Good afternoon. Welcome to Brazil Potash Investor Conference Call. At this time, I would like to turn the conference over to Ashish Gupta, Investor Relations. Thank you. You may begin.
Hello, every`one, and welcome to Brazil Potash's Business Update Call. Joining me on the call today are Matt Simpson, Chief Executive Officer; Mayo Schmidt, Executive Chairman; Adriano Espeschit, President of Potássio do Brasil, our wholly owned local subsidiary in Brazil; and Stan Bharti, our Advisory Board Chairman. I would like to remind you that during today's call, management's remarks may contain forward-looking statements which are subject to risks and uncertainties. These statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. We refer you to all risk factors contained in the press release and in filings with the Securities and Exchange Commission for more detailed discussion of the factors that could cause actual results to differ materially from those projections and any forward-looking statements.
The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances except as may be required under applicable securities laws. At this time, it is my pleasure to introduce Brazil Potash's CEO, Matt Simpson.
Thank you, Ashish. Good afternoon, everyone, and welcome to Brazil Potash's Investor Call today. I want to provide an update on the significant progress we have made since our IPO in November. Following remarks on our vision for Brazil Potash and the value creation opportunity we see ahead, I will turn it over to our recently appointed Executive Chairman, Mayo Schmidt, to discuss some great additions recently made to our board. Our President of Brazil Potash, Adriano, will then provide an update on construction and recent commercial contracts. I will then wrap up with an update on funding plans and the current potash market outlook. Before getting into our vision, I want to reinforce that our Brazil Potash Autazes Project remains on track.
Thanks to the hard work and dedication of our team, we continue to achieve some key milestones, advancing the project operationally and commercially while supporting communities where we operate and further strengthening our relationships with government officials, the local Mura Indigenous, and population, all of whom we met just last week while at site in Brazil. Turning to the opportunity, we continue to believe Brazil Potash represents a compelling investment at the intersection of food security, logistics optimization, and sustainable agricultural development. Brazil Potash is developing what we believe will be a transformative domestic source of potash fertilizer in Brazil, which is one of the world's largest and fastest-growing agricultural producers.
While Brazil has established itself as a critical player in global food security with over $167 billion of agricultural goods exported per year, it faces a strategic vulnerability in that the country imports 98% of its potash need, with nearly half coming from regions that are currently impacted by geopolitical tensions. Our Autazes project aims to address this challenge by developing one of the world's largest undeveloped potash basins, strategically located in Brazil's Amazonas State. We plan to produce 2.4 million tons of potash annually, which could supply approximately 17% of Brazil's current demand. The project has received all key permits required to commence construction and benefits from strong government and community support, including recent agreements struck with the Mura Indigenous. What truly differentiates Brazil Potash is our logistics cost advantage.
Our in-country location, only five mi from a major inland river system, enables us to deliver potash to Brazilian farmers at a cost that is lower than just the transportation cost alone for our competitors, who often have to ship product more than 9,000-12,000 mi to reach a Brazilian farmer. By utilizing existing river barge networks through our partnership with the Amaggi Group, which is one of the largest agricultural companies in Brazil, we expect to reduce delivery costs by roughly 71% as compared to imported material. The project's economics are compelling. We anticipate generating approximately $1 billion per year in EBITDA at full production, with an initial 23-year reserve life that has substantial expansion potential.
Looking ahead, we are focused on executing several near-term value drivers, such as securing additional offtake agreements, carving out the power line construction, which is the only major infrastructure that needs to be built, and advancing early works construction. We believe Brazil Potash is well positioned to create substantial shareholder value while strengthening Brazil's food security and agricultural sustainability. I will now turn it over to our Executive Chairman, Mayo Schmidt.
Thank you, Matt. I was aware of this unique asset through my leadership role as Chair and CEO of Nutrien. Importantly, this discovery of a world-leading reserve of a critical fertilizer, potash, in Brazil, immediately adjacent to the major production area, the state of Mato Grosso. Brazil, a country that is both 98% dependent and the world's leading importer of potash. For me, it was an opportunity to address global food security while providing investors and farmers market-leading economics. Today, the world's growing population continues to experience hunger. Thus, Brazil Potash is a critical project. My professional history includes 15 years as a commodity trader and operations manager with General Mills, responsible for collection and logistics of agriculture production, domestic and offshore. I went on to become President of ConAgra Grain Canada, establishing international grain trade and fertilizer operations across Canada.
