Verde Agritech Plc (AMHPF) CEO Cristiano Veloso on Q4 2020 Results - Earnings Call Transcript

Verde Agritech Plc (AMHPF) Q4 2020 Earnings Conference Call April 7, 2021 11:00 AM ET

Company Participants

Cristiano Veloso - President, CEO and Chairman

Felipe Paolucci - Chief Financial Officer

Michael Aldwyn - Lead Independent Director

Conference Call Participants

Cristiano Veloso

Hi, everyone. My name is Cristiano Veloso. I'm the Founder of Verde Agritech. I'd like to thank you for your interest in attending our Q4, 2020 and full year conference call. Before we begin today's phone call, we need to talk about COVID. Yesterday has been the worst day in the pandemic in Brazil. We've lost 4,000 people. In total, Brazil has lost 350,000 lives. In the next month, it's estimated that Brazil, we have lost nearly half a million people. I would like to pay our respects to one of our shareholders, [Danielle Salomo], who is Brazilian doctor and has been fighting the disease in the front line since it began over a year ago. I'd like to pay our respects to our friend and plant manager [Edstrom Santos], who has lost his father from the disease.

I'd like to pay my respects to my brother, also a shareholder who lost his godfather, my uncle to the disease. And finally, I'd like to pay our respects to our shareholder Magnus, who has recently made a very generous and sizable donation to a very poor community in Brazil. Before we begin then, as a gesture of respect to everyone's lives have been shattered by this pandemic. I will ask that we all hold one minute of silence before we begin our conference call today. Thank you.

Thank you. There are approximately 30 million people in Brazil, living at the moment in extreme poverty. Eight in each 10 people who live in Favela in Brazil are believed not to be able to feed their family. So if you want to help with any sum of money, the Brazil Foundation is a very respected organization in Brazil. I personally known one of its key directors, he has been doing a phenomenal job in the country. Accept donations from non- Brazilian residents. So throughout the presentation today, you will have the key our code next to us. And if you're watching this presentation later on, on YouTube, at any point of time, also, please make sure you access their website, have a look at the work they're doing. And if possible, be assured that your donation will be in very good hands to help people who very much needed.

The presentation today will follow a similar structure to the last few times. In the first part, our Chief Financial Officer, Felipe Paolucci, he will be talking about the results; he is going to be carrying out a presentation. In the second part, we will host a Q&A. For the Q&A, you can be typing in questions throughout the whole presentation. Don't wait till the end to type in your questions. If you think about something, just type it in and send it to us even if it's during Felipe's presentation. And then in the Q&A presentation, there will be myself answering. But if you also want to direct one of your questions to our Lead Independent Director, Michael St Aldwyn, he's also attending the call. And during the Q&A, he will be able to address also questions who were formulated with him in mind.

Before Felipe begins his presentation, I just want to remind you of today's disclaimer. So on the right hand side of the screen with a very clear disclaimer where it says right to the top. If you're risk averse, don't buy our stock; don't rely on anything on this presentation. But on the left hand side of this slide, you can also see something we worked on a few months ago. And recently I had a call from a very successful entrepreneur in the mining industry, public markets has listed a few companies has led to some very successful ones. And he was just telling me how someone had pointed out what we've been doing in our disclaimer by telling the market upfront directly the type of shareholders we believe are more aligned with us and type of shareholders who perhaps aren't. And he was just saying how he wished he had started doing it 30 years ago when he was running his first company.

So I will make sure I read that after such an enthusiastic compliment by this gentleman. I will make sure I will not only have them on our presentation, but we go one by one. And I hope all of you or most of you on this call are aligned with us. And for the ones who aren't, I think we'll find peace in knowing there are 1000s of other companies in the capital markets, which might perhaps be a better place for you to invest than in Verde Agritech. So we're not good enough for you, I'm afraid to invest if you're risk averse, you can just want to make a quick buck. If you expect us to delay our growth, so you can earn dividends in the near term. If you're looking for traditional potash company; frankly, if you don't deal well with change, if you don't understand how hard how difficult it is in developing new technologies, and especially new markets for innovative products like ours.

On the other hand, please join our ride if you want to change the world into a better place. If you're looking for a real world technology developing company, if you want to help Brazilian farmers protect their Amazon, if you believe Verde can fulfill its purpose, and can make yourself and the planet healthier. If you have watched, or we will watch the Kiss the Ground Netflix award winning documentary, and probably recommended to several people afterwards. And finally, if you care about soil biodiversity and how important it is for our planet.

So I will now pass it to Felipe Paolucci, our Chief Financial Officer who carries on with the presentation, and then we will come back with a call for the Q&A part of it. So thanks very much, Felipe. Please go ahead.

Felipe Paolucci

Yes, thank you, Cristiano. And everyone for joining this presentation. So I'm going to start now with the highlights, and then the other subjects will come afterwards. And hopefully, we're going to clarify many doubts and points that you'd like to hear today. So, the first chart 4, we do have case highlights here, ability to generate significant free cash flow in the long term, like we had before. We do have currently over R$22 million approved by financial institutions in Brazil to be used if needed. So far, we are not using any of this kind of cash. The total loans in 2020 for CapEx and working capital was around R$10.3 million. At the end of the year, the cash held by the company increased over 236%, which totaled CAD2.2 million.

About profitability, our gross margin increased to 59% in Q4, 2020, compared to 36% in the prior quarter and to 62% compared to 48% in the prior year. Sales increased by 76% in Q4, and by 103% in full year compared to the prior year. And last one on profitability, the company achieved a net profit of $550,000 compared to a net loss of over $1.1 billion in 2019. So 2020 was the first year that the company recorded a net profit. And revenue increased by 48% in Q4, and by 52% in full year.

And considering Brazilian reals that exclude the exchange rate impact in our currency, we have close to 100% growth for revenue.

On the operation side, the company's fully permitted to mine over 482,000 tonnes in 2021. Plant 1 is already operating also with the new product called BAKS. And in the last one in 2021, we are working on a new pre- feasibility study that will be elaborated during the year to replace and update the last one made in 2017. We do expect to have this update by the end of this year. In the right side of the chart, some comments just to highlight the 2020 was a very challenging year for everyone. And we hit pandemic scenario and in addition to it we had the potash price reduction of 27% price year-on-year in Brazil. Considering about COVID, we did not close even one day so far. We've made a lot of actions and a new safety and health instructions to the company and employees to avoid the risks and so far it's going very well.

Fortunately, we did not have big issues with our employees. We launched the new product called it BAKS and we are allowing new technologies as well like 3D Alliance and Micro S Technology. We achieved both targets were set the mid of 2020 for the year, like revenue and volume, and recorded the first year net profit of the company.

For this year, we do have a target of R$50 million revenue, and close to 350,000 tonnes of product sold. Well, just the right side of the corner, it's important to mention the exchange rate, we did close the year with R$3.84 compared to Canadian dollar against R$2.97 the prior year.

Moving on to chart 5, we can see the fourth and full year financial statements. In the left side, we have Q4, 2020 then Q4, 2019 comparison, and full year the same structure. I will highlight a few points here. And then in the coming charts, we can have more details in the Q1. So to mention here, it's important to say the revenue growth of close to 48% in the quarter and over 50% in the year is also on Canadian dollars. Gross profit increase of over 144% in the quarter and 97% in the year.

Sales expenses, general expenses, as well increased as expected to support the company growth. I have a bit of more details on there to explain to you. And in the end you can see our total net profit and loss that increased full year of a loss of $1.1 million in 2019 to a net profit of $550,000 in full year 2020.

Moving to chart 6, just a summary of a bit on the value per tonnes which makes it easier for you to identify -- excluding foreign effect. So revenue per tonnes sold has decreased 16% in the quarter and 25% in the year. This is basically due to the potash price increase, as I mentioned before and our price base in the CFR potash price in Brazil. Product cost per tonnes in the other hand mitigated this cost reduction of potash; we had the reduction of 46% in the quarter and close to 8% in the year mainly due to productivity efficiency, and also the exchange rate Brazilian reals devaluation. I have a bit more detail in the other chart as well.

So in the end, gross margin improved a lot from 36% to 59% in Q4 and 47% to 62% in full year 2020.

Moving to chart 7, we have direct left side the sales tonnes, you can see here our significant growth year-over-year since we start our operation in Q3, 2018. We came up from 29,000 tonnes in 2018 to 119,000 in 2019. And now in 2020, we had 243,000 metric tonnes sold. In the right side, the revenue shows also revenue growth year-on-year growth coming from $1.3 million in 2018 to close to $9 million of revenue in 2020.

