Potential Market Size of 4.4Mtpy
Amazon Mining Holding Plc (TSX-V symbol: “AMZ”)
(“Amazon” or the “Company”), is pleased to report the results of an
independent market study (“The Study”) conducted by Agroconsult
Consultoria & Marketing (“Agroconsult”) for Amazon’s wholly-owned
Cerrado Verde project (“Cerrado Verde” or the “Project”) in Minas Gerais
State, Brazil. The Study determined a potential sales price of
US$182.31/t for ThermoPotash in Minas Gerais State, and a potential
weighted average price of US$152.49/t for the targeted markets in the
surrounding states detailed in Table 1. The potential market in the area
analyzed is estimated to be 4.4 million tonnes per year. After
adjusting for delivery costs, net sales price for Amazon is estimated to
be US$160.04/t for Minas Gerais State and US$100.61/t for the targeted
markets in the surrounding states. The results of this study will form
the basis of an upcoming preliminary economic assessment examining the
viability of this project for the first time.
The Study focused on ThermoPotash being used as raw material for NPK
formulations and being sold directly to blenders. The recommended sales
price is based exclusively on how blenders can optimize NPK formulas by
using a wide range of raw materials as sources of Nitrogen, Phosphate
and Potash. Therefore the Study does not take into account
ThermoPotash’s slow-release, non-chloride and multi-nutrient
characteristics.
Table 1: ThermoPotash Targeted Markets and prices (US$ in tonnes)
|
State
|
Market Potential (tonnes)
|
Blenders' Breakeven Price
|
Amazon
Potential Sales Price
|
Delivery-adjusted Sales Price1
|
|
Minas Gerais
|
896,051
|
$190.22
|
$182.31
|
$160.04
|
|
Mato Grosso
|
895,043
|
$196.61
|
$189.85
|
$130.13
|
|
Goias
|
495,687
|
$156.68
|
$142.64
|
$112.98
|
|
Parana
|
778,171
|
$132.45
|
$131.01
|
$63.68
|
|
Mato Grosso do Sul
|
246,621
|
$181.45
|
$179.47
|
$122.20
|
|
Bahia
|
325,181
|
$155.58
|
$141.61
|
$93.98
|
|
Sao Paulo
|
722,513
|
$134.02
|
$131.77
|
$90.92
|
|
Total Market Potential
|
4,359,267
|
|
|
|
|
Weighted Average
|
|
$165.01
|
$158.62
|
$112.82
|
NOTE
1 The delivered price takes into account interstate shipping taxes.
Agroconsult analyzed the feasibility of incorporating ThermoPotash as
the source of potash in the most common NPK formulations used in the
markets of the above mentioned states. The following methodology was
used to determine sales price and market potential:
1. An Evaluation of the 2010 fertilizer market in Minas Gerais
was completed considering the demand by crop and by nutrient (N, P2O5 and K2O) and specific fertilizer blend.
2. The costs of traditional NPK formulations using currently
available raw materials were compared to the cost of the same
formulations using ThermoPotash.
3. The price of ThermoPotash was derived presuming that the
total raw material cost of NPK formulations using ThermoPotash as a
partial replacement for KCl (“Optimized Formulation”) was the same as
original formulation, for which a weighted average was determined.
Table 2: Fertilizer Elements and Prices used for Analysis:
