Fertoz Annual Report 2022

FY2022 Annual Report · Fertoz

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FERTOZ LTD (ACN 145 951 622)

Corporate Directory

DIRECTORS
Mr. Stuart Richardson
Non-Executive Chairman (Appointed 2 December 2022)
Non-Executive Director (Up to 1 December 2022)
Mr. Patrick Avery
Executive Director (Appointed 2 December 2022)
Executive Chairman (Up to 1 December 2022)
Mr. Greg West
Non-Executive Director (Appointed 14 February 2022)
Mr. Daniel Gleeson
Managing Director (Appointed 2 December 2022)
Mr. James Chisholm
Non-Executive Director (Resigned 6 April 2022)
Mr. Justyn Stedwell
Non-Executive Director (Resigned 14 February 2022)

COMPANY SECRETARY
Mr. Justyn Stedwell (Resigned 4 February 2022)
Ms. Nova Taylor (Appointed 4 February 2022)
Ms. Rebecca Woodman (Appointed 4 February 2022.
Resigned 7 June 2022)
Mr. Max Crowley (Appointed 7 June 2022)

REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS
Level 5, 126 Phillip Street
Sydney NSW 2000

SHARE REGISTER
Automic Pty Ltd
477 Collins Street,
Melbourne VIC 3000 Australia

AUDITOR
BDO Audit Pty Ltd
Level 10
12 Creek Street
Brisbane QLD 4000

CANADIAN LAWYERS
Ontario Lawyers
Petersen Law Professional Corporation
390 Bay Street, Suite 806
Toronto, Ontario, Canada, M5H

AUSTRALIAN LAWYERS
Delphi Partners
Level 23, 307 Queen Street,
Brisbane QLD 4000

BANKERS
Commonwealth Bank of Australia

STOCK EXCHANGE LISTING
Australian Securities Exchange (FTZ)

WEBSITE
www.fertoz.com

Contents

Corporate Directory

Chairman’s Message

Operations Review

Directors Report

Auditor’s Independence Declaration

Statement Of Profit Or Loss And Other

Comprehensive Income

Statement Of Financial Position

Statement Of Changes In Equity

Statement Of Cash Flows

Notes To The Financial Statements

Directors' Declaration

Independent Auditor's Report To The

Members Of Fertoz Limited

Shareholder Information

Chairman's Letter

Dear fellow shareholders,

for Fertoz North America. Judy has more than 10 years of experience

I am pleased to present the 2022 Annual Report for Fertoz Limited (ASX:

FTZ) and provide an overview of our achievements for the financial

year ended December 2022.

in this role, working with several companies in North America and is a

positive addition to the Fertoz team. In addition, Dylan Treadwell joined

the organization as Mining & Operations manager, based in Canada, in

February 2023, adding further experience to our management team.

The past 12 months was a period of refocus including reviewing all

aspects of the business under the direction and guidance of our newly

appointed Managing Director/ CEO Daniel Gleeson, who commenced

with Fertoz on 26 April 2022. Since then, Daniel has set about

restructuring the organization in North America, and the building blocks

Fertoz is looking forward to a solid and cashflow positive result in 2023.

We have a forecast target of 40,000 tonnes sold (+200%) growth over

the year and this is underwritten by inventory and known stockpiles

of rock phosphate at Deerlodge, Montana. Operating costs are being

addressed to improve gross margins, working towards a targeted 50%

are now in place to significantly lift sales into 2023 and beyond, with a

gross margin in 2023.

laser focus on generating positive cashflow.

In addition, 2023 should see material advancement in the carbon

Key successes in 2022 included:

reforestation project.

•

20% YOY (2021 v 2022) growth in sold tonnes (12,000 tonnes).

After raising $5 million in October 2022, our balance sheet remains well

• Successfully launched the “Fertify” brand in a joint arrangement

funded to achieve our goals.

with Excel Industries, Montana, USA.

•

Initial orders of 18,000 tonnes of the pelleted NPK Fertify product

received to December 2022.

