Verde AgriTech Limited (NPK) Earnings Call Transcript & Summary

I can see that one of our shareholders is actually attending the call. He's a medical doctor. His name is Daniel Solomon He's been working in 2 different hospitals, fighting the crisis here in Brazil. And what I'd like to suggest before we begin the presentation is that we all hold a 30 seconds' moment of silence in respect for everyone who is right now in the front line, trying to save lives and doing everything they can to help our friends and family get over that. So let's just wait for 30 seconds in silence. Thank you. Okay. We will begin now. But before we begin, I'd like to remind you that this presentation will have some forward-looking statements, and actual results may be different. The agenda for today's phone call, we will begin with the highlights for 2019, which I'll be presenting. Then Felipe Paolucci, our CFO, will present the financial results for the fourth quarter and full year-end. After that, I will present the outlook for 2020. After that, we will be hosting a corporate presentation, where we're going to be updating the impact the crisis is currently having in Verde, going into a little bit more detail in our business plan. And to finalize, we're going to have our Q&A. So to begin, you should all be seeing now the -- you should all be seeing the -- hang on, this is a technical problem here with Zoom. Just want to make sure this call is being recorded. Yes, the call -- so this call is also being recorded. At the end of it, you're going to be able to see it in our channel on YouTube. At the bottom of your screen on Zoom, there is an option which says Q&A. So throughout the presentation, you can write down questions. And then at the end, we're going to go through each one of your questions and try to answer as much as I -- as many as we can. So beginning with what we regard -- just before the highlights, just a quick reminder of what we do. You can see on the right-hand side a photo of the plant during the rainy season. So you can see how it gets all muddy and messy. We are mining, producing and selling a potassium silicate mineral. It is sold in Brazil as K Forte and globally as Super Greensand. Brazilian agriculture is very important for the world. We represent about 10% of global agriculture production. Our product has clear advantage for Brazilian farmers to switch from commercial potash to our product. We've only begun commercial production in July 2018. We have proven and probable reserves of around 800 million tonnes. As you may remember from the history of Verde, we invested a lot of money drilling out this reserve and coming up with all the necessary regulatory work required to validate it. And the full project, as it's conceived and as it's written in a public prefeasibility study, has a net present value of $2 billion. The highlights for 2019. We were issued some very important relevant license throughout the year. So environmental license, we were issued about 249,000 tonnes. For mining permits, we were issued about 400,000 tonnes per year of additional capacity. We've been able to strengthen the team in key positions. So we've hired 3 senior executives, Felipe Paolucci, who is our CFO and he's underneath me on the video here, wearing a green shirt. We've hired Thiago Pacheco as our Vice President, Sales, who began in December last year, replacing the previous one we had. And we've also hired a Mining Director, Elton, who's also doing a fantastic job. In addition to that, we've hired 10 new employees in the operational capabilities, this in 2019, who altogether have had strengthened the company. We currently operate a plant with capacity for 500,000 tonnes per annum. We've commissioned a second mine, which is in operation. We have over 400 customers and over 100,000 hectares already treated with K Forte, and we've developed new markets for Super Greensand. We've developed the Canadian market, and we've started exporting to China as well in 2019. So now Felipe will be presenting the 2019 fourth quarter numbers as well as the full year consolidated results. And after that, I will carry on with the outlook for 2020 as well as the -- a short presentation on where we are in the business. So Felipe, please go ahead.

I'm muted. Hello, Cristiano.

Yes. We can hear you.

Can you hear me? Okay.

Go ahead, please.

