Verde Agritech Ltd (NPK)

[alvik]

One of the most promising junior potash stories has achieved a major milestone.

Late Wednesday, Verde Potash PLC said it successfully produced potassium chloride (or KCl) from a pilot plant at its Cerrado Verde project in Brazil, using material from the deposit. That provides confidence to the market that Cerrado Verde will produce a viable fertilizer product (KCl is the salt produced in Canadian potash mines; Verde is also trying to produce a brand new product called ThermoPotash).

Jaret Anderson, an analyst at Mackie Research Capital, called the news a “big milestone” as it confirms the viability of Verde’s patented technology to produce KCl.

He wrote that the process could be a game changer for the potash industry, noting that Verde said its deposit could produce a whopping six million tonnes of potash a year for more than 20 years (though Verde is studying a scalable production strategy). It is potentially a very important project in Brazil, which relies heavily on potash imports.

Verde shares jumped 70¢, or 10%, to $7.70 in early trading Thursday.

Mr. Anderson maintained a speculative buy rating on the stock and a target of $12.00 a share. However, he noted that he is only attributing 83¢ a share of value to the so-called “Cambridge process” through which Verde has proved it can produce KCl. The next step will be a scoping study to establish the capital and operating costs associated with the Cambridge process. If the results are positive, he expects to give it a lot more value in the future.

“Given today’s news, there is material scope for us to increase our target if and when a positive scoping study is released,” Mr. Anderson wrote in a note.

http://business.financialpost.com/2011/12/01/verde-potash-completes-landmark-test/