In the year 2000, I undertook a new role as CEO and Chief Restructuring Officer of a historic Canadian agriculture company. I was the architect of building Viterra, growing from a regional co-op to become a global diversified agriculture leader in 14 countries and supplying over 40 million metric tons of production. A leader in manufacture and retail of fertilizers and grains, a listing on the TSX and the ASX, global supply chain regional to over 50 countries from areas of surplus to areas of need. Viterra's life cycle was from a $220 million enterprise value to over $7.35 billion in 11 years, achieving a 60% premium over the 20-day moving average share price. I also led the IPO of Hydro One on the TSX, the Canadian leader in transmission and distribution of hydro and nuclear.
While at Agrium's board, I chaired the merger of equals with PotashCorp, a $16.7 billion transaction. At integration, I was asked by the merged board to chair Nutrien. After a number of years chairing the board, at the board's request, I acted as the transitional CEO in 2021. Post-Nutrien, I was co-investor and chairman of VersaCold, Canada's cold storage, food, logistics, and transportation business from coast to coast. Within 18 months of ownership, we sold that business to Lineage for a three-times multiple from $500 million to $1.5 billion. I might also mention recently at Brazil Potash, our board was able to attract Christian Jörg. Christian has three decades of leadership in agriculture commodities, international trade, ag finance, and food security. Currently, he is CEO of VA Intertrading, Austria's leading trading company.
Formerly SVP at SALIC, the Kingdom of Saudi Arabia's food security for the Middle East, a supply chain where he invested nine years of his career. He led the development and acquisition of some of the world's leading agriculture production and infrastructure for SALIC. I know Christian's skills well, having attracted Christian to Viterra as Managing Director for Europe, the Middle East, and Africa. Christian came to Viterra from UBS, Geneva, and London, where he led commodity trade finance. He is the past CEO of MAG Commodities. He was Vice President and Managing Director of Collateral Management, SGS. Christian was a great contributor as we grew together Viterra from a $40 million EBITDA to over $700 million during our tenure. Now, I was drawn to this unique opportunity, noting that the world is reliant on Brazilian agriculture production.
Brazil Potash is the first potash mining project in the Potash Basin with several competitive advantages. Unique location, closest to the largest farming region of Brazil. The economics and cash production are undeniable and compelling. I'm very excited about the prospects of this critical project. We have developed a team of experts deeply invested in the success of this project. BPC represents the lowest all-in delivered cost for potash to farmers in Brazil. Adriano will now provide an overview of the exciting developments happening at site in Brazil.
Thanks, Mayo. I will give you guys a little bit about the plans for 2025. We had started the construction last year with some works on the field, but the big works will start this month with the archaeological services and also the rescue of the fauna and also the vegetation suppression. Those are the most important topics that we will work on, and they are part of our license for the project in Autazes. We also signed an MOU with the Swiss-based Keytrade to sell to them up to 1 million tons of our production over several years. In the short term, we will have more details on that, but for a while, it's only an MOU. We also are working to speak with some groups to carve out the power line construction as part of a reduction on our CapEx in around $200 million.
To finalize it, we are continuously working together with the Mura people, the Indigenous that are close to the project, and we had finalized with them a preliminary agreement to evolve the Well-Being Mura Program. Back to you, Matt.
Thank you, Adriano. I will now talk about some of the work currently ongoing to fund construction. Out of the $2.5 billion required to build the project, we anticipate receiving about $1.7 billion in debt, about $200 million from carving out the power line construction, roughly $150 million from the royalty, and the balance will come into equity. Some of the offtake contracts that Adriano mentioned that we're currently looking to sign up are extremely important because they provide comfort to the debt providers, which would largely be banks, international finance institutes, and export credit agencies, because they want to know who's going to be buying our product, are they a creditworthy counterparty, and what are the pricing terms going to be. We're also very actively lobbying Brazil's government to fund a portion of the construction.
It could be through their government-backed agency, BNDES, or other agencies, given that potash is deemed to be a critical mineral in Brazil, as it is in several other countries around the world. We've also had very recent meetings with several international finance institutes that are extremely active in Brazil and showing strong interest in getting behind the funding of construction of this project. The really interesting part with these international finance institutes is that they can provide you with much longer tenor or the duration of your loan as compared to a commercial bank, in some cases more than two and a half times at much lower interest rates.
