Itafos Reports Q1 2020 Financial Results and Operational Highlights
ITAFOS REPORTS Q1 2020 FINANCIAL RESULTS AND OPERATIONAL HIGHLIGHTS
TORONTO, ON – May 28, 2020 – Itafos (TSX-V: IFOS) (the “Company”) reported today its Q1 2020
financial results and operational h ighlights. The Company’s fin ancial statements and management’s
discussion and analysis for the th ree months ended March 31, 20 20 are available under the
Company’s profile at www.sedar.com and on the Company’s website at www.itafos.com. All dollar
values are in thousands of US Dollars except as otherwise noted.
Overall Highlights
For the three months ended March 31, 2020, the Company’s financial highlights were as follows:
generated adjusted EBITDA of $ (186), representing a 109% decrease year-over-year primarily
due to significant and continued downward pressure on diammonium phosphate (“DAP”) New
Orleans (“NOLA”) prices to which MAP sales prices are linked;
incurred net loss of $18,289, r epresenting a 37% increase year -over-year primarily due to
significant and continued downward pressure on DAP NOLA prices to which MAP sales prices
are linked, higher depreciation and depletion at Itafos Conda and higher foreign exchange loss
due to depreciation of the Brazilian Real against the US Dollar;
issued 5,000,000 shares to lenders of the secured term credit facility (the “ Facility”) in
exchange for, among other things, eliminating additional interest of 1% per annum payable in
cash for each quarter that the Company’s consolidated secured l everage ratio is equal to or
greater than 4.00:1.00 at the end of such quarter;
drew an additional $585 under the initial tranche of the secur ed working capital facility (the
“Revolving Facility ”) at Itafos Conda with an additional tranche of $10,000 remain ing
available to be committed and drawn by Itafos Conda subject to agreement on certain terms
and conditions; and
advanced aggressive corporate- wide cost savings and deferral of spending initiatives.
For the three months ended March 31, 2020, the Company’s business highlights were as follows:
continued strong operational performance at Itafos Conda with overall production volumes of
138,896t, representing largely consistent performance year-over-year;
generated adjusted EBITDA of $8,295 at Itafos Conda, represent ing a 28% decrease year-
over-year primarily due to significant and continued downward pressure on DAP NOLA prices
to which MAP sales prices are linked;
incurred net income of $955 a t Itafos Conda, representing a 82% decrease year-over-year
primarily due to higher depreciation and depletion and significant and continued downward
pressure on DAP NOLA prices to which MAP sales prices are linked;
demonstrated sustained environm ental, health and safety excell ence at Itafos Conda and
Itafos Arraias including no reportable injuries or environmental releases;
implemented corporate-wide risk mitigation measures to address potential impacts to
employees, contractors and operations as a result of the novel strain of coronavirus (“COVID-
19”) resulting in no confirmed ca ses recorded amongst employees a nd contractors and no
material impact to operations;
advanced activities related to extending Itafos Conda’s mine l ife through permitting and
development activities at Husky 1/North Dry Ridge (“H1/NDR”), including securing support for
the project by the Idaho legislature via House Joint Memorial #11 as well as additional letters
of support from local and state officials;
advanced activities related to optimizing Itafos Conda’s EBITDA generation potential, including
completing the micronutrient addition to granulation project an d advancing the zinc
micronutrient product development, by-product recovery anhydrou s hydrogen fluoride and
precipitated silica (“AHF/PS”) initiatives and on-site ammonia production project;
safely completed the idling of Itafos Arraias following best p ractices including completion of
associated employee and contractor terminations and monetization of remaining inventory and
raw materials to partially offset costs associated with the idling;
completed third party reviews of the restart requirements asso ciated with Itafos Arraias’ mine
and beneficiation plant and secured important long-term tax incentives for Itafos Arraias; and
advanced the development of Itafos Farim including updating th e in-pit geotechnical report,
selecting the preferred mining contractor and completing third party reviews of the mine
dewatering design and flood study.
For the three months ended March 31, 2020, the Company’s other highlights were as follows:
announced the appointment of Dr . Mhamed Ibnabdeljalil as Chief Executive Officer;
announced the appointment of Anth ony Cina as Chairman of the C ompany’s Board of
Directors;
announced the appointment of Ro ry O’Neill and Ricardo De Armas to the Company’s Board
of Directors, as designated by CLF;
issued 1,900,412 shares (net o f 400,182 shares withheld to pay applicable taxes) due to
vesting under the Company’s restricted share unit plan (the “RSU Plan”);
cash settled 100,928 RSUs fo r $39 due to vesting under the Company’s RSU Plan; and
granted 5,009,348 RSUs under t he Company’s RSU Plan, including 621,279 RSUs granted to
directors, 2,081,980 RSUs gr anted to management and 2,306,089 R SUs granted to
employees and contractors.
