Photo by: MBAC Fertiliser Corp
TORONTO (miningweekly.com) – Brazil-focused fertiliser producer MBAC Fertilizer made strides in addressing its liquidity position after successfully reprofiling its debt obligations and securing an $18.2-million working capital loan.
The TSX-listed company had been struggling with lower-than-expected working capital levels, restricting it to buy consumables and spare parts, which caused interruptions, delays and operational inefficiencies.
These setbacks climaxed in a slower-than-expected ramp-up and reduced output at its flagship Itafós mine, resulting in the company being unable to declare commercial production during the second quarter as planned.
Under the terms of the agreement with facility provider Banco Santander Brasil, the loan would carry an interest rate comprised of the London Interbank Offered Rate plus 3.473% a year.
It would be secured by a second lien on the mineral rights and assets of the Itafós mine and by a first lien on the shares and mineral rights of subsidiary Araxá Mineração e Metalurgia, which held the company’s rare earths/phosphate Araxá project, in the state of Minas Gerais.
MBAC also disclosed on Tuesday that it had secured a 24-month debt extension from all its senior lenders. Under the terms of the final approval for the senior debt reprofiling, the company would be allowed to defer repaying the principal and interest until September 15, 2016, while the current maturity dates of the various loans would be extended.
This entailed that the first tranche of $149.2-million in project finance would now mature on November 15, 2020, rather than between November 2019 and March 2022; the second tranche of 20.7-million would mature on March 15, 2018, instead of September 2016, and working capital loans of $20-million would mature on July 15, 2018, instead of between October 2014 and March 2015.
Further, MBAC had also received access to debt service reserve accounts in the amount of about $1.1-million and a waiver from having to replenish these accounts until March 2016.
“These two accomplishments represent major steps toward addressing our liquidity challenges, the main objective of the strategic action plan we unveiled earlier this year,” president and CEO Cristiano Melcher said.
He added that MBAC’s main focus would be on continuing to evaluate all strategic options, including pursuing additional financing options, ramping up production, streamlining costs and positioning MBAC as the phosphate supplier of choice in Brazil’s agricultural heartland.
Despite the company’s TSX-listed stock trading up 6.82% on Wednesday at C$0.23 apiece, the stock had slid 85.53% since the start of the year, reflecting the operational difficulties.