Shares Outstanding: 86,374,336
Fully Diluted: 94,388,643
TORONTO, Sept. 12, 2011 /PRNewswire/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (TSX: MBC and OTCQX:MBCFF) is very pleased to announce the results of an initial National Instrument 43-101 ("NI 43-101") compliant Preliminary Economic Assessment ("PEA") for the Company's 100% owned Santana Phosphate Project (the "Project") located in the southeast of Pará State, Brazil. The PEA is based on an initial inferred mineral resource estimate determined by drilling completed up to July 31, 2011. The PEA is preliminary in nature. It includes inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized. The Company will file on SEDAR a NI 43-101 technical report containing the mineral resource estimate and PEA within the next 45 days.
Highlights of the NI 43-101 Technical Report:
- The initial resource estimate for the Santana deposit is inferred resources of 33.5Mt with an average P2O5 content of 12.4% (using a 3% P2O5 Cut-off)
- This grade deposit makes Santana one of the highest grade phosphate mines in Brazil
Highlights of the PEA:
- Estimated production of 500,000 tonnes per annum of Single Superphosphate ("SSP") production starting in Q3, 2015, using 300,000 tonnes of P2O5 34% concentrate
- A robust NPV of $423 million (at a discount rate of 10%) and an IRR of 26.3%
- Operating cash costs of $127 per tonne SSP (includes a10% contingency)
- Capital costs of $385 million
- Mine life of 22 years (based on initial resource estimate)
- Production target Q3, 2015
- Significant resource expansion potential
- Opportunities to increase value by production of other higher-content phosphate fertilizers and animal nutrient products. A review of which will be finalized before completion of the feasibility study
- The initial lab tests with concentrates resulted in high quality SSP and phosphoric acid suitable for Triple Superphosphate ("TSP") and Di-calcium Phosphate ("DCP") production
Antenor Silva, President and CEO, stated "the Santana phosphate project is the next step in realizing our vision to be a significant integrated fertilizer producer in Brazil. Santana has many competitive advantages including the high grade phosphate which could potentially make it one of the lower cost phosphate mines in Brazil. Proximity of the Santana project to the largest fertilizer and animal feed markets and the fact that there are no other significant producers in the region provides a very compelling opportunity for MBAC. The high grade deposit will also permit the Company to consider higher concentrate phosphate fertilizer products such as Triple Superphosphate and Di-calcium Phosphate which is used as an animal supplement."
Mr. Silva further noted; "The preliminary economic assessment results show the Project producing an NPV of $423 million and an Internal Rate of Return ("IRR") of 26.3% and a discounted payback of 4 years using conservative assumptions. Our goal is to have the Santana project in production by the third quarter of 2015. "
MBAC, through its subsidiary is the sole registered and beneficial holder of eight exploration properties with an additional three exploration permits under application for a total of 97,949 hectares. The Santana Project is located in the southeast of Pará State, Brazil (see map below). The target Phosphate markets for the Project are the northern and eastern regions of Mato Grosso State and southern region of Pará State. Mato Grosso State is the largest soybean producer in Brazil, while Pará State is the largest beef producer in Brazil (which is the largest market for the animal supplement DCP). SSP demand in Mato Grosso State alone is approximately 1.7 million tonnes per annum. This demand is expected to grow at least 25% by 2015, with an estimated demand of SSP in 2015/16 in the range of 2.1 and 2.2 million tonnes of SSP per year.
The Project will have significant competitive advantage as its target market is located far from the main phosphate fertilizer producers. Currently most of the fertilizer brought into the region is imported and comes through Paranaguá Port, located approximately 2,150 km. away. Other potential suppliers are located in southern Minas Gerais State which is approximately 1,000 km. away. Phosphate products can also be imported from the Itaquí Port in the northern part of Brazil which is approximately 1,400 km. away, but the inland logistics to reach the region are poor.