Yes. So hello. Good evening for everyone or good morning. So I'm going to present now Q4 '19 and Q4 results. I chose some points to highlight here. And then we'll be able to answer questions by the end of this presentation. So talking a bit about Q4 '19 versus Q4 2018, we can see that our sales has grown over 115% from $692,000 in 2018 to close to $1,500,000. Volumes. Volumes also grew significantly in Q4 from 20,000 tonnes to 32,000 tonnes in Q4 2019. It's important also to highlight here, gross margin. We can see that's increased from 4% to 36%. This is mainly driven by fixed cost dilution. Once we grow, we can dilute fixed costs and also improve our margin. And a good point to highlight here in Q4 results, that this was the first quarter that we show up positive operational profit of $38,000 and a net profit loss of $79,000 in the quarter. So this is a good -- great achievement for the company since it's the first quarter that you can see a positive result in the financial statements. Going to the next slide, we can see the full year 2019 versus 2018. Cristiano, could you please move to the next chart? Yes. In the next chart here, full year '19, we can see that sales achieved 120,000 metric tons, close to 344% higher than prior year in value and also in volume. Good point to highlight also, we were able to increase $5 per tonne in our price and reduced our cost over to $10 per tonne, which results in a gross margin of 48% versus 21% in the prior year. Coming to operational profit and loss before cash events. Also to highlight was the first time that we see a positive result here compared to 2018 of a negative result of $1.4 million. And in the end of the day, the net profit loss, we had a loss of $1.1 million compared to $1.7 million in 2018. So that's -- those are the key numbers I would like to highlight in this conference. More details and information also are in our financial statements MD&A. And of course, we are always here to answer doubts or questions during the next days or any time you need. Cristiano, I will pass to you again.

Thank you. Thanks, Felipe. So we're going to carry on with the presentation. Next part of it is a slide with an outlook for 2020. I can see that there's still about 10 people who are connected via the phone, so I'll try to describe this as best as I can what is written on each one of the slides. The outlook we have here is a matter of fact to mid-2021. In that first scenario here, assuming there's no additional production, which is permitted, and in that scenario, we have a capacity to produce 500,000 tonnes, but we're only permitted to produce 198,000 tonnes, for us to achieve a breakeven point, we will need to sell 140,000 tonnes this year. That's the all-in breakeven point. The target for 2020 is far greater than that. So it's about 220,000 tonnes, which would give us revenues of about $10.6 million, representing an increase of 76% year-on-year. One very important point here is that we are on track to achieve this. So as of the date of this presentation, the company is on track to deliver on its sales target of CAD 10.6 million. In that scenario, we project cash in the bank at the end of June 2021 to be CAD 2.8 million. This comes from a note in our financial statement, which was filed on SEDAR on the 30th of March. The next slide presents another scenario, where we wouldn't be issued with an additional -- where we would be issued additional permits. So therefore, we would be allowed to produce and sell more. And if that is the case, and if you want to extrapolate the impact this will have in our results, you can use 2019 numbers as your guideline. So you can use the revenue per tonne from 2019 for $50 as well as the production costs from full year 2019 of $26. Just one important point, we need to take into account there has been some pretty strong FX movements from the Brazilian currency to Canadian dollars as well as oil price. So there might be some impact on the income statement and the balance sheet. But nevertheless, the numbers from last year still remain as a good reference for calculating. The next slide now, I will be giving a bit more of an update on the business, where we are. Since some of you have already been following the company for a while, a lot of the information will be repetitive. But I can see from the list of people attending the conference, there are a few potential new shareholders. There's some names here, which have been -- started recently to follow the company. And I reiterate that there is a Q&A option on Zoom, which you can just type in the questions and then we'll be addressing them. So the first point some of you might be asking yourselves is, how is this current crisis impacting Verde? Well, very little, to be honest. Right at the beginning, the Minister of Agriculture in Brazil declared that fertilizer production was an essential activity in the food and beverage production chain. So we not