Sandwell Mining Ltd.

October 02, 2009 14:46 ET

Sandwell Mining Ltd. to Acquire MBAC Opportunities & Financing Inc.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 2, 2009) -


Blair Murdoch, President and CEO of Sandwell Mining Ltd. ("Sandwell" or the "Company") (NEX:SDM.H) is very pleased to announce that Sandwell has agreed to acquire (the "Transaction") all of the issued and outstanding shares of MBAC Opportunities & Financing Inc. ("MBAC"), subject to completion of satisfactory technical and legal due diligence, receipt of all requisite regulatory and shareholder approvals, and execution of final documentation. MBAC is a Canadian private company that is focused on becoming a significant integrated producer of phosphate and potash fertilizer in the Brazilian market.

Transaction Terms

Sandwell and MBAC have executed a Letter of Intent ("LOI") dated October 1, 2009 which outlines the terms of the Transaction. By way of amalgamation or other form of arrangement, Sandwell will acquire all of the issued and outstanding shares of MBAC, including those shares of MBAC issuable immediately prior to completion of the Transaction upon exercise of (i) outstanding special warrants of MBAC, and (ii) subscription receipts of MBAC to be issued as discussed below by issuing 62.5 Sandwell shares in exchange for every MBAC common share held. Upon completion of the Transaction, MBAC will be a wholly-owned subsidiary of Sandwell. Following completion of the Transaction, and subject to shareholder approval, Sandwell intends to change its name to MBAC Fertilizer Corp and will consolidate its issued and outstanding shares on the basis of one post consolidation share for every 15 pre-consolidation shares held.

About MBAC

MBAC is a Canadian private company that is focused on becoming a significant integrated producer of phosphate and potash fertilizer in the Brazilian market. In October 2008, MBAC indirectly acquired all of the quotas of Itafos Mineracao Ltda ("Itafos"), which holds a 100% interest in the Itafos phosphate mine and related infrastructure (the "Campos Belos Project"), for approximately US$35 million paid in cash and shares of MBAC. MBAC has also recently expanded its property portfolio in Brazil with the acquisition of two potash exploration projects and one additional phosphate exploration project. MBAC is continuing to search for additional fertilizer opportunities in the Brazilian and other Latin-American markets. Strong agricultural fundamentals in Latin-America combined with unique opportunities in Brazil are expected to provide attractive growth opportunities for MBAC.

Antenor F. Silva Jr., President and CEO of MBAC stated: "We are very pleased to be undertaking this Transaction with Sandwell which will create a new, publicly-traded, integrated fertilizer company. Subject to completing the concurrent financing discussed below and closing the Transaction, MBAC will be a well financed phosphate producer and emerging potash developer with approximately $95 million in cash and an experienced management team in place to facilitate our growth strategy in Brazil."

Campos Belos Project Operations

MBAC's initial and immediate focus will be the operation and continued development of its Campos Belos Project located approximately 400 km north of Brasilia, Brazil. The Campos Belos Project is comprised of 54 mineral rights covering 93,519 hectares of promising phosphate concessions. It is MBAC's intention to expand its mining operations at Campos Belos and ultimately build-out an integrated fertilizer company producing value-added fertilizers such as Single Super Phosphate ("SSP").

The Campos Belos Project is located in the Cerrado region of Brazil where the soils are naturally poor in phosphate and potash. As one of the few phosphate mines in the area, the location of the Campos Belos Project provides a competitive advantage in MBAC's target markets in the central and north-east regions of Brazil due to the lower transportation costs relative to MBAC's competitors located primarily in southern Brazil. This region is experiencing high growth due to the vast amount of arable land that is available for agricultural purposes, which will support the growth of the phosphate operations.

