Brazil Potash Corp. has announced a binding commercial offtake agreement between its wholly owned subsidiary, Potássio do Brasil Ltda., and Kimia Solutions Ltda. The arrangement covers potash from the Autazes Project and is intended to support the company’s efforts to advance project financing for construction.
#Kimia agreement covers up to 704,000 tons annually
Under the 10-year take-or-pay agreement, Kimia has agreed to purchase between 23% to 32% of Brazil Potash’s annual potash output, with a maximum commitment of 704,000 tons per year. Purchases will be made at market prices.
Kimia’s obligations are scheduled to begin when production starts. The contracted volume will increase proportionally during the ramp-up period until the project reaches full production capacity.
#Three offtake agreements cover approximately 91% of planned production
Brazil Potash described the Kimia arrangement as its third and final definitive commercial offtake agreement, following agreements with Keytrade and AMAGGI. The company says the three commitments together cover approximately 91% of planned production.
According to Brazil Potash, the contracts run for between 10 to 17 years and represent over 2 million tons of annual sales. The remaining production is intended for spot sales, allowing for maintenance outages and production variability while retaining the possibility of capturing market premiums.
#Payment rights may support financing discussions
The agreement allows Brazil Potash to assign future payment rights to financial institutions for project financing purposes. The company said the contracted capacity will allow it to continue project financing discussions, but the announcement does not state that project financing has been secured.
Brazil Potash also referred to a recently signed MOU with Fictor Energia involving approximately $200 million in power line construction funding and a $20 million equity investment. The announcement identifies this arrangement as an MOU and does not describe the funding as completed.
#Autazes Project production plans
Brazil Potash’s initial planned annual production for the Autazes Project is up to 2.4 million tons per year. Management believes the project could potentially supply approximately 20% of current potash demand in Brazil. These statements are subject to the risks and uncertainties identified by the company.
The company also says management anticipates 100% of Brazil Potash’s production will be sold domestically. Brazil Potash states that Brazil imported over 95% of its potash fertilizer in 2021 and says the project is intended to reduce reliance on imports.
#Risks and outstanding conditions
Brazil Potash identified risks including changes in potash supply and demand, competitive pressures, capital expenditure timing, capital-market conditions, currency and exchange-rate movements, geological or environmental conditions, government legislation and regulation, political or economic developments, and the ability to obtain required licences and permits.
The company also listed the ability to secure project financing and other operational risks. The announcement does not confirm that construction has been completed, production has started, or all required licences and permits have been obtained.
#Key Takeaways
- Brazil Potash announced a binding 10-year take-or-pay agreement with Kimia Solutions.
- Kimia’s commitment covers between 23% to 32% of annual production, up to 704,000 tons per year.
- Brazil Potash says its three offtake agreements cover approximately 91% of planned production.
- The company says the contracts represent over 2 million tons of annual sales for periods ranging from 10 to 17 years.
- The agreement permits the assignment of future payment rights for project financing, but financing is not stated to be secured.
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