings release
• Slides