Midas Share Tips Update: Fertilizer maker Harvest Minerals set to accelerate growth
Mining is important in Brazil, but agriculture is also big business. The country is the fourth largest consumer of fertilizers in the world after China, the US and India. He only produces 4 percent of the fertilizer he needs, and he buys the rest abroad.
From soybeans to coffee to sugar, the price of imported fertilizers has tripled in the past two years, putting immense pressure on the cost of farm products.
These products are grown in abundance in the fertile state of Minas Gerais, a few hundred miles from So Paulo and Rio de Janeiro. Here Harvest Minerals has developed the Arapua Project, a site that produces pure organic fertilizer from weathered slag that is simply crushed, packaged and sold directly to local farmers.
Perseverance: Harvest’s shares have fallen 23 per cent to 13p in eight weeks after Harvest wrote down the value of some non-core assets and an old bad debt
Harvest was founded in 2015 and farmers were initially suspicious of its KP Fertil fertilizer brand. But the talk turned and KP Fertil has now been recognized by the Brazilian authorities as a real Macspreader.
On June 30, Chief Executive Brian McMaster announced that Harvest’s revenue had risen 149 per cent to US$4.9 million (£2.8million) and said the company should post strong profits this year . The group reports in Australian dollars as it was originally listed and registered in Australia, although it is now only listed on AIM.
McMaster also said it expects to sell 150,000 tonnes of fertilizer this year, a 76 percent increase compared to 2021. This should help boost profits as McMaster has already been driven by three price hikes and a fourth in the past six months imminent.
Still, Harvest’s shares have fallen 23 per cent to 13p in eight weeks after Harvest wrote down the value of some non-core assets and an old bad debt. That left Harvest with a pre-tax loss of $4.2 million.
However, the future looks very bright. Arapua is winning new business, customers keep coming back and the group should be a big beneficiary of the Russia-inspired upheaval. McMaster also speaks of a dividend for shareholders.
Harvest has also purchased another property, Miriri, in northeastern Brazil. The site will take some time to develop, but McMaster hopes to build something like KP Fertil there.
Midas ruling: Midas recommended Harvest in 2018 when shares were up 17p, so the current price of 13p is a blow to investors. However, you should stick with the stock. Brazil desperately needs more domestic fertilizer, and now that KP Fertil is certified and certified, Harvest should see rapid top-line and earnings growth. Bold investors can take a break from current levels.
Traded on: AIM Ticker: HMI Contact: HarvestMinerals.net or 020 3940 6625
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