TORONTO (miningweekly.com) – Toronto-listed phosphate and potash producer MBAC Fertilizer on Friday said it had received the final operating licence from the Tocantins State Environmental Agency to produce phosphate at its large Itafós Arraias project, in Brazil.

The licence would allow the company to operate all plants, including the sulphuric acid plant, the single superphosphate (SSP) plant and the granulation plant, with the first sales expected in July, while presales were currently building.

The company’s TSX-listed stock had rallied back from lows in recent weeks, despite trading well below its 52-week high of C$3.94, when it changed hands at C$2.02 apiece on Friday.

BMO Capital Markets analyst Joel Jackson said in a note to clients that investors were not likely to give MBAC much benefit of the doubt until phosphate deliveries had started on time – which appeared imminent – and the company had ramped up quickly with no further equity issues.

“We believe patient investors could be rewarded considering current share price levels,” he said.

Jackson said the announcement was potentially positive and he maintained his “outperform” rating and a C$3 share price target.

Tocantins state governor Wilson Siqueira Campos handed the operating licence to MBAC during an official ceremony held in Palmas, Tocantins, on Friday morning.

MBAC’s Itafós operation is the first large-scale fertiliser producer in the agricultural Cerrado area and the operation was expected to bring significant benefits for local farmers by supplying quality fertiliser with reduced logistics costs, as well as benefits to the community it serves with the attendant additional jobs, social programmes and infrastructure.

MBAC expected to sell between 175 000 t and 225 000 t of SSP this year at $280/t. The company expected to reach full capacity at Itafós in 2014 to produce 330 000 t of phosphate rock concentrate grading 28% phosphate, which would be mixed with sulphuric acid and reprocessed to produce 500 000 t/y of SSP. MBAC expected SSP prices to rise to $325/t from 2014 onwards.

The $323.1-million project, which suffered from a 17% or $47.1-million cost blowout earlier this year, after an earlier $18-million cost overrun, held compliant reserves of 64.8-million tonnes grading 5.08% phosphate.

The openpit operation has a 19-year life, a net present value of $254.2-million and a 21% internal rate of return when using a 10% discount. Payback was expected in 4.5 years.