All right. Hello, everyone, and welcome to the Verde AgriTech Fireside Chat. My name is Robert Blum, managing partner at Lytham Partners, and today I'll be moderating a Q&A discussion with Cristiano Veloso, the Chief Executive Officer at Verde. As a reminder, the company trades under the ticker symbol NPK on the TSX and VNPKF in the United States. All right, let's get started. Cristiano, welcome.
Hi, Robert. Thanks for the invitation.
Fantastic. For those not familiar with Verde AgriTech, can you give us a high-level overview of the company today across sort of the both sides of the pillars, the fertilizers as well as the rare earth program here?
Yeah. Hi, Robert. We're developing two different business. The coincidence between both different business is the fact that they are both critical minerals. We are a producer of fertilizers, a producer of potash. Potash is controlled by Russia. That represents about two-thirds of the global supply of potash, and we are the biggest producer of potash in Brazil, which is also the biggest importer of potash in the world. The second side of our business is rare earths, which we're now developing a new potential mine, and we have some very exciting developments coming up throughout this year.
All right. Very good. Let's talk first on the rare earth program, then we'll sort of come back to fertilizers maybe towards the end here. You know, what is sort of the simplest description of what you've discovered so far, deposit style, scale, sort of the quality here, and what do you believe sort of differentiates it from other ionic clay projects out there?
It's a very good question, and there's a lot of confusion in the market at the moment about rare earths. The biggest mistake is just calling it rare earths. You have 16 different elements, and the market dynamics for each one of those 16 different elements is very different. To be honest, most of them are worthless. The ones that really matter, and those are the ones investors should really be paying attention to, are praseodymium, neodymium, dysprosium, and terbium. Those are your magnetic rare earth oxides. Those are the ones that are really driving demand. Those are the ones essential for robotics, advanced manufacturing, and those are the ones that really matter. The problem is most companies have very little of magnetic rare earth oxides, and they end up distracting investors by just talking about rare earths.
You need to be very careful whenever you look at a company. You need really to understand what this company's producing. For example, there's a fantastic documentary done by 60 Minutes in the U.S. where you can hear about and watch the whole history, a fascinating history of MP Materials. MP Materials in their concentrate, they have only around 15% magnetic rare earth oxides. When it comes to dysprosium and terbium, which are the most valuable, rarest ones, they don't even disclose how much they have. In our case, the preliminary leaching work we did gave us around 40% of magnetic rare earth oxides in our leachate. More than that, when you look at our drilling results recently disclosed, you will see some phenomenal results for dysprosium and terbium. Yes, rare earths exciting.
People talk about it, the media all the time, but it's important for you to filter out what the noise is and really focus on what matters, and those are the four elements I've just mentioned.
All right, very good. Talk about some of the proof points that you think matter most over the next six months to 12 months to really show how this can translate into a commercially viable sort of a program here.
Robert, we're doing what we did for potash. We're doing exactly what we did for fertilizers. We are doing the drilling, the drilling campaign. We will be working on a resource report, and we will be working on our first economic assessment. We're doing all of that both under Canadian standards, known as NI 43-101, but also under U.S. standards S-K 1300, so we have our corporate options open at the end of program. Very important, Robert. There's a lot of people who are now new into mining, like I was back 20 years ago when I started this company and took it from a greenfield exploration to a large potash producer. We're doing the same thing. We're looking to do the same thing.
We're going to be following the same game plan we had before, and we're going to make sure that everything we learned throughout the last 20 years, all the mistakes we made, we will avoid, and everything we learned that makes a difference when you bring in a resource to production, we can build on it. We're very excited to have the opportunity to do it another time with rare earths.
Compared to what you did on the fertilizer side here, where, you know, where are you going to sort of play within the value chain here, you know? What's maybe going to be the logic behind that choice or maybe it's still to be determined?
Well, when you talk about the value, I hear that in a few different ways. If you think about the value for investors, there's no doubt that the earliest you get exposure to a mineral resource story, the more risk you have, but equally the greater the upside you have. The stage we are right now, which is drilling, validation, pre-resource statement, that is still early days. Usually with resource story, you have a significant re-rating once you can put out an independent resource validation, which is what we expect to do by the end of the first half of the year. At the same time, we're also already working hard towards a preliminary economic assessment, the PEA, which is your second independent validation, which equally promotes a big re-rating for a company. That is what we expect for the second half of the year.
