Minor certification delay at Harvest Minerals presents buying opportunity following $2m sales order (HMI)

By James Moore


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Harvest Minerals (LSE:HMI) saw its share price dip to 19.5p today after announcing a slight delay to the certification process for its multi-nutrient fertiliser product KPfertil. With the firm recently agreeing a game-changing $2m sales order for the fertiliser, this temporary weakness could provide a decent buying opportunity.

In the announcement today, Harvest said the application to register its product has now been processed by the Ministry of Agriculture (MAPA) in Brazil.  MAPA is now required to conduct a site visit to Harvest’s Arapua project later in April, with registration expected shortly afterwards.

Harvest’s executive chairman Brian McMaster said the certification process for KPfertil as a remineraliser has ‘taken longer than we initially expected’. However, he added that there has been no issues with KPfertil itself and said the delay had not impacted the firm’s day-to-day ability to produce and sell KPfertil. ‘Our focus is now on growing sales and revenues, and I look forward to providing further updates,’ he added.

Following the news, Harvest’s shares fell 7.3pc, or 1.5p, to 19.5p. But with the company earlier this month signing a game-changing $2m sales order in a significant move towards profitability, today’s price could present a buying opportunity. 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 annual capacity is being expanded to 320,000 tonnes. This 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 $7t 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.

With certification from MAPA enforcing KPfertil’s position as a completely natural product, potentially increasing local demand, the deal could be just the start for Harvest. Today’s delay does not sound serious enough to derail these attractive prospects, so those who still have faith in Harvest long-term may want to consider topping up before any other deals are announced.

Author: Daniel Flynn

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


In this article:

Author: James Moore

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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