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

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 |Tonnes|TREO|LREO|HREO|P2O5|Nb2O5|Al2O3|      Fe2O3  |
    |(% TREO)| (Mt) | %  |% * |% **| %  |  %  |  %  |        %    |
    |________|______|____|____|____|____|_____|_____|_____________|
    |                          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 La(2)O(3), Ce(2)O(3), Pr(2)O(3), Nd(2)O(3), Sm(2)O(3), Eu(2)O(3), Gd(2)O(3), Tb(2)O(3), Dy(2)O(3), Ho(2)O(3), Er(2)O(3), Tm(2)O(3), Yb(2)O(3), Lu(2)O(3) and Y(2)O(3)
*LREO (97.6% of TREO) includes La(2)O(3), Ce(2)O(3), Pr(2)O(3), Nd(2)O(3) and Sm(2)O(3)
**HREO + Y(2)O(3) (2.4% of TREO) includes Eu(2)O(3), Gd(2)O(3), Tb(2)O(3), Dy(2)O(3), Ho(2)O(3), Er(2)O(3), Tm(2)O(3), Yb(2)O(3), Lu(2)O(3) and Y(2)O(3)

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    |
    |____________________________________________________________|
    |         |              |          Suite of LREO's    |     |
    |Category |Cut-Off % TREO|_____________________________|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         |
    |__________________________________________________________________________________|
    |         |Cut-Off|                        Suite of HREO's (ppm)        |    |     |
    |         |   %   |_____________________________________________________|____|HREO |
    |         | TREO  |     |     |     |     |     |     |     |     |     |    |(ppm)|
    |Category |       |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

    Nb2O5basket 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 (P(2)O(5)) 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.


Source: PR Newswire