Transcription
Good afternoon everyone. Today I'm chatting with Mayo Schmidt from Brazil Pod Ash.
In today's interview, we get into tariffs and pod ash and what investors should be thinking about, as well as Brazil Pod Ash, which is a project that we've recently been digging into on the channel with an interview with the CEO Matt Simpson just a couple weeks ago. Where we found out that this is a company that projects to generate a billion dollars a year in Ibida that trades at a market cap of around hundred million.
I get into all those questions that you probably want me to ask when I have an opportunity to talk to a chairman like Mayo, who's previously served as the chairman of the largest fertilizer company in the world, Nutrien, as well as the CEO of Hydro1, which if you live in Ontario is a company that you've surely heard about.
All right, everybody, enjoy the interview.
Mayo, thanks for joining us today.
What a pleasure to be here, Steve. Thank you.
So, you've got a uh tremendous background in the pot ash industry and there's obviously a lot of talk about pod ash when we're talking about tariffs and how important of a resource it is for Canada. I know you're former the former CEO of Nutrian and chairman as I understand it. Um, what can you tell us about what's going through your head when you're thinking about the tariffs with pod ash? How does this impact uh pod ash markets?
You know, even Steve, as a young trader uh in Canada selling grains to the US, uh I had experience with with tariffs and uh you know, it it it it does create outcomes and sometimes unintended outcomes. And it's going to be interesting to see with the volatility that's being created now what consequences are both short-term and long-term because I think it it creates an environment where uh countries that uh are have a significant concern on food security for the understandable reasons will take long we'll plan for the long term. And so we've got short-term vibrations here that are going to affect long-term thinking and how people uh reassert themselves in markets or receive in markets, but ultimately uh who they're participating with long term is going to be very interesting in the supply chain.
Th this may seem like a silly question, but we're guys who we run a website where we cover equities for stocks and it seems like podash is really kind of unloved by retail investors. Um, one example of that I can give uh I don't know if you're familiar with Altius Resource ran by uh uh Brian Dalton who has uh just he has a whole bunch of podash royalties in that in that company and um it just it doesn't seem like it gets much love despite the fact that it generates pretty good cash flow. we you just don't really see we're in the social media world where we just don't see a whole lot of people talking about um pod ash when it comes to the retail investor community. Why do you think that is that uh retail investors don't necessarily flock to it?
Well, I I think there's a number of things that we've seen when you look at the supply and the bulk of it being in the hands of three providers uh which are typically uh you know supplying halfway around the world or at least uh across continents and uh you know the transportation and logistics um and quite frankly how they manage themselves on price versus the volume of production and the the volatility that that creates and so I think you know that's why you know I was drawn to this particular project is it's very interesting when you have incountry production in a country that imports 98% of its supply chain. So the risk that Brazil has to all of the geopolitical matters, the transportation, weather, u you know, ship setting, waiting to uh get through passages to get unloaded. Uh it creates an environment where there's certainty and that's the attraction for this and I think it's going to be an attraction once we get through the volatility period uh for investors to say there's absolute certainty. We know Brazil is raising a critical product food. We know that it's buys 98% of its product from out of country and this supply is coming from in country right next to the production area.
So I want to ask you about that. You brought up Brazil pod ash u which hundred million market cap. It's a company we had Matt Simpson on recently. He's throwing out uh some projections that it could be a billion dollar a year IBIDA company. Uh, normally we see a guy like yourself that has your background, former CEO of Hydro One. Uh, obviously I mentioned your background with Nutrient. We don't normally see names like yours associating themselves with these sort of pre-production mining companies. Why is it that you chose to get involved here? What's sort of your vision for Brazil potach that attracted you to this opportunity?
Yeah. Well, you know, frankly, it it comes from uh my youth being on the farm and having the experience that farmers have with prices. You know, we buy all of our inputs with uncertainty on weather and then uncertainty on markets when we go to sell 6 8 12 months later. And when you have an opportunity to participate in food security and I've spent my entire career uh moving production from areas of surplus to areas of need around the world and uh whether it's rail or or oceangoing vessels and the criticality of that you know uh the the pro the prospect here of participating to on a new find of a basin that will be one of the largest in the world that will produce pot ash for many generations will not go untapped one way or another. This is going to get developed. It is going to get completed. And that's our task is to be that group that completes it and gets it to market. Because if I were sitting today in one of the two major exporters in the world of food and I had to import from foreign supplies, two of the three countries are in conflict right now. I'd be focused on how I can secure my supply at a competitive price. And when you're in country and you're not fighting against the wave of logistics to get to market, it's just extraordinarily compelling. And that's what attracts me to it. It's just the industrial logic here is incredible.
I'm I'm curious what the the the technical due diligence that it takes for you to get involved. I I I met a guy during Pedak who is a former CIO for one of the large asset managers and he said he was putting together a private equity fund that would be able to step in and help fund some major gold projects. And I just remember chatting with a friend afterwards and going you know clearly a smart guy. He's got the background to do this but the level of technical diligence to actually get that investment right there just the things that can go wrong in mining projects. Now, I don't know anything about pod ash. Like I I I'm not even sure what color it is. Uh so that's that's that's the the knowledge base that I'm coming from. But I'm curious for for yourself when you look at this project, how how is it that you're able to have the the the the technical competence that this project will work?
Well, you know, there there's a number of things. One is this is not a new process. This is this is putting in a shaft that's been done many times before. It's a a a product that is critical. It's a proven product. I've not only uh gone through the data room, but I've also been on site, I've also met with the political leaders in Brazil to confirm their support and and how strong it is uh in in many ways. Um and uh also the uh just simply the trade and logistics of it. I mean, I've spent my entire career moving production to uh the demand and there's there's already the shipping channels uh exist and uh you know operate uh on a daily basis. So there there's very little that can disrupt this other than possible delays from uh construction which can happen anywhere. But the certainty of this in terms of the the construction and the building uh is is probably the only thing that can cause the delay. But the the product in the ground is certain and the demand is certain.