Gross margin, we had this to highlight our gross margin improvement. And the key reason for that is -- we have two key reasons and the other one tricky let's say two we can say that the Brazilian reals devaluation and the other one, which is the cost efficiency improvement. We had a lot of investment made in the last two years in the factory which allowed us to reduce our cost per tonnes for two reasons, efficiency and volume increase. And also another impact that to have we have in gross margin is the increase of CIF sales, which is the sales that we deliver the product to the farmer or to the customer which increases our revenue and of course our expenses, sales expenses, but this improvement year-on-year had a 2% increase in gross margin compared to prior year.

Moving to chart 9; sales and general administrative expenses. We do have the first table, the sales expenses, which is included here the sales and marketing and product deliver freight. You can see that both lines had a big increase and one sale and marketing expenses, I will explain the next chart but is mainly due to the new employees hired by the company to support our growth and on freight delivered like I mentioned before, the [1,110] the next chart based on that. Below the general expenses are our expenses related to the bankruptcy, IT tax, taxes and license and other expenses that are related to the business. And this one, I do not expect to have significant growth in the coming periods since that would part of it are also fixed costs.

So, moving on to chart 10 and the left side we have the sales expenses year-on-year comparison. In the comment below saying that what explains the sales and marketing expenses growth is basically the additional people that you had close to 20 or 19 people additional in our team to support the company growth. And in the right side of the chart we can see FOB, free on board against cost insurance and freight sales. For instance, in 2019, we had only 2,300 tonnes as CIF and to have last year over 31,000 tonnes sales on this CIF -- from 2% of total sales to 13 in 2020.

On financial summary, we saw revenue from sales on Q4 was $2.2 million of 56,000 tonnes of product sold $39 per tonnes as I mentioned before. And our revenue per tonne was lower basically because of the -- due to the potash price reduction in the market, which was from $290 to $250 per tonne of potash sold or delivered at Santos or Paranaguá ports. And full year 2020, our total revenue of $9.2 million, an increase of 52% compared to the prior year. On profitability, sales increased by 76% in Q4 and 103% in full year against 2019. Operating profit increased by $1.9 million in 2020. And the net profit after taxes increased by $1.65 million in 2020. And the gross margin increase to 59% and to 62% in full year compared to prior year.

The cash held by the group increased as well as I said in the first chart 236% with a total of $2.2 million and for 2020 the net cash generated under operational activities was $1 million compared the net cash utilized of $0.7 million in 2019 result in profit. On chart 12, we have our open table here with our lowers that the group currently has. And you can see that most of it was taken in 2020 or 2019. And most of it for long term returns which is -- which are being paid on time in full with low risk for the business for 2021 or 2022 out on the other control relates to this metric.

On chart 13, you can see the Brazil reals against US dollars in the first chart and against Canadian dollars in the second one, you can see that the trend is pretty similar and what is supported to highlights that we did had a big devaluation of the COVID-19 started in March 2020. But also if you want to see here we saw the Brazilian real devaluation. You can see Canadian dollars that decreased from 4.02 December to 4.49. And now it's 4.46 per Canadian dollars. Our numbers and projections and budget are considered this Brazilian reals devaluation as is currently.

And in the next chart 14, considered potassium chloride price as I mentioned as well that they bring year-over-year -- 2019 against 2020. And then the other hand now in Q1, 2021 we saw significant growth on price, increase on price and we do expect it remains at least in the coming months. So and then in the last chart here we can see the historic key price of potash since '91 just as reference for everyone.

Well, now, I have the last chart on 15 that shows the year-on-year sales growth on volume, the first chart you can see constant growth of the -- per quarter. Last year we had -- end of the year 103%, but also growth in each quarter. And then the guidance that we had in 2020, completely achieved by the company, which was 244,000 metric tonnes and R$35.2 million on revenue. And in the end the 2021, current guidance that we're chasing, and we're confident that we're going to deliver, which is the 350,000 tonnes of products sold, and R$50 million revenue. They are the key objectives for 2021 and expect to achieve least 10% of total sales of our new product BAKS. Launched the new technology in Q2, 2021, obtaining ISO 9001 and 1401 certifications. Obtained in mining construction of 2.5 million tonnes per year, which is a very important milestone in our path to achieve the target of 25 million tonnes in our production. And also initiated the cost of construction of Plant 2 with the purpose of necessary fresh infrastructure for development, such as plant color, reconnection, access roads improvement and preliminary CBO constructions from August 1 on this year. That's it for this moment. So let's go back to Cristiano for Q&A sections. And I'm also here to answer whatever is asked by you. Thank you very much. Let's, Cristiano move on. You are on mute, Cristiano.

Question-and-Answer Session

Operator

[Operator Instructions]

CristianoVeloso

Thanks very much, Felipe. So we, if anyone who wants to ask questions, there is at the bottom of the screen, there is an option called chat. So all we need to do is to click on chat typing your question. And your question will be answered. If you want, as I said in the beginning, if you'd like to direct one of the questions to our Lead Independent Director, Michael St Aldwyn, he is also available. So we've received some questions here, which I will start answering.

Unidentified Analyst

The first question how do you justify paying yourself a salary plus bonus of 10% of the firm's revenue in 2020? And over 15% of revenue in 2021?

Cristiano Veloso

I think the short answer to this question is that my compensation is dealt by the remuneration committee with three independent board members who then make a recommendation to the Board of Directors that side how to compensate all senior level executives as well as to receive the overall company remuneration via the budget. If there is any aspect in that regards, we have Michael St Aldwyn here who I'm pretty sure wouldn't mind answering questions connected to that if anyone feels that my question wasn't satisfactory.

Unidentified Analyst

The second part of your question was shouldn't this money be used instead to improve salaries of employees and hire key talent?

Cristiano Veloso

We have a very well structured compensation package for our employees compensating not just for their standard wages but also for achieving targets for overcoming challenges and I think a proof of the validity that is the fact we were voted a best place to work label or best place to work certification designation, recently in Brazil, which we're all very, very proud of.

Unidentified Analyst

The second question we have is, is it possible to farm in Brazil without inputs, using methods described in Kiss the Ground?

Cristiano Veloso

The answer is yes. We have hundreds, hundreds of farmers in Brazil, who could very well be the main stars of the documentary Kiss the Ground. It's very -- as a matter of fact, Brazil has been a pioneer in a number of those technologies described in the documentary. So for example, direct planting, Brazil was a pioneer, Brazil's the leader, every single essentially pretty much every single, large, or even small farmer in the farmer in the Cerrado. And most regions of Brazil will do direct planting, composting, and large scale industrial composting. Brazil is widely used and some of the technologies.

Unidentified Analyst

The other question is, is this a risk for the long term?

Cristiano Veloso

No, this isn't the risk. As a matter of fact, those farmers are the ones who love our product the most, because it's natural, because it helps with their soil microbiome, which you might remember from the documentary how important soil microbiome is. So it isn't the risk, it's a movement we support and it's a movement, I strongly believe we'll carry on growing stronger and stronger.

Unidentified Analyst

And now the question for year 2020 includes a significant tax payment. Does Brazil allow profits to be offset against historic losses?

Cristiano Veloso

The short answer is yes, Brazil allows profits to be offset against historic losses. We have lots of those historical losses in our balance sheet in Brazil, which at some point from a tax planning perspective, we will be able to be used to offset against profits, they at the moment, we are now in a tax regime in a tax structure and a tax scheme in Brazil, which is called [Lucru Diphtheriae] which is more favorable in terms of reduced taxation, then for you to start offsetting that.

Unidentified Analyst

The other question, are you planning to take more debt this year?

Cristiano Veloso

Possibly. So we're always looking for attractive debt package, we're also looking for ways to increase our working capital, we're looking at ways to be able to offer better payment terms better loan terms to when we do trade finance, to our distributors or to our customers. And a lot of that is funded out of that.

Unidentified Analyst

Other question. How competitive is current project which presumes K-40 and BAKS versus traditional fertilizer, i.e. price and effectiveness?

Cristiano Veloso

Good question. If you look at our purpose, then our purpose is to improve everyone's life and the planet's health to prove everyone's health in the planet itself. The only way for us to fulfill this purpose is to be able to offer our product to as many farmers as possible to maximize our reach. And the way I'm going to some people join in here and just mute them before start. Before becomes a -- anyway. So the only way for us to fulfill this purpose is to be able to offer our product in a price competitive way, in the markets we are focusing. So the essence of our business plan, both when you look at our first product K Forte, and when you look at our second product BAKS, the essence of our business plan is that it should get to the farmer, delivered to his farm for the same cost or in some cases cheaper, then he would have spent if he had chosen to buy a conventional chemical fertilizer. Hang on, someone sharing this screen here. The other question then you asked was in terms of effectiveness of the project.