only are allowed to carry on operating, but we have experienced an increase in terms of demand and people trying to lock in supply of fertilizers at an early date, a bit concerned about potential impact on the global supply chain. What has also changed with the crisis is that the price of all relevant or the most relevant commodities, agricultural commodities in Brazil, the price went up a lot when you look at those prices in Brazilian currency. So you can see soybeans going up from about BRL 88 to over BRL 100 throughout the crisis. You can see the price of corn going up from BRL 50 back in the beginning of the year to about BRL 60. You can see the price of coffee as well going up above BRL 550. What has also changed, which has benefited Verde, is the weakening of the Brazilian currency. So since the crisis began, the Brazilian real has weakened from an exchange rate of about BRL 4.10 all the way to BRL 5.20. A weaker currency is very positive for farmers who are paid, of course, in U.S.-traded commodities, but it's also very favorable for Verde because our competition, potassium chloride, is traded in the U.S. dollars. It makes those imports more expensive. The other change, you can see on this Slide 17, was that the interest rate in Brazil, which had already been coming down a lot, suffered a massive decline in the last few weeks. So in the beginning of last year, it was 6.5% per annum, the base interest rate, and it's currently 3.5%. So it's now cheaper than ever for farmers to borrow money to expand their planted acreage, to make more investments and to grow more. And to finalize in terms of the impact and the crisis, there's something which is very relevant in agriculture, which is the exchange ratio between how many bags of a given commodity are required to buy 1 tonne of a certain fertilizer. So this exchange rate, which in March before the crisis was that the -- you have to use 11 bags of soybeans. It's now gone up to 17. So again, making it the best exchange ratio operation for farmers in several years. The next part of the presentation now, we're going to remind you how Brazil is playing a key role in terms of feeding the world in a sustainable way. First of all, the acreage, the amount of land used in Brazil for agriculture is greater than 5 of the largest countries in Europe. The other aspect to take into account is this -- is on Slide 21. So Brazilian farmers are actually the world's biggest forest protectors, even though Emmanuel Macron wants to convince you otherwise. So on Slide 21, you can see first map showing each country what percentage of the total country is protected area. So you can see that in Brazil over 45% of the country is protected by law, whereas most of the other -- the only country -- most of the other countries is something between 17% and 40%. The other chart here shows who are the ones who protect this land by law. And you can see that in Brazil, it's about half of all this land protected, all those forest protectors were actually protected by farmers because there's a limit in terms of how much land they can farm and how much land they can protect. So about 50% of all this massive land is actually protected by Brazilian farmers. The other information on the slide I'd like to highlight is a comparison between Brazil and the U.S. in terms of how much of the country is rural area, agriculture area, and how much of the country is protected. So you can see that in Brazil, about half of it is protected, 50%, and 30% of it is used for agriculture. In the United States, 74% of it is used for agriculture and only 12% of it is protected land. It's a pretty good slide in the presentation for anyone who wants to share some information about how sustainable, what an example to the world's Brazil agriculture is in terms of sustainability. Now the slide on the importance of Brazil agriculture to the world. So we are the #1 or #2 in exports of some of the world's most important commodities. We're #1 in soybeans, #1 in coffee, #1 in beef, #1 in chicken, #1 in sugarcane and #2 in corn. Next slide or next section of the presentation, so a little bit on the Brazilian dependency on imported potash. So Brazil is the world's biggest importer, the second largest consumer of potash. Last year alone, farmers spent about $5.4 billion buying potash. And all this potash, it's about 10 million tonnes of potassium chloride, this adds to soils annually about 5 million tonnes of chloride. That chloride causes a number of problems to the environment and to our health. And by switching from potassium chloride to our natural fertilizer, there's some big benefits to Brazil and some big benefits to the world. But first, I'll have a very quick break here just to get a cup of water. You can see my voice isn't the best at the moment. So we're back in 30 seconds, excuse me. So I'm back now. Can you guys hear me? Can you hear me, Felipe?

The video is not working yet, camera.