Subsequent to the three months ended March 31, 2020, the Company issued 11,347 shares (net of
3,653 shares withheld to pay applicable taxes) due to vesting under its RSU Plan.
Financial Highlights
For the three months ended Ma rch 31, 2020 and 2019, the Company ’s financial highlights were as
follows:
(unaudited in thousands of US Dollars For the three months ended March 31,
except for per share amounts) 2020 2019
Revenues $ 75,361 $ 73,178
Operating loss (12,243 ) (6,010)
Net loss (18,289 ) (13,331)
Adjusted EBITDA (186 ) 2,146
Maintenance capex $ 1,919 $ 5,186
Growth capex 1,406 3,016
Basic loss per share $ (0.10 ) $ (0.09)
Fully diluted loss per share $ (0.10 ) $ (0.09)
For the three months ended March 31, 2020 and 2019, the Company’s financial highlights were
explained as follows:
revenues were up year-over-year primarily due to higher sales volumes at Itafos Conda, which
was partially offset by signific ant and continued downward pres sure on DAP NOLA prices to
which MAP sales prices are linked;
net loss was up year-over-year primarily due to significant an d continued downward pressure
on DAP NOLA prices to which MAP sales prices are linked, higher depreciation and depletion
at Itafos Conda and higher foreign exchange loss due to depreci ation of the Brazilian Real
against the US Dollar;
adjusted EBITDA was down year-over-year primarily due to signi ficant and continued
downward pressure on DAP NOLA prices to which MAP sales prices are linked;
maintenance capex was down year-over-year primarily due to the idling of Itafos Arraias; and
growth capex was down year-ove r-year primarily due to reduced spend at Itafos Farim.
As at March 31, 2020 and 2019, the Company’s financial highlights were as follows:
(unaudited in thousands of US Dollars)
March 31,
2020
December 31,
2019
Total assets $ 461,499 $ 510,764
Total liabilities 335,061 368,505
Net debt 199,264 182,201
Adjusted net debt 152,130 136,900
Total equity 126,438 142,259
As at March 31, 2020 and December 31, 2019, the Company’s financial highlights were explained as
follows:
total assets were down period-over-period primarily due to low er inventory at Itafos Conda and
Itafos Arraias and higher depreciation and depletion at Itafos Conda, which was partially offset
by fixed assets additions primarily at Itafos Conda;
total liabilities were down period-over-period primarily due t o lower trade and taxes payable at
Itafos Conda;
net debt and adjusted net debt w ere up period-over-period prim arily due to lower cash and
cash equivalents and paid-in-kind interest at corporate related to the Facility; and
total equity was down period-ov er-period primarily due to higher net loss.
Itafos Conda Highlights
During Q1 2020, Itafos Conda continued its strong track record of environmental, health, and safety
excellence with no reportable injuries and no environmental rel eases. Itafos Conda demonstrated
robust performance by achieving a year-over-year increase in SP A production due to higher
throughput from improved production efficiencies and higher rai lcar availability. The increase in SPA
production resulted in lower MAP production year-over-year, whi ch was largely offset by a second
successful production run of Itafos Conda’s new semi-specialty product, MAP+, resulting in largely
consistent granular production year-over-year.
Itafos Conda’s margins declined year-over-year primarily due to lower realized prices and higher
depreciation and depletion. Overa ll fertilizer market prices re mained depressed during Q1 2020,
particularly granular products, after a sharp decline following Q1 2019 due to elevated inventories and
delayed purchases resulting from unusually wet weather conditio ns in North America. The impact of
lower prices during Q1 2020 was partially offset by lower input costs as ammonia and sulfur costs
declined year-over-year and Q1 2019 included a spike in natural gas costs as a result of a supply
disruption.
During Q1 2020, Itafos Conda advanced activities related to extending Itafos Conda’s mine life through
permitting and development activ ities at H1/NDR, including secu ring support for the project by the
Idaho legislature via House Joint Memorial #11 as well as addit ional letters of support from local and
state officials.
