Low capex, high margin, Brazilian fertilizer production
Harvest Minerals’ Arapua project is a multi-nutrient fertilizer deposit lying at surface. First production is fully funded and expected in November, with the aim of producing and marketing an initial 50kt from an area called Maximus.
This near term production is welcome, however our investment case is based on a larger scale operation. Assuming Maximus is successful, Harvest will develop new mining areas for minimal capital cost. The Arapua land package covers 150km2 and should contain at least 15mt of mineable and marketable resources.
For an estimated $7/t Arapua material can be mined and crushed, to be sold at the mine gate. Helpfully, it is located in one of Brazil’s main agricultural regions which has poor soil and currently imports most of its fertilizer needs. This should ensure strong local demand and attractive pricing. A sales price of $50/t, which we believe is achievable, would give a gross profit margin in excess of 80%.