Okay. Thanks. So I'm back now with some water. So the first problem you have with chloride is that it has an impact on global warming. So chloride kills some soil microorganisms, which are essential for capturing carbon into your soils. And when you apply potassium chloride, you're essentially destroying one of nature's most efficient ways of storing carbon. The other benefit you have from eliminating chloride from potassium fertilizers is that you reduce the amount of -- the amount of issues to an environment of a substance called dioxin, which is responsible for causing cancer. This is especially important for sugarcane. You have about 10 million hectares of sugarcane grow in Brazil. And when you replace potassium chloride, a lot of that sugarcane which is burned as the production process for ethanol, and you reduce -- you eliminated the issuance of dioxins. The third benefit the world has to replace potassium chloride with our product is your health. Unfortunately, nowadays farmers, they're only compensated by the appearance and weight of the food they produce. For the appearance, they apply pesticides. And for the weight -- or they apply chemical fertilizers, so your NPK, nitrogen, phosphate and potash. When a farmer replaces potassium chloride as a source of potassium with our product, in addition to applying potassium, he will also be applying another 60 other trace elements, which are very important in increasing the nutrient density of food. So we allow farmers without increasing their costs to start growing much healthier food than he's currently been doing. Now beginning the final part of the corporate presentation, which is in terms of our business model and the expansion. As you know, we mine, process and sell a unique multinutrient fertilizer, which in Brazil is sold as K Forte, where it's exported as Super Greensand. Our product is made of a potassium mineral called glauconite. Glauconite has been used as a fertilizer for over 250 years. And whereas it was widely used in the United States, where millions of tonnes of it was spread over the soils throughout the centuries, more recently, it was only sold as a premium potassium fertilizer because the mine was running out of ore, and they would only be supplying to organic growers, charging a very high price spreads. Our mine though is very big. So as I mentioned, we already have 700 million tonnes in reserves. In addition to that, we have another 1.4 billion tonnes in resource. So the volume is so big that instead of focusing on a niche premium market we're actually going after the main markets. We are competing against the cheapest source of potassium, i.e., potassium chloride, even though our product has numerous benefits. This big reserve, this big market gives us a very impressive net present value of about $2 billion. At the moment, we're trading at about 1% of this $2 billion. The internal rate of return is pretty high as well at close to 300%. One reason those are so good is because of the limit cost to Brazil is smaller than any other competitor, which isn't a surprise. But you can see how we can land the product on an equivalent basis here, okay, for about half of the cost of our nearest competitor, which indicates the cheapest one would be coming from Uralkali in Russia. Capital expenditure for our project is also very small. So this Slide #35, it compares the capital expenditure between Verde and the last potassium mine built, which was built in Canada by K+S, the legacy project. So in Canada, the CapEx per tonne of K2O production capacity, okay, was $2,830, whereas our cost based not only on a feasibility -- on a study, but based on the actual cost we put to the ground to build operation, is $44 per tonne of K2O production capacity. And the reason it's so much cheap, of course, to produce our product because, in our case, the mine is an open pit operation with very simple transformation technology, whereas a conventional potash mine is as deep as 2,000 meters and can take anything from 5 to 10 years to be built. The other important thing to say on this slide here, this expansion was built from cash flow and some debt. The other problem we have and explains a lot why we are at such a fraction of this net present value is what we can see here on Slide 36, which are the permits. So to fulfill that feasibility study at $2 billion NPV, we will need to be producing 25 million tonnes per annum. However, unfortunately, right now we are permitted to produce only 200,000 tonnes. And you can see the breakdown of those 200,000 tonnes in this table below. The same table is available in our MD&A filed on the 30th of March. So you can see from Mine Pit 1, we currently have 233,000 tonnes granted in terms of mine permit already, but we have 0 granted in terms of environmental license. So for Mine Pit 1, we're waiting for this environmental license in order to be able to mine 233,000 tonnes per year. On Mine Pit #2, we have 150,000 tonnes already granted. We have a pending application for an additional 50,000 tonnes, and we already have in this pit an environmental license for 200,000 tonnes. The third pit is fully licensed for about 50,000 tonnes. All to say that this year, we do expect to have all those permits. We have pending applications currently to be issued. We're hoping they can be issued before the middle of this year. And if that is the case, we will be able to produce as much as 432,000 tonnes this year, and that's what we're working hard to get those license issued as well. This next slide shows our growth. So as you know, in 2017, we began with a little pilot plant, which we rented. Our revenue was about $138,000. There's a typo here. In 2018, revenue increased to $1.3 million. Last year, it went up about 4, 5x to $6 million of revenue. You can see the target for 2020 at $10 million. And then you can see the revenue target when it comes to Phase 2 and Phase 3 at $195 million and $692 million. At the bottom of this slide, you have our market share. So at the moment, our market share in Brazil is 0.19%. So really nothing. For this year, if we can accomplish our target of $10 million, our market share in the country is still going to be very small at 0.35%, and it will really start having an impact in terms of market share once Phase 2 and Phase 3 kicks in. Important to say, market -- potash markets in Brazil have been growing in average 3% every year. The next slide, we go into a little bit of detail on how or why we expect to be increasing sales this year. And in this slide, we compare our sales efforts