Verde Agritech Ltd (NPK)

[alvik]

Verde Potash released a billion tonne resource at its Cerrado Verde potash project in Brazil, making for a massive increase over its previous inferred tonnage.

Verde Potash (TSX-V: NPK) catapulted its potash-containing resource base to over a billion tonnes with the release of a new resource estimate for its Cerrado Verde potash project in Minas Gerais State, Brazil.

The latest resource estimate includes the junior's first tonnage in the indicated category and expands now hefty inferred resources eleven-fold to over a billion tonnes. At a 7.5 percent cut-off, Verde reported 74 million tonnes @ 9.22 percent K2O in indicated resources and 1.1 billion inferred tonnes @ 9.37 percent K2O.

The latest resources, which are within 80 metres of surface, add to those Verde has already defined at the Funchal Norte deposit at Cerrado Verde where there are 105 million inferred tonnes @ 10.3 percent K2O.

Verde, which recently changed its name from Amazon Mining, is jockeying with other junior potash companies to break into Brazil's fertilizer market, widely expected to grow as the agricultural sector in South America's largest country expands.

Verde's strategy in part rests on convincing customers there's a place for products from its unconventional potash deposit, where mineralization comes as potassium silicate in rock rather than the more typical potassium chloride from salt-based mines.

Verde's initial plans are to produce a calcined pellet product called thermopotash - yet to be adopted by farmers, but which Verde argues has advantages over traditional potash products such as being longer-lasting - though it may also create a conventional potassium chloride product using a newly developed extraction process.

To convince customers to adopt its product, Verde has reached out to a wide range of partners in agri-business to test the effectiveness of thermopotash. Early results have been positive, Verde has reported.

Indeed, success for Verde at this point hinges on those tests more than proving resource size, according to Max Vichniakov, who covers Verde as a mining analyst for Octagon Capital.

Vichniakov noted in an email that while the resource estimate was sizeable, indicating "a significant upside of the Cerrado Verde project," its scope was expected.

Instead, Vichniakov said, "we believe commercialization tests of the ThermoPotash product (Thermo-K) become one of the prime catalysts for the project going forward," Vichniakov said

"So from here, we expect (Verde) to report the commercial test results from Embrapa, the Brazilian developer of fertilizer alternatives for sugarcane, and Sekita, the Brazilian vegetable producer, in Q4/11. We think those results will the focus and underline the economics of the project."


If Verde can convince farmers to buy its potash, then the now billion-tonne plus resource could guarantee supply many years down the road. As Verde's President and CEO Cristiano Veloso put it in a prepared statement: "It is evident that we have a long life asset that could supply Brazil's potash needs well into the future providing our development program succeeds."

According to Verde's latest project development timeline it expects to have a feasibility study out in early 2012, begin mine construction in the fourth quarter 2012, and commission a mine in late 2013.

In a scoping study released last year Verde made the case for an open-pit potash mine based on the much smaller Funchal Norte inferred resource. In it Verde outlined two mining scenarios, one producing 1.1 million tonnes a year of calcined potash pellets grading 8-10 percent K2O and the other at double that output.

In the larger mining scenario Verde estimated $218 million capital costs, $36 per tonne operating costs, and a two-year payback period.

But with a larger resource to work from now, Verde could contemplate scaling up project size.

Verde also hinted in its latest press release that resources may grow as those defined so far only come from five of 13 targets at Cerrado Verde. Verde said it would release more resource estimates in the fourth quarter 2011.

http://www.mineweb.com/mineweb/view/mineweb/en/page72102?oid=132818&sn=Detail&pid=102055

Kip Keen
Wednesday , 03 Aug 2011