We're also now having conversations with some anchor equity investors both in Brazil, but also looking abroad to places such as the Middle East, and this is largely being organized by our new Director, Christian J örg, who, as Mayo mentioned, has extensive experience having worked for SALIC, which is part of this Kingdom of Saudi Arabia's global food security program for over nine years. In terms of carving out the power line for construction financing, which is again about $200 million, we've also had several discussions recently with companies that construct power lines that could also self-fund that construction, and there's also several infrastructure-focused funds that just invest in this type of product. I'm now going to talk a bit about the potash price outlook, as there's lots happening in the sector that's quite exciting.
Back in November of last year, the Belarusian government announced that they want to collude with Russia in the selling of potash. This is very significant because between Russia and Belarus, they supply about 42% of the world's potash. Right now, you largely have three countries being Canada, Russia, and Belarus that control 80% of the world's potash, and in Canada, there's actually a group called Canpotex, where both Nutrien and Mosaic sell their potash together. If the Russians and the Belarusians agree to join forces in the marketing, you'll now have only two groups that predominantly control 80% of the world's potash supply. Also very topical, only about two weeks ago, the Belarusian government announced publicly they're going to cut about 1 million tons of production over the first half of this year, so that bodes very positively for prices.
Very recently, as everyone is, I think, quite aware, because it's been so much covered in the news, the United States is contemplating 25% tariffs against Canada. The reason this is so significant is that the United States consumes about 10 million tons a year out of a market of about 70 million, so they're a very large consumer, but they import 95% of their potash, with over 80% of it coming from Canada and the balance coming from Russia. If these tariffs are placed onto Canada, given that there's a lot of inland supply transportation using rail networks from Canada to the United States, it's going to be hard to displace that tonnage, which means those prices will get pushed on to farmers and impact grocery prices for everyday consumers.
There's also potential that on February 13th or 14th at the Munich Security Conference, the United States will announce their plans for peace in Ukraine. The reason this is so significant is it's expected that part of those plans could entail sanctions against Russia if they don't come to the table and negotiate a peace settlement with Ukraine. How, again, this is relevant is that the Russian government or producers in Russia supply about 20% of the world's potash, again, out of which almost 20% comes into the United States. If the United States sanctions or puts tariffs on both Canada and Russia, it could have a very dramatic effect for potash prices globally. With this, we'll now turn it over to the floor for any questions from listeners.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue, and for participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. Once again, that is Star one to join the question queue. We will pause for a brief moment to poll for questions. With no questions at this time, I would like to turn the call back over to Ashish Gupta, Investor Relations, to conduct the next segment.
Operator, operator, this is operator, this is Stan Bharti. I'm the founder of Brazil Potash. I just want to know how many people on the call?
I don't have that total available to me at this time.
Okay, last time we had a big audience, so I'm surprised there's no questions. Guys, to wrap this up, first of all, thank you for dialing in. I appreciate it. I wanted to give my two cents' worth that I know that there's been some pressure on the stock, and what I wanted to mention to you was that about 70%, I don't have the exact number, 60%-70% of the stock, as we all know, is locked up. We did have a couple of financings that we did with a Reg filing where we have 7,000 shareholders who invested between a few thousand dollars to $1 million, and some of those shareholders, obviously, we have not been able to reach them. We keep trying.
It's been difficult, and the company that helped us raise this capital is not around anymore, so it's been somewhat difficult, but we are very focused on shareholder value. We're very focused on building this company. We're already in development, and I just want to personally assure you that this project is one of the best potash fertilizer projects in the world. It's taken us a long time to get us here, and now that we're here, we're going to make sure we build it, and we will deliver shareholder value. We appreciate your patience and understand your frustration with the stock price. Please give us some time, a few months, to get everything together as we build this company. We've added Mayo to the board. We've got Christian on the board now.
We're doing some strategic discussions in Brazil, so we're hoping that we'll be able to deliver to you some very good news. I'm happy to ask any questions if anyone wants to have a question for me.
Great. Thank you, Stan. This is Ashish Gupta. We did receive a number of questions by email, so we're going to run through some of those right now, if that's okay.
Sure. Yes.