Restructuring of sales organization and strategy, additional

support in operations and permitting, and appointment of USA-

based CFO Emma Davidson.

Further investments in storage facilities across North America and

significant preparation of USA inventory for the start of 2023 which

significantly reduced costs.

• Continued to accelerate Fertoz’s entry into a reforestation carbon

project in SE Asia, as well as expanding regenerative agricultural

efforts in carbon-in-soil activities in Canada.

I would like to thank our shareholders for your support in 2022, in

particular those which participated in Fertoz’s capital raise, and I

welcome new shareholders to our register.

I would also take this opportunity to thank our Board, management

team and staff led by Managing Director, Daniel Gleeson. All have

contributed to positioning Fertoz Limited for an exciting 2023 and

beyond. We have welcomed important new hires and the establishment

of the joint operation with Excel Industries, whose combined skills and

focus will assist in driving Fertoz towards profitability.

I look forward to providing further updates on progress across our

operations at Fertoz’s AGM which will be held in May 2023.

• Signed a 10-year offtake agreement with a key Canadian

Kind Regards,

customer, with Fertoz expected to deliver 120,000 tonnes of rock

phosphate in the first five years.

Recapping 2022, Fertoz recorded a solid start to the year with record

sales in Q1 and we achieved 20% growth in sold tonnage over the

Stuart Richardson

Chairman

year, despite several factors impacting our second half results. It

Fertoz Limited

was disappointing that Fertoz was unsuccessful at securing further

bulk permits to mine the Fernie deposit in British Columbia, Canada

in FY 2022 which saw the Group “sold out” of Canadian inventory by

September 2022. Remaining inventory was located at our Montana,

USA facility and due to high transport costs was not economic to sell

into Canada. Our management is confident in securing new mine

permits in British Columbia, Canada in 2023 and remains optimistic that

mining operations will commence in Fernie, British Columbia in late May.

We established a new sales team based in the USA in late 2021/2022.

This gives us confidence that our inventory in Montana will be sold in

2023, with mining of additional inventory expected to commence in

June 2023 to support the growing demand from the USA customer

base. Fertoz also restructured our permitting team and in December, we

appointed Judy Matkaluk to lead mine permitting and regulatory affairs

ANNUAL REPORT 2022

Company Overview

MISSION STATEMENT AND VISION

Fertoz Limited (ASX: FTZ) is a sustainable land management company

Fertoz partners with farmers and landowners to fundamentally

which works with nature to provide solutions that help feed and improve

improve agriculture and land management processes.

our planet. Fertoz aims to become a leading provider of sustainable

agricultural inputs for North America and a global developer of nature-

Fertoz products improve soil health, increase plant

based carbon projects.

ESG Focus – social benefit creates value for all
stakeholders.

growth and thus sequester more carbon in the soil and

in the plant, whether that soil and those plants are on

farms or forests.

Engagement with First Nations People and local communities is a key to

We have a fertilizer inputs business and years of lab

Fertoz’s projects and its success. Embracing its mission statement, Fertoz

tests, soil tests, trials and actual production on farms –

aims to improve livelihoods through better land management practices

we can prove the benefits of using our products and we

and traceability of food supply chains, ultimately reducing or eliminating

now offer additional services in carbon management,

the use of chemicals in the farming sector. Reforestation: the key focus

carbon credit generation and trading.

today in the carbon solutions division will empower communities and

local villages with employment opportunities and provide funding

streams (from carbon credit sales), which developed in consultation

with the local communities will deliver key community infrastructure

improvements.

Fertoz’s Board and Management is focused on the needs of key

stakeholders,

farmers, partner groups,

the environment,

local

communities as well as our employees and shareholders. .

PLANET

DEVELOPING THE FERTOZ CARBON DIVISION
TO DIRECTLY COMBAT NEGATIVE EFFECTS OF

CLIMATE CHANGE.