Also during Q1 2020, Itafos Conda advanced activities related t o optimizing Itafos Conda’s EBITDA
generation potential, including co mpleting the micronutrient ad dition to granulation project and
advancing the zinc micronutrient product development, by-product recovery (AHF/PS) initiatives and
on-site ammonia production project.
The Company is closely monitoring potential risks to Itafos Con da’s employees, contractors and
operations as a result of COVID-19. Itafos Conda has been deemed an essential business as part of
the fertilizer and agriculture s ector and therefore has not bee n forced to shut down operations on
account of COVID-19. The Company is not currently projecting any material impact on Itafos Conda’s
operations as a result of COVID-19.
In response to COVID-19, the Company has implemented risk mitigation measures at Itafos Conda to
address potential impacts to its employees, contractors and operations as follows:
adopted temporary travel restrictions;
established a daily COVID-19 em ergency operations center to track and respond in real-time
to regional and local developments;
implemented measures to reduce on site presence and interaction of staff;
increased cleaning and di sinfecting measures;
adopted new policies related to sick leave and isolation in case of symptoms;
established ongoing dialogue with key business partners (custo mers, logistics providers,
mining contractor, health insurance provider) to continually monitor situation;
requalified superviso rs and staff on applicable critical operations in the event of an outbreak;
assessed business relief options.
Currently, there are no confirmed cases of COVID-19 amongst emp loyees or contractors at Itafos
Conda.
For the three months ended Ma rch 31, 2020 and 2019, Itafos Cond a’s business highlights were as
follows:
(unaudited in thousands of US Dollars For the three months ended March 31,
except for volumes and prices) 2020 2019
Production volumes (t)
MAP 90,548 98,755
MAP+ 5,275 —
SPA 40,265 35,533
MGA 583 30
APP 2,225 5,427
Total production volumes 138,896 139,745
Sales volumes (t)
MAP 107,772 76,877
MAP+ 2,653 —
SPA 39,231 33,444
MGA 513 30
APP 1,647 2,448
Total sales volumes 151,816 112,799
Realized price ($/t)
MAP $ 295 $ 449
MAP+ $ 364 $ —
SPA $ 941 $ 1,006
MGA $ 945 $ 967
APP $ 451 $ 473
Revenues ($)
MAP $ 31,832 $ 34,486
MAP+ $ 966 $ —
SPA $ 36,906 $ 33,633
MGA $ 485 $ 29
APP $ 743 $ 1,157
Total revenues $ 70,932 $ 69,305
Revenues per tonne P2O5 $ 728 $ 933
Cash costs per tonne P2O5 $ 632 $ 760
Adjusted EBITDA $ 8,295 $ 11,456
Maintenance capex $ 1,919 $ 2,573
Growth capex $ 1,924 $ 488
For the three months ended March 31, 2020 and 2019, Itafos Cond a’s business highlights were
explained as follows:
MAP production volumes were down year-over-year primarily due to higher SPA and MAP+
production;
MAP sales volumes were up year-over-year primarily due to high er product lifting resulting in
lower MAP inventory levels at the end of Q1 2020;
MAP realized prices were down year-over-year primarily due to significant and continued
downward pressure on DAP NOLA prices to which MAP sales prices are linked;
MAP+ production volumes were up year-over-year primarily due p roduction runs during Q1
2020 whereas the product had not yet been introduced during Q1 2019;
SPA production volumes were up ye ar-over-year primarily due to higher throughput from
improved production efficiencies;
SPA sales volumes were up year-over-year primarily due to high er production and improved
railcar availability;
SPA realized prices were down year-over-year primarily due to market pricing as a result of
overall fertilizer market conditions;
revenues per tonne P 2O5 were down year-over-year despite higher sales volumes primaril y
due to significant and continued downward pressure on DAP NOLA prices to which MAP sales
prices are linked;
cash costs per tonne P 2O5 were down year-over-year primarily due to reduced input costs from
improved mining rates and lower raw material costs;
maintenance capex was down year -over-year primarily due to rep lacement of mining
equipment during Q1 2019; and
growth capex was up year-over-ye ar primarily due increased act ivities related to extending
Itafos Conda’s mine life through permitting and development act ivities at H1/NDR and
completion of the micronutrient addition to granulation project.
