Fertoz Ltd (ASX:FTZ) continued to build its commercial fertiliser partnerships in the US during the March quarter by securing a multi-year supply agreement and letter of intent for joint venture with PhoSul LLC.
This agreement targets 1,000 tonnes of product sales in the first year and will run year-to-year, renewing automatically.
Executive chairman Patrick Avery said he was pleased to strike a new partnership with PhoSul LLC, which Fertoz would look to deepen through a joint venture.
He said: “PhoSol is part of Propeat, a leader in commercial fertilisers in the US, and part of the Pocock Group, which could provide further opportunities to grow our business utilising that network to broaden our product lines and increase volumes.”
COVID-19 impact on sales
Although some supply disruptions were evident during the quarter and sales were lower than expected, subsequent to the end of the quarter, sales have increased beyond expectations and if logistics disruptions continue to ease, the company is confident of maintaining sales to budget.
Avery said: “Although sales got off to a slow start due to COVID-19, the industry continues to grow in terms of both farmers and acres, and the number of transitional acres is also increasing.
“With organic farmers needing to achieve strong yields this crop year in order to maintain healthy profitability, we see opportunity to continue growing our book of sales of certified organic fertiliser options that empower farmers to improve their soil fertility and crop yield.”
The company undertook quarterly production and product planning to identified sufficient ore resources in easy to access stockpiles, allowing it to minimise mining expenditure in 2020.
Avery said: “Fertoz continued with our exploration program in the fall, winter and spring, completing exploration and mining studies, ore and mining analyses and finalising some longer-range plans.
“Bulk sampling permits are ready for Alberta and Marten-Fernie area, and will be utilised as required.”
“We have significant volumes in inventory and will only extract sufficient bulk samples this summer to match sales volumes.”
North American operations
During the quarter the company progressed discussions with numerous potential distributors and third-party fertiliser processors in the USA, with a focus on supply to the western regions, particularly California.
Fertoz also opened discussions with mid-sized fertiliser companies without organic divisions to promote potential joint ventures.
The first production run is set for quarter two CY20, initially trialling the product in Idaho and neighbouring states, with Fertoz to lead the sales efforts of these products and slowly ramping up deliveries to partner Humic Growth.
Asia Pacific plans
Sales to Australia and New Zealand for the first quarter of 2020 are down but still ahead of budget.
The next product shipment to Australia of 336 tonnes is due to arrive in May.
Product is ready to ship to Philippines and Vanuatu after COVID-19 delays and the recent cyclone in Vanuatu.
Share purchase plan
Fertoz completed a share purchase plan (SPP) over the quarter which aimed to raise $2.5 million at 80 cents per share.
Avery said: “During the quarter, Fertoz also finalised a share purchase plan which saw us raise $2 million.
“This was underwritten by major shareholders and funds from the SPP will be used for working capital to accelerate our move into California and Southern USA.”
On February 7 the company confirmed the receipt of applications for 9.45 million shares at 80 cents per share, raising $756,000 before costs and issued the remaining 15.55 million shares under the SPP on February 24, 2020.
As of March 31, 2020, the company had A$1.8 million in cash, no significant loan balances owing and cashflow budget to improve materially in the second half of 2020 as sales in quarter two are settled.
For the coming quarter, Fertoz is focused on delivering value through:
- Expanding sales and driving solid growth from multiple distributor agreements now in place;
- Progressing discussions with potential distributors and joint venture partners to grow the footprint in California and the Pacific North West;
- Managing costs in response to the COVID-19 pandemic and researching potential for additional funding from the Canadian and Australian governments; and
- Assisting existing partners to effect sales during the pandemic and working with logistics providers and government agencies to help overcome supply disruptions caused by COVID-19.