MBAC reports 2012 results, provides corporate update and announces bought private placement

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TSX:MBC
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TORONTO , April 1, 2013 /CNW/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (TSX:MBC and OTCQX:MBCFF) announces highlights of its year-end results for the financial year ended December 31, 2012 , provides a general corporate update including an update on the Itafós Arraias Single Super Phosphate ("SSP") Project ("Itafós" or "Itafós Project"). The Company also announces that it has entered into an agreement with Canaccord Genuity Corp. ("Canaccord"), pursuant to which Canaccord, as underwriter, has agreed to purchase, on a bought private placement basis, 20,500,000 common shares of the Company (the "Common Shares") at a price of $2.20 per Common Share for gross proceeds of C$45,100,000 (the "Bought Private Placement"). The Corporation has granted Canaccord an option (the "Underwriter's Option") to purchase an additional 4,550,000 Common Shares at the offer price and on the same terms as the offering (see "Bought Private Placement" below).

The Company is today filing its Financial Statements, Management Discussion and Analysis ("MD&A") and Annual Information Form for the year ended December 31, 2012 , as well as an updated technical report for the Itafós Project entitled "Updated Technical Report Itafós Arraias SSP Project", dated and effective as at March 27, 2013 (the "Updated Itafós Technical Report"), on www.sedar.com.

Highlights for the year ended December 31, 2012 include:

• Achieved approximately 80% completion for the Itafós Project which has continued to be advanced since year end;
• Received the operating licenses for the mining operations at the Itafόs Project;
• Commenced ore extraction at the Itafόs Project;
• Completed a positive Pre-Feasibility Study ("PFS") for the Santana Phosphate Project;
• Completed a positive Preliminary Economic Assessment ("PEA") for the Araxá Project;
• Continued to advance manpower needs as the Company transitions to operations, hiring 85% of workforce necessary for the operation at the Itafós Project;
• Continued exploration and development on all projects;
• Invested $242 million in property plant and equipment and exploration activities; and
• Demonstrated continued access to capital by executing a loan with Banco Votorantim for $22 million .

Highlights Subsequent to Year End

• Completed the Updated Itafós Technical Report which provides:
  • 47% increase in proven and probable reserves, an increase in mine life to approximately 19 years, current project economics and other updates;
  • Total estimated capital costs of the Project of $323 million , which represents a 17% increase from the Company's previous estimate;
• Received operating licenses for the water dam, the tailings dam, pipelines and the beneficiation plant for the Itafós Project;
• The Company sold its interest in a non-material area of exploration ground 35 kilometres from its Santana Phosphate Project for a price of $10 million ; and
• Received a working capital loan from Banco Itaú BBA for $10 million .

ITAFÓS PROJECT UPDATE

Physical progress of the construction at the Itafόs Project to date is approximately 90% completed. Highlights of recent progress include:

• Beneficiation plant commissioning has commenced which is a critical path item for the start-up of operations;
• Mine construction has been completed and is operational;
• Approximately 225,000 tonnes of phosphate ore have been stockpiled with an average grade of 8% P2O5;
• Powerline has been completed and is operational;
• Water dam has reached the water level necessary for water supply to the plants;
• Water and tailings pipelines are being commissioned;
• All major equipment has been delivered to site;
• The General Manager for the Itafós Project has been appointed and now all key management personnel needed to operate the plants is in place.

The Company expects the Itafós Project to be fully licensed and in operation by the end of Q2 2013.

In February 2013 , senior management became aware of additional delays impacting the forecasted start-up date for the beneficiation plant. This led senior management to initiate a detailed investigation focusing on scope changes, cost to complete and timelines for the construction project. Based on this investigation, the Company estimates the current capital cost will now be $323.1 million , which represents an increase of $47.1 million or 17% from its latest estimate provided in the January 2013 prospectus. Management has concluded that the primary reasons for the additional estimated capital costs are as follows:

• Renegotiation with the primary electro-mechanical erection contractor caused increased amounts payable above originally established costs due to the extended timeline and significantly increased labour costs. Given the advanced stage of construction, management determined that the prudent course of action was to renegotiate the contract rather than to replace this key contractor, which would have generated further significant delays and cost increases.
• Poor engineering work and planning deficiencies, led the Company to retain additional engineering contractors to reassess engineering work for the Project. Following this re-assessment, management was informed that significant additional parts and supplies and scope changes were required for the completion of the Project.
• Numerous unexpected issues, delays and costs related to the logistics of moving the equipment to site as a result of poor port infrastructure and delays at customs. Although all major equipment required for start-up had been purchased and arrived in Brazil by early February 2013 , certain large equipment required special arrangements to be transported to site.
• In February 2013 , the civil works contractor was terminated and replaced due to poor performance. This change in contractors added to cost and time due to the demobilization of the former contractor and the mobilization of the new contractor.

