MBAC provides corporate update and reports 2013 results
Shares Outstanding: 152,029,492
Fully Diluted: 171,450,330
TORONTO, March 27, 2014 /CNW/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (TSX:MBC and OTCQX:MBCFF) announces highlights of its year end results and provides a general corporate update on the Itafós Arraias Single Super Phosphate ("SSP") Operations ("Itafós" or the "Itafós Operations").
The Financial Statements and Management Discussion and Analysis ("MD&A") for the financial year ended December 31, 2013 are available on www.sedar.com.
Highlights for the year ended December 31, 2013 include:
- Completed construction of the production facility at the Itafós Arraias SSP Operations;
- Produced 24,446 tonnes and delivered 21,146 tonnes of SSP;
- Completed the Updated Itafós Technical Report indicating a 47% increase in proven and probable reserves, and an increase in mine life to approximately 19 years;
- Invested US$170.7 million in property, plant and equipment and exploration activities;
- Executed amendments to certain loan agreements to defer the commencement of principal repayments to September 2014; and
- Filed the feasibility study for the Santana Phosphate Project which supports a robust project with strong economics.
Subsequent to year end:
- Cristiano Melcher joined the Company as President and Chief Executive Officer;
- Executed and received disbursements from new working capital loans;
- The Company has received firm purchase commitments for approximately 110,000 tonnes of SSP;
- Received a letter of intent for a working capital loan facility from IFC for up to US$40.0 million subject to certain conditions; and
- Significantly advanced discussions with its senior lenders with respect to the extension of principal repayment terms on US$192.0 million of senior debt by up to 30 months.
ITAFÓS OPERATIONS UPDATE
The Company continues to ramp-up operations and expects to achieve commercial production in Q2 2014. The table below summarizes the operational highlights for the Itafós Operations during the financial year ended December 31, 2013:
|(in tonnes unless otherwise stated)||
|P2O5 grade (%)||7.5|
|SSP pre-commercial production||24,446|
|SSP pre-commercial sales||21,146|
|Pre-commercial net revenue (thousands)||US$4,253|
|Average net selling price per tonne (thousands)||US$201|
While the global phosphate price environment started to show some strength during the last quarter of 2013, MBAC's revenue and average selling price were impacted by the seasonality of Brazil's planting season and higher than customary inventory levels. Q4 is typically a slow period for fertilizer companies in Brazil operating in this industry.
Di-ammonium Phosphate ("DAP") prices (fob Morocco) have increased by approximately 20% since bottoming in November 2013. Triple Super Phosphate ("TSP") prices have also seen a strong increase (approximately 32%) since hitting five-year lows in late 2013. The rising prices are expected to have similar impact on SSP prices in Brazil as 2013 Brazilian fertilizer inventories are depleting. The Company believes that SSP prices should fully benefit from the rising global prices as the fertilizing season progresses.
Average selling prices for SSP in 2014 are expected to be consistent with the 2013 average selling price. We anticipate that the cost of production for SSP will be consistent with guidance previously disclosed by the Company.
Year-to-date, the Company has received firm purchase commitments for approximately 30% of its expected sales for 2014. The Company has received advanced payments on a portion of these sales. The Company is pleased with this progress made to date as it demonstrates acceptance of the product quality by the marketplace.
With the Company now in production of its finished product, the focus is on ramping up operations, controlling production costs and maximizing sales. Product sales efforts are focused on 2014 through negotiations with large fertilizer distributors, blenders, large farms and grain traders within the region.
The Company witnessed significant progress in its operations in Q1 2014. In March, the beneficiation plant has been operating on a stable basis at or above planned output. All the others plants are in a position to operate at budgeted volumes. The Company currently has approximately 30,000 tonnes SSP in total inventories. Given the progress witnessed in the operations in March 2014, the Company is confident that it will be in a position to meet previously disclosed sales guidance.
The Company has been actively managing its working capital position, and expects to see continued production increases in the near term as its working capital position is improved.
UPDATE ON FINANCING INITIATIVES
The Company has been successful in advancing discussions with its senior lenders with respect to providing a working capital facility and re-profiling its senior debt in order to defer principal payments for up to 30 months.
