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Pan American Fertilizer (V.PFE): Generating cash with high quality gypsum

Stockhouse Editorial
0 Comments| November 19, 2013

Click to enlargePan American Fertilizer Corp. (TSX: V.PFE, Stock Forum) is a Canadian company dedicated to providing fertilizer to growing global markets specifically in South America.
Q&A with Pan American Fertilizer’s Executive Chairman, Dr. Robert Rennie
Congratulations on your new position of Executive Chairman with Pan American Fertilizer. What attracted you to the company?

The company founder, Randy Wright’s vision to create a fully integrated junior fertilizer company focused on the growing markets in South America and his focus on developing assets that require minimal capital investment and generate cash quickly. In addition I spent over 7 years on the ground in Argentina with Agrium Inc. (TSX: T.AGU, Stock Forum) and know the potential of agriculture in Argentina.
Has PFE been affected by Uralkali’s announcement to stop export sales through Belarusian Potash Company?

The BPC situation has temporarily caused confusion in the potash industry but it doesn’t impact the long-term need for fertilizers in order to feed a growing and hungry world.  PFE currently has no potash assets so it is not directly affected by this short-term uncertainty.
What are the company’s key drivers to success so far?
  1. High quality asset in its gypsum properties. 
  2. Confirmed demand confirmed by several LOI’s.
  3. Market diversification for both agricultural and industrial grade gypsum.
  4. Rapid mine development with relatively low capital investment
  5. Ability to repatriate funds from Argentina to Canada (and vice versa).
  6. Strong support from the local and provincial governments.
You are strategically located in Santiago Del Estero, Argentina. What are the competitive advantages of having your base extraction operations here?

The reality is you have to be where the mining asset is. What is the strategic advantage of mining potash in Saskatchewan? Having said that, we can readily transport to our customers in Paraguay and Uruguay.
What gives PFE a competitive advantage in terms of its product?
Customers tell me they have two critical needs:
  1. High quality product and
  2. Security of supply. 
Pan American Fertilizer can supply both.
What milestones have you set to achieve for the remainder of 2013 into Q1 2014?
The key milestone for 2013 is to complete the move from our current mine site to our new site near the city of Santiago del Estero and to ensure that the facility is fully operational by year end.  In 2014 production rates will be increased thus reducing COGS and new distribution channels will be introduced. We will then explore potential acquisitions that fit with Randy’s vision for PFE.
Why do you think PFE is a de-risk investment in today’s market?
The typical junior fertilizer company (whether potash or phosphate) is 5-7 years and billions of investment dollars away from first commercial production. PFE is generating cash now and will be cash flow positive early next year. From that profitable base business in gypsum, we can grow the company through M&A and be a better candidate for additional investment funding.
Why should our audience be interested in following Pan American Fertilizer?
Agriculture is a long-term growth area and fertilizers are a critical part of that growth story. In addition, despite the negative press related to doing business in Argentina, both domestic and foreign ag companies (including my old company, Agrium) are very profitable in Argentina. We sense that now is the time to be in Argentina.
Dr. Robert Rennie – Executive Chairman - Dr. Rennie has over 27 years of experience in the global fertilizer industry. He is currently Chairman of AVAC Ltd., an Alberta based private venture capital company that has invested over $130 million in early stage start-up companies in value added agriculture, information technology and health care. From 2005 to 2012 Dr. Rennie was President and CEO of Spur Ventures Inc., a Vancouver-based company developing a $300 million phosphate mining and manufacturing complex in China. Prior to Spur, Dr. Rennie was Vice President International and Vice President Corporate Relations for Agrium Inc.
Disclosure: Pan American Fertilizer is a Stockhouse client.


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