MBAC Provides Corporate Update, Announces Binding Debt Commitment and Reports Q2 2013 Results

TSX:MBC
OTCQX:MBCFF
Shares Outstanding:152,029,492
Fully Diluted:160,893,150

TORONTO, Aug. 14, 2013 /CNW/ - MBAC Fertilizer Corp. ("MBAC" or the "Company") (TSX:MBC and OTCQX:MBCFF) announces highlights of its quarterly results and provides a general corporate update including an update on its Itafós Arraias Single Super Phosphate ("SSP") Operations ("Itafós" or the "Itafós Operations").

The Company has entered into a binding commitment for unsecured loan facility financing with Banco Itaú BBA ("Itaú") for US$62.0 million (the "Itaú Loan Facilities"), principally for working capital to support the ramp-up of the Itafós Operations and general corporate purposes. The closing is expected to occur by September 1, 2013.

The Company has begun production of granulated SSP ("GSSP") with first delivery in progress. The Company has now transitioned from a development stage company to an integrated fertilizer producer.

The Financial Statements and Management Discussion and Analysis ("MD&A") for the quarter ended June 30, 2013 are available on www.sedar.com.

Highlights for the quarter ended June 30, 2013 include:

• Received the final operating license ("Licença de Operação") from the Tocantins State Environmental Agency to operate all plants, including the sulphuric acid plant, the SSP plant and the granulation plant at the Itafós Arraias SSP Operation;
• Raised net proceeds of US$48.1 million in a bought deal private placement;
• Invested US$44.9 million in property plant and equipment and exploration activities;
• Received orders of 50,000 tonnes of SSP during the quarter of which 15,000 tonnes has been prepaid; and
• Obtained approval for a working capital line of credit in the amount of approximately US$10.0 million, all of which has since been disbursed.

Highlights subsequent to quarter end:

• Produced first batch of GSSP meeting industry specifications with first delivery in progress;
• Entered into a binding commitment for Itaú Loan Facilities in the amount of US$62.0 million; and
• Executed an amendment to the WestLB credit facility agreement to defer repayment subject to certain conditions.

FINANCIAL RESULTS

MBAC was a pre-commercial stage company in Q2 2013, focused on the completion of construction of the production facility at its Itafós Arraias SSP Operation. As a result, the Company did not generate revenue during the period and incurred a net loss of US$17.2 million for the quarter primarily comprised of foreign exchange loss, general and administrative expenses and unrealized loss on a derivative instrument. The Company expects to generate positive cash flow from operations in the upcoming periods as it ramps up production towards its nominal capacity.

ITAFÓS ARRAIAS SSP OPERATION UPDATE

During the quarter, the Company received the final operating license to operate all plants, including the sulphuric acid plant, the SSP plant and the granulation plant. This represents a significant milestone as it is the final regulatory approval required to start operations as an integrated SSP producer.

The Company has produced GSSP with delivery to customers in progress. The Company will continue to refine the production processes in an effort to optimize efficiency of the operations in the ordinary course of the ramping-up of the operations. Among these optimization efforts, the Company is currently undertaking studies to evaluate options to produce a weak phosphoric acid for increasing the grade of the product by using its excess sulphuric acid capacity. The Company continues to be well positioned to produce 450,000 tonnes in 2014.

With the Company now in production of GSSP, focus is now on maximizing sales for this year and next year.

PROJECT UPDATES

While the Company's focus remains on the Itafós Operations, MBAC continues to advance its two active projects, the Santana Phosphate Project ("Santana") and the Araxá Rare Earth/Niobium/Phosphate Project ("Araxá"). The Company expects to complete the Definitive Feasibility Study for Santana in Q3 2013.

The Company is completing the pilot plant tests for the production of a rare earth concentrate at Araxá. The Company has been successfully able to produce 200 kilograms of 99% rare earth concentrate. The next steps will be to separate the concentrate into the specific rare earth oxides which is expected to start later this year.

CORPORATE UPDATE

As previously disclosed, the Executive Committee has undertaken a number of significant strategic initiatives to strengthen the financial flexibility of the Company by increasing the cash available to fund the ramp up of production at the Itafós Operations and pursue strategic opportunities. These initiatives included retaining financial advisors to review debt financing alternatives for the Company; and the possible sale of a minority interest in the Santana Project and the possible sale of part or all of the Araxá Project.

After completing a competitive process in which the Company received several term sheets, MBAC has entered into a binding commitment for the Itaú Loan Facilities totaling approximately US$62.0 million. Proceeds from the Itaú Loan Facilities will be used for, among other purposes, working capital to support the ramp-up of the Itafós Operations and general corporate purposes.

The commitment letter for the Itaú Loan Facilities includes (i) a loan facility for R$116.8 million (approximately US$51 million) with an interest rate of CDI + 8% per annum; and a (ii) a loan facility for US$11 million with an interest rate of 9% per annum. Both loans mature on April 15, 2019. The Itaú Loan Facilities will be guaranteed by MBAC and certain of its subsidiaries.

Upon closing of the Itaú Loan Facilities, the Company will issue an aggregate of 6,081,180 warrants to Itaú, with each warrant entitling the holder to purchase one common share of the Company at a price of $2.20 per share until April 15, 2019, subject to the approval of the Toronto Stock Exchange.

The Itaú Loan Facilities are expected to close on or before September 1, 2013 and subject to customary conditions, including the execution of definitive documentation.

CONFERENCE CALL

The Company will hold a conference call to discuss its 2013 second quarter financial results on Thursday, August 15, 2013 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 August 22, 2013. To access the archived conference call, please dial 1-855-859-2056 and enter the encore code: 29711947.

The corporate presentation and audio of the conference call will be available via webcast at: http://www.newswire.ca/en/webcast/detail/1206979/1323707. 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

About MBAC

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 Arraias SSP 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 and minor 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.

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 expectation of reaching full capacity at the Itafós Operations in 2014; the expectation of generating positive cash flow from operations in the upcoming periods as it ramps up production towards its nominal capacity; the completion of GSSP delivery; the expectation the Company will be able to strengthen its financial flexibility, the expectation that the Itaú Loan Facilities will close on or before September 1, 2013, the expectation of completing the Definitive Feasibility Study for the Santana Project in Q3, 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. 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 Company's achieving full capacity at the Itafós Operations in 2014; the Itaú Loan Facilities not closing on or before September 1, 2013, delivery of GSSP not being completed, the expectation to generate positive cash flow from operations in the upcoming periods; the expectation of completing the Definitive Feasibility Study for the Santana Project in Q3, the Company's goal of becoming a significant integrated producer of fertilizers, the realization of Itafós estimated capacity of 500,000 tonnes a year of SSP; 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.