January 31, 2012 / 10:19 PM / in 6 years

Verde Potash shares tumble following shift in plans

* Shares down about 20 pct on Venture Exchange

* Suspends ongoing feasibility study on ThermoPotash

* To focus on potassium chloride production

Jan 31 (Reuters) - Shares of Brazilian potash explorer Verde Potash fell roughly 20 percent on Tuesday, after the company said it was temporarily shelving plans to produce a cheaper potash variant, in favor of a costlier plan to produce the more common form of the crop nutrient - potassium chloride.

The Canadian-listed company said it now intends to focus its efforts on a conventional potash crop nutrient and has therefore decided to temporarily suspend its ongoing feasibility study work on ThermoPotash - a lower cost and potentially lower priced potassium-based fertilizer.

Verde had initially planned to produce ThermoPotash from its wholly-owned Cerrado Verde project in Brazil, before moving on to producing conventional potassium chloride as part of the second phase of its project.

The company said it would “resume the feasibility study on ThermoPotash once it completed the proposed Phase 1 of potassium chloride production, anticipated to be in 2015.”

Verde, previously known as Amazon Mining, said it will push forward on a definitive feasibility study for potassium chloride production. The study is expected to be completed by the end of the year.

Verde’s preliminary study for the production of potassium chloride pegged the initial capital costs for a 600,000 tonne a year project at just over $650 million, with initial operating costs pegged at slightly above $260 per tonne.

In comparison, Verde’s preliminary study in 2010 for the production of ThermoPotash had outlined initial capital costs for a 1.1 million tonne a year project at just under $200 million, with initial operating costs pegged at just over $40 a tonne.

The company said that according to the new preliminary economic assessment (PEA) completed on Cerrado Verde by SRK Consulting its estimated capital expenditures and expected time to production are lower and shorter than most conventional greenfield projects in the pipeline.

“We believe that the estimated operating expenses presented in the PEA are competitive with the world’s lowest cost potash producers for buyers in Brazil when importation and distribution costs are included,” Verde’s Chief Executive Cristiano Veloso said in a statement.

Brazil, which is one of the world’s top grain producers, is also a very large importer of potash, a key soil nutrient.

Verde said the latest study envisages production from the project gradually ramping-up to 3 million tonnes of potash annually by 2024 at a total capital cost of $2.37 billion.

However, the latest study failed to impress investors and shares of Verde closed down C$1.66 at C$6.90 a share on the TSX Venture Exchange on Tuesday.

$1=$1.00 Canadian Reporting By Euan Rocha in Toronto; editing by Rob Wilson

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