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Press release from PR Newswire

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

Thursday, September 13, 2012

MBAC reports robust preliminary economic assessment for Araxá Rare Earth Oxide/Niobium/Phosphate deposit18:17 EDT Thursday, September 13, 2012 TORONTO, Sept. 13, 2012 /PRNewswire/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (TSX:MBC) (OTCQX: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: PROJECT HIGHLIGHTS PHASE 1 PHASE 2 PHASE 3 Operating years 2016 - 2020 2021 - 2023 2024 - 2056 Run of Mine (tonnes per year) 120,000 240,000 385,000 Ore Feed Grade (% TREO) 7.96 7.96 4.96 REO Production (tonnes per year) 8,750 17,500 17,500 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. Table 1 - Araxá Project Mineral Resource Grade Tonnage Report - 1st June 2012 (Block Model - 10mE X 10mN X 2mRL) - Ordinary Kriging (OK) Cut-Off (% TREO) Tonnes (Mt) TREO % LREO % * HREO % ** P2O5 % Nb2O5 % Al2O3 % Fe2O3 % Measured Resource Category 2 1.33 5.62 5.48 0.15 7.89 1.25 3.31 34.23 Indicated Resource Category 2 5.02 4.85 4.73 0.12 8.54 0.96 5.68 32.76 Measured and Indicated Mineral Resource (2% Cut-Off TREO) *** 2 6.34 5.01 4.88 0.13 8.40 1.02 5.19 33.06 Inferred Mineral Resource (2% Cut-Off TREO) *** 2 21.94 3.99 3.88 0.11 7.86 0.64 4.31 29.59 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. Table 2 Suite of LREO Mineral Resource @2% TREO cut-off Category Cut-Off % TREO Suite of LREO's LREO La2O3 Ce2O3 Pr2O3 Nd2O3 Sm2O3 Measured 2.0 1.53% 2.81% 0.26% 0.79% 0.08% 5.48% Indicated 2.0 1.35% 2.40% 0.22% 0.67% 0.07% 4.73% Inferred 2.0 1.12% 1.96% 0.18% 0.55% 0.06% 3.88% Mineral resources are not mineral reserves and do not have demonstrated economic viability Appropriate rounding has been applied to the table Table 3 Suite of HREO Mineral Resource @2% TREO cut-off Category Cut-Off % TREO Suite of HREO's (ppm)   HREO (ppm) Eu2o3 Gd2o3 Tb4o7 Dy2o3 Ho2o3 Er2o3 Tm2o3 Yb2o3 Lu2o3 Y2o3 Measured 2.0 182 371 38 153 22 44 3 23 1 622 1463 Indicated 2.0 158 322 33 129 18 36 2 18 1 502 1217 Inferred 2.0 135 275 29 117 16 32 2 16 0 459 1080 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. The PEA indicates that the Project is expected to generate robust returns.         NPV (after tax) US$ (millions) 967 IRR   30%     The assumptions for the economic analysis are as follows:          Total Capex US$ (millions) 620.53 Capex Phase 1 US$ (millions) 406.05 Capex Phase 2 & 3 US$ (millions) 214.48       Selling Price REO Basket Price US$/kg 29.19 Nb2O5 basket price US$/kg 50.00 Cost REO production cost     Phase 1 US$/kg 10.50 Phase 2 US$/kg 9.60 Phase 3 US$/kg 12.16 Nb2O5 US$/kg 10.00 WACC 10% (BRL/USD = 2.00)       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 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 strategy, objectives and goals for the Araxá Project, including those related to testwork and confirming results from work performed to-date, the realization of the expected economics of the Project and the expected completion of a prefeasibility study for 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, the confirmation of testwork to-date, meeting the various expected cost estimates, completing a prefeasibility study, successfully negotiating with third parties to develop the Nb-REE area of the Project; realizing the estimated mineral resources at the project and the additional of new mineral resources; as well as those factors disclosed in the Company's current Annual Information Form and Management's Discussion and Analysis, as well as other current 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.For further information: <p> Steve Burleton, Vice President, Corporate Development, at 416-367-2200, <a href="mailto:investor@mbacfert.com">investor@mbacfert.com</a> or visit our website at: <a href="http://www.mbacfert.com">www.mbacfert.com</a> </p>