Mining and processing of highly soluble phosphate rock (24% phosphorus ("P2O5") content) is currently underway at the Campos Belos Project for direct application in local markets. In 2007 and 2008, Itafos sold approximately 50,000 tonnes and 70,000 tonnes of phosphate rock, respectively. In order to maximize near term cash flow, improvements are currently being made to increase the production of P2O5 to 100,000 tonnes per year of phosphate rock. Over the next couple of years, the mining of a lower grade ore (6% P2O5) will be concentrated to 29%-30% P2O5 and used in the production of SSP. MBAC is evaluating the expansion of capacity of the facilities to 330,000 tonnes per year of phosphate concentrate facilitating the production of approximately 550,000 tonnes per year of SSP for sale to local markets by the second half of 2012.

MBAC expects to spend up to US$200 million over the next two (2) years to upgrade the Campos Belos Project and to build the required infrastructure needed to produce SSP. MBAC is targeting commercial production of SSP to begin in the first quarter of 2012, which is expected to significantly increase operating cash flows.

Campos Belos Project Mineral Resource Estimate

A preliminary resource estimate for the Campos Belos Project was conducted by MCB Servicos e Mineracao Ltda of Santa Amelia, Brazil for four (4) main targets: Coite, Mateus, Juscelio and Sao Bento, all in the Near Mine Block located between the cities of Campos Belos, in Goias State and Novo Alegre, in Tocantins State, Brazil. Total indicated resources of 7,077,000 tons and total inferred resources of 129,624,000 tons were estimated with grading of 5.71% P2O5 (see table below). No detailed resource estimates have been made for the Regional Mine Block which is at an earlier stage of exploration.

Near Mine Block Mineral Resource Estimate(i)

Indicated Mineral Resource Inferred Mineral Resource
Target Tons (x1000) P205 (%) Tons (x1000) P205 (%)
Coite 1,720 7.7 2,403 5.71
Mateus 1,093 4.74 5,306 5.71
Juscelino 2,740 4.92 23,707 5.71
Sao Bento 1,524 5.57 - -
Domingos - - 26,663 5.71
Canabrava - - 17,860 5.71
Cabecuda - - 53,686 5.71
TOTAL 7,077 5.71 129,624 5.71

(i) Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability.
(i) Cut-off grade of 3.5% of P2O5

The preliminary mineral resource estimate for the Near Mine Block was prepared by Rogerio Moreno, (AusIMM), Principle Geologist, MCB Servicos e Mineracao Ltda of Santa Amelia, Brazil. The resource estimate was prepared in accordance with requirements of National Instrument 43-101 ("NI 43-101") of the Canadian Securities regulators.

A total of 7,349 metres of HQ diamond drilling was completed in 223 drill holes on the Near Mine Block. A 3D mineralization model was constructed for each target using a cut-off grade of 2.0% P205 to constrain the samples to generate a total of 928 composites with 2.5 m length. The method of interpolation used was Inverse Squared Distance. Based on preliminary processing tests, resources contained inside the mineralized bodies with a cut off of 3.5% P2O5 were considered Indicated Mineral Resources.

Inferred Mineral Resources were estimated considering a reproduction of the phosphate-bearing siltstone geological features from the drilled area to the rest of the phosphate-bearing siltstone on the Near Mine Block.

Aneba Potash and Apui Phosphate Projects, Brazil

MBAC has acquired the option to earn up to a 100% interest in the Aneba Potash Project and Apui Phosphate Project (the "Projects") from Redstone Resources Ltd. ("Redstone") (ASX:RDS). MBAC currently holds a 35% undivided interest in the Projects and has the right to earn up to a further 40% (the "Additional Interests") in either or both of the Projects by funding exploration of up to US$6 million plus all land taxes necessary to keep the Projects in good standing over a four (4) year period (US$1 million per year plus applicable land taxes for the Aneba Project, and/or US$500,000 per year plus applicable land taxes for the Apui Project). After earning a 75% interest in a Project and provided it has delivered to Redstone a bankable feasibility study for that Project, MBAC will have the right to exercise the option to acquire the remaining interest in such Project for consideration of US$15 million in cash or $1.5 million in MBAC shares.