Our products increase plant growth and thus CO2
sequestration; our products can be blended with

synthetic/conventional fertilizers to reduce overall

CO2 emissions (1t of nitrous oxide from conventional
nitrogen fertilizers is equivalent to 296t of CO2)

Importantly, our products contribute to a better

environmental outcome through significant reductions

in leaching of phosphorous into our waterways and the

avoidance of phosphogypsum waste stacks (1 tonne

of synthetic phosphate fertilizer creates 4 tonnes of

waste) that contain radionuclides (radon) particles.

GOVERNANCE

Fertoz has secured the majority of high-grade, low impurity

IMPLEMENTING RISK MANAGEMENT POLICIES.

rock phosphate deposits in North America and has had deposits

COMPETITIVE ADVANTAGES

certified organic by all the key Federal and State Authorities.

2. Our phosphate deposits/stockpiles contain significant tonnage to

meet decades of anticipated supply and demand.

PEOPLE
DIVERSITY, INCLUSION, PAY EQUALITY, HEALTH,

3. Our facilities and contract processing throughout western North

America are located close to a large grower base, thereby

SAFETY AND EDUCATION.

minimising logistic costs.

PROSPERITY
PARTNERING WITH STAKEHOLDERS TO ENSURE

4. Multiple crop and soil trials over the past decade gives us an

important understanding and advantage to develop protocols

for registration with carbon regulators focusing on plant and soil

sequestration advantages utilising best practice regenerative

and sustainable farming methods.

Fertoz is rapidly advancing carbon program protocols, contracts

WEALTH DISTRIBUTION AND PERSONAL OPPORTUNITY.

with our partner Trimble, and contracts with fertilizer dealers

and growers that purchase our rock phosphate products.

ANNUAL REPORT 2022
ANNUAL REPORT 2022

OUR STRATEGY

Fertoz’s vision is to become a leading provider of sustainable agricultural

This foothold in the regenerative agricultural market has led to the

inputs for North America and Australasia whilst delivering nature-based

creation of our carbon project development division which provides

solutions to soil health improvement and the removal of carbon from

our atmosphere. Whether that is in the form of agricultural practices

in Canada or reforestation in Southeast Asia, our objectives remain

the same, which is high quality carbon credits that are measurable,

verifiable, permanent, and unique.

carbon projects.

As a premium fertilizer provider that specializes

in sustainable

phosphate-based products, Fertoz is advancing its mining projects in

the Wapiti and Fernie area of Canada, where it holds large, high-quality

deposits of organic rock phosphate. In addition to this, we continue

to secure long-term contracts with rock phosphate mines in the USA

(Montana) and Mexico (Monterrey) to ensure consistent, high-quality

supply throughout western North America. In addition, distributing

fused magnesium calcium phosphate

in Australia, New Zealand

and the Philippines further supports our mission to provide solutions

to regenerative practices which growers throughout the world are

adopting.

Operations Review

Fertilizer

Fertoz reported a strong first half of 2022 with increasing fertilizer sales

volume and revenue growth up 67% on the previous corresponding

period (PCP). The fertilizer sector continued to grow at a rapid rate,

in part due to the continued pricing pressure on synthetic fertilizers

as a result of high energy, freight and labour prices as well continuing

shortages of high-grade, low impurity phosphate within North America.

Additionally, the transition towards sustainable fertilizers is being driven

aggressively by government,

ingredient companies,

industry and

growers alike. There is pressure from lithium iron phosphate battery

Fertoz announced it had signed a 10-year contract to continue its rock

phosphate operations from Deerlodge, Montana. Fertoz has been

operating at Deerlodge with organic certification since 2018 under a

five-year contract, which enabled it to establish its high-quality rock

phosphate business. Rock material from Deerlodge has high phosphate

levels with low metal content capable of organic certification. It is hauled

from Deerlodge to Butte, Montana for crushing, screening and sizing by

Fertoz’s processing partner.