In some circumstances, our project will be as effective as conventional chemical fertilizers. But as in some circumstances, it will not. So for example, if you have a soil, which is already very poor in potash, very poor in nutrient, and you're going to grow in that soil, a crop, which is a short cycle crop, i.e. a crop that will be developed, fully developed from planting to harvesting month, two months, you're probably better off with the water soluble potassium fertilizer, than you are with the gradual release fertilizer, like ourselves. So thank you. Thank you for your question.

Unidentified Analyst

The other question is, will you meet that April 12 deadline set by A&M for receiving environmental license for the 12 tenements comprising the 25 million tonnes per year application?

Cristiano Veloso

Just to give a little bit of context for everyone in this question. So the area where we hope to one day mine 25 million tonnes is quite sizable. And when you apply for an environmental license, the environmental license, as well as the studies you need to make in order to be granted with an environmental license, they have a relatively short timeframe. So as a result of that, it is impossible for us to be shoot right now for with a environmental license for 25 million tonnes, if we are not going to be able to mine or we're not going to be able to mine that resource in some case over 10 years down the line. So what we have succeeded in doing is to fulfill our obligation that with our initial environmental license for 2.5 million tonnes which we hope to mine in the near term. And then for the other titles, which account for the total 25 million tonnes. As time progress, we will then in due course be presenting the environmental license. So they don't lapse.

Unidentified Analyst

The next question. Do you have a projected price on the Brazilian real in the next 12 months?

Cristiano Veloso

I'm sorry, I'll bet we don't. It's been so volatile, has proven so many brilliant economists wrong in Brazil looking at those estimates that I won't risk. -- go ahead.

FelipePaolucci

Just to -- the projection 2021 is to have in Brazil reals for our product, close to last year add value and I know that that the potash price a bit higher. However, we are also selling a bit further than prior years. So the end of the day, we expect to have around in Brazil realized R$ 144 per tonne this year, what will come to R$50 million revenue for 350,000 metric tonnes of products sold.

CristianoVeloso

Thank you, Felipe. The next question by Ben. He is asking if we can go back to this slide, which has the objectives for 2021. So he's asking to discuss those objectives in a little bit more detail. If you put up this slide again, I can go over them.

FelipePaolucci

Can you, Cristiano, the left side here, slide 16.

CristianoVeloso

Yes. So the first objective there is that the 10% of our sales of BAKS to new project. It's a more of a technical sale. So it's not even though it has it's -- even though I strongly believe that at some point 70% of our sales, or thereabouts should be of BAKS. There's a learning curve, every time we try to introduce something new. So I think for this year, something like 10% would be reasonable. Let me just answer your question here Ben. Just give me one second. The objective for 2021 is to launch a new technology something like BAKS we've been working on for several years. It's something we're terribly excited about something very exciting. And I hope by the end of this second quarter, we can finally talk about it. The third one, some ISO certifications, both the 9001 for quality, the 1401 for environmental standards. We also started the certification for the 50 something which is for safety, employee safety, production safety, and we've also applied and working on a very important certification, which is the [BECO] certification, BECO. I hope as well in the near future we can become a BECO certified company. I suggest you guys go and have a look at what this certification is all about. The other one, obtaining the mining concession for 2.5 million tonnes for which is something a step towards our greater objective. And it's something I strongly believe we should be seeing some point this year.

And then finally, we hope to start building Plant 2 at least starting to. There's some crazy inflation at the moment in Brazil, in terms of civil construction, steel prices went up, and some price of civil construction materials went up as 50% - 70%. So we kind of like examining that, but at least the essential work, we hope to get accomplished this year. So we can have the plant fully commissioned and ready to be delivering project for the second half of next year. I am confident that the current plant should be able to fulfill all orders, both for this year and for the first half of next year. But I'm not so sure as far as the next year is concerned.

Okay, going, sorry, I'm bit distracted. There are so many people sending me messages here. It's just like keeps popping up. So going back to the next question here. Can the product be transported by slurry pipeline to a port for export?

The answer is, I don't know. But it's -- it isn't something we are too concerned about right now. So the Brazilian market is worth so much money. And it relies on over 95% of important project, that this is really our main focus. So we didn't w look at the possibility of a slurry pipeline for an export port.

Unidentified Analyst

The next question, if the company had hit the target it set for itself a few years ago, we would have done 600,000 tonnes last year, would we not?

Cristiano Veloso

Yes, it's good question. It's a good question. I think to answer this question; I need to split it into two. The first part of the question is about -- the first part of it -- I am just distracted here; there are 14 questions here now already. The first part of your question is if we look at the pre- feasibility study, the pre-feasibility study, it starts with the phase one at 600,000 tonnes. But it doesn't mean and then it has a second phase at 5 million tonnes, it is the third phase for 25 million tonnes. When the feasibility study was made in 2017, for a brand new project. No one could possibly predict or what or how this could develop or even if, which is and if let's bear in mind here that it's not when we will reach 25 million tonnes in all to certain extent is if we might be able to succeed ever. Product might not be taken up by the market to achieve that sort of market share. So I wouldn't think about the 600,000 tonnes as a number for the feasibility as the same way you would look at 5 million tonnes as a number from the feasibility as the same way, you would look at 5 million tonnes as a next step, because as you can see, the next plant we're building is for an additional 1.2 million tonnes. And we're going to keep going in a scalable way. So the pre-feasibility study, as with all pre-feasibility studies ever filed on SEDAR. They're really like a road map, didn't know that some initial study of what a mineral resource might look like in terms of economics.

If you ask this question from a previous conversation we might have had, in which I would have remembered you very diligently with the notepads taking up notes and everything I said in the different places we met over the years. Which I miss, it probably was self confidence, or exaggerated self confidence, thinking that we would be able to already be producing 600,000 tonnes at this point. The bottom line and I've shared that in all the conversations in all the calls before is that it's very, very hard, selling a new product to a farmer. It's not easy to turn to someone and tell him that that fertilizer, which made him worth hundreds of millions of dollars in several situations billions of dollars. Now, this little company has something better to offer. And he was doing all wrong when he was making his hundreds of millions of dollars. So it's not an easy sale, very competitive market. We're literally competing against giants here with billions of dollars in hundreds of millions of dollars in marketing budget, hundreds of sales and established sales structure in place. And so it's a fierce competition. And that's why I really want to remind you all that it's a very risky investment. It's a very risky proposition, what we're trying to do, and if it was free of risks, easy and simple. I'm pretty sure over all those years, there would already be a no other company, major company perhaps in our place doing what we're doing if it was something easy. That's my reflection about your question.

Unidentified Analyst

Another question here. Have there been any delays in obtaining your mining and or environmental license?

Cristiano Veloso

Oh, several, several delays, several hiccups, several problems has been-- has not been a straight path at all, as is the case with pretty much I won't say all but every mining project I have looked at.

Unidentified Analyst

Has there been any pushback from regulatory bodies?

Cristiano Veloso

I don't know exactly what you mean by pushback. But from what I understand, which is someone to turn to us and say no, what are you guys doing can't be done? Absolutely not. It's to the contrary. Because we don't have a tailing them because we have minimum impact on native vegetation. Because of the environmental, the sustainability nature, the sustainable nature of our mining operations, we were actually given an award by the environmental secretary of Minas Gerais State, a two or three years ago.

Unidentified Analyst

Another question, what percentage of your reduction in costs of production in Canadian dollars in 2020 can be ascribed to the devaluation of the real? Felipe?

FelipePaolucci

Yes, sir. I can handle. We have a close to 45% cost decrease. And we can say that 30% was related to exchange rate Brazilian real devaluation and the 50% due to cost effectiveness improvement.

CristianoVeloso

Felipe, another technical question for you. Can you confirm that Mr. Veloso's 2020 compensation was expensed as part of the G&A expenses category on page 30.

FelipePaolucci

Yes, our payments today is the salary to everyone, which is not related to the sales and commercial or marketing are located in general and administrative expenses, yes.

CristianoVeloso

Thank you, Felipe.

Unidentified Analyst

The next question, what is the total volume of Verde Greensand that has been exported from Brazil to date? 2018 through 2020?

Cristiano Veloso

I don't know from the top of my head, but it's very small. It's very small.

Unidentified Analyst

Can you split this total amount; you asked China and all the countries.