from 2019 with 2020. So in 2019, we had 11 people working with sales and marketing. Nowadays, we have 27 people working with sales and marketing at Verde. In terms of independent sales agents, people who are not employees, but get paid a commission for selling our product, in 2019, we had 41 sales agents. In 2020, we already have 85 sales agents selling our product in Brazil. We've also increased the number of distributors. So distributors is different to the independent sales agents. It's a shop. It's a corporate structure. So in 2019, we have 13 distributors, who altogether had 28 stores in different parts of Brazil. In 2020, we already have 22 distributors with 39 stores in the country. The sales team by those distributors in 2019, there were 89 people working for them selling K Forte. In 2020, we are now talking about 161 people from our distributors helping us. When it comes to selling the product, something else which is very advantageous for the farmer is the fact, even though it's a better product, we don't charge more for the product. So on this slide, you can see the comparison between the delivered cost of potassium chloride to the delivered cost of K Forte to the farmer. So if a farmer now currently spends BRL 1,500 to deliver -- to get product delivered to his farm, how we price our product is to divide that number by 6 because our product, as you know, has 6x less potassium, get to BRL 244, and that is the cost. So we can turn to the farmer and tell him, "Look, if you're currently spending $1 million buying imported potash to your farm, we can change that. You're going to carry on spending the same amount, and you're going to get the same quantity of potassium delivered to your farmer -- to your farm. However, you're going to get for free a number of micronutrients; you're going to get a number of agricultural benefits such as the absence of chloride, which is a problem for root development; lack of salinity, which is a problem as well for crops; and a gradual release of nutrients, which is more important." So there are a number of advantages here for farmers to get for free when they switch to our product. Even though we sell the product very cheap in Brazil, I always remind shareholders and farmers in Brazil as well that there are plenty of people paying as much as $3,000 per tonne for the same -- exactly the same product. So it's sold on Amazon, among other retailers in the United States. And I'd like to say that this is a validation of how superior the product is in comparison to conventional potash. The reason -- next slide. The reason farmers are switching from potassium chloride to K Forte, they cost the same, as explained. It has those free benefits. So it has free silicon, free manganese, free magnesium, free cobalt, free zinc. It's chloride-free, it's salt-free. And then finally, it's a more convenient product than potassium chloride. So if you're applying potassium chloride, you have to split your applications. You can't -- if your farmer kept going applying all of it at once, because if it rains a lot, you're going to lose a lot of nutrients or depending on the crop, which if the crop requires a lot of potassium like coffee, for example, and you apply at once, all the potassium the crop needs, it will literally kill the plant because of salinity. So in several crops, they need to split applications as many as 4x. With K Forte, because it's a gradual-release fertilizer, you can make only 1 application and resolve the problem for a given year. The next slide, it shows the one thing we like to highlight all the time about how our business plan is predicated upon the fact we can self-fund, self-finance our development. So we still have just short of -- just around 40 million shares after being listed since 2007. And this slide here, Slide 42, helps to illustrate how we can carry on growing without having to dilute ourselves as shareholders. So you can see the total capital expenditure we had for building a plant with a production capacity of 500,000 tonnes. Total CapEx was $2.3 million. And that plant, if it runs at 100% of capacity, it generates free cash flow of $14 million. And if you think about that plant as modules, you can see that just by running that plant at 100% capacity, you can essentially build about 6 new plants to produce an additional 3 million tonnes of capacity. Or if you don't want to wait until you're producing at 100% capacity, if you want to look at half of capacity, you still generated enough cash flow at 50% of capacity to build 3 of those modules, which would give you an additional 1.5 million tonnes. So I like to think that Verde has declared itself independent from capital market, independent from having to raise funds. Next slide is one I hope to help shareholders to understand how the crop planting season takes place in Brazil and when farmers apply our product and why some quarters are more relevant to us than others. So if you look at soybeans, the time of the year when K Forte is applied, it's essentially from May until August. That's when most of the farmers will be applying it. When you look at corn, it's May until July. If you're looking at cotton, it's from June until September. If you're looking at coffee, it's from May until September. And if you look at sugarcane, it's essentially from March until September. So you can see why most of our demand takes place between June and August every year. For those of you who aren't looking at the presentation, this slide also shows when each crop is harvested in Brazil, when planting seasons takes place. So it's an important one to understand the dynamics in agriculture in Brazil. Finally, our capital structure. It hasn't changed a lot. So you have about 50 million shares fully diluted, 46 million shares outstanding. Management and the Board, we carry on being paid in shares, not cash. And you can see here on the slide, the breakdown of how many shares we have to issue for each one of the capital raises we did since the pre-IPO round when I began the company back in 2005. To finalize before we go into the Q&A, several reasons to invest in Verde. We are in production. It's a massive reserve. It's a scalable product. The product is and has been disruptive in the Brazilian market. We have very few shares outstanding in comparison to most of the other companies who've got to production. Dr. Alysson Paolinelli remains being our huge support, a massive name in the Brazilian agriculture sector, our Director. And there's a lot to happen for 2020. So this concludes the presentation.