The Company believes that the following factors will assist in mitigating the risk of further capital cost increases to completion of the construction project:

• All detailed engineering including scope changes has now been completed;
• All major equipment has now been delivered to the construction site;
• Since the renegotiation of the electro-mechanical contract, the Company has seen significant improvements in the pace of the electro-mechanical erection works;
• The Company has firm quotes and delivery dates for the parts and supplies required for completion of construction (such as pipes, cables, hoists and steel platforms); and
• The balance of work left is minimal given the Project is 90% completed.

Notwithstanding the Company's efforts and the mitigating factors above, there can be no guarantee that the Company will not face additional unforeseen delays or cost increases.

Given the advanced stage of the Itafós construction and in the importance of completing the Project on a timely and cost effective basis, the Board of Directors has appointed an Executive Committee whose role is to provide direct oversight of all aspects of the Itafós Project, including cash flow management and progress of construction. The Executive Committee will be composed of three independent directors Peter Marrone , Alexander Davidson and David Nierenberg , a newly appointed Director (see "Corporate Update" below). Peter Marrone will chair the Executive Committee. Also, Antenor Silva, Vice Chairman and CEO, will dedicate all his time and efforts to the completion and ramp-up of the Itafós Project.

SSP Market Update and Sales

Fertilizer product deliveries in the Company's target region have lagged year to date compared to last year due to unusually dry conditions experienced in the first quarter of 2013. Fertilizer product purchases in the target region are now expected to occur later in the year. Brazilian soybean production is forecast to hit record levels in 2013 leading the Company to believe the market for fertilizer will continue to strengthen over the next several months. As a result, the Company is expecting slightly lower SSP prices in 2013 but expects prices to rise into 2014 (please refer to the Itafós Updated Technical Report.)

The Company expects to reach nominal capacity by the end of the year. The Company expects to produce at full capacity starting in 2014.

The result of delays in the startup of operations and the sales season has led to an increase in working capital requirements which has been funded through internal resources and available credit facilities. With a delay in the season and various other factors the Company expects to sell 175,000 to 225,000 tonnes in 2013. Sales are expected to increase significantly towards full capacity in 2014. In March 2013 , the Company received its first orders for 35,000 tonnes of SSP which is expected to be delivered in July of 2013.

Project Economics

The Updated Itafós Technical Report includes updated resource and reserve estimates, production estimates, pricing assumptions, sales volume estimates, operating cost estimates and capital expenditure estimates. Based on the updated information, the Itafós Project is estimated to provide an NPV of $254.2 million , an Internal Rate of Return of 21% and a payback period of 4.5 years. The proven reserves have increased to 15.9 million tonnes and probable reserves have increased to 48.9 million tonnes representing a total of 47% increase from the previously published proven reserves of 13.0 million tonnes and probable reserves of 31.2 million tonnes. Based on this updated technical report, the Itafós Project has an expected mine life of approximately 19 years with an average ore grade 5.08% P2O5 and expected annual output of approximately 500,000 tonnes per year of SSP. The capex for the Itafós Project is now estimated at approximately $323.1 million .

The total amount of capital costs invested in the Itafós Project, on an accrual basis, as at December 31, 2012 was $262.4 million . In addition, borrowing costs of $10.6 million were capitalized to construction costs.

Funding Requirements

As a result of the recent construction capital costs review, and based on the Company's current cash balances, MBAC has determined that its current funding requirement in connection with its Itafós Project is estimated to be approximately $45 million . This figure includes capital costs, working capital and G&A required until the start of production, expected in late Q2 2013.

Bought Private Placement

The Company has entered into an agreement with Canaccord, pursuant to which the underwriter has agreed to purchase, on a bought private placement basis, 20,500,000 Common Shares of the Company at a price of $2.20 per Common Share for gross proceeds of C$45,100,000 which is expected to close on or around April 18, 2013 . The Corporation has granted Canaccord the Underwriter's Option to purchase an additional 4,550,000 Common Shares at the offer price and on the same terms as the offering, exercisable 48 hours prior to the closing date of the offering. If the Underwriter's Option is exercised in full, an additional C$10,010,000 will be raised pursuant to the Bought Private Placement, for total aggregate gross proceeds of C$55,110,000.

