Amazon Mining Conference Call Transcript

November 3, 2010 10:00 AM

Operator: Hello, and welcome to today’s Amazon Mining conference call. As a reminder, all lines are on listen only mode, and we will conduct questions and answers at the end of the presentation. If you need any assistance, please press *0 to speak to an operator. At this time, I would like to turn the call over to Cristiano Veloso, CEO of Amazon Mining to begin. Please go ahead, sir.

Mr. Cristiano Veloso: Good morning, everyone. Thanks for joining us on this call today. We’re very pleased with the recent conclusion of our scoping study and very excited about the next few weeks for Amazon.

Today, we’ll start by reviewing the marketing study, which was conducted by AgroConsult. AgroConsult is a leading agribusiness consultancy company. Their main clients include two of the largest fertilizer companies in Brazil, namely Bunge and Heringer, as well as a number of international companies, such as Syngenta, Bayer, BHP, and John Deere.

Then, we will present the scoping study for some other venture potash projects. This work was done by two of the best engineering companies in the world. The most famous internationally is SRK, and the second, also very respected, is a company called ECM. This section will be presented by Jed Richardson, our Vice President of Corporate Development. Mr. Richardson was a mining engineer with Alcan and also spent about 10 years of his career as a market analyst with Royal Bank of Canada and Sprott Securities.

After Jed’s presentation, we will then discuss the next steps for Amazon Mining. For this section, I have with me here in Belo Horizonte, Brazil, Pedro Ladeira, Vice President of Engineering, and Mauricio Sampaio, Vice President of Operations.

Pedro Ladeira, he began his career with Cementos Minetti, one of the world’s largest cement producers. While at Cementos Minetti, he was responsible for building two of the largest plants in Brazil and has also managed some of South America’s largest cement operations. As we’ll see, cement’s very similar to what we’re doing with our ThermoPotash process.

Mauricio Sampaio has an extensive career in the fertilizer sector, having already built two successful companies in the sector, and for about a decade, Mauricio Sampaio was the man in Brazil who was responsible, not only for buying most of the country’s potash, but also selling it in the country.

We believe that with Pedro and Mauricio, we have the best team to be completing those engineering studies, building operations and marketing this product in the country.
After the section on our next steps, we’ll then have our question and answers, and now I would like to invite Jed Richardson to start his presentation on this scoping study and the marketing study.

Mr. Jed Richardson: Good morning to all those listening in. Thanks for taking the time out to listen to our presentation. I’m just going to go over a brief summary of the results of our scoping study done by ECM and SRK.

The first thing I’d just really like to highlight is our capital expenditure. I think this is something that really differentiates Amazon’s story from the conventional potash stories you may be accustomed to, by nature of the ThermoPotash product, and being an at surface potash occurrence, we’re able to bring our product to production in just a couple years.

And with an initial capex estimated for a 1.1 million ton scenario at US$153 million plus US$23 million in contingency and US$18 million in pre-construction costs, we have a very robust net present value discounted at 10% of over US$455 million and an operating cost close to US$37 per tonne to produce our product with an internal rate of return of almost 33%.

We also had SRK run a scenario with 2.2 million tonnes, and there, the capex only increases less than 50% to double the production with capital expenditure estimated at US$218 million, contingency at US$32 million, and a similar US$18.2 million in pre-construction costs. Our operating cost - just by scaling up the operation - drops to US$32 per tonne, and our net present value skyrockets really to US$858 million with a robust internal rate of return of over 40%.

Really, I think what this scoping study really accomplished is, we’ve been communicating to the investment community that we’ve got, what we’ve got in concept for quite some time now. This really gives us some validation on what the economics can really look like for a project like this, it being new. And really now we can start discussions in earnest on how to move the project forward and what appropriate value is for our shares.

We’re happy with share performance over the last little while, but now with some third party economics, we can start to move to a more appropriate value for what we think is really a premiere project in a market that desperately, desperately needs a potash source.