Itafos Arraias Highlights
On November 21, 2019, the Compan y announced its decision to idl e Itafos Arraias and suspend the
previously announced repurpose plan at Itafos Arraias as part o f a disciplined approach to capital
allocation considering the continued downward pressure on globa l fertilizer prices and the additional
capital requirements to complete the Repurpose Plan. For the th ree months ended March 31, 2020,
the Company safely completed the idling of Itafos Arraias follo wing best practices to protect and
preserve the value of the underlying assets. Following receipt of approval from the labor union, the
Company completed the employee l ayoffs and contractor terminati ons at Itafos Arraias associated
with the idling. Notwithstanding the idling of Itafos Arraias, the Company will cont inue to employ
personnel that are necessary for the care and maintenance of the assets and will continue to maintain
all licenses and permits in good standing and compliance with e xisting regulations. In addition, the
Company successfully monetized inventory and raw materials at Itafos Arraias to partially offset costs
associated with the idling.
In parallel with its decision to idle Itafos Arraias, the Compa ny engaged the services of Golder
Associates Inc. and Jesa Technologies LLC to conduct third party reports on Itafos Arraias’ mine and
beneficiation plant, respectively . The third party reports, whi ch were completed in January 2020,
confirm that restarting Itafos Arraias’ mine and beneficiation plant is feasible and outline the respective
timing and capex requirements.
In February 2020, Itafos Arraias secured important long-term ta x incentives. As Itafos Arraias is
domiciled in Brazil, the business is subject to a federal tax r ate of 34%, com posed of a federal
corporate income tax of 25% and other taxes of 9%. The location of Itafos Arraias’ assets makes it
eligible to participate in a regional development program admin istered by the Superintendência do
Desenvolvimento da Amazônia (“SUDAM”). Created in 1966 to promote development of the Amazon
region in Brazil, SUDAM offers t ax incentives that allow eligib le companies to reduce the federal tax
rate of 34% to 15.25% by means o f a 75% discount to the federal corporate income tax of 25%. In
February 2020, SUDAM accepted Itafos Arraias’ application, granting Itafos Arraias the tax incentives
for a period of ten years with an opportunity to extend thereafter.
The Company is closely monitoring potential risks to Itafos Arr aias’ employees, contractors and
operations as a result of COVID-19. Itafos Arraias has been deemed an essential business as part of
the fertilizer and agriculture sector and therefore has not been forced to shut down operations or care
and maintenance activities on a ccount of COVID-19. The Company is not currently projecting any
material impact on Itafos Arraias’ operations or care and maintenance activities as a result of COVID-
19.
In response to COVID-19, the Company has implemented risk mitig ation measures at Itafos Arraias
to address potential impacts to its employees, contractors and operations and care and maintenance
activities as follows:
adopted temporary travel restrictions;
temporarily closed the São Paul o office and implemented measur es to facilitate employees
working from home;
cancelled all non-critical site visits and implemented measure s to safely continue critical
activities (e.g., tailings dam inspections);
increased safety measures relat ed to screening site visitors;
increased cleaning and disi nfecting measures; and
adopted new policies related to sick leave and isolation in case of symptoms.
Currently, there are no confirmed cases of COVID-19 amongst emp loyees or contractors at Itafos
Arraias.
For the three months ended Marc h 31, 2020 and 2019, Itafos Arra ias’ business highlights were as
follows:
(unaudited in thousands of US Dollars For the three months ended March 31,
except for volumes and prices) 2020 2019
Production volumes (t)
SSP 3,879 6,563
SSP+ 1,113 8,591
PK compounds — —
Total production volumes 4,992 15,154
Excess sulfuric acid production volumes (t) — 8,794
Sales volumes (t)
SSP 25,429 7,133
SSP+ 2,459 5,903
PK compounds — —
Total sales volumes 27,888 13,036
Excess sulfuric acid sales volumes (t) 5,213 8,794
Realized price ($/t)
SSP $ 138 $ 165
SSP+ $ 184 $ 229
PK compounds $ — $ —
Excess sulfuric acid $ 90 $ 153
Revenues ($)
SSP, net $ 3,508 $ 1,174
SSP+, net $ 453 $ 1,351
PK compounds $ — $ —
Total revenues $ 3,961 $ 2,525
Excess sulfuric acid revenues ($) 468 1,348
Revenues per tonne P2O5 $ 1,063 $ 1,139
Cash costs per tonne P2O5 $ 2,157 $ 4,339
Adjusted EBITDA $ (4,959 ) $ (6,417)
Maintenance capex $ — $ 2,602
Growth capex $ — $ 587