Cristiano Veloso

By value, most of it was sent to the United States by tonnage, I think a bigger portion was sent to China. As I said before, our focus is Brazil. When we sell the product in the United States, it's a niche product. So it's the garden market, it's somewhat organic growers, and they're not buying the product because of its potassium content, because it's just too expensive. If you look at the potassium content versus other the locally available products, such as K-Mag, Trio, even potassium sulfate, the reason they buy it in the United States is because of what it does to the soil as a soil conditioning aspect to it. There's a history in the United States of farmers using Greensand with verified and prove to the soils and Greensand is same mineral as we mined in Brazil. So it's -- this is the niche market we fulfill in the United States. In terms of China, we made the sale to a distributor in the country, he is going through regulatory process to rights to the product, but it's not something we -- it's not something and will never be anything as important as the Brazilian market for logistic reasons. The end of the day potash is an industrial mineral and because the concentration of potash in our products so slow, it's 10% versus the other commodities, which is about 60%. It will be forever impossible to compete.

Unidentified Analyst

How are you approaching the development of export market?

Cristiano Veloso

This is something that can wait while we focus on the domestic market.

Unidentified Analyst

How are we approaching it? Is paying a little bit more attention to our Amazon sales.

Cristiano Veloso

Amazon has made a bunch of changes in terms of how they received their product as a consequence of COVID. That made a little bit trickier for us to operate with them. But we are fixing it. And we recently hired someone who is dedicating a big chunk of his time as well, trying to do outbound sales in terms of exports, but it still remains something which isn't our focus. However, I do strongly encourage every one of you who is in this call to go on Amazon. If you're in the US soon to go on Amazon; if you're in Canada to buy Super Greensand and try for yourself what a great product it is. Talk to your family, talk to your neighbors and let's spread the word out in North America so we can together create this market for the product.

Unidentified Analyst

The next question. Dan, current year expectations for fertilizer prices. Your crystal ball.

Cristiano Veloso

Dan, I don't know. Everything we're reading is suggesting prices will go up. I've met and kept in touch with a fund manager was probably the most knowledgeable person in the world, perhaps in terms of fertilizers certainly runs more money than anyone else in that space. And he started bullish. He had already been talking about the depressed commodity prices over several years. He likes to talk a lot about the transformation to happen in China with the ethanol policy how what a big game changer it will be. So there are some people in the space who are very bullish about a renewed increase in fertilizer prices. I like to say we had the golden age of potash which was very interesting times. Very interesting times the golden age of potash. It begun before the financial crisis. So it began around 2007 throughout the financial crisis in '08, there was a blip. So it crashed but came back strong, really fast. And then we saw potash prices very high all the way until 2015. It was interesting. I mean, it was a sexy commodity back then. And as with any company, in a sexy commodity market, we were treated very well by Bay Street. We're preparing another presentation those looking over some of the photos to do that will be a little bit about of our history. And in those golden days, okay, golden days of potash, that's when no share price went up with the way up to $10 that's when we did funding finance at $6. But those banks they would take me to dinners with Dennis Rodman by our side, quite a character.

In those crazy days, we had as many as 11 analysts covering the company. Pretty much all the big banks in Canada were covering us target prices all the way up to $16. I was also looking at the photo with those 11 analysts visiting our site coming down to visit the site and everything else. From all of them, only two still have a job. The other nine are doing several other things. So those were the golden days of potash. As for your question, and I don't think we're going to go back to the golden days of potash because the players there, the big players, the new trend for Uralkali, Mosaic, I think they've learned the lesson and I think they will make sure they keep prices, some sort of lid on those prices. So you don't start attracting other companies like Verde and start incentivizing big companies like BHP to go ahead with Jansen project in Saskatchewan. So that is what my crystal ball says. But unfortunately, lots of those big companies, lots of the executives, they have a very short timeframe for how they think. And that's the risk we all face that given the short timeframe, they will look at the opportunity they will increase potash prices and create some huge boom in the short term. But then suffer the consequence as we've been suffering.

Okay, with the day since 2013 for the last eight years, so 2015 we still have potash price around $400 - $500 were still like no very, very high. And then the President of Uralkali wasn't happy that Lukashenko was allowing, the President of Belarus was allowing Belaruskali to sell potash out of their cartel. So he called up and told the CEO of Uralkali to fly down to Minsk, and meet for our discussion. I don't think that schedule went very well, because the poor guy as he was making his way back to the airport, ready to board his private plane, was arrested and was thrown in a cold jail in Minsk throughout the winter. Which I don't think was a very nice experience. But all of suddenly they are -- the directors of Uralkali puts out a press release saying, this is the beginning of a price war. We're no longer friends of Belaruskali, now we're going to favor volume over price. In one day, potash companies lost billions of dollars in valuation. No one else cared about potash anymore from that point, onwards, until I would say this year when some people woke up again to potash with a little bit of an increased price. And, of course, that fight for potash prices, which crushed the price brought the prices down to $200.

Of course, that was the trigger, or that made it a perfect storm for the Verde Agritech, literally a perfect storm for our company. This perfect storm, it's not just because price crashed, but at the same time that those prices crashed. We had the worst recession ever in Brazil. No one wanted to touch Brazil. We had some interesting economist covers about what was the worst recession in the history of Brazil, horrendous time. And to make things even worse, we had the very famous, massive, perhaps the ongoing bear market on TSXV. When no one cared about resource stocks, no one cared about mining stocks; it was when some of you might remember the boom of cannabis and we had some difficult times and then was in the midst of that perfect storm. A father of two young children that we were in 2017 in a situation where we had no proven project, no one believed on what we're doing. Even the ones who believed didn't believe either in Brazil or potash or the government or anything which was going on. So in the midst of that perfect storm, we run out of money in a challenging environment.

I remember, coming back in 2017, beginning of 2017 and having to turn to the company and saying, look guys, unfortunately, we have to cut costs. Unfortunately, we can't afford senior people anymore in the company. We're down to four or five people who are being paid the salary at that point. I myself at that point in time in 2017 with a share price of around $0.20 cents and zero prospects on whether we would really be able to succeed or to sell a gram of the product, I turned to my wife and said tight the belt, let's cut costs, because I don't know when I'm going to be able to get the salary again in Verde Agritech. We're going to be paid in stock, our fellow directors, supported me, supported the company agreed to the same terms, and I'm very thankful for them. But we had senior executives in the company, who came -- who had come from successful careers prior to joining Verde. We decided to become an employed executive rather than make the sacrifice. And because it was a terrible market in Brazil, they went on to be unemployed, and do all this stuff that time rather than carry on fighting with the company in a completely earn certain point of time, in our history.

So sorry, Dan, if it was a long answer to your question about our expectations for fertilizer prices. But I think it's very important for everyone to understand where we all come from, and how hard it has been for everyone in the company to move the project along. How uncertain it was back then, and how uncertain it still is, and how proud I am of everyone who decided to stay on with the company. And be crucial for its success, like the board members who stayed on and like some of our employees, which deserve their names to be mentioned here in full as well. So that's the answer.

Unidentified Analyst

Next question. With an increase in sales for export markets, especially the northern hemisphere suggests China help even out quarterly sales as a grown season this markets would be different.

Cristiano Veloso

Yes, would absolutely help would be phenomenal, would be excellent if we could do that. It's just not easy. It's just not. It's simply with trying, but it's not something easy. No, we're not selling the product there the same way we sell the product here. They have alternatives there, which cost a fraction of our product, literally a fraction. So it's a difficult one. And it's one we ended up being restricted to niche markets. And but it's something maybe we'll break into one or few opportunities that will help address that. What we're also trying to do to address that is to identify and develop and sell the product, choose some crops in Brazil that would have a higher demand during Q1; this is something we're looking at. But if you have any hope of being able to level things or make things as discrepant today as they currently are in terms of Q1, Q2, and Q3 type of sales volumes. We won't be able to do that because that's in the nature of agriculture that's in the nature of climate that's in the nature of how the growing season takes place.

Unidentified Analyst

The next question. Does Verde operates its own fleet of delivery vehicles and drivers or do you contract all your delivery service?

Cristiano Veloso

We contract 100% of our delivery vehicles. We don't own a single truck; we have no intention of owning a single truck.

Unidentified Analyst

Next question, what is likely -- what's the likely timing of a government decision on mine expansion?

Cristiano Veloso

I won't give a likely timing because I've been proven wrong so many times that I gave up giving likely timings an importance. A few years ago Kitt, all I can say I believe it's something we should have issued this year, it's something we're working hard to get issue this year.

Unidentified Analyst

Is the devaluation of Brazilian currency good for the company?