The Apui Phosphate Project is located in the Amazon State and covers all of the Jatuarana basin, which was identified as having significant phosphate mineralization by the Brazilian Geological Survey in the 1980's. The Apui Phosphate Project comprises 17 tenements covering approximately 180,000 hectares. Widespread phosphate mineralization was indicated from reconnaissance exploration.

The Aneba Potash Project is located in the Amazon basin immediately north of two (2) world class potash deposits (Arari and Fazendinha) owned and controlled by Petrobras SA, Brazil's largest energy company. Potash occurs within salt beds in the basin at depths of 950 m to 1050 m with the Arari deposit hosting 659 Mt grading 17.7% KCl and the Fazendinha deposit hosting 520 Mt grading 28.8% KCl (Redstone News Release dated September 11, 2009). The Aneba Potash Project is comprised of 27 exploration leases covering approximately 270,000 hectares and six (6) pending applications for exploration licenses.

Offshore Potash Project

Brazil currently imports approximately 90% of its potash consumption annually and the amount of potash consumed is expected to grow by 6% per annum through 2025 according to Associacao Nacional para Difusao de Adubos ("ANDA").

MBAC has obtained exploration permits for potash off the coast of Brazil. These exploration permits cover close to three (3) million hectares spread over three (3) primary groups. MBAC has access to exploration results from exploration programs conducted by Petrobras in its search for oil and gas off the coast of Brazil, which will reduce the time and cost of MBAC's exploration for potash. Initial examination of some of this data confirms the existence of potash beneath the ocean floor. MBAC is currently in the process of working with consultants to analyze the technical aspects of solution mining the deposits under water using similar techniques to those used in drilling for oil and gas under water. MBAC is also working with engineering companies to determine the feasibility of partially processing the ore off-shore on a barge as a way of reducing costs. Preliminary feedback on both fronts has been very positive to date.

Private Placement Financing

Concurrent with the Transaction, MBAC plans to undertake a brokered private placement financing for a minimum of $60 million. The offering will be in the form of subscription receipts, which will be exchanged for common shares of the Company upon completion of the Transaction. The proceeds of the private placement will be used to fund a portion of the Campos Belos Project expansion as well as potash and phosphate exploration. Prior to this financing and following the share consolidation mentioned above, the Company will have approximately 59.0 million shares outstanding, fully diluted. Subject to the completion of the above noted financing, and post closing of the Transaction, the Company will have approximately $95 million in cash, including approximately $40 million that MBAC currently has available in its treasury.

New Management, Board of Directors, and Name Change

Concurrent with the closing of the Transaction, current Sandwell management and directors, Edward Farrauto, Blair Murdoch and Ryan King will resign from the Board of Directors and as officers of the Company. Following closing of the Transaction, the board of directors will consist of up to eight (8) directors, each of which will be a nominee of MBAC and the new senior management team will consist of Antenor Silva, Anthony Cina, CA, Carlos Braga, Luiz Bizzi and Steve Burleton, CFA. A brief overview of the senior management team follows.

Antenor F. Silva Junior; President and CEO. Antenor recently retired from a very successful career at Yamana Gold Inc. where he was President and Chief Operating Officer. Antenor has over 40 years of experience in the mining and chemical industries having worked in various roles including executive management, operations, R&D, engineering and construction. He is known as one of the pioneers in R&D for metallurgy and engineering for mining projects in Brazil. Antenor also helped to develop an innovative metallurgical process that permitted the concentration of lower grade phosphate rock into a high grade concentrate. This process has led to the highly profitable development and growth of the phosphate fertilizer production in Brazil. Antenor holds a B.Sc. in Mining Engineering from Universidade de Sao Paulo.

Anthony Cina, CA; Vice President, Finance and CFO. Anthony is a Chartered Accountant and has practiced public accounting for the past 20 years, most recently as managing partner of a public accounting firm providing audit, tax and business advisory services. Anthony's practice focused on providing strategic planning, financing solutions and tax structure and planning opportunities to a wide array of clients, both nationally and internationally.