IFC Working Capital Loan
The Company received a letter of intent for a working capital loan facility from IFC for up to US$40 million subject to certain conditions including commercial and operational due diligence and final IFC board approval. Subsequently, IFC's technical and commercial teams have visited the Itafós Operations site. IFC is now finalizing its review. The Loan Facility is expected to close in 60 to 90 days and is subject to certain conditions including final board approval and the execution and delivery of definitive documentation. Proceeds from the Loan Facility will be used as working capital to support the Itafós Operations.
Long-term Debt Amendment and Principal Repayment Deferrals
The Company has significantly advanced discussions with its senior lenders with respect to the extension of principal repayment terms on US$192 million of senior debt by up to 30 months. Such extension will be subject to certain conditions including final credit committee approvals and the execution of definitive documentation.
The re-profiling of the repayment terms of its long term debt will provide the Company with additional liquidity for the Itafós Operations, and enable the Company to pursue its operational and strategic plans in an optimized manner.
Cristiano Melcher, President and CEO of MBAC stated "We are very pleased to see the level of support and commitment demonstrated by our financial partners. The combination of these initiatives provides the Company with a strong platform for pursuing its short, medium and longer term plans, and will enable us to focus on managing our operations and projects as efficiently as possible."
Financial results for the three months ended December 31, 2013
During the quarter, the Company produced 19,296 tonnes and delivered 20,364 tonnes of granulated SSP to customers. Prior to reaching commercial production, the Company capitalizes all costs related to Itafós to property, plant and equipment. Proceeds from sales during this period are offset against capitalized costs. MBAC was a pre-commercial stage company in Q4 2013; as a result, the Company did not generate material revenue during the quarter and incurred a net loss of US$11.0 million, or US$0.08 basic and diluted net loss per share. Adjusted net loss1 was US$3.4 million or US$0.02 basic and diluted Adjusted net loss per share for the quarter, which primarily was comprised of unrealized foreign exchange loss, finance expenses and general and administrative expenses. The Company expects to generate positive cash flow from operations in the upcoming periods as it ramps up production towards its nominal capacity of 500,000 tonnes per annum.
1 Adjusted for the exclusion of certain non-cash and non-recurring items. Please refer to the Annual 2013 MD&A filed on www.sedar.com for a full reconciliation of the Non-IFRS measures.
Financial results for the Financial Year ended December 31, 2013
For the financial year ended December 31, 2013, the Company produced 24,446 tonnes and delivered 21,146 tonnes of granulated SSP to customers. For the year the Company incurred a net loss of US$32.2 million, or US$0.22 basic and diluted net loss per share. Adjusted net loss was US$17.0 million or US$0.12 basic and diluted Adjusted net loss per share, which was primarily comprised of unrealized foreign exchange loss, finance expense and general and administrative expenses.
Due to an error on the part of the Lenders' Agent, minimum required balances had not been deposited by the Lenders' Agent in certain debt service reserve accounts as at December 31, 2013; this compromised compliance of certain non-financial covenants required by the Company's project finance loans. As a result, the Company was required to reclassify all of its long-term debt to current liabilities. IFRS requires for liabilities to be presented as current when the Company does not have the ability to defer payments for over 12 months as at period end. Such rule applies regardless of cure periods or subsequent remediation. Subsequent to year end the Company had insufficient funds in the debt service reserve accounts however, all lenders agreed to formally waive any recourse rights they would have against the Company as a result of such breach. The Company expects the long-term debt amount to be reclassified to long-term liabilities in Q2 2014. In addition, this has not impacted the negotiations regarding rescheduling of the Company's debt obligations.
The Company will hold a conference call to discuss its 2013 year-end financial results on Thursday, March 27, 2014 at 10:00 am ET. All interested parties can join the conference call by dialing 1-888-231-8191 or 647-427-7450. Please dial in 15 minutes prior to the start of the call to secure a line. The conference call will be archived for replay until midnight April 11, 2014. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0893 and enter the encore code: 13768943.