Cristiano Veloso

Yes, the devaluation of the Brazilian currency is excellent for the company. It makes potash prices in Brazil more expensive, allows us to sell our product for higher prices. But it also makes it more profitable for farmers to farm. So soybeans, corn, coffee, they all traded in US dollars, and they end up with more money in their pockets every time the Brazilian currency becomes weaker.

Unidentified Analyst

The next question, if you currently use all contracted services, do you have any plans required operate on fleet?

Cristiano Veloso

No, no intention. It's a new different business something complicated. So it's not something we intend to be doing.

Unidentified Analyst

Is the design of the new processing plant a multiple copy of the existing plant at São Gotardo with multiple parallel lines? Or is it with a single line but with much higher hourly throughput?

Cristiano Veloso

That's a good question. When we begun in 2018, with our own, building our own facility, we went to the market and bought the biggest equipment, the biggest mill for the type of application we have that could be sourced, cost effective that could be sourced in Brazil. So that was the biggest one. We build the facility. And then because this is the biggest one that dictates the requirement for you to have parallel lines. So that already answers your question. But adding to answer your question a few months ago or perhaps over a year ago, now the same company. So it's the leading Brazilian supply of that sort of equipment, they launched a new equipment, new mill with a greater production capacity, should the one we had originally purchased. And then at that point, it made complete sense to buy the bigger one. But also to replace the one we had currently bought to make it easier in terms of operation, in terms of replacement parts, in terms of replacing part inventory and added output.

So it was an easy decision to replace both equipments, we've been lucky to be able to sell the old one. Even if we weren't able to sell the old one, if it was just going to be right off, it would still have been a good decision. And now talking about plant two, it will equally be parallel lines. So for Plant 2, instead of looking at two of those Mills, we're going to have four, four of those large Mills. There's a company in Germany that can manufacture bigger Mills. Those were the mills we considered for our pre- feasibility study and for phases two and three. However, there were crazy expensive since then, when the exchange rate wasn't as bad nowadays is just even more expensive. So it doesn't make sense. It's better to work with those multiple mills than having just a one much bigger one.

What percentages of domestic sales are made directly to individual and use of farmers at full retail price versus sales to intermediaries, distributors and custom blenders under some kind of wholesale discount?

I don't know the percentage from the top of my head but I would say it's probably 80% going to distributors, and 20% sold via Amazon, in which case would be sales directed directly to individual farmers in the garden gardening market.

Unidentified Analyst

What's the magnitude of the discount to retail price that you offer to intermediaries?

Cristiano Veloso

I don't know from the top of my head is going to be like something standard.

Unidentified Analyst

Did these intermediaries hold their own purchase? Are those where they delivered the product to them?

Cristiano Veloso

We do both. So we're selling DDP delivery duty paid. So they don't need to worry about anything. They get the product there as if they were just buying from next door. In some other cases we sell FOB or CIF? So, it depends on the case.

Unidentified Analyst

Is a split between direct retail sales and intermediary sales that are taken on a geographic basis? Are you serving directly or customers looking at you either with the plant and shipping?

Cristiano Veloso

Hang on. Let me go back to your question here because I was answering a question here thinking about the international market. So the first answer I gave you was thinking about the international market.

FelipePaolucci

In the domestic market percent, it's half or 60%, direct sales and 40% of distributors amount.

CristianoVeloso

So that would be the answer to them. Thanks Felipe.

FelipePaolucci

The discount is 15%, yes.

CristianoVeloso

At a discount, the magnitude of discounts it's 15%.

Unidentified Analyst

Through the cut to the distributor, does this intermediary hold their own purchase or does Verde deliver the product to them?

Cristiano Veloso

We do both. So in some cases, we sell it FOB some cases we deliver the project.

Unidentified Analyst

Is a split between direct with the sales and intermediaries sales under taken geographic basis?

Cristiano Veloso

I assumed this is directly to all customers located within a 200 kilometers of the plant and shipping to intermediaries and blends focus located call market. So the split isn't taken into account, the geography it's taken into account the opportunity the size of the opportunity. If my answer wasn't clear, some of those questions please, by all means, go back and Gold Cooper, just ask it again, I will be happy to address them.

Unidentified Analyst

Next question. Can you list the names of companies you see as a domestic competition in the production of locally sourced fertilizers who's on your watch and monitor list?

Cristiano Veloso

So the main competitors would be the traditional fertilizer companies like Nutrien like Mosaic like Yara, the giant then you have some Brazilian local distributors like Heringer, like Fertipar then we look at the domestic fertilizer production. You have other smaller companies which don't have much scale but also show up every now and then in certain price beds.

Unidentified Analyst

What's the total CapEx budget for 2021? Felipe, if you can come back to that question.

FelipePaolucci

The total CapEx projected currently is R$12 million this year, so far at this point.

CristianoVeloso

Thank you, Felipe.

Unidentified Analyst

The next question, what's the current capital budget estimate for 2022 and 2023?

Cristiano Veloso

We don't have one yet. The December 2019 shows a total full time staff level of 69.

Unidentified Analyst

What's your current forecast planned for full time employees at the end of 2021? Do you have this number, Felipe Paolucci?

FelipePaolucci

Just a second.

CristianoVeloso

While you have a look at, I'll going through another question.

Unidentified Analyst

How did the 2020 audit review unfold with the new auditors appointed in November 2020?

Cristiano Veloso

It was a very thorough audit, which you would expect from a firm that was taken up the file for the first time. So they went over literally everything and was very time consuming and I'm sure Felipe's team deserves congratulations for the hard work they put into addressing everything the auditors had as well as the audit committee that was part of the process.

Unidentified Analyst

How do you spell BECO? Please any suggested reading?

Cristiano Veloso

If you just type in BECO certificate, certification, you will see, it's very interesting. Your spelling here is correct BECO.

Unidentified Analyst

Were there any transition issues or challenges during the 2020 audit?

Cristiano Veloso

There wasn't. Felipe when you answer the other question, you can also comment if you felt that way.

Unidentified Analyst

Will you be able to recommend the new audit firm who just finished the 2020 audit to be retained to conduct the 2021 audit?

Cristiano Veloso

I believe so. At this point here we need also to thank Felipe for having carried out a competitive price estimate in the last audit which saved us some money and but I don't see why we wouldn't be keeping the same one. Felipe, do you want to answer?

FelipePaolucci

Yes, the expectation is to have additional 34 times employee additional this year at the end of 2020 December.

Unidentified Analyst

Why did the company believe it was necessary to have a chairman appointed to the board subcommittees? But since 2013 did not believe it was necessary or appropriate to have Chairman named for the Verde Board? Why was this position changed in 2021?

Cristiano Veloso

I don't know. I think we were just so busy carry on with the business and we had so many challenges and so many so much to do that we were never stocked before to elect a chairman. And I had been acting let's say as a as a chairman during the board meetings and things were flowing very naturally and why has this position changed in 2021. I think as the company now gets ready for its next leg of growth after those initial years of major sacrifice. I think it's important to start having more formal structures in place. And I'm very pleased with the appointment and the decision the board made to appoint Michael St Aldwyn as the Independent Lead Director. He is a phenomenal person very -- brings up some excellent points very critic, very detail oriented in every aspects and I'm pretty sure he will be helping us management and other stakeholders in keeping up with the most stringent corporate governance requirements for any company nowadays.

Unidentified Analyst

Next question, what's the capacity of Plant 2?

Cristiano Veloso

The capacity of Plant 2, the operating capacity is 1.2 million tonnes per year.

Unidentified Analyst

Can you provide information as to how Verde's research and development is organized and managed?

Cristiano Veloso

We are small company goals. We don't have a formal R&D department. I mean if you look at the patents we've filed, we filed about six patents. For the first two patents were filed I was part of the -- no, I was the one leading it. The name as the inventor shows up the name of raw engineer at the time. But then the other four patents we filed. They have myself as inventor who truly was coming up with the ideas. So we are tiny company in that aspect as we grow, we might be looking at you setting up a formal R&D team but for now it's still very, very informal.

Unidentified Analyst

Do you arrange and run your own fields' trials using the various existing and new developed fertilizer formulations to test their effectiveness?

Cristiano Veloso

We -- it's good question. We don't do any trials ourselves. Every trial we make is using a third party, which is usually a consultant or university or Research Institute. So we have a few of those trials ongoing. That's why we test some of our technologies as some -- we are testing some -- all our new technologies.

Unidentified Analyst

Chris, how much would Plant 2 be able to produce once constructed?

Cristiano Veloso

1.2 million tonnes operating capacity.

