Roth initiates coverage on Brazil Potash, sets $17 PT

Investing.com -- Brazil Potash Corp (NYSE:GRO ) has been assigned a "buy" rating from Roth Capital Partners (WA:CPAP ) as the brokerage initiated coverage on the company. 

Analysts at Roth have set a price target of $17, citing the potential of Brazil Potash’s flagship Autazes project to transform the domestic potash supply landscape in Brazil.

The Autazes project, located in Amazonas State, holds significant promise as a major domestic source of potash, a key component in agricultural fertilizers. 

“As of 2021, Brazil was the world’s largest importer of potash due to its significant farming industry and lack of significant domestic supply of potash,” said analysts at Rosh in the note. 

This heavy dependence underscores the importance of the Autazes development, which is poised to supply 2.4 million tons annually, potentially fulfilling 18% of the country's potash needs.

Roth analysts emphasized that the project has advanced to a critical stage, with construction permits already secured. 

The company plans to reach a final investment decision by the second half of 2025, supported by ongoing economic studies and the potential for additional financing arrangements. 

The project’s production is projected to commence in 2029, with full capacity expected by 2031. 

Once operational, the mine is anticipated to generate annual revenues of about $1.1 billion and contribute to Brazil's agricultural sector.

Despite current low potash prices, which hover around $280 per ton, Roth’s analysis suggests that the market could experience a price rebound driven by supply curtailments from key producers and increasing global demand. 

Brazil Potash’s location provides additional pricing advantages, as domestic production is likely to reduce transportation costs significantly compared to imports.

Financing remains a critical focus for the company, which completed a $30 million IPO in late 2024. 

Roth estimates that an additional $3.1 billion will be required to fully fund the Autazes project. 

Analysts expect a mix of debt and equity financing and have modeled potential interest rates conservatively. 

Additionally, the company’s agreement with AMAGGI, a major player in Brazil’s soybean market, for an annual offtake of 550,000 tons of potash, is seen as a positive step toward securing further financial backing.

Roth’s valuation of the company incorporates a discounted cash flow model, assuming long-term potash pricing of $450 per ton. 

The analysts project strong free cash flow once production begins, highlighting the economic resilience of the Autazes project. 

However, potential risks remain, including regulatory hurdles, price volatility, and operational challenges.

The mineral exploration and development company was trading 2.9% higher at 09:38 ET (14:38 GMT).

Source: Investing.com