So I’m going to pass off and let Pedro Ladeira speak to you about our next steps on the engineering front. If you’ll note earlier this month, we announced Pedro’s joining our team. Pedro’s an esteemed engineer who will really guide the process in taking us through bankable feasibility. Pedro?

Mr. Pedro Ladeira: Good morning everybody. Thank you, Jed, for your words and comments. The purpose of my speech is to tell about the next steps regarding the bankable feasibility study and the development of a semi-commercial plant.

We’re about to start the feasibility study for ThermoPotash plants, fulfilling the outcomes and assumptions taken from the scoping study and focusing mainly on the Petco prior version of a 1-2 million tonnes per year plant. The feasibility study, and to determine more in detail from capex, operational costs, machinery, detailed engineering, infrastructure, and site location. About the potential that were not exploited during these scoping study phases will be addressed during this step.

As an important gas reserve more recently announced, which is colloquial, Amazon claims we’re going to be in closer contact with the Brazilian authorities, to follow up and on the development of such opportunity, I mean, to obtain a cheaper fuel source, which is very favorable regarding the logistics and costs for.
Also, as we discovered some limestone reserves, identified close to the glauconite reserve that we have now as our claim, it is also possible that we can deal with a better cost limestone, which shall contribute to lowering our raw material costs, which is very beneficial for the project.

Regarding the time schedule for the feasibility studies, we’re talking about some 4-6 months period with the support of those international well known engineering companies, but of course led by ourselves through the whole process.

Well, regarding the semi-commercial plant, I think it’s a very important and necessary task to develop internal to the feasibility study, directional for semi-commercial plants. One of the targets of such installation is increase, is introduce in a larger scale, the product to the markets.

And an important target is to test and optimize some of the process variables, layout, and main equipment setups which will be considered for the industrial plant dimensioning. So these are very important issues for us, both the feasibility and the semi-commercial plants.

A semi-commercial plant can be built in 8-12 months period. Well, for my side, this is what I had to say now, I will wait for your questions, and I am now handing off to Mauricio, who will be speaking on the next steps in the company’s marketing efforts. Thank you.

Mr. Mauricio Sampaio: Good morning, and thanks for your attention.
I’d like to let you know that, in terms of ThermoPotash, it’s a new product in terms of industrial scale, but since the 80’s, revealing research, agronomic, new tests produced better results compared with KCl. We have a lot, we had a lot of data comparing KCl and Agronomics. Responses are better with ThermoPotash.
It’s a multinutrient fertilizer, and the presence of calcium, magnesium, sulfur, Silicium and potash in ThermoPotash combined with the fertilizer, slow release properties to improve the fertility of resilient soils.

The most important milestone Amazon’s team has reached for us, in fact, developing an economic process route to produce ThermoPotash from the Verdete slate rock while show, in our scoping study, this gave Amazon a large marketing opportunity, and an alternative fertilizer to be produced in big scale with lower costs - talking about our distribution strategy.

In order to introduce a new fertilizer into domestic market, it’s first necessary to establish a program of tests to measure the agronomic efficiency of ThermoPotash. Amazon’s select primary partners to conduct this test are EMBRAPA, CPAC, University of Lavras and University of Uberlandia in Minas Gerais state.

The main objective of the test will be to compare the efficiency of ThermoPotash with KCl as a source of potash. ThermoPotash has already been sent to these institutes, and now our springtime and planting season, they are beginning the experiments with soybeans, corn, coffee, pastures, and other important cultures. Preliminary results will be available by mid-June, July next year.

Amazon became a member, also, of Rede FertBrasil, Brazil, that’s an important leadership network by the Ministry of Agriculture, and members such as EMBRAPA, the Ministry of Economics, and other researchers and developed companies that are working together to find ways to reduce our extreme dependence on imported fertilizer. Amazon’s ThermoPotash is now becoming the key strategic importance of our project. The Federal Institute, such as EMBRAPA, EPT, has shown great support for our project as well.

Amazon has developed an extraordinary team, including now Dr. Eduardo Spolidorio, who is in charge of the marketing department and continues to improve our relationship with our private partners - Sekita and ArcelorMittal - to complete the field test in ThermoPotash this year. Sekita is start testing in November and January, and ArcelorMittal is to start testing with eucalyptus in December.

