Harvest Minerals (LSE:HMI) has announced that a delay in the Brazilian registration of its natural fertiliser KPfértil is not impacting sales of the product. Harvest announced that it has submitted all the requested information to Brazil’s Ministry of Agriculture (MAPA) to register KPfértil as a remineraliser and is awaiting confirmation of approval. MAPA is expected to conduct a site visit to Harvest’s Arapua project later this month, with registration expected shortly afterwards.
Executive chairman Brian McMaster reiterated today that the delay had not impacted Harvest’s ability to sell the product.
He said: ‘Although the confirmation of KPfértil as a remineraliser hasn’t been as efficient as we would have liked, it has not impacted our ability to sell our product. I’d again like to thank all our shareholders for their continued support.’
Harvest’s shares had fallen 3.5pc, or 0.7p, to 19.2p today as at the time of writing. This temporary weakness could be a good buying opportunity following the news last month that Harvest has signed a game-changing $2m sales order for KPfértil in a significant move towards profitability. The deal saw major Brazilian fertiliser and agriproducts distributor Agrocerrado buy an initial supply of 36Kt of KPfertil at $60/t, with delivery coming in early May this year. Supply will come from existing stock already produced at Arapua, where Harvest is expanding annual capacity to 320,000 tonnes. The growth means the deal only covers around 10pc of installed capacity.
As we wrote at the time of the deal, Harvest has previously reported all-in production costs of $7/t at Arapua, meaning the deal will give the firm a profit of $53/t, or an 88pc 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 deal was agreed before the registration of KPfertil with MAPA.
Elsewhere in today’s update, Harvest said it had submitted a further application to MAPA to register Arapua as a fertiliser producer. Although this will not provide any immediate benefit, it could save the company time if it decides to register KPfértil as a fertiliser as well as a remineraliser. The business also said it had begun work on the environmental report for Arapua, following the approval of final exploration report for the site at the end of last month. It will submit the environmental report to the Brazilian Department of Mines as the final part of the firm’s application for a full mining licence. In the meantime, Harvest continues to operate under the existing environmental licence for trial mining granted in December 2015 for four years.
Harvest also said it has now got all the necessary equipment and machinery ready to take annual processing capacity to more than 320,000 tonnes of KPfértil. The material is due to arrive on site next week for full installation this quarter. The business also announced that it has expanded its sales and marketing team and has provided Agrocerrado with commercial and technical training on KPfértil.
McMaster added: ‘We have continued to gain momentum through the first quarter and now into the second. The expansion to both our sales team and processing plant provides us with the capacity to continue to grow our sales and revenues, which remains a key focus for 2018.’
Author: Daniel Flynn
Disclosure: The author of this piece does not own shares in the company mentioned