In between, we should be putting out several drilling results, which we've been doing pretty much once every month. There will be some exciting news as well in terms of of flow sheet development and concentrates, so it's going to be a very busy 2026 for us. It makes me just very melancholic about how exciting it was when we did it for the first time with fertilizers throughout the last few years. Just very exciting to be doing it again.
All right. Very good. I want to come back to the macro, and you touched upon this a little bit at the beginning there. You know, talk about for those that just sort of may be unfamiliar with this, the macro side for the various rare earth elements that you talked about. You know, what are some of the biggest drivers of demand growth, where there's supply tightness over maybe the next decade, and how you think about some of the, you know, the ex-China supply changes, and changes that sort of realistically are beginning to form here?
Okay. Before I answer the question, there's 16 different elements, each one with its different market dynamics.
Right.
For example, there's a rare earth called cerium, which is worthless, like lanthanum, pretty much worthless, which for example, when you look at MP Materials and their concentrate, about 70% of their concentrate is a combination of cerium and lanthanum, which is a problem. You want to avoid having that as much as possible in your concentrate. I'm going to leave out of this analysis the dynamics of rare earths which aren't worth much money. Let's focus on magnetic rare earth oxides. You have neodymium, you have praseodymium. Those two are the main constituents of magnets. Every time you need to transform movement into energy or energy into movement, you need magnets. Think about wind power generation.
Every time you generate electricity out of wind, and you have the need to transform that into power, you need some very powerful magnets. You need a lot of that praseodymium and neodymium. The same way when you're converting energy into movement via batteries, think about EV batteries, for example. You're going to need those powerful magnets. That is where the bulk of the demand is coming from those two elements. What's interesting is every time you need more efficiency for different reasons, that's when you need a little drop of dysprosium and terbium, and those are the ones which are the rarest. China has very little of those two elements. In the U.S., likewise, MP Materials has close to nothing, and those are the ones which we're very excited to have in significant quantities in our resource.
The big driver for consumption of those magnetic rare earth oxides is expected to come from robots. Jensen Huang was talking a few days ago, and in his view, which is a little bit more conservative or well-reasoned than what Elon Musk and some others like to talk about robots. In his view, we are going to be seeing a significant number of humanoid robots and robots in general three to five years. Some people say that Amazon has already crossed the barrier where they have more robots in operation than they have human beings, and you have a whole manufacturing revolution going on in the U.S. where there's a significant adoption of robots, both for industrial and other uses.
It's this demand, it's this driver which people don't grasp how much this will influence the demand for magnetic rare earth oxides. Next time you look at a robot, every movement you see in an articulation in a robot, every movement you see there in a robot hand, arms, whatever it is, if they're dancing, if they're fighting, whatever they're doing, all of that movement is powered by those actuators which are full of those magnets rich in magnetic rare earth oxides.
All right. Very good. Great education there for those that may not be familiar. Let's switch to fertilizers in the few minutes that we have left here. You know, sort of summarize your fertilizer platform, who your customer is, and sort of the reasons why farmers adopt your products in the market here.
We have a very large potash resource, so we have about 3 billion tons. It's enough to make Brazil self-sufficient in potash for about five decades. Potash we supply is better than the potash which comes mainly from Russia and Belarus because it doesn't have chloride. It's not a salt. That chloride, that salinity is a problem for crops and causes a number of issues for farmers. Our product is free from chloride and therefore has a number of benefits for different crops in Brazil. The problem Brazilian farmers are facing right now in the country comes from a very high interest rate, around 16%. That's the country's base rate. When you look at how much a farmer can fund itself commercially, you're looking at 20% plus.
