Stephen Burleton, VP of Corporate Development for MBAC Fertilizer has a lot to be optimistic about. After just two years in the business, MBAC is ready to bring phosphate and potash to market in Brazil during 2012.
Burleton brings a tremendous amount of experience to MBAC. He said, “I've been in the finance business for about 21 years as an investment banker. I left that business to join this company as a start up two and a half years ago from nothing. We've been able to develop it into a project that has three very legitimate projects and a couple more that we are looking at right now.”
One of the things that Burleton is most excited about is the location of their current project, Itafos. He said, “We are excited about the location in Brazil. When you are looking at phosphate and potash there is probably no better opportunity than in Brazil right now. They import most of their fertilizer.” Because they import, there is an opportunity for MBAC to profit. Said Burleton, “There is a great need for domestic supply, which we are there to help with.”
Itafos is not the only project that MBAC is working on. Burleton said, “When you look at the projects, we've got one project that is fully funded and ready to be in production by the end of the year. We de-risked it completely, over the two years. It is going to be producing about half a million tons of fertilizer starting in September of 2012, which is when we plan to ramp it up.” MBAC has two other projects they are currently working on. “We have two other really exciting projects; one is a phosphate project in the northern part of Brazil, called Santana. That is probably one of the highest grade phosphate deposits in Brazil right now. We have a new project, the Araxá project, in southern Brazil, which started off as a phosphate project but we discovered there is a very high-grade niobium rare earth deposit sitting above it.
We put out our first 43-101 on that and the grades are 8.5%-8.6% to a rare earth oxide which would place it as one of the highest grade mines in the world. It is open-pit, near surface, so we don't have to deal with expensive mine digging down. So we've got these three projects, one of them will be up and running this year, giving us significant cash flow, and we have two more coming on in the next two or three years.”
In terms of the rare earth at the Araxá project, it is primarily light. Said Burleton, “We have about 3% heavies, but we have a lot of neodymium, which people are looking for. It is a very interesting mix, but is it primarily light at this point.”
What might lead investors to be interested in MBAC? Burleton said, “First and foremost, this is a growth story. This isn't just about one project; it is about a number of projects that we are building here. Unlike a lot of the other developers in the fertilizer space, we will have cash flow at the end of this year. We funded the Itafos project, so we de-risked it.” MBAC has put a significant amount of money into the Itafos project. Said Burleton, “It will be about a $250 million dollar investment – totally funded at this point. You look at the upside from the other two projects which will continue to grow. When you look at this from an evaluation perspective, right now our market cap is about $280 million dollars. We've got an NAV on the first project at $400 million. It will be generating cash of anywhere from $70 to $100 million dollars, depending on where the price of fertilizer is starting next year. We put out a preliminary economic assessment on Santana. That shows an NAV of $400 million dollars as well. We want to do a PEA on Araxá which should be coming up in the next couple of months. In our estimation, it will be even higher than the other two. When you total all of those NAV's with the market cap and the near term market play, I think we are severely undervalued.”
Just like any new company, MBAC faces challenges. Said Burleton, “From a company perspective I think things are well in place. We face the typical challenges when you have a project. We have an experienced management team who has built a bunch of these projects before and put them in place.” Getting the projects up and running doesn't cause Burleton to lose sleep. He said, “For us, I don't think that is as big a challenge. It is getting the story out there and getting recognized. Our investor base is significantly institutional. We have a very small retail base right now. I think we want to get more retail investors involved and get them involved with the story.” Even with additional retail investors, Burleton sees a special place for the institutions. He said, “Our institutional shareholders are great. They are long-term, supportive people who have participated in all of the offerings, but you don't see a lot of trade off of those. We have to continue to grow the story.”
For investors who are interested in MBAC, Burleton sees an upside. He said, “We have a company with near term cash flow, fully financed, so we have de-risked it. We have two other projects that in three or four year’s time – they will see those projects as being more significant than our original project. The upside potential to these things is fantastic. It is very exciting to think that I could be talking to you in 2015 and we could have our third project up and starting to run up. I think that is quite a lot for a small little company that we started two years ago.”
MBAC Fertilizer Corp.
120 Adelaide Street West