Fertify™

demand, which saw $2.6B of government investment in the USA

During the year, Fertoz entered a joint arrangement (Fertify) with

(announced in September 2022) and a dwindling supply of high-grade

partner Excel Industries, based in Montana, USA, to build a fertilizer

phosphate (>30%), which positions Fertoz resources as high value.

pelleting plant. This will manufacture a fertilizer pellet product

The 2H 2022 disappointed to the extent Fertoz was unable to secure

permits to extract phosphate in Fernie, Canada. This certainly impacted

sales in second half 2022 with lack of inventory in Canada to sell. Fertoz

containing nitrogen, phosphorus and potassium (“NPK”) for the organic

and regenerative agriculture market in North America. This market is

expected to grow at more than 14% CAGR over the next five years2 .

has employed a new head of Mining & Operations, who has a keen

Fertoz will use material from Deerlodge in the Fertify fertilizer pellet

focus to ensure we continuously develop permits and ensure we do

production process.

not have a situation where permits in any field season are not in good

standing. A complete review of Fertoz’s processing facilities (contracted

parties) was completed in late 2022/1Q 2023, which will result in a

material improvement in 2023 gross margins. Management has made

significant changes to operational procedures based on the 2022 result,

and processing costs have been materially reduced going forward.

Fertoz sees this as a first step to launching value added inputs to its

high-grade, low impurity rock phosphate supply and developing higher

margin sales. Strong sales are expected from this venture in 2023 and

beyond, with forward order interest from farmers of 18,000 tonnes to be

delivered in 2023.

Fertoz has invested towards a more consistent supply chain flow to

Carbon

meet demand and customer satisfaction. This included new storage

facilities in Montana which will store and process the current inventory

in Montana and provide greater flexibility for processing in winter. This

inventory investment is key to maintaining a reliable supply chain and

Fertoz continues to advance positively on its reforestation project in

SE Asia with a potential funding partner, ensuring that the project will

withstand the rigorous environmental, social and investor scrutiny.

retaining key customers and importantly facilitating sales 1H each year

Fertoz continues to build a robust and sustainable approach that

ahead of a season`s mining campaign.

contributes to the success of this project and future projects the

Fertoz’s sales strategy has also continued to evolve, with an increased

Company expects to follow.

focus on the large customer base within Montana, Idaho, Oregon and

Carbon in agriculture that specifically targets the voluntary carbon

North Dakota. We are targeting direct sales to corporate growers

market in Canada continues to gather momentum. Growers, agronomy

focused on alfalfa and hay production due to proximity of our supply

groups and retailers are actively seeking Fertoz for signing up acres into

and the need for cost effective, slow release phosphorous that improves

contracts for both ‘No Till’ and ‘NERP’ protocols due to our efficiency,

soil health. Having positioned our most recent sales team member in

simplicity and reputation in the market. The targeted acres are trending

Idaho, demand and interest in late 2022 has been very strong and will

towards 1 million in 2023 for the combined protocols.

be one of the building blocks for our objective to reach sales of 300,000

tonnes by 2026. With more than 50 million acres of harvested hay in the

USA1 and 6 million acres of alfalfa in Montana, Idaho and the Dakotas

alone, Fertoz is well positioned for sales growth in this region.

Collaboration with key growers has the potential to support further

project development in the area of high oil yielding winter cover

crops such as specific breeds of canola that in turn will be processed

into sustainable aviation fuel for several key companies. Further work

Fertoz continues to look to expand the rock phosphate tonnage

is being undertaken in this area with leading energy companies, and

available and secured a new tenement in Canada after discovering

Fertoz hopes to secure partnership agreements with the energy groups

high-grade rock phosphate in the Fernie region of British Columbia.

and large targeted farms to develop these winter crops. Current

Initial drill holes down to a depth of 3-6m returned “field testing” grade

government grants in Canada that support sustainable agriculture are

of +25% P and low impurities (high-grade material). The deposit is

being seen as an accelerator for intercropping programs, such as canola

accessed from the surface, over approximately 25km strike length and

and peas, which are fertilized with organic rock phosphate and nitrogen

widths of typical 3-5m. Fertoz expects the new tenement to add easily

from the peas and sown using ‘No Till’ methods further adding to the

accessible phosphate material to its future supply capabilities to help

Fertoz opportunity.

meet growing demand.