Considering our future marketing strategy to supply the vendors and reach a large market within already getting in touch with their technical and commercial teams. With our ThermoPotash composition, in terms of macro and micro nutrients, the crops will be able to assimilate the higher agronomic benefits potential of ThermoPotash can release to reach the NPK formulation segment fertilizer and consequently meet the farmer’s needs.

It’s also important to mention the special contribution of Dr. Gaspar Korndorfer at the University of Uberlandia. He has conducted many amazing tests concerning the immediate and slow release of ThermoPotash that have been already published on our website. Together, Dr. Gaspar and Eduardo are finalizing the sugar cane program to be implemented with three sugarcane companies completing the all program trials for segment potash.

Now, I would like to re-introduce Mr. Cris Veloso. He’ll talk about the next steps with the governmental people.

Mr. Cristiano Veloso: Yes, thanks Mauricio. Okay. Now I’d like to draw note, we’ve been having some discussions with the government for a while now. So what I’d like to do to make a brief summary of what those discussions are, and also very importantly, how we expect to finance this project construction.

Starting with the government, we have initiated those discussions about two years ago, and with the recent elections completed now, both at federal and state levels, we expect to conclude this process very soon.

On the elections front, at federal level, we all in Amazon are very pleased with Dilma Rousseff’s election. She represents the continuity of President Lula’s excellent eight years’ government. I think it’s also important to note that our new president, she’s from Belo Horizonte, which is the capital of Minas Gerais state, where our potash project is located. Dilma Rousseff is well aware of agribusiness’s importance to Brazil, and the strong need to increase local fertilizer production.

At Minas Gerais state level, our current governor, Antônio Augusto Anastasia was re-elected with a vast majority. Up to now, the focus of our discussions has been at state level, as they control the required institutions we hope to assist us on the development of the project. Mr. Anastasia, he has a very competent team of state secretaries. It includes the former president of Cargill in Brazil, who is the secretary for economic development, a former Vale director who is the secretary for mining and energy and the former president of EMBRAPA, who is the secretary of technology.

Those discussions in government are progressing well, and this afternoon, we have a very important meeting as part of that. Most of what has been discussed cannot be discussed at this stage and should be issued as a press release when an agreement is reached.

At this point, however, we can share what was made public in Brazil.
So there is a new law in the parliament, and this new law can eliminate all state taxes over ThermoPotash production as well as those taxes over our capital costs. This tax is about 15%, and its reduction would significantly contribute to the project economics.

We can also share that the Brazilian Development Bank, BNDES, which has already invested over $100 billion in the last couple years in many different companies’ projects. BNDES, they have a very strong technical team and is part of an important working group that Mauricio just mentioned called Rede FertBrasil to evaluate new fertilizers for Brazil. This group recently determined our project as the normative solution to reduce Brazil’s potash imports. We certainly hope to work with BNDES to eventually finance the project construction.

Now, we would like to start the Q&A section, and I will invite Jed to assist us moderating those questions.

Mr. Jed Richardson: Okay, operator? Can you please open the line, and we’ll take, we’ll start queueing the questions?

Operator: Thank you sir. Thank you, sir. For anyone on the phone with a question or comment, please press 01 on your telephone keypad. Once again, 01 on your telephone keypad to enter the queue. Thank you.

Mr. Jed Richardson: I hope all those listening have been able to hear our management team in Brazil share the next steps, but what we will do is we’ll try to make transcripts of the call available on the website if anything was inaudible.

Operator: We do have a few questions in queue, sir. First up is Jaret Anderson with Salman Partners. Go ahead please.

Mr. Jaret Anderson: Great, thanks a lot. The question’s probably for either Jed or for Pedro. Have you done any sensitivity analysis, either yourself or SRK in terms of the potential benefits you would get in the event you could find a lower cost for limestone and/or for an energy source, something other than pet coke?