|
|
Am. Sulphate
|
Urea
|
Am. Nitrate
|
SSP
|
STP
|
MAP
|
DAP
|
Thermo-Phosphate
|
KCl
|
Thermo-Potash
|
|
N
|
20.0%
|
46.0%
|
34.5%
|
|
|
10.5%
|
16.0%
|
|
|
|
|
P
|
|
|
|
20.0%
|
46.0%
|
54.0%
|
45.0%
|
17.0%
|
|
|
|
K
|
|
|
|
|
|
|
|
|
60.0%
|
8.0%
|
|
US$ Price1
|
258.52
|
366.42
|
348.67
|
253.07
|
410.81
|
514.06
|
560.82
|
265.00
|
515.55
|
182.312
|
NOTE
1 Price currently paid by blenders for fertilizers delivered at Uberaba fertilizer complex, Minas Gerais state.
2 Expected sale price for Minas Gerais State
Table 3: Optimized Formulation vs. Standard Formulation in 4-20-20 Fertilizer
|
|
Standard - w/o TK
|
Optimized Formulation - w/ TK
|
|
|
Weight (kg)
|
Price (US$)
|
N
|
P
|
K
|
Weight (kg)
|
Price (US$)
|
N
|
P
|
K
|
|
Am. Sulphate (US$258.52/t)
|
74.2
|
19.18
|
1.48%
|
0.00%
|
0.00%
|
5.6
|
1.45
|
0.11%
|
0.00%
|
0.00%
|
|
SSP (US$253.07/t)
|
352.8
|
89.28
|
0.00%
|
7.06%
|
0.00%
|
0
|
0.00
|
0.00%
|
0.00%
|
0.00%
|
|
MAP (US$514.06/t)
|
239.7
|
123.22
|
2.52%
|
12.94%
|
0.00%
|
370.4
|
190.41
|
3.89%
|
20.00%
|
0.00%
|
|
KCl (US$515.55/t)
|
333.3
|
171.83
|
0.00%
|
0.00%
|
20.00%
|
288.6
|
148.79
|
0.00%
|
0.00%
|
17.32%
|
|
ThermoPotash ($182.31/t)
|
0
|
0
|
0.00%
|
0.00%
|
0.00%
|
335.5
|
61.16
|
0.00%
|
0.00%
|
2.68%
|
|
Total Weight
|
1000
|
403.53
|
4.00%
|
20.00%
|
20.00%
|
1000
|
401.81
|
4.00%
|
20.00%
|
20.00%
|
Benefits of ThermoPotash blended formulas to farmers
- Provides 13.4% of the potash in a slow release form;
- Allows farmers to reduce their use of limestone for pH correction by 164 kg per tonne applied;
- Provides substantial doses of other macronutrients (calcium, magnesium and bio available silicon);
- No change in application method or cost.
Benefits of adopting ThermoPotash to the fertilizer blenders
- There are virtually no losses to fines in ThermoPotash (up to 10% of
KCl delivered in Brazil as granules ends up as powder due to
transportation);
- Lowers inventory risk due to long lead times (Brazilian blenders
have to wait approximately 60 days to receive KCl bought from Russia or
Canada);
- Increased profit margins (Blenders’ margins average less than 5%).
The Optimized Formulations provide the same levels of NPK as the
original formulation. By contrast the ThermoPotash Optimized
Formulations substitute different secondary nutrients (see below Table
4). The calculated weighted average sales price is based on the
successful development of product 3. The Company is also working on
developing other products.
Table 4: Different product formulations for ThermoPotash
|
Elements
|
Contents (%)
|
|
Product 1
|
Product 2
|
Product 3
|
|
K2O
|
8.0%
|
8.0%
|
8.0%
|
|
CaO
|
30.0%
|
19.5%
|
30.0%
|
|
SiO2
|
40.0%
|
32.7%
|
30.0%
|
|
MgO
|
2.3%
|
8.6%
|
2.3%
|
|
S
|
0.0%
|
0.0%
|
10.0%
|
|
Status
|
Pilot scale production
|
Lab scale production
|
Under development
|
Market Potential
Agroconsult estimates that, by incorporating ThermoPotash into
fertilizer blends in this manner, the total market would be
approximately 4.4 million tonnes per annum (see Table 1 above for
details), with the potential to reduce KCl consumption by farmers in the
region by 12.7%, or approximately 581,236 tonnes. Overall, the states
mentioned account for approximately 76% of Brazil’s potash consumption.
Transport Cost
The price of US$182.31/t is a Cost & Freight price for Minas
Gerais State blenders, Amazon would have to absorb ThermoPotash’s
delivery costs to the two main blender complexes in the state: to
Uberaba at an estimated US$17.77/t and to the Minas South Complex at an
estimated US$32.77/t. Considering that the initial expectation is to
sell 70% to Uberaba and 30% to Minas South Complex, the average FOB
(Freight on Board) price estimate for Minas Gerais State is US$160.04/t.
Price Sensitivity Analysis
Pricing is sensitive to moves in all three components. Agroconsult
estimates a 10% increase in prices of Nitrogen, Phosphorus and Potash
would increase the ThermoPotash’s price potential by US$12.01, US$5.74
and US$6.87, per tonne respectively. Conversely, a 10% decrease in the
prices of Nitrogen, Phosphorus and Potash would decrease ThermoPotash’s
price potential by US$6.44, US$5.75, and US$6.88 per tonne. Table 5
illustrates the results of the sensitivity analysis.
Table 5: Sensitivity Analysis Results
|
Change in Element Prices
|
+10%
|
-10%
|
|
Nitrogen
|
+US$12.01
|
-US$6.44
|
|
Phosphorus
|
+US$5.74
|
-US$5.75
|
|
Potash
|
+US$6.87
|
-US$6.88
|
Commenting President and CEO, Cristiano Veloso said, “We congratulate
Agroconsult and our VP Operations Mauricio Sampaio for developing this
ingenious strategy to introduce ThermoPotash to the Brazilian market,
which will create a true win-win-win for farmers, blenders, and Amazon
and our shareholders. The incorporation of ThermoPotash into NPK
formulations will virtually eliminate adoption risk for farmers, and
will reduce costs and increase flexibility for blenders, therefore
securing strong prices for our proposed product. This strategy takes
advantage of longstanding price inequalities in component prices for
both nitrogen and phosphate, providing blenders with a new potash
product that allows them to optimize use of the most economical nitrogen
and phosphate components. Delivery-adjusted sales price will become the
basis of our upcoming Preliminary Economic Assessment.”