Unidentified Analyst

Next question. Who is responsible for conducting regular reviews of international academic publications that would be relevant to the company in its developing product line?

Cristiano Veloso

It's an excellent question. To me, so anyone interested Google Scholar has an alert option, which you can create the words of interest. And every single time a new paper is published, that refers to that word, be it in the abstract, or in the full text of the word, it shows up and Google sent you, and then you can decide how often you want to receive those updates. So I have about 10 words, which are relevant to us. And I have a daily alert, which I receive around the time I go to bad. At which point I review and spend my time prior going to sleep reading some very interesting papers. And then I share with the team and react upon some of this stuff, which is there. More recently, we've been able, thanks to our anywhere office policy very more, much more recently, we've been able to hire a lot of outstanding people, and a few of those with PhDs and masters. And we've then created a group where we now collaborate and we have more people sharing all the research and more people doing similar things to what I'm doing. But for anyone in innovation, anyone in developing product, it's always a joy to be reading scientific papers and how much you learn how much perspective it brings what you're doing and to what you might be doing. The last one I read was very interesting was about the difference between short to short read DNA versus long reads DNA and the implications we're going to see for agriculture. As long read DNA allows you to have a better understanding of soil Meta genomic, and it's impacting in a number of different areas of agriculture. I could talk for another half an hour about that. But let's go on.

Unidentified Analyst

You have previously stated that regular dividends are something that Verde will consider in the future. Do you have a set of preconditions at which point you would be recommending dividends start being declared and paid? Is there a general cash flow production which this starts to become a consideration?

Cristiano Veloso

I don't have an answer to this question. It's not something the Board of Directors has ever discussed. But it's important valid point. And I will suggest that Michael St Aldwyn brings this issue to the next board meeting and I think directors should be looking into this issue in a more structured and informal way.

Unidentified Analyst

The next question. Let me just see here how many more we have and gone, guys. Okay, that's a lot. So the next question. I get that it's hard selling a new product to a successful farmer. But he sells up 20% in price ex-[Indiscernible]. And as well as your farmer has had these currency devalued, or to another 20% now has got to be the best chance to gain market share.

Cristiano Veloso

Yes, you're absolutely right. Our margins have increased significantly. This has allowed us to be somewhat aggressive in certain situations, and we will continue being aggressive when we feel like it's the time to be to grow market share. One important point to take into account is that the reason farmers don't buy our product is not because of price. I can't remember a single time when we lost, well I can remember, but that was a bit different. But what I'm saying is, it's not the price that is -- it's the barrier. It's really the aversion to trying something new, which has its merits, but also brings other difficulties to a farmer. It's no secret to all of you that our product is a powder. And it's not as easy applying a powdered product as it is applying a granulated product. So that's one point which takes into account, another point to take into account. And we've lost sales to farmers who absolutely love our product. But they turned to us and said, look, Chris, I'm sorry. They distributed a can here and offered me a package, which included all agrochemicals, all pesticides, herbicides, including the seeds included these fertilizers, or the package. And he got paid in grains he got paid in soybeans, soybeans, which have been replanted yet. So you do end up having some aggressive people moving in the market as well. And we fight against it the best as we can. And but they take market share. So it's not an easy market. It's not an easy if anyone is looking to invest in a done deal here. We're going to get 25 million tonnes and, hurray, forget about it, it's not worthy if it's not what we have here. It's hard work, its day-to-day fighting. Oh, it's a daily David versus Goliath fight. We were here. And that's why I'm so proud of the team we have and how committed they are to what we were doing and very proud of how successful they've been in such a terrible market in such a difficult circumstance to grow our sales in 100% from last year to this year. And only that together with us together with the board together commit to another growth this year of another maybe 50%.

Unidentified Analyst

The next question by Jeff who also find some very interesting videos and articles. And I'm thankful for him sharing them with me. I need to ministerial workgroup was established to address the topic of developing, the national fertilizer plan on March 9 and standard there is 110 -20 day discussion period. My question is, is your company Verde in discussion with the government?

Cristiano Veloso

Yes, I was consulted by some of the members of that inter ministerial group. They're very impressed by the work Verde has done. Every single member of that group has a big respect to our director, Alysson Paolinelli, was appointed by the government or by research institutes as a contender for the Nobel Prize. Well this Nobel Prize for this year and we are aware of what's going. And we're also familiar with what's going on. We're also very familiar, Jeff, very familiar. It's not the first time this happens, we're living. We're witnessing that for the second time when we begun, in a way, doing potash. We saw the price spike, we saw the farmers complaining with the government back then in '09, '10, '11. And the government at that time, also had some of those inter ministerial work groups and what the President back then did was call up the CEO of [Balley] and tell Mr. [Indiscernible] that he had to buy fertilizer assets, to which Mr. [Indiscernible] complied, went on and bought fertilizer assets in the country, which were owned by Bunge and made some investment in that front.

And then later on in a different -- with a different president in place those fertilizer assets were sold to Mosaic that now runs those phosphate mines which were taken over by Balley and has also been running this firm -- this potash mine in the Northeast of Brazil. So it's nothing new. And it's not, if there's any expectation that this will change anything for Verde. If there's one thing those last 15 years has taught me is to be very skeptical to really focus on what we can accomplish as a company and what we can work and what it depends on analysis that's what we're doing. Thanks, Fabio, he is just congratulating us, it's from a bank.

Unidentified Analyst

Can you provide the direct email address for Mr. St Aldwyn so that I can forward the letter regarding the stock option plan that will be coming to the AGM in June?

Cristiano Veloso

Yes, I can most certainly do that. What we will be doing is to put up an email in one, perhaps that brought next newsletter, I don't know if Mickey wants to be like, disclose a personal email. So perhaps the best thing would be to create a corporate email for him. And then we can allow any stakeholder that wants to speak directly to, who wants to speak directly to our independently director can talk to him. Just one thing, I wanted to talk about our stock option plan as well in advance of that, because I know the content of this letter. If you look at all TSX companies hundreds and hundreds of them. And if you look 1000s, I think over the period of time, Verde has been public company. We might be the company that has issued over those years, the least proportionally, the least amount of stock options.

And the reason I think that is because I learned very early, together with our board a lesson in 2010. The lesson was when you're awarding stock options. You don't want to create a situation where let's say your CFO or your VP sales or Chief Operating Officer where he can become rich too quick and leave the company. Unfortunately this happened with us. We had the standard stock option plan back in 2017. Where it was I think a third, a third and a third vesting period. So the best thing took place over a relatively short period of time So, I think was like two years or something like that. So what happened with Verde was some of the people who were given stock options back, when we had to reinvent the company the first time in 2008 - 2009, from a gold company to a fertilizer company, some people had received those stock options, very cheap exercise price, because that was the price back then, when saw the share price going up to $10, $6, $7, $8, they turned to me and say, Chris, we love you, they love your company, thank you very much, but I'm going to do something else.

And they could do that, because was a further, further third of a small timeframe. So we learned this lesson. And for that reason, the staff in the company, they have a vesting period, which takes them five years before they can fully vest with their stock options. So a 10th, the 10th, the 10th, and then I only the end of the fifth year, they can get the full package. That way, what we are seeing what we've seen, in spite of this price increase is that what we saw happening and learned back in 2007, doesn't happen, hasn't repeated again. The other lesson we learned was that when you do very short, when you have a timeframe, where people have to exercise the stock options straightaway, or risk losing them. You create an incentive, which we also saw happening for people to then exercise at whatever price it is, sell the shares in the market and move on to doing other things. So to address that, and has been very successful, what we've done is to increase the time that anyone has to exercise the stock option, so give the stock option to our procurement manager. And he can after the vest, after five years, he can carry on with those lessons, stock options have been remembered by exactly what the term is, but perhaps for another 10 years, before he faces this situation of exercising and having to sell or not. So we saw a lot of that happening in the past learn the lesson. And it's been much, much better. I think it's also relevant to share two other things with you guys. The first one is we have a program in Brazil called [Stasia Sauco] so become an owner, where twice per year, our employees, they can write us a letter, there's a number of criteria, they need to fulfill in terms of having accomplished certain targets, they tell us a bit about their history, why they are with Verde, why they want to be with Verde and some fascinating letters we receive some fascinating people. And we choose and we award stock options and they become owners of the company. So it's a very successful program we have in place and very important I believe for what we are growing in Verde. The other the other aspect when it comes to hiring senior executives, it's essential for you to bring, I remember when I went to hire Felipe Paolucci who had a bunch of other alternatives and I know that the package of options was a crucial reason why he joined the Verde versus other companies. So be in a position where you can and like Verde will be for the coming years to issue stock options to bring more senior talent is essential unless of course, we want to start paying much, much, much higher, much, much higher salaries. That's the trade off. That's a compromise. If you get off of the stock options, you really want to bring talents, in a talent you need to do that and when it comes to board positions as well. We have a corporate governance committee who is also always assessing the performance of the board, looking at the necessity to bring on new board members, it's always essential for you to have stock options as a way to make it interesting enough for someone to dedicate and if you don't have those stock options, no problem. No, like, you're going to end up having to pay way more in terms of fees to be able to bring people with the company.

