Fertoz’s (ASX:FTZ) longtime strategy has been to sell rocks to farmers.

The company has four mines in Canada, the US and Mexico where its crushing up rock phosphate and then marketing it to organic farmers.

Until now it’s all been a bit of a fizzle as investors struggle with the concept of mining+sales+agriculture, and sales numbers also haven’t given them much to believe in.

A number of analysts have heard of Fertoz but don’t cover the company, and Stockhead located just one recent broker report, from CCZ Equities Research. The broker was very enthusiastic in its assessment, but did not provide a recommendation.

Fertoz chairman Pat Avery says the whole process of getting from start to sales has been slower than investors expected.

“We think we’re one of these quiet emerging innovative companies that’s going to be the next wave,” he told Stockhead.

“The Fertoz geologists before my time had very good ideas about organic food and the growth of organic food… about four to five years ago, so they launched out to find high quality phosphate resources.

“Phosphate is laid down and can vary greatly in quality, so the geologists spent a long time looking and mapping up and down the Rockies. It took two to three years to find high-quality, low-metals phosphate.

Then Fertoz had to set up a sales and distribution arm — phosphate fertiliser for organic agriculture doesn’t have the same network as your traditional super phosphates — and then educate farmers that they can, in fact, use it and retain the organic tag.

As Stockhead outlined here, organic farming is booming, there aren’t many low sovereign risk locations with high-quality stuff, and even though unadulterated rock phosphate is a pretty rough-and-ready fertiliser, there aren’t many other options in the organic space.

Fertoz also happens to be the only ASX-listed phosphate miner to target the organic farming sector.

A slog

On the mining side, it’s taken about five years to find and secure the North American mines and then obtain the required approvals, contracts and organic certifications.

An unnamed CCZ analyst liked the company because it’s now established a wide network of customers, stores and wholesalers in the American northwest.

“The company seems to have built a first mover advantage establishing the mines with limited competition from organic phosphate products in the NW area and are extracting decent profits,” the analyst said.

It sells at $US350-$400/tonne ($501-$573/tonne)  versus conventional non-organic phosphate fertilisers which sell for $US650-$700/tonne.

Ambitious targets

Sales were slow in 2017 and 2018.

In 2017, Fertoz sold about 2000 tonnes mostly as test runs, Avery says.

Sales in 2018 started well in the summer and autumn, but an unexpected snowfall in September threw that off.

Fertoz still sold about 10,000 tonnes, but Avery says wet weather is a problem, particularly when you don’t have the established warehousing and distribution networks of traditional fertilisers.

A “brutally cold” winter in the west meant many crops couldn’t be planted and fertilised even by May, and although they have 15 tonnes worth of storage in Montana, it’s difficult getting that to farmers who only have a three-day window of good weather.

Fertoz is setting up a better distribution network this autumn in order to have product available for springtime 2020.

“We’ve got to focus on more distributors and more sales,” Avery said.

The March quarter saw a cash take of $722,000 and the company has cash of $2.1m.

Fertoz has set ambitious sales targets for FY19 of 30,000-50,000 tonnes — Avery says it’ll come in at the lower end of that guidance — and 100,000 tonnes in FY20.

Avery is tipping that the company will break even in the September quarter this year, saying that kicks in at 18 tonnes of sales.

In calendar 2019, he has a goal of reserving some cash for growth — no dividends yet but Avery says next year that could be a possibility.