Harvest Minerals (LSE:HMI) has bagged a game-changing $2m sales contract today for its multi-nutrient natural fertiliser, KPfertil. The firm rose 11.4pc, or 2p, to 19.6p after reporting that it has sold the fertiliser, produced at its Arapua Deriliser project in Brazil, to Agrocerrado, a major fertiliser and agriproducts distributor in the region.
Agrocerrado has agreed to buy an initial supply of 36Kt of KPfertil at $60/t, with delivery coming in early May this year marking a major step towards profitability for Harvest. Supply will come from existing stock already produced at Arapua, where annual capacity is being expanded to 320,000 tonnes. This means today’s deal only covers around 10pc of installed capacity.
Harvest has previously reported all-in production costs of $7t at Arapua, meaning today’s deal will give the firm a profit of $53/t, or an 88pc profit margin. This equates to a profit before tax of $1.9m, with further orders from Agrocerrado potentially in the pipeline – the company said additional discussions regarding sales are on-going. Another important point is that the sale was agreed prior to the registration of KPfertil with the Ministry of Agriculture (MAPA), which is currently being processed and is expected to complete by the end of the month.
With certification from MAPA enforcing KPfertil’s position as a completely natural product, potentially increasing local demand, today’s deal could be just the start for Harvest.
Harvest’s executive chairman, Brian McMaster, said, ‘With a sales value in excess of US$2m, this is truly fantastic news and proves that we have a commercial product that is in demand in one of Brazil’s premier agricultural belts. Agrocerrado is one of the largest established fertiliser and agribusiness distributors in the region; this agreement not only underpins the opportunity in the local market for Harvest, but fully justifies our decision to expand our production capacity, which will stand at 320,000 tonnes annually by early Q2.’
‘As we stated at the start of the year, with the de-risking of our project over the past two years, the focus is now on sales and revenue growth as we transform Harvest into a profitable business with the aim of providing significant returns to all our shareholders. The signing of this contract is another major step towards this goal and I’d like to thank all our team in Brazil for their diligence during this process and look forward to reporting further updates as we look to maximise distribution.’
Author: Daniel Flynn
The author of this piece does not own shares in the company mentioned