About Agroconsult
Agroconsult Consultoria & Marketing is a leading consulting
company focused on agribusiness founded in 2000. Clients include: BHP
Billiton, Bunge, Fosfertil, Petrobras, Heringer, Bayer, Santander,
Citibank, John Deere, Bando do Brasil and Syngenta. Agroconsult’s team
is comprised of a multi-disciplinary group of professionals who follow
the market closely, prepare in depth analyses on the various
agribusiness segments with a view to formulating short, medium and long
term market trend reports on the main agricultural commodities as well
as to developing customized studies and projects.
http://www.agroconsult.com.br
About Amazon
Amazon Mining is a mineral exploration and development company
founded by Brazilians in 2005. The company is focused on the development
of Cerrado Verde project. Cerrado Verde is source of a potash rich rock
from which Amazon plans to produce a slow-release, non-chloride,
multi-nutrient, fertilizer product. Amazon Mining is a UK public company
with shares listed on the TSX Venture Exchange since November 2007.
On behalf of the Board of Directors of Amazon Mining Holding Plc, Jed Richardson, Vice President of Corporate Development.
For additional information please contact:
Cristiano Veloso, President & Chief Executive Officer
Tel: +44 (0) 20 8133 7607; Fax: +44(0)20 7405 7773; Email:
cv@amazonplc.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it
OR
Jed Richardson, VP Corporate Development
Tel: +1(416)866-2966; Fax: +1(416)866-8829; Email:
jed@amazonplc.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it
www.amazonplc.com
Cautionary Language and Forward Looking Statements
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE
EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS
RELEASE. THIS PRESS RELEASE CONTAINS CERTAIN “FORWARD LOOKING
STATEMENTS”, WHICH INCLUDE BUT IS NOT LIMITED TO, STATEMENTS WITH
RESPECT TO THE FUTURE FINANCIAL OR OPERATING PERFORMANCE OF THE COMPANY,
ITS SUBSIDIARIES AND ITS PROJECTS, STATEMENTS REGARDING USE OF
PROCEEDS, EXPLORATION PROSPECTS, IDENTIFICATION OF MINERAL RESERVES,
COSTS OF AND CAPITAL FOR EXPLORATION PROJECTS, EXPLORATION EXPENDITURES,
TIMING OF FUTURE EXPLORATION AND PERMITTING, REQUIREMENTS FOR
ADDITIONAL CAPITAL, GOVERNMENT REGULATIONS OF MINING OPERATIONS,
ENVIRONMENTAL RISKS, RECLAMATION EXPENSES, TITLE DISPUTES OR CLAIMS, AND
LIMITATIONS OF INSURANCE COVERAGE. FORWARD LOOKING STATEMENTS CAN
GENERALLY BE IDENTIFIED BY THE USE OF WORDS SUCH AS “PLANS”, “EXPECTS”,
OR “DOES NOT EXPECT” OR “IS EXPECTED”, “ANTICIPATES” OR “DOES NOT
ANTICIPATE”, OR “BELIEVES”, “INTENDS”, “FORECASTS”, “BUDGET”,
“SCHEDULED”, “ESTIMATES” OR VARIATIONS OF SUCH WORDS OR PHRASES OR STATE
THAT CERTAIN ACTIONS, EVENT, OR RESULTS “MAY”, “COULD”, “WOULD”,
“MIGHT”, OR “WILL BE TAKEN”, “OCCUR” OR “BE ACHIEVED”. FORWARD LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SAID STATEMENTS.
THERE CAN BE NO ASSURANCES THAT FORWARD-LOOKING STATEMENTS WILL PROVE TO
BE ACCURATE, AS ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SAID STATEMENTS. ACCORDINGLY,
READERS SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS.
The potential grades detailed in this release are conceptual in
nature. There has been insufficient exploration to define a mineral
resource and it is uncertain if further exploration will result in the
targets being delineated as a mineral resource.
Readers are cautioned not to rely solely on the summary of such
information contained in this release and are directed to the complete
set of drill results posted on Amazon’s website (www.amazonplc.com) and filed on SEDAR (www.sedar.com) and any future amendments to such. Readers are also directed to the cautionary notices and disclaimers contained herein.