And I can see several of you who have sent questions. So I will go back here to the beginning of the presentation and start directing each one of those questions. So we have 11 questions here, and I hope I can answer most of them. First one. Of the customers who bought back in 2018, how many bought again in 2019? And did some fail to repeat buy? And of those who did repeat, by how much more did they buy? Did some buy 5x more than in 2018, for example? So there's several questions here. So the first one, several of our customers bought back in 2018, however, not as many as we wanted. The ones who failed to buy the product back, it was our fault. So last year, our CRM, customer relationship management system, wasn't great and how the sales structure -- how the sales procedures have been structured also wasn't very effective. So we made a terrible mistake. And it was so bad that, in some cases, farmers, they just didn't buy it back because we didn't contact them, or in some cases, we contact them was a bit too late. They had already bought from someone else when we finally approached them. So this was a massive mistake we made last year. It has been fixed. So now we've specialized our sales team. It's already delivering much better results. We've implemented Salesforce, which is the world's #1 CRM, and you can see how effective it is. And then answering the last part of the question here. Yes, there has been cases where people went from buying much more than 5x. Let's say, there was -- I can think of one farmer here, who went all the way from buying 1 truck to buying 5,000 tonnes. So buying from buying 30 tonnes of product going to buy 5,000 tonnes of product. There was there. We saw this growth in a number of situations. The next question is, is the product is listed for sale on Amazon, but hasn't been available for months? Is this the case? In the U.S., it has been available. A couple of our products run out of stock, which is perhaps good news. And we always replace the stock around now because most of the demand takes place now and when it's beginning of spring, summer in the northern hemisphere. The problem we had when we went to replace our stock with Amazon this year was that Amazon is not taking any stock that isn't essentials because of the crisis. So a number of items are out of stock and they're not taking it. So they're not allowing us to refill some of the products we have for sale. Now another question. Your CFO mentioned cost at $10 per tonne, while Cris' slide said $26 per tonne. Is $10 an operation figure while $26 is all-in, including SG&A, et cetera? So Felipe, do you want to respond to this one?

Yes. Sure. Can you hear me?

Say again.

Now you can. Now what I mentioned is that, just to make clear, is not at the cost of $10 per tonne, but the cost decreased $10 per tonne year-on-year. So the production cost per tonne in 2018, it was $36, and now in 2019, it was $26. So this is the difference, that $10 is the difference between 2018, 2019.