That combined with the impact of the increase of price of urea from the Gulf is creating a massive crisis in fertilizers in Brazil, which we're trying to cope the best by being very conservative with credit and making sure that we can focus on the longest relationships we've had with some of our customers. It's something, Robert, to be perfectly honest, it's hard to get very excited in the short term given how strong the headwind is against the sector. With everything in commodities, it's cyclical. There's no doubt it will pass, and once it does, there's no doubt we will have a very strong business.
All right. Let's a couple more on the fertilizer here before we wrap up. Talk about some of your products really highlight sort of the carbon avoidance and carbon removal via sort of Enhanced Rock Weathering and such. How do you sort of plan to turn that beyond, you know, in sort of a business that investors can really know is working?
Well, we love talking about it. We love talking about the fact that our fertilizer has a significant smaller carbon footprint than imported potash. The fact that once our product releases potassium to the soil, as a result of that, it also captures carbon via something called Enhanced Rock Weathering. Unfortunately, it's not something that the market seems to care at the moment. The way we think it makes the most sense for investors to think about it comes from regulatory requirements. For example, Brazil is one of the world's largest exporters of cotton. In two more years, I think, the European Union will demand that every T-shirt, whatever it is, sold in Europe will need to show what the carbon footprint is. There is some pressure already in the production chain to lower this carbon emission.
That's how, you know, we can show that to the farmers, how by switching to our product, they have this other advantage by reducing CO2. The other one with Enhanced Rock Weathering, which is a very complicated new way of capturing carbon, that has a significant interest from big players like Microsoft on sourcing carbon credits via this technology. That's something else which we are exploring in spite of its challenges. I'll be perfectly honest with you, when we look at the company, fertilizer is challenging.
Yep.
It's a lot of headwinds. Enhanced Rock Weathering, carbon, it's great, and we get very excited, but very hard to monetize. Where we look at what we're doing and what's happening, and we see a phenomenal pipeline of news and the same opportunity for repricing, which we saw as we were taking our mine to production, is what we're doing with rare earths right now, Robert.
Yep. Agreed. Let's kind of wrap things up here. What are the key milestones on that rare earth that we should be looking for to summarize over the next six to 12 months here?
A lot of drilling results. In October, when we announced the discovery, we laid out our work program, which we have been executing ever since. We've been able to validate already a few targets. What you should be looking at every time we put out a press release with our drilling results is how much bigger the mineralized structure is becoming. We've split it now in eight targets, which all together represents about 5,000 ha of mineralized clay for rare earths. You should be looking at this validation, how big this resource is starting to shape up to be. You should also be looking at the combination of rare earth elements which we have there.
Hopefully, we're going to carry on repeating the same phenomenal results we're seeing for Nd, neodymium, Pr, praseodymium, Dy, dysprosium, and Tb, terbium. You expect you would like to see that sort of high grade results to continue to be validated. Two months, three months from now, we should be getting ready to put out this resource report, and hopefully it's going to be big. Hopefully it's going to be one of the biggest resource reports, magnetic rare earth oxides resource in the world. We're very excited. Something else very important. We're drilling from surface. When we look at our drilling results, it's like from surface down to 10 m, a lot of the drilling results we have so far.
Very easy to mine, very cheap to mine, highly weathered material, very high grades of magnetic rare earth oxides in your leachate. In the second half of the year, it all becomes engineering. A lot of news, a lot of updates as we progress our preliminary economic assessment. Hopefully with some fantastic Christmas news for everyone with an amazing preliminary economic assessment and a lot of excitement to plan for the following year.
All right. Very good. Well, a lot to be on the lookout for here. Cristiano, thank you so much for your time here and your participation in today's event here. Thank you to everybody here for watching. If there are any questions, or you'd like to schedule a meeting with Cristiano here, please shoot me an email. That's Blum, B-L-U-M, @lythampartners.com. Again, we have additional presentations and fireside chats coming up here, so please stick around for more. Again, Cristiano, thank you so much for your time today.
My pleasure. Great to be here. Thanks a lot.
Cristiano, again, thank you very much for your participation in today's summit. Again, quick reminder, all of our webcasts will be available on demand, so if you missed anything today, please visit the link after the event to access the recordings. Okay. Up next, I'm going to sit down with Brian Ostroff of Arianne Phosphate. Please stick around for more.