Summary of the Resource Estimate
The Santana inferred resource estimate is based on 53 diamond drill holes (2,386m) and 6 reverse circulation ("RC") holes (238m) drilled at a spacing of approximately 200m by 200m. Only data received as at July 31, 2011 has been used in this estimate. MBAC has an ongoing infill drilling and extensional drill hole program underway.
Santana is defined by flat lying phosphate rich metavolcaniclastic and carbonate rocks belonging to the Iriri group of Precambrian age. The main mineralization is located within a supergene enriched saprolite zone and is between 10m and 80 m thick. Additional large widths of fresh hydrothermally altered carbonate rocks have been intercepted in three deeper drill holes down to 200m depth, but this has not been estimated due to lack of data
The resource estimate has focused on this main oxide mineralization with 2 flat lying mineralized domains defined using the saprolite and fresh geological boundary along with a 3% P2O5 grade cut-off to guide the wireframing process. The inferred mineral resource estimate, comprising 33.5Mt with an average P2O5 grade of 12.39% (using a 3% P2O5 cut-off) is summarized in Table 1 below.
| Table 1 - Grade Tonnage Report Santana Phosphate Project
Inverse distance weighted to Power Two (IDW2) estimate
(Block Model - 12.5mE X 12.5mN X 3mRL - Cut off 3% P2O5 utilised)
|Resource Category*||Tonnes Mt|| P2O5
Note: Appropriate rounding has been applied
*Mineral resources that are not mineral reserves do not have demonstrated economic viability.
As of the end of August the Company had completed drilling of over 170 holes and only 59 of these drill holes have been used for the current inferred mineral resource estimate. The ongoing extensional drilling found mineralized holes at 400m on the east and the west of the current block model showing the mineralization remains open in both sides.
Other regional investigation is being carried on and other drilling targets are yet to be defined. The geology setting found at the current drilling targets are present in other areas of the MBAC claims and the aim of the regional investigation is to define new drilling targets.
Summary of the Project Economics
The PEA indicates that the Project is expected to generate robust returns. The assumptions for the economic analysis are as follows:
|Total Capex||USD Million||385.32|
|At Project Site|
|SSP Price (1)||USD/Tonne||400.00|
Note: (1) The SSP price through 2020 was based on TSP prices furnished by a leading independent authority in fertilizer industry. For the period after 2020, the price was escalated at a rate of 2% per annum
For the purposes of the PEA, MBAC has forecasted production of 500,000 tonnes of SSP. This production will require 300,000 tonnes of phosphate concentrate (averaging 34% P2O5) and 200,000 tonnes of sulphuric acid. Lab tests have shown that the ore can be easily concentrated to 34% P2O5 or up to 38% P2O5 with good metallurgical recoveries. A recovery of 55% was used in this assessment which the Company believes to be conservative. Also the solubilisation tests showed very positive results, and the SSP produced have in average 20% P2O5 soluble in Citrate plus water, and 19% P2O5 soluble in water, on a dry basis.
Initial lab tests for Phosphoric Acid production showed promising results, producing an acid with very low impurities and low grade of fluorine. The Phosphoric Acid produced is suitable for production of high grade phosphate products, such as TSP and DCP. The economic feasibility of the production of such high grade material shall be investigated during the feasibility study process.
The SSP price through 2020 was based on TSP prices furnished by a leading independent authority in fertilizer industry (FOB Morocco) and adjusted for additional logistics costs for freight to the targeted market for the Project. For the period after 2020, the price was escalated at a rate of 2% per annum.
Operating costs for the Project were based on Itafós Arraias SSP Project inputs and were adjusted for the operational requirements of the Santana Project. The cost changes mainly reflect variances in quantity of reagents, energy, mining costs, and freight. A 10% contingency was included in these estimates resulting in SSP cost at site of US$127/tonne.
Capital costs were based on the Itafós Arraias SSP Project capital costs, with additional costs included for the Project requirements such as (i) Mill Plant size; (ii) infrastructure; and (iii) mine equipment. Furthermore, an additional, US$73 million in contingencies were included to account for infrastructure in the region. Total capital costs for the Project are estimated to be US$385 million.