Carlos Braga, MBA; Vice President, Operations. Carlos is a Mining Engineer and holds an MBA from Cornell University. He has significant experience in Brazilian mining, fertilizer and strategy consulting sectors. Before joining MBAC, Carlos worked at A.T. Kearney, managing strategic consulting projects at various industries in Latin America. Prior to that, Carlos worked at a large mining & metals company with over $1.5 billion in revenues. Carlos also worked for Fosfertil, managing operations in the mining and fertilizer industries.

Luiz Bizzi, Ph.D, MBA; Vice President, Exploration. Luiz has over 20 years experience in mineral exploration in South America. Prior to joining MBAC, Luiz was responsible for minerals exploration and business development in South America for BHP Billiton. Luiz holds a Geology (Hons) degree from Universidade de Brasilia, a Ph.D. in Geological Sciences from the University of Cape Town, RSA and an MBA from Fundacao Getulio Vargas.

Steve Burleton, CFA, MBA; Vice President, Corporate Development. Steve has over 18 years of experience in the Canadian investment banking industry having dealt with companies in mining, industrial and consumer products. Most recently he was responsible for the agricultural sector coverage with a leading Canadian boutique investment bank.

Technical and Scientific Information

The preparation of the technical and scientific content of this news release was supervised and approved of by Rogerio Moreno, Principal Geologist with MCB Servicos e Mineracao Ltda. Mr. Moreno is a professional geologist registered with the Australian Institute of Mining and Metalurgy (AusIMM) and is a Qualified Person (QP) as defined by NI 43-101.


Completion of the Transaction is subject to a number of conditions, including without limitation; completion of satisfactory technical and legal due diligence including a project site visit, and TSX Venture Exchange (the "TSXV") and MBAC and Sandwell shareholders' approval. The Transaction cannot close until the required approvals are obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared by Sandwell in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Sandwell Mining Ltd. should be considered highly speculative.

Cautionary Statement Regarding Forward-Looking Information

This press release contains "forward-looking information" within the meaning of applicable Canadian legislation, concerning the business, operations and financial performance and condition of MBAC. Forward-looking information includes, but is not limited to statements with respect to the anticipated dilution of shareholders of Sandwell upon completion of the Transaction; statements with respect to anticipated developments in MBAC's operations in future periods; planned exploration and development activities; the adequacy of MBAC's financial resources and other events or conditions that may occur in the future; estimated production; the ability of MBAC to continue to create value for its shareholders; the future price of raw materials and phosphate; the estimation of mineral resources; the realization of mineral resource estimates; the timing and amount of estimated future production; costs of production; costs and timing of completion of upgrades at the Campos Belos Project to build the sulphuric acid and granulation plants needed to produce SSP; capital expenditures; permitting time lines and permitting, mining or processing issues; currency exchange rate fluctuations; government regulation of mining operations; information concerning the interpretation of drill results; success of exploration activities; environmental risks; unanticipated reclamation expenses; title disputes or claims; and limitations on insurance coverage. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled estimates", "forecasts", "intends", "anticipates", "does not anticipate", or "believes", or variations of such words and phrases or statement that certain actions, events or results "may", "could", "would", "might", "will" or "will be taken", "occur", or "be achieved".
Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made, and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of MBAC to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: unexpected events during construction, expansion and operation; variations in grade and tonnes mined; delay or failure to receive board or government approvals; timing and availability of external financing on acceptable terms; risks related to international operations; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of commodities; possible variations in resource, grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; political unrest and insurrection; acts of terrorism; accidents, labour disputes and other risks of the mining industry; delays in the completion of development or construction activities, as well as those factors discussed herein. Although management of MBAC has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. MBAC does not undertake to update any forward-looking statements that are incorporated herein, except in accordance with applicable securities laws.

Neither MBAC nor Sandwell has completed a feasibility study to support any improvements or upgrades at the Campos Belos Project. It is uncertain at this time whether any upgrades or improvements will be found to be economical.

Information Relating to the United States

This press release does not constitute an offer of securities for sale in the United States. The securities being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements.

The TSXV has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Sandwell Mining Ltd.
    Blair Murdoch
    President & CEO