MBAC reports robust preliminary economic assessment for Araxá Rare Earth Oxide/Niobium/Phosphate deposit

Press Release: MBAC Fertilizer Corp. – 2 hours 56 minutes ago

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TORONTO , Sept. 13, 2012 /CNW/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (MBC.TO) (MBCFF) is very pleased to announce the results of an initial preliminary economic assessment ("PEA") for the Company's 100% owned Araxá Rare Earth Oxide ("REO")-Niobium-Phosphate Project (the "Araxá Project" or the "Project") located in the western part of Minas Gerais State, Brazil . The Company will file a technical report containing the mineral resource estimate and the PEA on SEDAR within the next 45 days. The PEA is preliminary in nature and includes inferred mineral resources that 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 PEA will be realized.

Highlights of the PEA:

• The PEA is based on the current mineral resource estimate for the Araxá Project contained in the amended and restated technical report filed on August 31, 2012 , comprising a combined measured and indicated mineral resource of 6.34 Mt at 5.01% TREO and an inferred mineral resource of 21.94 Mt at 3.99% TREO.
• Production is expected to commence in Q1 2016, at 120,000 tonnes per year of initial feedstock.
• Estimated initial production of 8,750 tonnes per annum of individual REO (Phase 1), doubling capacity to 17,500 tonnes per annum of REO after 5 years.
• Estimated production of 740 tonnes per annum of niobium oxide as a by-product in the first five years, growing to 1,832 tonnes per annum during Phase 3.
• Mine life of 40 years with significant resource expansion potential.
• Capital costs of US$406.05 million estimated for Phase 1, with an additional US$214.48 million estimated for the expansion required after the fifth year of operation.
• Conservative basket pricing of US$29.19 per kilogram relative to current rare earth prices.
• Estimated operating cash costs of US$10.50 per kilogram of REO in Phase 1, US$9.60 per kilogram in Phase 2 and US$12.20 per kilogram in Phase 3 (includes a 5% contingency).
• A robust after tax NPV of US$967 million (at a discount rate of 10%) and an IRR of 30%.

Antenor Silva, Vice Chairman and CEO, stated "These results confirm our expectation that the Araxá deposit has significant value for MBAC. Based on the results in the PEA, MBAC is moving forward quickly and plans to complete a prefeasibility study in Q2 2013. We are also currently putting in place a pilot plant to confirm laboratory estimates and produce a rare earth oxide concentrate with an expected 98-99% REO. We continue to see interest from potential off-take partners who share our view on the potential of this asset."

The Araxá Project

The Project consists of four tenements covering 214 hectares. The Barreiro carbonatite containing the Araxá REO is also the host rock to Companhia Brasileira de Metalurgia e Mineração's ("CBMM") niobium mine and Vale's Araxá SSP plant (1.3 million tonnes per year). Exploration from the Araxá Project has led to the discovery of significant REO, phosphate and niobium mineralization.

The Project will be executed in three phases, as described below:

Summary of the Mineral Resource Estimate

The current mineral resource estimate for the Araxá Project is based on 67 diamond holes (3,764m) drilled at a spacing of approximately 40m by 40m down to 20m by 20m in the centre of the deposit. Data received as at May 1, 2011 has been used in this estimate.

The main REO mineralization has been defined by historical drilling within a 650m by 250m target, and is derived from the residual enrichment of a REO rich protholite, and possibly a carbonatite. Monazite is the principal REO mineral present, and apatite is by far the most common and important phosphate mineral in the Araxá carbonatite.

MBAC has undertaken a systematic exploration program over the past year which has been successful in defining significant mineral resources of REO, Phosphate and Niobium. Andes Mining Services ("AMS"), who prepared the current mineral resource estimate, is of the opinion that the Company has successfully confirmed the mineral resource potential of the Araxá Project based on the 2011 and 2012 exploration programs, with significant further upside for additional measured and indicated resources.

A summary of the estimated measured, indicated and inferred mineral resources for the Araxá Project is provided below in Table 1, and estimate has an effective date of June 1, 2012 . The mineral resource estimate has focused on the main oxide mineralization within a flat lying mineralized domain defined down to approximately 60m in depth using a 1% TREO grade cut-off to guide the wireframing process.

Mineral resources are not mineral reserves and do not have demonstrated economic viability
Appropriate rounding has been applied to the table

TREO includes La2O3, Ce2O3, Pr2O3, Nd2O3, Sm2O3, Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3 and Y2O3
*LREO (97.6% of TREO) includes La2O3, Ce2O3, Pr2O3, Nd2O3 and Sm2O3
**HREO + Y2O3 (2.4% of TREO) includes Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3 and Y2O3

Tables 2 and 3 below highlight the breakdown for the various REOs for the Araxá Project.