So it's it's not necessarily like if we're talking about say gold where you know you might not run into high-grade enough gold or you could run into recoverability issues. I is is that not so much a factor in pot ash as it is with other types of m mining?
Yeah. Well, you're right. And when it was discovered, there were also 41 subsequent drillings that were completed at a million half dollars each to confirm the supply and to confirm the base basin. So, there's been an extraordinary amount of discovery work done while the 21 approvals that were required the years that they took to get completed. So there's been an exhaustive study done of both the product and the availability and uh the opportunity to operate in market to extract the production.
Okay. So let's let let's talk about the Brazil market. The nation is the largest pot ash importer and second largest consumer of pod ash globally. From your conversations with the people in Brazil, is there any kind of rush to get to pot ash production?
Well, you know, currently, of course, they have a supply, but they also worry that the geopolitical matters, you know, the Russia Ukraine conflict uh gets in the way of that Bellarus with sanctions. um in even in North America from Canada uh you know the supply chain whether you have in the last year a port strike a rail strike um you know and and then the logistics of getting you know the 100 day shipments uh you know it's a case of even after production it goes into storage then it gets loaded on rail cars then it gets moved to a port back into storage back on the ships all the way down through the Panama Canal to the coast and then unloaded and reloaded. So the logistics constraints here are considerable and this is a product that they find 12 km from the river which is a 2 to three day movement right into the Migraso the largest production area in the country. It's just such a compelling logistical story here and the cost associated with that are so dimminimous compared to the foreign foreign supplies. It's just got everybody's attention.
So, I'm curious why why didn't one of the majors pick up this project? Like like I know that there's a royalty agreement with Franco Nevada who's obviously got you got the legendary Pier Land uh who doesn't just throw money around willy-nilly, but but why do you think that one of the major pod ash producers like a nutrient want to um go and and or why didn't they go and beat you guys to this project?
Well, there's always who's first and and who who who has the leading thinking and you know it was a group of entrepreneurs from Canada that secured the basin from petroast. So that was done. So you know and then they've gone on to uh more recently secure uh contracts with the producers. So they've already taken the demand out of the market. So it's not only the take or pay. What that means is there's the farming community has committed to 550,000 tons. So that market is already taken now. It's already committed to. So that's 550,000 tons less available for foreign shipments. So you know it's a case that you know I'm in fact next week we'll be meeting in in the uh in the Middle East with invited to talk about uh opportunities for food security. So, you know, I think it's a case of a number of things. Projects that they may already have underway that get in the way of other strategy and uh you know, it's in my mind it's a case uh here where the sovereigns that are uh interested in food security are moving quickly to understand the opportunity and the strategics will fall in where they fall in and uh you know see see what uh what opportunities may exist when they're ready to act. But it's undeniable that the production's there and it is going to stay in market. It's not going to get exported. It's going to be utilized and those contracts are already written for the next dozen years. So that that supply chain is already taken for a dozen years forward.
So we've we've obviously got retail investors that are watching this and they're trying to do their due diligence and their homework. And one of the things that I'm sure that they're all just kind of like, Steve, why aren't you asking this is and I have to ask is the timeline. What what do you think that that timeline looks like? When when do you think you guys will actually get to production and start spitting out cash flow?
Yeah. Yeah. No, that's that's a good question and the right question. Uh 2029. When when you think about projects like this always take a long time because of the permits and the preparation and then ultimately the shafts and building the the plant. Uh those things are all in motion and so it's not an unusual timeline at all. And you know in terms of a startup it it faces the challenges other startups face but um you know the certainty of the demand when you look at food, energy and water the three critical elements for human survival. This is one of those and uh when we have a growing population at 83 an increase on the planet of 83 net 83 million people a year headed to 10 billion and got arable available land for production decreasing in every country that produces other than Brazil. It's it's just such a compelling story. So it is going to take to 2029 get the get the plant done get the production but then the as I say the contracts are are confirmed and the supply chain uh will be there.
Now I I asked Matt Simpson this question and I'm going to ask it to you as well just because I know that uh if if I'm a retail investor and I'm sitting back and I'm trying to do my homework, there's something that's going to be going through my mind. We're talking about a company here that projects to do a billion dollars a year in IBIDA that's currently trading at a market cap of around hundred million but there's this huge risk and that is how much dilution is going to have to happen before we get from point A to point B. So if you are a retail investor is there any kind of way that you can get comfort with that roadmap?
Well, I I think there is I I think first of all when we think about, you know, bringing in capital at the asset level, you know, and then secondly, it's it's a compelling opportunity right now. And that's why I think as uh Matt may have mentioned, uh you know, I've acquired shares, he's buying shares. I mean, I I think it's such a compelling price because of the volatility in the market. And with my the first half of my career as a commodity trader, I see this as an opportunity and I don't think other players will see it any different any differently. So I think it's really a question of um what what what party is going to be interested at this time and take the first step and take advantage of the metrics that exist today in the marketplace because it's a compelling opportunity even without the discount but with the discount in the share price I think it's an extraordinary opportunity.
All right. Well Mayo I really appreciate you taking the time to sit down and chat with us. Um I I think that this is one of the most interesting uh companies that we've stumbled across and uh we don't normally get to chat with people who have your kind of background. So we really appreciate you taking the time to do this and uh hopefully we can chat again in the future when there's more developments with the company.
Well, I look forward to that, Steve. I have a lot of energy for this project. It's uh it needs to happen. It's important for food security for the world and I'm glad that I'm participating. Thank you.
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