Mr. Jed Richardson: Okay, yeah. I’ll let Pedro add if he has more info, but what, well, all I can say here is that the scoping study assumed that the limestone was purchased at market, and we feel that we could probably, we, with our own deposit, we should be able to reduce that limestone price considerably.
And also, the limestone deposit that Amazon has been able to get control of is considerably closer to our project than the limestone that we’d be purchasing from elsewhere.

So I can’t exactly, we can’t exactly quantify that. I’m not sure if, I’m not sure if you’ve got more info, Pedro, but I do know what, for our scoping study, we assumed it’d be, we’d be purchasing it at 15 R$ per tonne. Pedro, do you have more?

Mr. Pedro Ladeira: Yeah, yeah. Yeah, right. I think for the limestone, as we get the results closer to our plants, our expectation that we can manage to get a better cost. And of course, there won’t be the profit from the other companies that we earn actually, so by doing, all operation, we expect to have lower costs, both from logistics and from, just because we’re just absorbing costs of operation.

Mr. Jed Richardson: Yeah, if you were to look at it, I think it’s about 300kg of limestone per ton of product, and we were paying it 15 R$, which would just be about US$9 per ton. So that we can kind of back out if we were able to reduce that cost by almost 2/3, which is plausible. You can kind of estimate what impact that would have on our per ton operating costs.

Mr. Jaret Anderson: That’s very helpful. Any, is there any kind of similar numbers you can offer in terms of costs you can get, if you could find some cheap gas or something that was more attractive in terms of a feed stock vs. pet coke?

Mr. Jed Richardson: That is going to be harder to assess right now. The gas that has been discovered in the area is just being, there hasn’t been any infrastructure around that. There’s still exploration wells. The cost that that gas may be sold at is hard to say. Right now, it would be stranded gas, which would be very advantageous to us, where we could be, if not the only, but a very large, it would be the large consumer in the area. But if that were to be tied into a pipeline, it could change the costs, and right now, it’s just too early to know what that would be.

Mr. Jaret Anderson: Is it fair to say that your energy costs in the scoping study are probably in the neighborhood of 10, 12 bucks a tonne?

Mr. Jed Richardson: I think broken out it works out to about $13. Pedro, do you know the number?

Mr. Pedro Ladeira: It’s roughly like $10 to $11.

Mr. Jed Richardson: Okay, alright, perfect.

Mr. Jaret Anderson: And sorry, I don’t mean to hog the time. Last question. Just on the sugar cane studies that were mentioned by Mauricio, is there a timeline on when we can expect those to start, and when we might expect results?

Mr. Pedro Ladeira: The fact, we start with planting sugarcane in January, and we measured immediately the release of the ThermoPotash, and the first crop of sugarcane that will be a year and a half before. Sugarcane is, it’s a very important culture.

Mr. Jaret Anderson: So it’d take about, we wouldn’t see results then until mid-2012?

Mr. Cristiano Veloso: Yeah, Jaret, just a second, it’s Cris here. Let me hand the phone to Mauricio. The call dropped. Just a second here.

Mr. Mauricio Sampaio: Sorry, the line was, not work. I’m having problems with the phone. But continuing about the sugarcane strategy is to measure the immediate release and the slow release that is very important for this industry, because they are looking for other sources of potash. Because every year they have to apply a lot of KCl, because our soil has a very high quantity of deterioration potention. And the sugarcane industry are looking for another product of that can substitute our necessity of KCl.

Mr. Jaret Anderson: Okay, and Mauricio, just for clarity, I just wanted to understand, you’re planning to essentially start the trials in January, 2011. Did I understand that it would take about a year and a half to get results?

Mr. Mauricio Sampaio: Yes, correct.

Mr. Jaret Anderson: Okay. Thank you very much.

Mr. Mauricio Sampaio: A year, a year and a half. Okay.

Mr. Jaret Anderson: That’s it for me. Thanks.

Operator: Our next question comes from Steven Gold with Clarus. Go ahead, please.