Based on these assumptions preliminary financial model indicates robust project economics with a NPV of US$423 million as at Q3 2013 (the estimated start of construction). This figure does not include US$20 million required for exploration and engineering development during 2011 and 2012.
The Company will continue to explore the possibility of production of other higher-content phosphate fertilizers and animal supplement products to generate additional returns for the Project.
The next steps for the Project will be to increase the resource confidence and estimates. The Company intends to complete the Pre-feasibility study by early 2012 and a Bankable Feasibility Study by the first quarter of 2013.
Beau Nicholls, (MAIG) principal consulting geologist of Amazon Geoservices, is the Qualified Person with respect to the inferred resource estimate for Santana. RC and Diamond Core (DC) samples were taken at one meter intervals by MBAC technical staff, utilizing internationally accepted drilling and sampling techniques. All RC drill samples are weighed on site to ensure adequate recovery although wet RC samples were noted by Amazon Geoservices that will need sample quality to be quantified with twin DC holes. DC drill holes consist predominantly of HQ core. DC is logged and sawn on site with half core samples sent to the laboratory. All samples are analyzed for P2O5 using standard Whole Rock XRF by ALS laboratories. QA/QC programs show industry acceptable precision and accuracy limits on both Certified Standards and field duplicate samples. No umpire samples have been taken at this stage. Bulk Density samples are routinely measured in all DC drilling. Amazon Geoservices have validated the database and QA/QC programs, managed geological and grade wireframing along with block modeling and resource estimation and has approved the resource estimation portion of this news release.
Carlos Guzmán, registered member of the Chilean Mining Commission, principal mining engineer and project director of NCL Brasil Ltda., is responsible for the overall preparation of the PEA and particularly with the mining study and economic analysis. He has read and approved the technical portions of this news release.
MBAC is focused on becoming a significant integrated producer of phosphate and potash fertilizers in the Brazilian and Latin American markets. MBAC has an experienced team with over 150 years of combined experience in the business of fertilizer operations, management, marketing and finance within Brazil. In October 2008, MBAC acquired Itafós Mineração Ltda, which consisted of a phosphate mine, a mill and plant and related infrastructure, all located in central Brazil. MBAC's exploration portfolio includes a number of additional phosphate and potash projects, which are also located in Brazil. The Company continues to search for additional fertilizer opportunities in the Brazilian and other Latin-American markets, where strong agricultural fundamentals and unique opportunities are expected to provide attractive growth opportunities in the near future. Further information on MBAC can be found on the Company's website at www.mbacfert.com and on SEDAR at www.sedar.com.
President & Chief Executive Officer
FORWARD LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements related to activities, events or developments that the Company expects or anticipates will or may occur in the future, including, without limitation, statements related to the Company's business strategy, objectives and goals; the economic feasibility of the Santana Project; and the development of a Phosphate mine in the area of the project. Forward-looking statements are often identified by the use of words such as "plans", "planning", "planned", "expects" or "looking forward", "does not expect", "continues", "scheduled", "estimates", "forecasts", "intends", "potential", "anticipates", "does not anticipate", or "belief", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are based on a number of factors and assumptions made by management and considered reasonable at the time such statements are made, and forward-looking statements involve known and unknown risks, uncertainties and other factors may cause the actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such factors include, among others, obtaining all necessary financing, licenses to explore and develop the project; successful definition and confirmation based on further studies and additional exploration work of an economic mineral resource base at the project; as well as those factors disclosed in the Company's current Annual Information Form and Management's Discussion and Analysis, as well as other public disclosure documents, available on SEDAR at www.sedar.com. Although MBAC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. The forward-looking statements contained herein are presented for the purposes of assisting investors in understanding the Company's plan, objectives and goals and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking statements.
SOURCE MBAC Fertilizer Corp.
Image with caption: "Location of Santana Project in Pará State, Brazil (CNW Group/MBAC Fertilizer Corp.)". Image available at: http://photos.newswire.ca/images/download/20110912_C2240_PHOTO_EN_3050.jpg