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Harvest Minerals bags distribution deal with major Brazilian fertiliser plater (HMI)

26 Jul 2018 | by: James Moore

Harvest Minerals (LSE:HMI) saw its shares rise 6.4pc to 18.9p today after revealing that it has secured a deal with one of Brazil’s largest fertiliser companies to sell its flagship product KPfértil across the country. Harvest’s strategic alliance agreement with Geociclo will see its products sold to new agricultural region across Brazil, extending the firm’s existing market penetration.

It will be given access to Geociclo’s Ministry of Agriculture (MAPA) accredited research facility – which is expected to speed up product development – and can store large amounts of fertiliser at Geociclo’s facilities. Geociclo is established in the Brazilian fertiliser sector and has worked with international organisations like the Agricultural Research Company of Minas Gerais and the Massachusetts Institute of Technology.

Its facilities are located in Uberlândia in Minas Gerais, Brazil, the country’s largest agricultural region, approximately 450km from Harvest’s Arapua project. This location is outside of the geographic area targeted initially by Harvest’s sales and marketing functions.

Today’s news continues a strong recent run for Harvest, which announced last week that it has secured the much-anticipated government approval needed to register KPfértil as a remineraliser. Earlier this year, the business also signed a game-changing $2m sales order for KPfértil in a significant move towards profitability. The deal saw substantialBrazilian fertiliser and agriproducts distributor Agrocerrado buy an initial supply of 36Kt of KPfertil at $60/t, with delivery coming in early May this year.

As we wrote at the time of the deal, Harvest has previously reported all-in production costs of  $7/t at Arapua, meaning the agreement will provide a profit of $53/t, or an 88pc margin. This equates to a gain before tax of $1.9m, with further orders from Agrocerrado potentially in the pipeline – the company said additional discussions regarding sales are on-going.

Brian McMaster, executive chairman of Harvest, said today: ‘Geociclo is an internationally recognised agricultural company and we believe that this alliance will significantly enhance our sales channels and complement our existing arrangements with other parties. As market leaders in the Minas Gerais region, Brazil’s largest agricultural region, Geociclo have an established sales team that will now work to promote KPFértil.  Additionally, the Agreement provides further benefits, namely Geociclo’s extensive research and development facilities which our team will utilise to broaden our range of products.  Geociclo’s existing MAPA accredited manufacturing facilities, capable of blending and producing these new products, allows us a fast-track to market.

‘With the recent receipt of MAPA approval for KPfértil, we will continue to focus on sales and our objective of expanding production capacity at Arapua to build revenue and shareholder value.’

Author: Daniel Flynn

Disclosure: The author of this piece does not own shares in the company mentioned

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