Unidentified Analyst

Another question here, can you comment on increased demand for your products in the cannabis space?

Cristiano Veloso

Steve, I cannot sorry, the last time I made a comment like that they just busy wants to shut down our bank account. So I'm not going to be saying anything about that.

Unidentified Analyst

Jeff, philosophically, what's your opinion on NPK utilizing hedging to neutralize your FX exposure at some point? Felipe, do you want to answer this question? I think Felipe; he might be having a break.

FelipePaolucci

No, I wasn't. I was in mute -- talking by myself here. So well, we do have a natural hedging which is once the potash price or the Brazil real devaluates and normally, and we can see that the exporters also decrease or increase their price in US dollars. It's like a natural hedge. So the final price in Brazil real is sometimes when the exchange rates change a lot, sometimes remains a similar to the prior periods. So we can say that this could be close to natural hedge, we only have as cost in US dollars related to one raw material, which is not representative at all of our cost. So I do not see at this point, we'd not have any debt in US dollars. The only experience we do have in Canadian or US dollars are the ones related to the FX, and a few payments that we have in our headquarter. So since revenue is really very close, it doesn't change a lot because of the exchange rate. And we do not see any requirement of hedge but I'm sure that we are all the time looking at it, if necessary; we'll implement that policy of Verde. The costs for hedging Brazil are quite high. So it just makes sense. For example, if we have a big exposure in dollars, sometimes it cost over 10% or 12% or 15%. So at this point, I think we are safe enough to not do hedging.

CristianoVeloso

Thank you, Felipe. As we approach two hours of our call, if you're watching it on YouTube, I thank you very much for your interest. I thank you for spending those two hours with us at your leisure time. And I also would like to thank the nearly 50 attendees we have live with us and have been live with us here for the last couple hours. So thanks very much for being with us here.

Unidentified Analyst

Next question, BAKS, any data on actual tests carried out on the farms?

Cristiano Veloso

That's a good question, not as of yet. So we should start getting data from farms in the second part of this year. That's when we should have some results. But BAKS is a combination, as of K-40 and all the well established fertilizers. So there's nothing new or there's nothing different we would expect in terms of yields in terms of results. It's -- there isn't a big expectation about that.

Unidentified Analyst

Next question. Will Plant 2 sit side by side with Plant 1, or we'll use scrap sell Plant 1? Asking because earlier you sold off the old plant.

Cristiano Veloso

Okay, good question. Just to clarify, I didn't sell off the old plant. We sold off one piece of equipment which was a mill which became outdated to the size of mills we started. We became able to use. Answering the first part of your question, we won't sell Plant 1; Plant 1 will carry on operating for the foreseeable future. And Plant 2 will not be built side by side with Plant 1. It's in a different site, which we've already bought, it's ours. It's our land it's -- and it's a site which is next to the mine. So Plant 1 is over 20 kilometers away from the mine which we the moment have to truck or to be processed in Plant 1. We had to do that because of infrastructure required to which we will now be making some investment so we can have commercial trucks. Our customers go in and pick up the product from Plant 1. If you didn't understand answer sooner, please let me know. And I'll go back to it. If there's any question I wasn't clear enough, one of us weren't clear enough, please feel free to go back and insist on the question, or clarifying any aspect I might have missed.

Unidentified Analyst

Any other film to watch after Kiss the Ground? Any resilient film related to the subject?

Cristiano Veloso

Good question. I can't think of any other film after this documentary Kiss the Ground. It's I think straight to the point. It's a brilliant documentary I think will help changing people's views about the importance of soil by diversity, will help people understanding why -- what is beneath our soil matters so much.

Unidentified Analyst

And then finally, if there's a Brazilian film related to the subject.

Cristiano Veloso

Nothing commercial that I'm aware of. There are some documentaries which were done, which are more like lectures with some images inserted, which are interesting, you can contact me via email, I can have a look and share with you if you're interested.

Unidentified Analyst

During 2020, there was a single stock option exercise that been 750,000 shares per shares for a total of $200,000 page 52. States 300 was in lieu of bonus to the board to exercise shares. Can you confirm this was not bonus to the board? But bonus you must have alluded as CEO, confirmed part of the bonus report in notes 26 confirmed? What are Verde's thoughts on the Brazilian government looking at options to help reducing the country's reliance on imported fertilizers and how do you think they will promote Brazilian production? Will Verde be able to benefit from this? And are you planning on making a submission to the commission?

Cristiano Veloso

I think I've shared my view Gold when I said answered the other question. The other question you asked but it is a very important point. And I think you all like to hear that. We created a committee in the board of directors, a temporary committee which is in charge of looking at what's going on with this working group and making recommendations to management and the board in terms of how to position in regards to it. I personally like very much your suggestion that Verde should be making a formal document and submitting it to the commission in which document we should narrate everything we've done, everything with accomplished everything we intend to continue doing for Brazil. And I like the idea to start with, started with a quote, don't ask your country what your country can make for you; ask yourself what you can make for your country. So I think that will be our opening statement on this letter and then we will go on narrating everything we've done over the years to help Brazil address this issue.

Unidentified Analyst

Now that Cerrado Verde project is in regular production is in cash flow positive, are there any plans to continue improving up reserves? Are there -- Verde has exploration development rights?

Cristiano Veloso

Short answer is no, reserves we have on significant. We're looking at decades of mine life at the very high levels. What we do have ongoing is infill drilling for more accurate mine plan design. So that's something we have ongoing and we'll carry on doing but we aren't looking to carry on exploring anything new, there isn't any. We did a lot of that. We did a lot of that from 2009 when I think our first drilling campaign began all the way until 2012. When I think on our final resource calculation was established.

Unidentified Analyst

Are they testimonials or data regarding Verde products ability to increase drought tolerance?

Cristiano Veloso

Good question. Our product has a nutrient called silicon, which is a phenomenal nutrient. It improves crop resistance against a biotic stress. A biotic stress is drought tolerance, too much heat, like water, increase crop resistance against pests against diseases. So we do have several testimonials, where farmers go on and say how the area they had treated with our product even though there was a drought what's called in Portuguese, a [Veera Nico], even though that was one of those crops trade strong wasn't as effective as a [Niebo] as an adjacent plantation, which wasn't using our product. So there's a message here, Mickey, from a shareholder to you. It seemed -- it is very distressed here. So I don't know if you want to address that in here or by an email directly to him. So it's your call?

MichaelAldwyn

Well, I think simply put the obviously in the past when there has not been a lot of cash around. The company has issued a number of options in order to compensate the executives and indeed the members of the board. We are in the final stages of establishing a plan whereby we will limit the number of options that will be issued for that purpose. But we are not ready to make a public statement on that at this point.

CristianoVeloso

So essentially, as Michael told you we had issued $12.4 million stock options to date of which 5.4 million were given to Mr. Veloso. $6.4 million options have expired or been forfeited. $3.28 million have been exercised, of which 6% were exercised by Mr. Veloso. We need to change the rules to limit Mr. Veloso's personal benefit. Yes, I think the key aspect here is the fact we issued $12.4 million options over 14 years, 14 years of being a public company, having gone through big volatility of prices and crisis. The real number which needs to be looked at is not a $12.4 million because lots of those options will let's say were issued when was it $8 and was never exercised, or people laughed before heads refined. So that's any relevant, absolutely relevant number. The number which is very relevant here and people need to think about is that over a decade, we've only exercised $3.28 million stock options. That's nothing, absolutely nothing. When you look into those numbers over such a big period of time, over such a distressed or situations where lived crisis and not everything which was going on. So 3.28 is nothing I challenge anyone finding other companies that have been public for as long as we did or even on a per year basis where that number would be much, much smaller into that.