Thank you, Felipe. The next question, when you sell a tonne of your product, what are you displacing? We're displacing potassium chloride. And what is the cost per tonne of the products you are displacing? So the cost per tonne of the product we're displacing is BRL 1,500 to BRL 1,600. That's how much it costs. Next question. What is involved in your company getting the necessary approvals to increase your permitted output? What levels of government to involve cost? Are there any incumbent lobbying groups that are fighting your desire to expand? It's bureaucracy. So the -- what's necessary to get the approvals is that there's a line, a big queue of projects. There aren't enough people to look at all those projects, and it goes through a painful -- very painful queue. So we hope that this year we will be issued some more of those license. And there isn't an incumbent lobbying against us or anything which has been an issue that has affected the capability of us getting license issued. The next question. Are you considering midterm risks associated to a scenario when negative GDP impact and unemployment might lead to logistics issues and/or social unrest that could affect business? So to start with the last question in terms of social unrest. Brazil has acted fast in terms of providing money to the population which will be most impacted with the crisis. So there is a version of helicopter money going on into Brazil, which has reduced the risk of something like that happening. The other -- the first part of the question is the impact on -- it might lead on logistics. So far, there has been 0 impact in terms of logistics. All truck drivers, which we rely on to deliver, all carry on business as usual. There hasn't -- the price come down because there's less product to be moved at the moment. So the freight rates came down. Diesel, of course, came down as well. So we're actually getting cheaper costs in terms of logistics now than we were at the same time last year. The next question is, any update or traction with the marketplace initiative? So the marketplace was something we launched last year where we were going to try to find buyers, traders who are interested in sourcing agricultural product from farmers who were more concerned with sustainability. Essentially every time a farmer uses our product, they can grow healthy food, they can have a positive impact to the environment. So we hope -- and the marketplace, with initiative for that, we hope we could be finding those traders. Even though we still believe it's a massive opportunity, it has been on hold. So we haven't had chance, power -- manpower to focus and fully develop this initiative, but it is in our pipeline, and we hope to resume that at some point. The next question. Given the overall aspirations and importance of Brazil for Verde, don't you think it would benefit the business to list in Bovespa? It is something we should definitely take into account for the future. The problem, though, with Bovespa is it's a very illiquid market. Small caps, medium caps in Bovespa, the trade is extremely thin. So it's something we might find in the future and something to be considered. What I can also say is that lot of the funds, Brazilian funds, and then we have Brazilian funds, the shareholders we have, Brazilian retail shareholders, they can also buy international stocks by getting an account at an international trader. We have a few examples. The next question, what does it cost the average farmer in application costs per hectare, so labor, et cetera? It varies a lot, it varies a lot. But I presume you're thinking about our product. So I presume this question is how much it cost for the average farmer to apply our product per hectare, labor and equipment and diesel. What we did, which helps answer this question, we did a calculation, which was, if a farmer wants to apply 100 kilograms of K2O, potassium oxide, he can apply with KCl 6x less product than if he applies K Forte, which is 6x less concentrated. So what we worked out, which is what I think you're trying to work out with this question, is how much more per tonne of product a farmer has to spend to apply our product in comparison to potassium chloride. And the number is in average BRL 8. Exchange rate to U.S. dollars at the moment is about BRL 5.2. So those BRL 8, what we do when we sell our product in Brazil is to deduct that from our delivered cost to the farmer. So essentially, when we sell the product in Brazil, it costs to the farmer the same amount as potassium chloride, not in the farm gate, but applied to the soils, down on -- including his application costs. So good question, allowed me to go into a little bit more detail in terms of how our pricing is done. Next question, and I can see they keep growing. Has been much in the way of customers from 2019 pre-ordering your production for 2020? Yes, we had a lot of our 2019 customers who have already reordered, have already paid for a down -- made a down payment for deliveries in 2020. As I said on -- during the presentation, we are, as of present, we are on track to deliver our stated goal of selling about $10 million in 2020. The other question. Can you undercut on price even more to win market share? Yes, we can. And yes, in some circumstances, we do want to cut the price even further. And we have an aggressive pricing strategy when it comes down to bigger volumes. So yes, we use that low cost we have as a benefit for our expansion. Are you able -- next question. Are you able to sell into China cheaper than the big players? It's a good question. When we sell into China, we can't sell cheaper than potassium chloride. So potassium chloride will always get delivered there cheaper than our product. But when we sell to China, it's not against potassium chloride that we compete. Our distributor in China positions our product against upcoming potassium mineral called polyhalite, which became a little bit more famous because of Anglo American's acquisition of Sirius Minerals in the U.K., but that product is currently sold globally by ICL, Israeli potassium producer. And this distributor, essentially, that's how he has positioned. So yes, when we sell to China, we're not selling it as -- with