1. https://hayandforage.com/article-2826-usda-nearly-everything-is-up.html

2. https://www.businesswire.com/news/home/20191216005341/en/Global-Organic-
Fertilizers-Market-2019-2023-14-CAGR-Projection-Over-the-Next-Five-Years-
Technavio

ANNUAL REPORT 2022

Initial trial results Fertoz ran with a major food ingredients company

Current assets total approximately $5,967,785 and include inventory at

in the September quarter showed a 17% increase in revenue to the

cost of $1,226,915 . This inventory, after further minimal processing, is

farmer (from $861/ac to $1008/ac) versus straight canola production,

expected to have a gross sales value of $6 million and be sold in FY 2023.

whilst delivering the raw materials crop to utilize in a sustainable fuel

Current liabilities are $1,265,442 . Fertoz has a strong working capital

source for energy companies. These trial results and more planned will

position to commence the 2023 year.

strengthen Fertoz`s ability to be a key input supply into this emerging

Available cash balance at year-end amounted to $2,861,377 (2021:

sustainable opportunity.

Safety

$5,196,846).

Board Changes

There were no lost time, injuries or environmental incidents recorded

Daniel Gleeson was appointed as CEO in April 2022, and subsequently

during the year ended 31 December 2022.

appointed as Managing Director in December 2022. Greg West was also

Outlook

appointed a Director.

Stuart Richardson transitioned to Non-Executive Chairman with Patrick

The economic outlook for Fertoz remains positive as overall phosphate

Avery stepping down as Executive Chairman to a role of Executive

prices remain high despite decreasing prices for nitrogen and potassium.

Director. Patrick Avery later shifted to a Non-Executive Director role

This is in part due to the ongoing conflict in Ukraine as well as the block

(February 2023).

on exports from China which has historically traded significant volumes.

Justyn Stedwell and James Chisholm resigned as directors in 2022.

In addition to this, logistics costs remain high, emphasizing the strategic

location of Fertoz’s operations in western North America.

Fertoz expects a vastly improved financial result in 2023, starting with the

$6 million (gross sales value) of available inventory at site in Montana,

USA, and reduced costs of goods from lower partner processing costs

enabling a budgeted cashflow positive result in FY2023. Confidence is

supported with strong early customer demand based around strategic

marketing campaigns for our rock phosphate and Fertify™ products

and Fertoz is well positioned to start 2023 with record sales.

CORPORATE

Financials

The loss for the consolidated entity after providing for income tax

amounted to $4,215,190 (2021: $3,752,831).

Sales for the year ended 31 December 2022 were 59% higher than the

previous year, up from $2,243,501 to $3,556,807. This does not include

receipt from sale of materials removed from the Company’s Fernie

project in Alberta amounting to $828,627 (2021: $943,450), which are

offset against the exploration and evaluation asset. The Group also

spent $1,085,989 (2021: $988,418) on exploration expenditure during the

year.

Contributing to the loss were additional costs related to processing ore

into a state ready for sale. This has been fully reviewed and significant

changes have occurred within Fertoz operations to ensure a commercial

return is achieved on every tonne of phosphate to be sold in the future.

Staff have been replaced and cost savings will occur in staffing benefits

in 2023. The 2022 statement of profit or loss and other comprehensive

income and the loss recorded reflects these issues, mainly around

elevated cost of goods and third party contractor costs. Management’s

focus has been to attain significantly better pricing across all aspects of

finishing the product for sale and this will in turn benefit operations and

financial performance in FY2023.

Directors'
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For The Year Ended 31 December 2022

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Auditors’
Independence
Declaration

For The Year Ended 31 December 2022

Auditors’ Independence Declaration

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Consolidated
Financial
Statements

For The Year Ended 31 December 2022

Consolidated Financial Statements

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Consolidated statement of profit or loss and other
comprehensive income

Consolidated statement of financial position (As of 31 Dec 2022)

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Consolidated statement of changes in equity

Consolidated statement of cashflows

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