The other question is 60% was exercised by Mr. Veloso, it's not a surprise Mr. Veloso, myself I'm the only one who's been with the company since I began it in my garage back in 2005 all the way up to now so it's not surprising the only one who was happy enough to or have your call it something else to decide to stay with the company throughout two of the worst crisis you can think of, financial crisis in a wait and then I'm thinking about the company of course, there are always crisis and then the potash crisis in 2000 and in 2015. So it's also no surprise, what ought to be sad here is that even though those options were exercised by myself, not a single one, not a single one of those shares were sold, not a single one. And in a number, a lot of times that exercise was needed to inject new money into the company in difficult circumstances. So not a single one was sold. So yes, that's what it is.

Unidentified Analyst

The next question here is have you considered increasing the price since really, K Forte is a much more valuable resource than KCL as a whole, particularly considered certified organic product, if also farmers are not so concerned about the price maybe this would not lose business anyway.

Cristiano Veloso

Our purpose Herald is to improve everyone's health and the planet's health. In order to improve everyone's health, we have to make the product accessible to as many farmers as we possibly can. In order to make it accessible to as many as you can. We can't transform it in a niche product in Brazil; it remains to be sold as a replacement of potassium chloride, replacement of KCI on K Forte adjusted basis.

Unidentified Analyst

Do you have -- next question, do you have to spend any money on exploration or infill drilling? What would be the cost of the new PFS?

Cristiano Veloso

We don't need to invest any new money on exploration on infield drilling for the purpose of the pre-feasibility study. There are plenty of reserves there that don't make it required. I did -- total cost of the PFS. I don't know exactly how much is in our budget this year. But we don't have all the quotes until now to come up with, to answer this question. And this completes after two hours and 10 minutes, all the questions and going through here to see if there's any question here that I missed. So if anyone felt that his or her question wasn't properly answered here and wants to send it again, please feel free to do so as a follow up question or anything like that. Oh, I found a question here. Note 26, Felipe, maybe we might be able to help this one. Note 26 disclosed compensation, was any of this paid in 2020 or some of all of it is to understanding as compensation payable, December 31 2020. And including the 1.4 million of trade in order payables. I understand it's all payable. There's nothing, Felipe --

FelipePaolucci

Yes, everything was paid or accurate in 2020. So for example, we paid a bonus to employees locally here last week, which was already booked last year so there is nothing to be paid this year that's related to last year that was not a booked in 2020.

CristianoVeloso

Okay, I'm having a look here I can see someone send a new message. I haven't got there yet but from what I can see here, I think everything has been answered. Let me see the new message came up. Okay, thank you. Elon Musk compensation deal. I don't know what Elon Musk compensation deal is but we can learn about it. Thanks, Suna.

Unidentified Analyst

Next question for the week. Frederick. How Verde's reserves value?

Cristiano Veloso

Well, I don't know the answer to that question. I mean in the financial statements, they are, I don't think they are valued. I think they're valued only on the basis of the investment made. So I don't think they carry a greater value than what investment was. Of course, there is an NPV from the pre-feasibility study. But as was said, as was mentioned several times, it's really a game plan. It's not when we're going to be able to get you 25 million tonnes or more, it's really a NIF if we're going to be able to grow the company at this sort of size. And here, there's one thing I think it's worth mentioning, which is that this is a growth company, it's growth stock. It's an entrepreneurial company, full of risks, it's full of uncertainties. It's full of dreamers like myself, who have gone around, looking for ways to improve the health of the planet and everyone's health, tried to change the world tried to change how very successful farmers cultivate full of risks. And if by all means you risk averse, this isn't the right company to you, this is the right fit, if you feel like you need to micromanage-- management, if you feel like you need to micromanage the board of directors, if you feel like you need to micromanage your financial statements and take everything, all the boxes and everything else if you like, if you have this anxiety, you should be spending your time doing that you don't have better things to do. I think you're starting from the wrong angle. You should look for a company that fits that kind of situation. Like established company and operating company. A different circumstance not what we are as a true growth company operates in an extraordinarily risky environment, which is so bold about it that puts up on its PowerPoint presentation that you might lose all your money if you invest in Verde. And in two situations quite frankly, we were very close to doing that perhaps not all the money but very close to all the money people invested in for Verde. That's reality. So we did the IPO in 2007. Very good. 120 very promising early stage growth projects. Everyone was very excited about it.

On it came the financial crisis, share price went down to I think $0.15 or something as low as that whatever people sought shares, then in our if it's not losing all your money, it's losing virtually all your money with you. If you paid 120 for that share, and then it's now down to $0.15. And then some of the people who bought those shares turned to me and said, Chris, we are the Emperors of Bay Street. We know what's good for you and your company. We want to get your company and merge it with another shell company forget about what you're doing. The markets are never going to recover back. Forget about this potash thing you want to do. The company still has some cash left from the IPO it's now trading at $0.10 -$0.20 it has $0.60 in its balance sheet from cash. Let's do it and then I had fight, wasn't easy, it was my late 20s back then am I wrong here am I so what am I missing here all those emperors of Bay Street turned to me and saying fact I wanted to do potash is wrong. But for the good for the worse I succeeded in telling them to move on.

And later on they all became good friends. They all became very happy because they saw all those shares they bought at $0.12 go they up to $10 in the golden age of potash. I know at least one who bought a whole bunch of shares and sold very close to the $10 when potash was very sexy, it was making the headlines in all over the world BHP the biggest mining company in the biggest super cycle was trying to buy potash, was trying to buy Potash Corp Saskatchewan. So yes, those were the golden days of potash but a lot of people and feel very sorry, very sorry. A lot of people look at what was going on and lost virtually all their money. That was the first time we had to reinvent the company. That was the first time I could have wrong I could have been wrong, we could have just failed completely. I wouldn't be here you guys wouldn't be here. But no, that isn't what happened. But hey, then we live in the golden age of potash. I'm having dinner an extra Dennis Rodman and the potash is crazy sexy. And people buy stock; people buy stock at $10 people buy stock at $8, $7. We have analysts telling everyone a big name is Alice who get paid millions of dollars, literally millions of dollars per year, millions in bonus and compensation.

Going around telling people Verde is going to be a $16. I think the highest price was closer to $20 from at least one big bank and telling people going around and it's a great story, it's going to go and keep going up. And then we saw what's happened later on. We saw this stock going all the way down from the height of $20 down to $0.20. And that $0.20 again, we had to reinvent the company. Because what triggered the price going up that much was something completely different to what we do nowadays was something was potassium chloride was the expectation we will be able to produce potassium chloride the same fertilizer we now just between us despise but that was what we're doing back then. Literally new, a tailings dam would burst in Brazil, a tailings dam killing hundreds of people and a second one would then also burst and 10 dams which were even smaller than the ones we were planning to build for our potassium chloride operation. Needless to say about the potash price crash and from $500 was always $600. Now there are analysts talking about $800 all along. So we had to reinvent ourselves for a second time. And when we reinvented ourselves for a second time. Lots of people sold. I'm very sorry, lots of people sold, lots of people lost a lot of money when they made the decision to just sell at $0.20 or $0.25. But the whole world the whole dynamics of the market had changed. You had some very smart people. Very smart institutional investor, who bought in placements at 4.15 at 6.45.

Some big successful fund managers but they had it completely wrong what could have happened to potash prices. So we're doing good now. We have a new project sales are going well. We're very passionate about our purpose, very happy about what things are going on. But the same way I saw our share price being completely wiped out and we having to reinvent ourselves, when you think about buying stock in Verde, or you are shareholder in Verde, do not think this cannot happen again. Nothing we can control I mean it's something so new that it's even impossible for you to come up with all the risk factors associated with our business. No one has known done it before guys if it was easy, BHP, Nutrient, Nutrient spends per year on customer entertainment, probably more money than our market capitalization is. So if any of those companies had any expectation, there was even a remote chance we would succeed. They have plenty of cash to come and take us over. So this is a David versus Goliath is an entrepreneurial company, it's growth company. And if you want to see this with different eyes you're really fooling yourselves. And I think you should look for a different place to put your money and plenty of good companies out there. But probably it isn't Verde.

Operator

Cristiano Veloso

Thanks very much. It was a joy having spending this time with all of you. I really enjoy answering those questions. I'm very thankful for the support you have given me over the years. I know some of you have relatives who have, who were huge believers and lovers of everything which we're doing and died throughout this journey. And I know some of you keep this dream alive. So I'm thankful for that as well from a family perspective, thankful for all the inputs we, I often receive by WhatsApp via email. I'm sure Michael will learn to appreciate as well the importance of those inputs, this assistance, and that's the word. I want to thank today's call as well. So thanks everyone. Stay safe. Make sure you donate some money to the Brazil foundation; it will be put to very good use. Thanks a lot. Stay safe. Bye-bye.