NI 43-101 Preliminary Economic Assessment - Verde Potash

Verde Potash Plc 15-1
Cerrado Verde Project
NI 43-101 Preliminary Economic Assessment
15
Market Studies and Contracts (Item 19)
15.1 Market Studies
15.1.1 Introduction
The goal of AgroConsult study is to analyze the economic feasibility of using ThermoPotash
(8% K2O) as a source of potassium for fertilizing activities in the states of Minas Gerais, Mato
Grosso, Mato Grosso do Sul, São Paulo, Paraná, Goiás and Bahia.
In order to determine a market potential of ThermoPotash, was conducted a comparative analysis
of its pricing competitiveness in relation to traditional raw materials. The project looked at
possible uses for ThermoPotash as a source of potassium in the main NPK formulas most
commonly used on each crop (soybeans, cotton, sugarcane, summer corn, second crop corn, dry
rice, irrigated rice, beans, potatoes, coffee, pasture, reforestation, wheat, sorghum and fruit and
vegetables) in each state.
Today, Brazil is the world's fourth-largest consumer of fertilizers. In 2009, 22.5Mt of fertilizer
were used in Brazil and this figure is expected to rise to 23.58 million in 2010. (Source: 2009
Statistical Yearbook of the Fertilizer Industry from ANDA – Associação Nacional para Difusão
de Adubos – Nacional Association for Promotion of Fertilizer) Fertilizer application is vital for
the performance of the farming industry and is likely to remain important for the foreseeable
future. However, more than half of the fertilizer consumed in Brazil is imported, which
represents a fundamental weakness for local agribusiness. There is an even greater dependence
on potash, which is supplied as potassium chloride, more than 90% of which has to be imported.
Since 2008, the government, the private sector and Brazilian agribusiness leaders have been
playing closer attention to this issue. There is clear agreement that Brazil needs to reduce its
dependence on imported fertilizers. To do so, Brazil needs to take two steps: expand raw
material production and develop new sources of nutrients.
In this case, introducing ThermoPotash as a new source of potassium on the Brazilian fertilizer
market is a timely move, in line with government, private sector and producer concerns.
Was used the forecast data for 2010 fertilizer deliveries estimated at 23.58Mt of product and 3.97
million K 2 O, 82% of which is consumed as NPK formulas and 18% on its own. Using the same
information, the states included in this survey represent 76% of the fertilizer market and 76.1%
of Brazilian K 2 O consumption.
The following sections will provide information on the Brazilian agribusiness and fertilizer
markets, the methodology adopted these results by the survey as well as the price and market
potential for ThermoPotash in each state.
15.1.2 Methodology
The goal of this study is to analyze the economic feasibility of using ThermoPotash (8% K 2 O) in
the main fertilizer formulas marketed in Minas Gerais, Mato Grosso, Mato Grosso do Sul, São
Paulo, Paraná, Goiás and Bahia.
To do so, we evaluated the fertilizer markets in the selected regions during 2010 and estimated
fertilizer delivery volumes by crop and nutrient (N, P e K 2 O). The data was taken from the
AgroConsult database, which is frequently updated with market information.
SRK Consulting (U.S.), Inc. September 16, 2011
Cerrado Verde_NI 43-101 PEA_343500.020_007_KG