Company Announcements

Review of 2020 and Outlook for 2021

Source: RNS
RNS Number : 8720N
Harvest Minerals Limited
03 February 2021
 

Harvest Minerals Limited / Index: LSE / Epic: HMI / Sector: Mining

3 February 2021

Harvest Minerals Limited ('Harvest' or the 'Company')

 

Review of 2020 and Outlook for 2021

               

Harvest Minerals Limited, the AIM listed remineraliser producer, is pleased to provide shareholders with a recap of its activities during 2020 and outlook for what is expected to come in 2021 as it continues to make strides at its 100% owned revenue generating Arapua Fertiliser Project in Brazil ('Arapua').

 

2020 / Outlook Highlights:

·    Total sales orders of 54,155 tonnes of KP Fértil®, beating our previously stated 50,000 tonnes target for the year

2021 sales guidance targeted at 80,000 tonnes

·    Awarded full mining and environmental permits to mine and process up to 400Ktpa of KP Fértil®

·    Product storage capacity expanded by 300% to a total of 30,000 tonnes of product

·    Mining area increased four-fold to 78,894m2 providing greater production flexibility according to demand and reducing operating costs

·    Completed a series of agronomic tests

Coffee - outstanding results based on long-term trials carried out at a large producing farm

Sugarcane plantation areas and carrot crops - superior yield performance when using KP Fértil® compared to more traditional fertilisers

·    Planted 18,000 native trees during 2020 to offset emissions generated by the diesel used in our operations

·    Agreement with Banco do Brasil whereby Harvest's clients can access the bank's rural line of credit to fund its product orders

·    Protocol of Intentions signed with the Institute for Integrated Development of Minas Gerais ('INDI') for assistance in areas such as business matchmaking with local suppliers, permitting and licences, tax planning, and funding options, as it may be required

 

Brian McMaster, Chairman of Harvest, said: "This past year was one of consolidation of our operational platform ensuring the necessary scalability to meet market demand as the effectiveness of our KP Fértil® product becomes more widely known across the regions covered by our sales team. After the onset of the Covid-19 pandemic, the team we adjusted our sales estimates to 50,000 tonnes, which represents a maiden profit, and it is extremely encouraging to sell in excess of that target.  There is now little doubt, Harvest has a real, profitable business with a multi-decade life of mine.

 

"We are particularly pleased to have also completed a series of very critical agronomical tests, which have delivered exceptional results and can therefore be used as our flagship tool to expand our client portfolio from small to large crops, improving the reputation and distribution of our product. As expected, demand was stronger towards the end of the year and entering 2021 and we expect that we will reap the benefits of the solid platform we have built over the past two years as we continue to progress throughout the year.

 

While we are proud of our achievements in such short period of time, we have barely tapped the immediate market potential of the agriculture regions surrounding our operations. We now believe we have the appropriate platform from which to deliver increased growth and I look forward to updating shareholders as we progress in due course."

 

Review of Operations

2020 was a landmark year for operations at the Company's Arapua Fertiliser Project. A key turning point was in February 2020 when Harvest was awarded with the full mining and environmental permits, granting the Company full tenure over the asset and allowing it to mine and process up to 400Ktpa of ore. This is above the current processing capacity; however, both the environmental permit capacity and production capacity can be increased as demand requires.

 

Over the 2020-year, Harvest also successfully executed the expansion of its Product Storage Facility to 30,000 tonnes, a three-fold increase in finished product storage capacity, along with the expansion of the Mining Area to 78,894m2, a four-fold increase. These expansions, which were self-funded and completed approximately 30% under budget, provide the flexibility to increase production, dry ore and allow for additional run of mine at times of peak demand for the Company's product.

 

Soon after the expansion was concluded, Harvest started to operate on a 24-hour, three-shift production scale to meet peak demand.

 

Marketing, Sales & Product Development

The unexpected onset of the Covid-19 pandemic created a significant period of volatility for Harvest and its customers.  Despite this, given the strength of our product and the team's determination, Harvest boosted its sales efforts by adding further to its experienced sales workforce, which is now comprised of 7 associates/agronomists split into two regional teams. It also includes a third-party network of 20 resale centres.  In total, the Company commercialised 54,155 tonnes of KP Fértil®, 82% placed in the second half of the year, and superior to our previously stated target of 50,000 tonnes. While Harvest expects to reach significantly higher sales targets overtime, the Company is very encouraged by the distribution of its product and repeat orders from key clients in such short period of time since commercialisation less than two years ago.

 

Harvest has previously stated that in broad terms, "breakeven" is represented by sales of approximately 40,000 tonnes of KP Fértil®, accordingly, having sold 54,000 tonnes represents Harvest achieving its maiden profit on a cash accounting basis. However, due to IFRS accounting rules, this profit won't be recorded in the audited financial statements until this financial year is completed.

