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MBAC Fertilizer completes feasibility study for Itafos project in Brazil; report shows growth in M&I resources

Phosphate and potash explorer MBAC Fertilizer (TSX:MBC) has announced the completion of the NI 43-101 compliant Feasibility Study for its 100% owned Itafos phosphate project located near the city of Arraias, Tocantins in Brazil, which strongly supports its decision to proceed with the project, it said.

The mineral resource estimate for the Arraias property was updated with an estimated Near Mine Block regions deposit containing 58.8 million tonnes of measured and indicated mineral resources, averaging 5.01% P2O5 at a 2.8% P2O5 cut-off grade as of July 16, 2010.

The report also indicated that it is reasonable to assume that MBAC will experience additional exploration success in other areas with similar favourable lithology, the company said in a statement.

"We are extremely pleased that the report confirms the project will generate robust returns. The growth in measured and indicated resources and the improvement in grades over those reported in the most recent 43-101 report have increased the mine life to 15 years and result in a significant increase in the value of the Project," said president and CEO Antenor Silva.

With the increased resources, the company was able to optimize the mine plan and reduce the pre-stripping volume to 4.7 million tonnes, as well as reduce the stripping ratio to 1.85 for the first ten years, and increase the plant feed grade especially in the early years.

The current mine plan anticipates a significantly higher head feed grade (starting with an average 6.77% P2O5 in the first year) with a lower stripping ratio during the first few years.

The report supports an open pit mining operation, crushing of the ore on-site, grinding and flotation concentration of the phosphate ore.

The project is now estimated to produce on average 500,000 tonnes of Single Super Phosphate (SSP) annually.

The report details a total capital cost of US$195 million including G&A, start-up and reclamation, which is consistent with the initial capital expenditure estimate of US$189 million included in the April study. The initial rate of return calculated is 26.8%.

Separately, the company has also announced that it has received an indicative term sheet for a project financing facility of up to US$130 million from Banco Itau BBA S.A, a subsidiary of Itau Unibanco Group.

The loan, together with the company`s cash on hand and other available facilities, are expected to fund the projected capital expenditures for the project.

MBAC has also submitted an environmental impact assessment and report for the Itafos Project to the Tocantins State Environmental Agency, for which a public hearing is expected to be scheduled in September 2010. It expects to receive the construction license by December 2010.

Itafos is located in the municipality of Arraias Tocantins, in the southeast of Tocantins state, just a few kilometers away from Campos Belos, a town in the Goias state in central Brazil. The existing small-scale phosphate mining operation is based on high grade (+18% P2O5) mineralization.

MBAC, however, is currently focused on the development of a higher volume and much larger mining operation, which is expected to be in place by second quarter of 2012. At full capacity, the proposed beneficiation plant is expected to generate 330 ktpa of phosphate rock concentrate at 28% P2O5. The company remains committed to its mid-2012 production target.

MBAC is looking to become a large producer of phosphate and potash fertilizers in the Brazilian and Latin American markets.

In October 2008, MBAC acquired the Itafos phosphate mine and related infrastructure, located in central Brazil. Its portfolio includes a number of additional phosphate and potash projects, which are also located in Brazil.

The company was up 4.35% as of 3:45pm ET on Tuesday to $2.16 on the Toronto Stock Exchange.