Yes. Great. Thanks again, Stan. As I mentioned, we had invited all investors to submit questions as part of our Ask GRO campaign. We did have a very high level of participation, and I want to thank everyone who submitted a question. In the interest of time, we'll be focusing on the most commonly asked questions. I think, first off, Brazil is the world's largest importer of potash, yet relies on 98% of supply, much of it from countries currently at war or under sanctions. Matt, can you explain how Brazil Potash's domestic production capability would help address this vulnerability for Brazilian farmers?
Yeah, sure, Ashish. By having domestic production of potash in Brazil, it ensures Brazilian farmers' supply of potash is not exposed to geopolitical events such as tariffs, sanctions, or war, as we've seen lately, that have caused massive volatility and actually caused prices to quadruple back between the period 2021 and 2022. It also mitigates against port strikes, rail strikes that we've also seen, in particular in Canada, over the last few years.
Great. Thank you for that. Our next question relates to the cost advantage. The question was, your delivered cost advantage appears substantial versus imported potash. Can you help us understand the key drivers of this advantage and why you believe it's sustainable?
Sure. I'll take that one also, Ashish. It really all boils down to transportation logistics in that not only is Brazil Potash in Brazil, but we're only five mi away from a major inland river system that we use to transport our potash using river barges, and those river barges are effectively our highway. Imported material needs to travel somewhere around 9,000-12,000 mi, typically initially by rail, whether it comes from Saskatchewan or Russia, and then ocean vessel in the final leg by truck taking over 100 days. It's interesting when you look at the cost curve, the transportation cost for importers is about two and a half times what they spend on mining and processing.
Great. This one kind of touches on recent commercial progress. Can you tell us about the Amaggi offtake agreement and the recent MoU announcement with Keytrade? How would this help you with your financing that you had mentioned on the call?
Yeah. The reason that the offtake agreements are so important is that groups that are going to provide debt, so major banks, export credit agencies, international finance institutes, definitely take comfort in knowing that there's a credible counterparty to buy our product, along with knowing what the pricing terms are going to be. The contract that we signed with Amaggi is for 15-17 years at the CFR Brazil market price, plus inland freight, which adds about $35-$50 to our benefit, minus a single-digit price discount. We also expect to sign a similar agreement with Keytrade and are working with a third party such that our goal over the coming months is to have about 2 million-2.2 million tons of our 2.4 million under long-term contract.
The reason why I'm not making it 100% is we do want to keep a small amount of spot sales available to provide flexibility for any maintenance outages or production upsets.
Great. Thank you for that color, Matt. The next question relates to the ESG. The environmental aspects of this project seem compelling, particularly around emissions reduction. Could you elaborate on the ESG benefits and how they align with Brazil's climate goals?
Adriano, why don't you take that one?
Yeah.
Okay. I will take this one. We did an independent study, and the Autazes potash project will reduce the amount of CO2 emissions in around 1.2 million tons per year just because of the Brazilian energy metric. We have here in Brazil 84% renewable energy compared with Canada that burns gas or Russia that has coal to generate their power. Another 200,000 plus tons per year will be reduced, avoiding the transport by rail, ocean vessels, and trucks for more than around 12,000 mi. That is an important contribution for Brazil's climate goals.
Thank you, Adriano. Just to paraphrase.
If I can add, Ashish, if I can add, what people are listening, we are the greenest potash project being developed in the world because all our energy is sustainable. Almost all of the potash projects use either natural gas or diesel or coal. All our energy is sustainable. That is a very big factor. We will supply the greenest potash to the farmer in Brazil in small quantities and will sell it in reais, which is the local Brazilian currency, and the farmer does not have to worry about paying in dollars, which is what they have to do when potash is imported. Not only does this project help Brazil in getting the potash at a low price, at a competitive price in the local currency, it also helps eliminating the middleman who sometimes marks up the potash.
Overall, this project single-handedly is going to be a game changer for the agriculture industry of Brazil, and we will also be a disruptor in the potash industry of the world by being in the biggest market and supplying the competitively potash in small quantities to farmers in a green ESG way.
Great. Thank you for that added color, Stan. I appreciate the response, Adriano. Our next question relates to milestones. With the construction permits now on hand and the recent additions to the board with the new members that Mayo flagged earlier, what are the key milestones investors should be watching for over the next year to two years?