the price as high as we do when we sell it in the U.S., where the focus is really the premium market, organic market. In China, the focus is on competing against polyhalite, against potassium sulfate. And yes, we are price-competitive against those products. The next question. What is the lead time for farmers placing orders ahead of fertilizer application? It varies a lot, varies a lot. So you have some organized groups who have already placed orders last year to take the product in June, July, October this year. And there are lots of farmers who leave up to the last minute to place their orders. So there isn't a rule of thumb when it comes to that. The next question comes from a senior executive from a very large fertilizer company, and he's asking, what's about the R&D work to prove K Forte is effective as a replacement to KCl? Is there any university trials conducted or being conducted? So the first part of the question, what about -- there's tons of R&D work done proving K Forte is effective as a replacement of the potassium chloride as well as nearly 4 years of commercial usage. Is there any university trials conducted or being conducted? There has been several university trials conducted since 2008. And we have other trials currently being conducted in specific circumstances not to prove whether or not the product is effective, but to prove some additional benefits of the product. So for example, we have some interesting studies going on trying to measure how much more carbon our product can lock into soils against potassium chloride. We have some other interesting works looking at how our product positive impacts seed germination versus potassium chloride, which the chlorine and salinity impacted. So we're beyond the stage of trying to improve efficacy. This is being done and completed for -- between 2010 and 2016. Now we are in a different stage. How is management -- this is another good question here. How is management paying the income tax on the deemed income received as shares? So that -- it's from whatever assets they can get, they have accumulated throughout life and saving and family savings and everything else, but the key question is myself as management. So that's fancy notes, it's family money, it's saved money, which have been saved, and that's how I paid the taxes. The next question. Are there any plans to produce a granular product to make it more attractive to potential buyers? Yes, this is something we've been looking at, but it's not a priority at the moment because we believe the size of the market for the product as it is in powder format is so big, and there's so much market to be developed for the product as it is before we start deploying our own CapEx on a granulation plant. The next question is, what crop is currently the biggest user of Verde's product? And the crop that's currently the biggest user of Verde's product is coffee. And you can help us by the next time you go to a coffee shop or to a restaurant, asking the guy, the waiter -- well, whenever you're allowed to go back out, where you can ask for some chloride-free coffee. And you're going to get some very puzzled face, what is a chloride-free coffee? And you can tell them how much potassium chloride most coffee farmers have to apply and how about half of all coffee sold globally comes from about 300 kilometers from where our plant is located. The next question. Does a customer buy only once a year during his farming time? Yes, most of the farmers will make one purchase per year. There are exceptions. But as -- the answer here would be yes, it's only once every year. In terms of our product, okay, because our product, different to KCl, different potassium chloride, can be applied once per year. If you're buying potassium chloride, then you're growing, let's say, coffee, yes, you may have to buy it in different installments up to 4 times per year. Or if you're growing soybeans and then planting corn, you're going to be doing it a couple of times per year. The next question. So the monsoon -- so the non-season times, are we still in production? And does that mean sales go to 0? So during the non-season times, which is essentially -- which coincides with the raining season of Brazil from November until March, we bring production close to 0. So they -- I say close to 0 because the mine has to stop producing. But the plant, we can still produce a small amount of product depending on the weather, depending on demand. So that's how we operate. And the last question, are you speaking to any of the huge corporate agri players in Brazil rather than just private farmers? The answer is, yes. We're not only speaking to the huge corporate agri players in Brazil, but also a bunch of them are already our customers and have been increasing the acreage planted with K Forte. So, ladies and gentlemen, that completes all the questions we've received so far. I would like to thank all of you for attending our first video conference call. For the ones who joined by telephone, I recommend next time to try connecting via Zoom so you can benefit from the slide. I'd like to thank you. We are very excited for 2020. We think it can be a very special year for our company. We are already seeing the impact of the change we made in terms of sales strategy at the end of last year. We're already seeing this working. And I look forward to hosting our next video call with the results for Q1. We should also expect to receive by the end of April a monthly update. So in addition to putting out our press releases every quarter with the results and hosting this video conference call, we're also going to be circulating a monthly update where we can't, of course, disclose any material information, but we hope will be plenty of information to allow you to keep up to date with what we're doing. I just stopped because I want to see if there was another question here. There are 2 more questions. And one of the questions was congratulations. No stupid questions by anybody. So I presume this congratulations is to all of you 40 people who spent the last 1 hour and 20 minutes listening to an update. So thank you a lot. Stay safe. And I look forward to seeing you again in the next few weeks. Thank you. Bye-bye.