 

Over the course of 2020, Harvest continuously received positive agronomic results proving the effectiveness of KP Fértil® when compared to competitors' products. The agronomical tests are a critical component in the growth of the Company's product development and market outreach.

 

One key accomplishment was the completion and positive outcome of the long-term agronomical tests in coffee cultivation, which started in 2017, using KP Fértil® as a source of potassium ('K') and phosphate ('P') for coffee plants at one of the Veloso Agropecuária ('Veloso') coffee plantations in Minas Gerais state, Brazil. The trials consisted of two years of applying a potassium and phosphate fertiliser and a third final year of applying no additional source of potassium and phosphate (fertiliser suppression) to test the effectiveness of different sources of potassium and phosphate. The results confirmed that KP Fértil® can and should be used to replace conventional fertilisers as a source of potassium and phosphate. It showed that superior results in coffee are enhanced when used in association with coffee compost (coffee straw), increasing the value of the coffee produced by increasing the proportion of the largest coffee cherries and yield.

 

Agronomic tests using KP Fértil® have also returned superior yield performance in sugarcane plantation areas compared to the more traditional and widely used reactive phosphate fertiliser. Likewise, superior yield performance has been achieved in carrot crops when compared to today's widely used standard application.

 

These results, among other proven positive tests in other cultures, reinforce the versatility of Harvest's product and its wide application optionality and are instrumental for the Company's commercial team in increasing its client portfolio.

 

Sustainability

As the producer of an organic product, Harvest takes its social and environmental responsibilities very seriously. One of the 2020 initiatives was the signing of an agreement with the Instituto Estadual de Florestas (IEF or State Forest Institute) for the commitment to plant 18,000 native trees during 2020 as a measure to offset emissions generated by the diesel used in operations, aiming at to making Harvest a carbon free company.

 

Other Corporate Development Initiatives

 

Protocol of Intentions Signed with Minas Gerais' Investment Agency - A Protocol of Intentions has been signed by Harvest and the Government of Minas Gerais, through the Institute for Integrated Development of Minas Gerais ('INDI'), an organisation connected to the State Secretariat for Economic Development ('Sede'). The Protocol of Intentions signed by Harvest and INDI will cover areas such as business matchmaking with local suppliers, permitting and licenses, tax planning, and funding options, as it may be required.

 

Agreement with Banco do Brasil - An agreement has been signed with Banco do Brasil, whereby Harvest's clients will now be able to access the bank's rural line of credit to fund their orders of KP Fértil® up to a total amount of R$5.0 million per client (about US$1.0 million). It is expected that with the continuous relationship with Banco do Brasil, the size of the line of credit should increase over time. Banco do Brasil is the country's largest provider of rural credit to the giant Brazilian agriculture industry. The benefit of the line of credit to Harvest is threefold: not only will it assist the sales strategy of the Company's commercial department by providing an important marketing tool to offer clients, but it will also provide additional working capital flexibility with a decreased credit risk profile of its clients' portfolio.

 

2021 Outlook

According to the Federation of Agriculture and Livestock of the State of Minas Gerais (Faemg), the Gross Value of Production (in BRD) in Minas Gerais, Harvest's primary market, hit a historical record in 2020 of R$96.1 billion (about US$18.7 billion), a 24.3% growth compared to 2019's figures. FAEMG expects the sector to continue to grow in 2021, highlighting the positive prospects for the sugarcane segment.

 

The work completed in 2020 in product development, agronomic tests in key crops, and increased production and storage capacity, has positioned Harvest to reap the benefits of a strong agribusiness sector.

 

In 2021 the Company will continue to take initiatives to strengthen its sales reach and production efficiency, which, we believe should reflect in a healthy year-on-year increase is sales volumes. 

 

Plans for 2021 include: 

·    Expansion of Harvest's sales and marketing force with experienced representatives who have an existing client book

·    Increased focused on sugarcane plantations given the very positive agronomic test results

·    Expansion of sales efforts into new crops

·    Registration with the Minister of Agriculture for sales of KP Fértil® in smaller bags (i.e. 25Kg) to cover the gardening, small producers, general retail markets and resales, which drive higher margins

·    Logistics optimisation plan to enhance the price competitiveness of Harvest's product

 

**ENDS**

 

For further information, please visit www.harvestminerals.net or contact:

 

Harvest Minerals Limited

Brian McMaster (Chairman)

 

Tel: +44 (0) 203 940 6625


 

 

 


Strand Hanson Limited

Nominated & Financial Adviser

James Spinney

Ritchie Balmer

Jack Botros

Tel: +44 (0) 20 7409 3494


 

 

 


Shard Capital Partners

Broker

Damon Heath

Tel: +44 (0) 20 7186 9900

 

 

 

St Brides Partners Ltd

Financial PR

Isabel de Salis

Beth Melluish

Tel: +44 (0) 20 7236 117

 

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