Despite tax breaks, Autazes potash project will have to raise $400m

Profert provides R$10 billion in federal tax credits for new fertilizer plants, along with sector support from BNDES.

In an interview with Valor, Brazil Potash CEO Matt Simpson estimated that Profert and Manaus Free Trade Zone benefits could generate savings of up to $190 million in tax breaks. Even so, the project will still need to raise between $300 million and $400 million in equity to secure financing.

According to Simpson, the project’s main challenge today is putting together the financial structure needed to begin construction. The company has been working on a mix of debt, investor contributions, tax incentives, and infrastructure contracts to make an estimated $2.5 billion investment possible.

“An operating license and a mining concession [issued by the National Mining Agency] will still be required after construction, but today the priority is bringing together the resources needed to get the project off the ground,” he said.

As part of this effort, the company expects greater involvement from government-backed institutions in financing the fertilizer sector. Simpson said participation from entities such as the Brazilian Development Bank (BNDES) could boost international investors’ confidence in projects considered strategic for reducing Brazil’s dependence on imported potash.

“It would be very welcome to see the Brazilian government participate, whether through BNDES or other institutions,” the executive said. “It’s not so much the size of the investment that matters, but the fact that the government has a financial stake in these fertilizer projects. That gives international investors comfort that the project is effectively backed by the Brazilian government and helps address any challenges that may come up,” he said.

Simpson said he has already held some talks with government-affiliated institutions but declined to provide further details.

The company expects to begin commercial potash production by the end of 2030, though the timeline remains contingent on the pace of fundraising for construction. Simpson said the project was designed to produce 2.2 million tonnes a year initially, equivalent to roughly 17% of Brazilian consumption.

Even without having begun major construction, Brazil Potash has already committed 91% of its planned output through long-term take-or-pay contracts. The agreements, running 10 to 17 years, were signed with Amaggi, Swiss distributor Keytrade, and Kimia, which have committed to purchasing minimum volumes of potash at market prices.

For farmers, potash won’t necessarily get cheaper simply because of domestic extraction. Simpson said the plan is to sell the raw material at market prices, but argued that domestic supply could act as a “shock absorber,” reducing volatility from geopolitical shocks.

That argument comes against a backdrop in which more than half of global potash production sits in countries under sanctions or at war—in this case, Russia and Belarus. During recent conflicts, prices have ranged from $280 to $1,200 per tonne. Brazil Potash sees potential to export the input to Latin America and the United States but considers serving the Brazilian market the priority.

Logistics is one of Brazil Potash’s main economic arguments for the project. Simpson said transporting potash from Autazes to producers in Mato Grosso will cost about $53 per tonne—less than half the $100-plus per tonne estimated for imported product that arrives at ports such as Santos and Paranaguá and is then trucked to the Central-West. The strategy is to use the return leg of barges that currently carry soybeans, corn and cotton and come back partially empty.

On the social and environmental front, Simpson said the main outstanding licensing issue is the 165-kilometer transmission line expected to connect the project to the Silves substation in Amazonas state.

This month, Supreme Court Justice Edson Fachin rejected a request to suspend lower-court decisions that had granted social and environmental approval for the Autazes Project. “The project, as the courts have recognized, is not located on Indigenous land,” Simpson said.

*By Danton Boatini Júnior, Globo Rural — São Paulo

Source: Valor International

https://valorinternational.globo.com/