Verde Potash shares rise 7 pct after strategy change

Wed Aug 21, 2013 1:07pm EDT
 
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WINNIPEG, Manitoba Aug 21 (Reuters) - Shares of Brazil's Verde Potash PLC jumped 7 percent on Wednesday after it changed its approach to building a mine to produce the crop nutrient and reduced up-front costs.

Potash prices have fallen in recent weeks due to the breakup of the Belarusian Potash Company, weighing on shares of big fertilizer producers and making it more challenging for small companies to develop new projects.

Verde's Cerrado Verde mine would be built in Brazil's Minas Gerais state, far from the conventional potash mining areas in Canada and Russia. Brazil, a major producer of corn, sugar cane and other crops, is among the world's largest potash importers.

Verde said the project's first phase will now produce up to 1,000 tonnes per day of ThermoPotash, a new chlorine-free potash product tailored to Brazilian soils and suitable for products like fruits and vegetables. A second phase will produce traditional muriate of potash on a larger scale.

Verde's production process is now more conventional than its previous plan, said analyst Spencer Churchill of Paradigm Capital.

"It's the right approach," Churchill said. "To take two steps back to go five steps forward eventually is the right move."

The move to two phases using a kiln plant that could produce both ThermoPotash and conventional potash was necessary because the equipment previously under consideration would not have processed enough ore to be economic under the old plan.

Verde said in May that its kiln supplier could not guarantee it could process the necessary tonnage of ore per day, sending Verde's stock into a tailspin.

The company expects to complete a pre-feasibility study in the first quarter of 2014 that will lay out costs and timelines, and is working on borrowing funds for phase 1, possibly with financial support from Brazil's federal and state development banks.

Shares of Verde in Toronto were up 4 Canadian cents to 59 Canadian cents. The stock is down about 82 percent on the year.

($1=$1.04 Canadian) (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bernard Orr)