Mineral resources are not mineral reserves and do not have demonstrated economic viability
Appropriate rounding has been applied to the table

Mineral resources are not mineral reserves and do not have demonstrated economic viability
Appropriate rounding has been applied to the table

The mineral resource estimate has been prepared by Bradley Ackroyd (MAIG (CP)) of AMS, who is a qualified person within the meaning of National Instrument 43-101. AMS and MBAC are not aware of any factors, including environmental, permitting, legal, title, taxation, socio-economic, marketing, political, or other relevant factors, which could materially affected the mineral resource estimate.

Mineral Processing and Metallurgical Testing

The long exploration history of this area, combined with recent metallurgical testwork performed by MBAC, along with the support of relevant research institutes in Brazil , suggests that the Araxá REO can be processed economically to produce high purity REO products.

MBAC has engaged in laboratory work to define a technological route for the rare earth elements recovery. These tests included alkaline digestion, hydrochloric acid leach, nitric acid leach, ammonium chloride fusion and sulphuric leach. The acid leach followed by salt precipitation returned the best recovery, averaging 92%.

MBAC is currently preparing to put in place a pilot plant to test this acid leaching route and, following that, a pilot plant will be utilized to analyze oxide separation using a solvent extraction technology.

Summary of the Project Economics

The PEA performed by VENMYN, Sandton, Republic of South Africa is preliminary in nature and includes inferred mineral resources that 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 PEA will be realized.

Products

The PEA forecasts initial production of 8,750 tonnes of individual REO per annum. This production will require 120,000 tonnes of feedstock and 110,000 tonnes of sulphuric acid. After five years the production is expected to double to 17,500 tonnes of individual REO per annum. Several bench scale experiments have demonstrated that the mineralization is refractory to physical concentration processes. Bench scale tests have shown that a high purity REO concentrate can be obtained by chemical processing, with a grade averaging 95% TREO. A recovery of 92% was used in this assessment, which has been achieved in bench scale experiments. Computational simulations have been completed for the separation of individual oxides by solvent extraction and it has shown that the separation is feasible. Based on the testing to-date, it is expected that high quality individual REO products can be produced (higher than 99% REO).

Basket Price

The Company based the basket price on a number of research analysts' forecasts for REO prices and took the average price for each REO. For the purpose of the PEA the REO prices adopted are approximately 60% of the current international market price (FOB China ). The Company is confident that based upon the analysts' REO price, the Project is sufficiently robust to proceed to a Prefeasibility Study. Niobium price was based on the current international market price.

Operating Costs

Operating costs for the Project were based on several lab tests. The cost changes mainly reflect variances in quantity of reagents, energy, mining costs, and freight. A 5% contingency was included in these estimates resulting in REO cost at site of US$10.50/kg for Phase 1 and US$9.60 and US$12.20 for Phases 2 and 3, respectively.

Capital Costs

Capital costs were based on a list of equipment which must be used for the production of REO and niobium, estimated costs associated with the construction of a sulphuric plant that will be constructed in order to supply the REO plant as well as estimated costs associated with a plant upgrade for future expansions. Total initial capital costs for the Project are estimated to be US$406.1 million, including US$105 million in contingencies given the early stage of the Project. An additional estimated US$214.5 million will be required for the sulphuric plant upgrade expected after the fifth year of operation.

NPV

Based on the assumptions outlined in the PEA, and summarized above, the preliminary financial model indicates robust Project economics with an after tax NPV of US $967 million . This figure does not include the costs for exploration and engineering development during 2011, 2012 and 2013. The Company will continue to explore the possibility of production of phosphate (P2O5) to generate additional returns for the Project.

Upcoming Milestones

The Company intends to complete a prefeasibility study for the Araxá Project in Q2 2013. A pilot plant is currently being built for testing and confirmation of the results achieved in the laboratory. The pilot plant testing is expected to be completed in Q2 2013.

Qualified Persons

The scientific and technical information in this press release has been reviewed and approved by each of Bradley Ackroyd (MAIG (CP)) of AMS and Andy Clay (MSAIMM, FAusIMM, FGSSA, MAIMA) Managing Director of Venmyn, a South African-based, independent mining and minerals management advisor. Each of Messrs. Ackroyd and Clay are qualified persons within the meaning of National Instrument 43-101.

About MBAC

MBAC is focused on becoming a significant integrated producer of phosphate and potash 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 . 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 exciting phosphate and potash 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.

Antenor Silva
Vice Chairman & Chief Executive Officer