The corporate presentation and audio of the conference call will be available via webcast at: http://event.on24.com/r.htm?e=765933&s=1&k=0811ABA80C33AA8BE9396D69E896BA6E. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available on the Company's website.
MBAC is focused on becoming a significant integrated producer of phosphate fertilizers and related products in the Brazilian and Latin American markets. MBAC has an experienced team with significant experience in the business of fertilizer operations, management, marketing and finance within Brazil. MBAC owns and operates the Itafós Operations which consists of an integrated fertilizer producing facility comprised of a phosphate mine, a mill, a beneficiation plant, a sulphuric acid plant, an SSP plant and a granulation plant and related infrastructure located in central Brazil. The Itafós Operations are estimated to have production capacity of approximately 500,000 tonnes of SSP per annum. MBAC's exploration portfolio includes a number of additional exciting phosphate projects, which are also located in Brazil. The Santana Phosphate Project is a high grade phosphate deposit located in close proximity to the largest fertilizer market of Mato Grosso State and animal feed market of Pará State. 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.
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; that the Company will complete the Bought Private Placement and close the same on or before April 18, 2014, the expectation that the mine life for the Itafós Operations will be of 19 years and in relation to proven and probable resources at the Itafós Operations; will continue refining production processes and plant functioning to optimize efficiencies of operations, the expectation regarding production and delivery of SSP meeting firm commitments from clients, the expectation regarding completing and receiving disbursement pursuant to the proposed IFC Working Capital Loan, the expectation of completing the long-term debt amendment for principal repayment, the expectation that formal waivers will be obtained from all Lenders in relation to the breach of certain non-financing covenants under certain debt agreements. The expectations in relation to SSP prices increases or reaching the levels expected for 2014; the Company's goal of becoming a significant integrated producer of fertilizers, the realization of the Itafós Operations estimated capacity of 500,000 tonnes per year of SSP, the Company's ability to ramp up operations, control production costs and maximize sales; and that the Company will continue to be able to manage and to improve its working capital position. the expectation regarding the development and financing of the Santana Project, as well as expectations in relation to certain beneficial factors in comparison to Itafós, as well as the forecast economics of the Santana Project, as well as in relation to realization of the goals regarding financing strategies and respective structure. 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 risk factors include, among others, the non-completion of the Bought Deal Financing, the risk of the mine life of Itafós not reaching 19 years, and the proven and probable resources expectations not being realized, the risk of non-completion of SSP delivery meeting purchase orders; the risk of not completing and receiving disbursement pursuant to the proposed IFC Working Capital Loan, the expectation of completing the long-term debt amendment for principal repayment. The risk that SSP prices will not increase or be at the levels expected for 2014; the Company's goal of becoming a significant integrated producer of fertilizers, the realization of the Itafós Operations estimated capacity of 500,000 tonnes per year of SSP, the Company's ability to ramp up operations, control production costs and maximize sales, and that sales efforts will not be successful, the risk that the Company may not be able to manage or improve its working capital position, the expectation regarding the development and financing of the Santana Project, as well as risks that certain factors in Santana may not benefit compared to Itafós; the risk that the goals regarding financing strategies and respective structure may not be realized, the risk that formal waivers may not be obtained from all Lenders in relation to the breach of certain non-financing covenants under certain debt agreements 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.
The Company has included certain non-IFRS measures including "Adjusted Net Loss and Adjusted Net Loss per share" to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards ("IFRS"). The Company believes that these measures, together with measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The presentation of adjusted non-IFRS measures are not meant to be a substitute for net loss or net loss per share presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Adjusted net loss and Adjusted net loss per share are calculated as net loss excluding (a) share-based payment expense, (b) gains and losses on the disposition of long-term assets, (c) amortization of deferred transaction costs, (d) unrealized gains and losses on derivative instruments, and (e) unrealized foreign exchange gains and losses. Management believes that the presentation of Adjusted net loss and Adjusted net loss per share provide useful information to investors because they exclude certain non-cash and other non-recurring items and are a better indication of the Company's results from operations.
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