DuSolo Fertilizers Inc. (TSXV:DSF) announced today that they will be implementing a series of initiatives at their Bomfim Agro-mineral Project, located in the Cerrado region of Brazil, due to lower than anticipated product sales.
DuSolo Fertilizers Inc. (TSXV:DSF) announced today that they will be implementing a series of initiatives at their Bomfim Agro-mineral Project, located in the Cerrado region of Brazil, due to lower than anticipated product sales. This strategic review is in response to weaker crop prices, the lower purchasing power of the Real and delayed credit availability from the government to farmers and agri-businesses.
As quoted in the press release:
The following strategic initiatives will be undertaken:
- Drawdown of Bridge Loan facility. Funds have already been received and will be used as working capital as DuSolo begins to accept forward sales contracts.
- Plans to reconfigure Bomfim Processing Plant in order to increase DANF product output without installing additional hammer mills, saving the Company C$400,000.
- Looking at alternative sales strategies, including forward sales contracts and expanding sales into other regions in Brazil.
Year to Date, 2015, DuSolo produced and sold the following amounts of DANF product (all figures are in tonnes):
Mine Production Plant Production Delivery of Sales To Be Delivered 52,931 29,939 7,373 3,363
Of the 81,100 tonnes in signed commitments, approximately 3,290 tonnes of product has already delivered, and an additional 3,363 tonnes will be delivered in the short term. All of these contracts are still in good standing, though buyers have been slow to perform due to the market conditions described above.
To smooth upcoming sales revenue, the Company will implement a number of sales strategies in order to ensure that DANF product sales continue, including accepting forward sales contracts, while continuing to receive proceeds from sales on delivery.
The material processed to date has come from the Santiago project (“Santiago”). Further analysis and characterization has confirmed that mineralization at Santiago is softer and more fine that previously thought. This has led to the primary screen being under utilized and the secondary screen being over loaded causing a production bottleneck. DuSolo, at minimal cost, will reconfigure the Bomfim Processing Plant (“the Plant”) to better handle this material.
The reconfiguration includes a plate change in the existing hammer mills to increase final product top size from 1.5mm to 2mm, which has already been completed. In addition, the screen decks will be resized to redirect material to different stockpiles, reducing rehandle and increasing primary and secondary screen efficiency. Once both of these changes are in place, the Plant is expected to achieve a sustainable throughput of 80 tonnes per hour versus the current maximum of 60 tonnes per hour.
The optimization of the Plant will allow for higher production, without having to install the additional hammer mills as previously planned. This will result in a C$400,000 savings for DuSolo. The Company will complete the reconfiguration in September, and expects DANF product inventory stockpiled to meet September sales demand. The Plant is expected to recommence production with the new screens and mills for a short period in October in order to test the upgrades and build sufficient product stock to meet low season sales.
Other Phosphate Opportunities
DuSolo maintains its focus on growth through building its operations, as well as assessing new phosphate opportunities in other regions of Brazil. The Company is of the opinion that current market conditions in the fertilizer market are temporary and are likely to improve in the mid to long term. It is therefore evaluating investment opportunities created by the weakness in phosphate demand, and looking to expand into new agricultural areas in Brazil as part of its strategy to become a mid-tier Brazilian fertilizer producer.
DuSolo CEO, Darren Bowden, said:
In light of the current market conditions in Brazil, and the effect it has had on the Company’s performance, DuSolo’s new board and management have undertaken a strategic review of all operations. In the coming months, the Company plans to implement a number of sales and production strategies in an attempt to increase revenues, while managing its production costs. DuSolo’s long term focus remains unchanged, as we continue to build the Company into a domestic Brazilian phosphate producer.