Mr. Steven Gold: Thank you. Good morning, guys. My question is surrounding the cost, and most have been answered, but really what I want to get at now is, you know, I understand there’s an education process with respect to your potential customer base. Given the news you’ve come out with over the last month, month and a half, two months, both in terms of the test trials and in terms of cost estimates and so forth, have you had any more reception from those potential customers, either those that are, you know, pondering the usage of the product, or those that have currently been using it?

Mr. Jed Richardson: This one probably is best for Mauricio. We have been, we have been talking with the agencies that we’re already involved with, that’d be EMBRAPA, the sugarcane growers, our development partners, but we also have been working with some of the blenders. Mauricio, I think you touched on this in your comments, but could you just reiterate for Steve the conversations we’ve had about our product with the blenders?

Mr. Mauricio Sampaio: Sorry, Jed, but my line was…could you repeat, please?

Mr. Jed Richardson: Yeah, Steve was asking about what conversations we’ve had with potential consumers of the ThermoPotash product, and I was pointing out that, in your introduction piece, you mentioned that we had had conversations with some of the blenders over the past little while. Can you just give some context, can you just tell us a little bit about how those conversations have gone and what they were about?

Mr. Mauricio Sampaio: They are going pretty well. We start to have a conversation in terms of technical advantage of ThermoPotash, and we are changing ideas about the quantities in the formers as sure would be in the AgroConsult results. We, now they are validating the study, and we ask, we also ask for them to send us the feedback about the macronutrients that the ThermoPotash can have. Also calcium, magnesium, [Silicon], and that means in the house of sulfur, that means good product and differentiation product for them.

And now they are getting, they have done some calculation about our pricing, and things that we improved, that we press released the study of AgroConsult international market going very, very high. For example, KCl was pricing in the study at $415 per ton now. In Brazilian market, this, they are paying now more than $450, sometimes $500 per tonne. That means a good scenario for the, in terms of pricing for our beginning of the, as we showed. If the KCl ups the price, the product can also improve at $6 per tonne, more than 10%.

Mr. Steven Gold: Okay, thanks for that. That does it for my questions, I guess, surrounding the most recent events, but while I have you, with the election over, and I don’t mean to beat a dead horse, because I’ve asked you guys this in the past, just curious if you can give us an update in terms of any potential financial incentives offered by the state or federal government.

I understand that the, both at the state level and the federal level, those that we had hoped to see elected were indeed elected, and that there is a bit of a pause with the election, that they’d focus on that, and do you get a sense that you guys can return to discussions with them for those incentives to move the project forward on the financing side?

Mr. Jed Richardson: Sure. Just to get everybody caught up. Brazil has a stated goal of being fertilizer independent, I believe by 2020. Brazil has natural gas and energy to produce nitrogen. There’s quite a number of phosphate plants around, phosphate resources around the country. The one problem really is potash, and they import over 90% of what they consume. Cris, why don’t you just fill everyone in again on how things are progressing with the government?

Mr. Cristiano Veloso: Yeah, Steve, I think action means much more than words. I think better than going on and really, saying again that they’re committed, I think it’s fair to say that the results came up this weekend, and should they, on Wednesday afternoon, we already have a very important meeting. So it’s going fast, and it’s in everyone’s interest to get it wrapped up ASAP.

Mr. Steven Gold: Okay, that’s good. Thanks again, guys.

Mr. Jed Richardson: Thank you.

Operator: Our next question is from Horst Hueniken from Stifel Nicolaus. Go ahead please.

Mr. Horst Hueniken: Good morning. Cristiano, you referenced the new tax law at 15%. Could you just explain what the structure of that tax is? I’m particularly interested to know if this is for a temporary period or for permanent.

Mr. Cristiano Veloso: Yeah, hi. It is permanent. It is in the legislation right now, and it’s the equivalent to GST. I think that’s what it’s called in Canada. It’s a value added tax, which would be eliminated.

Mr. Horst Hueniken: Understood. Okay, so it’s already passed everything, it’s not subject to yet another vote?

Mr. Cristiano Veloso: No, it’s still subject to a vote, but I think it’s fair to say that now with the government reelected, we would hope this should be approved pretty soon.

