Verde Potash heats up on Brazilian thermopotash - Ahead of the Herd

AUTHORIZEDREPRINTwww.northernminer.comAugust 1-7, 2011 • VOL. 97, NO. 24 • SINCE 1915more market development.”The company needed to develop a marketbecause, while this plentiful resourcehas been known since the 1960s, no onehas actually managed to sell any of it.But <strong>Verde</strong> hopes to change that bytransforming the otherwise useless glauconite-basedrocks into potentiallyvaluable “Thermopotash.” Decades ago,Vale (vale-n) looked into the potassium-richrocks at Cerrado <strong>Verde</strong> as apotential source of fertilizer, and found itcould create a potash alternative by cookingthe rocks at high temperatures, andadding limestone. In this way, Thermopotashwas born.The product has a lower potassiumoxide grade than more conventional potash,but it is alsolow-chlorine, requiresfarmers use less limestone on their fields,and its low solubility means the nutrientsare released slowly and not washedaway by Brazil’s heavy rains.But the cost of roasting the verdete over1,000°C was high, and local demand wasrelatively low, so Vale abandoned theproject and let the claims lapse.The situations in Brazil and the potashmarket have since changed dramatically.The agricultural sector has exploded, andfertilizer prices have followed suit. Andthere, in the middle of this boom, sits<strong>Verde</strong> <strong>Potash</strong> and its sizable resource,waiting to reap the benefits of a welltimedland play.A PEA and market studies confirm that<strong>Verde</strong> could make a respectable profitfrom Thermopotash. A second technologicalbreakthrough — currently in theworks, and patent-pending — couldradically change the company’s fortunes.Humble beginnings<strong>Verde</strong> <strong>Potash</strong>, which recently changed itsname from Amazon Mining, did not beginas a potash company.When Veloso started the company in2005, he was intent on finding far morealluring gold. A native of Brazil’s miningcapital Belo Horizonte, he was familiarwith the country’s one-time status as theworld’s largest exporter of gold (albeit inthe 18th century), and wanted to makethe most of his local experience to advanceprojects.His experiences as a 24-year-old,however, were somewhat limited. Butfresh from completing an advanced degreein international business law, followingtwo earlier degrees, Veloso gatheredseed capital for the private venture, andwas ready to spread his entrepreneurialroots.“I’ve always been a bit of an entrepreneur,”Veloso says, recounting how heended <strong>up</strong> running a mining company atan age when most are trying to get hiredby one. “Mining was a part of my lifegrowing <strong>up</strong>, and it just came as naturalwhen I started.”The company found limited successwith early properties, but debuted on theTSX Venture Exchange with a $16-millioninitial public offering at $1.20 in late2007. A year later, the company tradedat barely 20¢, and change was afoot.Lured by a steep increase in potashprices, which in Brazil peaked at aroundUS$1,000 a tonne in 2008, Veloso ledthe company out of gold and into potash.He encountered strong resistance, butwith the company having already abandonedthree gold projects in 2008, Velosofought for the change in direction,and won. So the team got to work.“When potash prices started going <strong>up</strong>,”Veloso says, “we sat down with our explorationteam, and we carefully lookedat every single opportunity on potash inBrazil.”Veloso said the team found environmentaland social problems with the obviouspotash prospects in the AmazonBasin, and obstacles for properties surroundingVale’s Taquari-Vassourasmine in Sergipe state, the only active potassiummine in Brazil.The most interesting project turnedout to be a potassium silicate propertythat Ysao Munemassa, <strong>Verde</strong>’s currentexploration manager, had worked onwith Vale long ago. Munemassa pointed<strong>Verde</strong> to the property’s still unrealizedpotential, and helped identify the bestground. In return, he got a 3% royalty onthe property, which <strong>Verde</strong> can buy for$3 million at any time.<strong>Verde</strong> went on a staking rush to secureas much choice land as possible, evenclaiming some areas as diamond andphosphate licenses to avoid suspicion.The efforts proved wise. Vale swoopedin shortly after, and staked a large landpackage adjacent to <strong>Verde</strong>.On Nov. 24, 2008, <strong>Verde</strong> announced ithad amassed a 1,650-sq.-km land packagethat represented a “major Brazilian potashopportunity,” and a new direction forthe company. Shortly after, the company’sshare price hit an all-time low of 7¢.Out of NecessityThe next year was one of patience.<strong>Verde</strong> worked to prove <strong>up</strong> a resource, andprove to investors that verdete slate —and the Thermopotash made from it —were indeed worthwhile commodities.The company amassed a who’s who ofresearch and development partners. TheBrazilian government-sponsored Centrefor Mineral Technology signed on, as didthe research program Agrominerais. Embrapa,Brazil’s main agricultural researchcorporation, the University ofUberlandia, and the University of Lavraswould also all eventually research thepracticability of Thermopotash.The government of Minas Gerais,meanwhile, fully endorsed the idea, andpromised preferential tax treatment,s<strong>up</strong>port in financing the project and helpwith the approval process.Later in 2009, ArcelorMittal (mt-n)signed <strong>up</strong> to test Thermopotash, as wouldAgrifirma Brazil, a UK-based agriculturefirm, while Sekita Agronegocios, a leadingBrazilian agribusiness, signed on in2