Yeah, I'll take that one. There are several key milestones that are going to be delivered on this year as we continue to advance the project, and that's in addition to some of the major announcements that we've already made, such as having Mayo and Christian join the board. We did announce recently a memorandum of understanding with Keytrade. We do expect to convert that to a binding contract. There are also pretty advanced discussions with a third group also on an offtake contract, and as mentioned earlier, those are quite important for securing future debt for construction. We are also speaking to a number of different groups to carve out the construction of the power line and the cost to build that line, which will carve out about $200 million. That is something we are also working towards announcing this year.
Initiation of due diligence work by some of those international finance institutes and export credit agencies is going to be well progressed. Geotechnical pilot hole for the shaft sinking. We are also now working to build an access road to the project area and provisionary setup of our port. Lots of news coming out.
Very exciting. I know Stan touched on this just a little bit, but the next question we got was just about how invested management and the board is in the company's success. Could you give us a little bit of color there?
Sure. I'll start this one, and Stan, by all means, add if you'd like. The founders' board and management own about 11% of Brazil Potash, so we're very, very well aligned with our investors to make this company successful. It's pretty amazing to take a person like Mayo Schmidt, who was the founder of Viterra and then merged PotashCorp with Agrium to form Nutrien. These are absolute gorillas that have multi-billion dollar market caps and have him join a junior like us, and it just shows his conviction to this project. Stan, anything you'd want to add?
Sorry. Yeah. All I want to say is this project, as I mentioned before, is a game changer, and the potash market is a very thin market with three or four big players. We are the disruptors in this market, and as disruptors, we will change the way the potash market works to the better for the world and for the farmers in Brazil and generally for food security. It is very important from that point of view. The other thing is that projects like this, all the big companies are looking at us because, frankly, listen, I mean, we're small compared to all the big boys, and it's been tough, but here we are now building the project, taking it to the next level, and I think you'll see the results and the milestones we've lined up. The strategic things like Matt mentioned, the offtake agreements.
We're aggressively working on the debt package with several banks that should be announced soon. We've already mentioned that we have a royalty with Franco-Nevada. We're talking about offtake partners for our power line. All that stuff will come into play in the next few months. We think this project is really, in the fertilizer industry, priority one.
Great. Thank you for that. Matt, you kind of already covered this to some extent, but the question we received was whether you could elaborate further on the funding strategy for the development of the Autazes project. What are you looking at in terms of specific next financing milestones?
There are really four parallel paths that we're working on to secure funding for project construction. The most critical one is to get an anchor equity investor, and this likely would be at the project level, which just means it wouldn't be shares that would be added to our Top Co or the traded company level. This would be down in Brazil. The thinking behind that is that if we're going to bring such a large equity investor in, we want to keep the shares nice and tight at the traded level to maximize return for investors. We're talking right now to a number of massive agricultural and natural resources companies both inside and outside of Brazil.
We're also speaking to some sovereign wealth funds, and that's really where Christian's been extremely helpful, and then to some insurance, pension funds, family offices that are long-only, and that's where Mayo also brings a pretty unique set of relationships. In addition to those anchor equity investors, we're also talking to a number of different construction companies, and Adriano's really spearheading this work that could invest in exchange for future work or take a portion of their fees in shares. We've also advanced discussions with some of those international finance institutes and export credit agencies for the debt. As I mentioned a bit earlier, the carve-out of the $200 million power line is also groups that we're having fairly positive discussions with.
Thanks, Matt. Our final question relates to the timeline for the first shipments. You mentioned you were on track on the call timewise, but could you provide some more color, please?
Adriano, why don't you take that one?
I mean, Adriano, I'm happy to do so too, but at a high level, we expect to be in early first phase production by 2028, and that's our goal, and we're aggressively pursuing that. Adriano, maybe you can explain the detailed timeline.
Okay, Stan. We are working on the full funding for construction, and we think that, as Stan said, that we can start to extract some ore from the underground mine by 2028, processing it during 2029, and probably we'll have the ramp-up ongoing in early 2030.
Great. Thank you so much, Stan, Adriano, and Matt. That concludes the Q&A portion of today's call. I'll turn the call back to Matt for some closing remarks.
Again, I'd like to just thank everybody for participating in the call tonight. As Stan already mentioned, of course, we're not happy with how the share price has moved since I started trading on the company, but rest assured, we're working extremely hard to get the share price up. We've been very active in putting out some important press releases, adding to our board, starting the construction of the project, and this whole week, we're actually marketing to a number of investors throughout Europe. With that, thank you everyone. Have a good night.
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.