Mr. Horst Hueniken: Okay. Has the government indicated a time for this vote, or not yet?

Mr. Cristiano Veloso: Not yet, no.

Mr. Horst Hueniken: All right, thanks. Appreciate it.

Mr. Cristiano Veloso: You’re welcome. Thanks.

Operator: Next up is Robert Winslow with Wellington West. Please go ahead.

Mr. Robert Winslow: Good morning.

Mr. Jed Richardson: Morning.

Mr. Robert Winslow: Just one little detail here. You’re talking about initial production slated for early 2013. Has there been any discussions on what’s assumed in the model here as far as ramp rate? Would you be ramping up over 6 months, 12 months? Curious.

Mr. Jed Richardson: There were some assumptions, and Pedro, correct me if I’m wrong, I think we have 40% production in year one, and then we move up to 80% production in year two, and then full production by year three.

Mr. Robert Winslow: Okay, great. That’s helpful. And then the second thing for me, just talking about the Op Ex, you made a comment here in the press release how you’d been looking at cement as your basis for estimating costs before in the neighborhood of $50-55 a tonne. Now this latest study, that estimate falls quite dramatically to $35-40 range, and given that you’re not producing yet, what is it that these consultants have been able to determine that makes the cost estimate that much lower? There’s got to be some material change in some assumptions here. Maybe you can elaborate on that for us, please.

Mr. Jed Richardson: Again, just in, for speed, the cement, the cement, the temperature is higher that it’s heated up to, and the grind, the material that’s being ground is harder. So we were, going into it, even though we were using cement as a barometer where we thought that our operating costs could fall to, we did know that there was, that it was a conservative estimate, so that it came, came below that wasn’t entirely a surprise, but we wanted to, we were using the cement number just so that we could be comfortable with where our operating costs could line up and use that as a mat to match where we thought our sales price would be.

Mr. Robert Winslow: Okay, that makes sense, and will there be a pilot plant of sorts, or what’s the plan there?

Mr. Jed Richardson: Yeah, what we’re, we have a rotary kiln that we’re using to produce material in batch quantities already, but we are planning to do a, like, a semi-commercial plant. Pedro was giving us the details of that in his speech where, towards the end of this year, we should have a continuous operation, semi-commercial type pilot plant, and the cost for that is included in that $18.4 million that we’ve assumed as pre-construction prices.

Mr. Robert Winslow: Okay, sorry to –

Mr. Jed Richardson: - expenditure.

Mr. Robert Winslow: You said semi-commercial plant in operation by year end? That’s over the next three months?

Mr. Jed Richardson: Oh, sorry! Year end 2011. I’ve already moved over!

Mr. Robert Winslow: I figured as much. Okay, that’s helpful. Thank you very much.

Mr. Jed Richardson: No problem.

Operator: Next up is Mark Robinson with Cormark. Please go ahead.

Mr. Mark Robinson: Good morning, guys. So it sounds like, through some of these previous questions, that blenders are, broadly speaking, comfortable with the contemplated price that you put out a couple weeks ago. Can you comment on what work those blenders might have to do then to educate their customers, and like, if there were any marketing costs associated with that education process that might have to be borne by Amazon?

Mr. Mauricio Sampaio: In fact, it’s not a question of education costs. They are very familiar with the optimization costs in the NPK formulation. We are, we sent to the blenders, and for them, it’s very, very clear what’s our target to substitute a part of KCl into the NPK formulation, and also a part of other raw material that ThermoPotash can improve the quality without the, higher the price. This is a very, very common issue in the industry.

And the main point to get at the beginning is to confirm to the blender that the product has better results in terms of efficiency, comparing KCl, and we have a lot of proof that it will happen, but the main important thing is to get the preliminary results that’s not, as I said, in sugarcane.

It will be in the middle of the next year that ThermoPotash will compare in the crops like soybean and corn that’s in a short time to measure the results, and our marketing plan is to get the blenders and the farmers to show them our standards of, plans of using the ThermoPotash. That’s our marketing plan to reach the market, and it’s even important to begin the distribution with the pilot plant that Pedro set for us.