The Common Shares will be offered by way of the "accredited investor" and "minimum amount investment" exemptions under National Instrument 45-106 in all Canadian provinces and territories as agreed upon by the Company and Canaccord and offshore, and in the United States on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended. The funds are expected to be used for completion of the Itafós Project and for general corporate purposes. Completion of the private placement is subject to execution and delivery of standard documentation and receipt of all required regulatory approvals and consents, including the approval of the Toronto Stock Exchange. The shares issued under the above private placement will be subject to a four month hold period under applicable Canadian securities legislation.

The CEO and associates will participate in the amount of approximately C$5.5 million in the Bought Private Placement. The Board of Directors and other members of senior management have also agreed to participate in the amount of approximately C$4.0 million.

In addition, the Company is actively pursuing additional debt financing alternatives and the sale of non-core assets to ensure that any unforeseen contingencies are properly financed.

The Company is confident that it will be able to meet its funding requirements for the Itafós Project.

CORPORATE UPDATE

The Board of Directors is pleased to announce the appointment of David Nierenberg and Eduardo Ledsham to its Board of Directors, effective immediately.

David Nierenberg is the founder of The D3 Family Funds. He is a summa cum laude graduate of Yale College and a graduate of Yale Law School. He brings several complementary disciplines: lawyer, strategic management consultant, corporate director, asset allocator, and venture capitalist. David worked seven years at Bain & Company, a large consulting firm, where he was a partner. He has been a full time investor for 27 years, 10 as a venture capitalist, principally with Trinity Ventures, and 17 at D3. Currently, he serves on the Washington State Investment Board, which oversees public employee retirement funds; chairs the board investment committee for Whitman College; and serves on the boards of Electro Scientific Industries (ESIO) and RadiSys Corporation (RSYS), which are D3 portfolio companies. From 2008 - 2012 he chaired the advisory board of the Millstein Center for Corporate Governance and Performance at the Yale School of Management.

Eduardo Ledsham has over 28 years of experience in mineral exploration project development and in implementation of greenfield projects. Mr. Ledsham joined Vale in 1986, working initially on copper, gold, manganese and nickel exploration and development projects in Carajas, Brazil . From 2005 to 2008, he served as Exploration and Development Director; in 2008, he was appointed Director of Global Exploration and Project Development, Energy and Fertilizers; and, in May 2010 , he took on the role of Executive Director for Exploration, Energy and Project Implementation. Mr. Ledsham was a Board Member of Fosfertil S.A and was the Chairman of two energy companies, Vale Soluções em Energia and Vale Energia Limpa. He is currently the CEO of B&A Mineração Ltda., a Brazilian mining company which was created as a joint venture between AGN Participações, a Brazilian holding company whose main shareholder is Roger Agnelli , Vale's former CEO, and BTG Pactual, a Brazilian investment bank. Mr. Ledsham holds an undergraduate degree in Geology (Federal University of Minas Gerais), and a postgraduate degree in Valuation of Companies and Projects (Getulio Vargas Foundation). He also holds two MBAs (Dom Cabral Foundation, and IBMEC).

David is an entrepreneur who brings considerable experience in strategic oversight and efficiencies on capital projects. Eduardo has a very strong technical background and is very experienced in the management of mine development and in the fertilizer sector in Brazil .

The Company believes that the addition of the two new board members, the formation of the Executive Committee and the focus of the Vice-Chairman and Chief Executive Officer on the completion of the Itafόs Project will better align the Company with its objective of completing the Itafόs Project in a timely and cost efficient manner.

Carlos Guzmán, FAusIMM, RM (Chilean Mining Commission), of NCL, is the qualified person who has approved the scientific and technical information contained in this press release.

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

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 completion of Itafós Project within a timely and costly manner, that the Bought Deal will be closed on or around April 18, 2013 , the expectation that the Underwriter's Option will be exercised, the expectation that the funds of the offer will be used for completion of the Itafós project and for general corporate purposes. 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, completion of commissioning of the beneficiation plant at the Itafós Project, the expectation that Itafós will be fully licensed and in operation by the end of Q2 2013, the belief that the detailed engineering and scope changes made to the project are sufficient to ensure completion of the Itafós Project, the belief that there will be no further delays on the expected timeline for the completion of Itafós Project and start-up, the Company's forecasts related to capital expenditures, costs to complete, working capital and funding requirements to complete the Itafós Project and other funding requirements, the expectation that the Itafós Project will reach nominal capacity by the end of the year and will produce at full capacity starting in 2014, the expectation that the company will sell 175,000 to 225,000 tonnes in 2013 and that sales will increase towards full capacity in 2014, the expectation that product will be delivered in July 2013 , the expectation that the Bought Private Placement will close on April 18, 2013 , 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.