DuSolo to Acquire New High-Grade Phosphate Project in Brazil

After market close on Wednesday, DuSolo Fertilizers (TSXV:DSF) announced it had entered an agreement with Mineração Batalha e Participações to acquire the São Roque phosphate project in Brazil.
Under the terms of the deal, DuSolo will conduct a drill program worth approximately C$100,000 in lieu of payment to Mineração Batalha e Participações in order to earn a 70 percent interest in the project. Contingent on positive results of the drill program, DuSolo and Mineração Batalha will form a 70-30 joint venture for the project.
High-grade phosphate mineralization has been identified at surface at the project, with multiple grab samples from outcrops returning over 20 percent P205.
Exploration costs will be funded by DuSolo, while future production costs will be split between the two partners in proportion to their interest in the project. DuSolo can also exercise a call option to secure the remaining 30 percent of the project for a cash payment of US$3 million, or may end the partnership at any given time.

“São Roque is an excellent addition to the Company’s portfolio of projects. With this acquisition, DuSolo has phosphate assets throughout the Cerrado, one of the world’s fastest growing agricultural regions,” said Darren Bowden, DuSolo CEO, in a statement. “Despite the current downturn in Brazilian fertilizer demand, the Company remains optimistic about demand recovering in the mid to long term and therefore continues to pursue its expansion strategy within Brazil.”
The deal comes amidst tough conditions in the Brazilian fertilizer industry. According to a corporate update from the end of August, DuSolo’s sales of Direct Application Natural Fertilizer (DANF) have been softer than expected due to weak crop prices.
The company announced plans to implement new sales and production strategies to manage costs and increase its revenues, including the drawdown of its bridge loan facility, and a reconfiguration of its Bomfim Processing Plant that would save the company C$400,000.

In a September 3 article for Seeking Alpha, Peter Arendas suggested that things could be looking up for the company in Q4. While he admitted that the market wasn’t impressed with the company’s Q3 financials, he chalked the performance up to a longer-than expected rainy season, a weak Real, and delayed subsidies for Brazilian farmers.
“Although Q3 wasn’t good, DuSolo’s potential remains unchanged, and the current low share price makes it an even more attractive investment opportunity,”Arendas stated, adding that the company had secured 81,000 tons of DANF contracts, which the company says are still in good standing. “The fiscal Q4 operational and financial results should be much better compared to Q3, and DuSolo’s share price should recover in the coming months,” he concluded at the time.
Now, with a new project added to the mix, there will no doubt be interesting times ahead for DuSolo. At close of day on Wednesday, shares of the company were trading at $0.13.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: DuSolo Fertilizers is a client of the Investing News Network. This article is not paid-for content.
Related reading:
DuSolo Fertilizers Continues to Make Sales Deals for DANF in Brazil