Mr. Mark Robinson: Okay. That’s it for me, thanks.

Mr. Mauricio Sampaio: You’re welcome.

Operator: As a reminder, 01 on your telephone keypad for any questions or comments. Next up is Joel Jackson with BMO Capital. Go ahead.

Mr. Joel Jackson: Alright, thank you guys. I want to ask a couple questions. In your press release that came out last Tuesday, in your NPK Optimal formulation, which is standard formulation than a 4-20-20 NPK, I just want to get some understanding on how you came up with the 2.68% of the 20% K that comes with ThermoPotash, how that number was derived?

Mr. Jed Richardson: Sorry…

Mr. Joel Jackson: The ratio between ThermoPotash in your optimal formulation, how you came up to the optimal formulation ratio between ThermoPotash and KCl to form the 20% K part of NPK.

Mr. Jed Richardson: Okay, that was determined really by how much, how much ThermoPotash could fit. Mauricio, do you understand the question?

Mr. Mauricio Sampaio: Yes.

Mr. Jed Richardson: Okay, yeah, if you could help Joel understand.

Mr. Mauricio Sampaio: Yes. In the 4-20-20, the standard normal, we optimized the formula as the blenders usually do in the blends. And we reach the TK price doing, exercising in our mathematical optimization, that we should, pricing the ThermoPotash of $181 C&F into Minas Gerais’ state. That means the price, delivery, C&F to the blender. And we do, we get more competitive price using $182.38 per tonne, because the optimization cost of formula was $401 per tonne comparing with $403 per tonne standard normal price.

Mr. Jed Richardson: Joel, if you’ll look at the formula as well, you’ll see that what we’ve done is we’ve concentrated, in the optimized formula, the blenders use greater, use higher concentrated products, like the map for the, substituting some of the SSP and the ammonium sulfate, and what that does is it creates space for the ThermoPotash, and there’s actually a cost savings to the blenders by doing that.

Mr. Mark Robinson: Okay, I see. And would that be the optimal, I mean, I suppose if you would not be able to push ThermoPotash to a higher percentage of the K, that makes sense, that’s probably the optimal maximum ThermoPotash percentage you could push to keep blender profitability the same or better?

Mr. Jed Richardson: Yeah, no, pretty much.

Mr. Mark Robinson: Okay. Okay. On similar lines, in the same press release, I just want to understand as well how the 4.4 million ton potential, market potential was derived at. With that derived at, I mean, can you just talk about how that was derived at actually.

Mr. Jed Richardson: Okay. Again, doing the same, doing the same math for different standard, for the standard formulations, and only looking at those where it was advantageous, so where there was cost savings to the blenders, and there was room for the ThermoPotash, and that market potential was just on the adjacent states.

Mr. Mark Robinson: So is this also going back to the optimized formulation, figuring out if that –

Mr. Jed Richardson: Yes.

Mr. Mark Robinson: - formulation does displace the standard formulation, what that means for the different states for blenders’ volume, is that right?

Mr. Jed Richardson: Exactly, and it was an iterative process done state by state.

Mr. Mark Robinson: Okay. Okay, thanks for that.

Mr. Mauricio Sampaio: To just complement that, all this Agriconsult study you are basing on the farmers’ need to buy crop, and AgroConsult has an excellent database of NPK formulation, and they include all the possibility to the real market happen in each state. Different condition for Mato Grosso comparing, Minas Gerais, the real condition that fertilizer is being applied in the NPK formulations.

Mr. Mark Robinson: Thank you.

Operator: That was our final question. I will now turn the conference back to our speakers for closing remarks.

Mr. Jed Richardson: Okay, just like to thank everyone for participating in the call. For those of you who had some difficulty hearing portions of the call, or some of our speakers, we’ll do our best to put together a transcript and put that on the website and distribute it to our mailing lists. Again, thanks for your time, and have a good rest of the day. Thank you very much.

Operator: Thank you very much, ladies and gentlemen. This conference is now concluded.