Itafos Reports Q1 2023 Results
TSX-V: IFOS
News Release
ITAFOS REPORTS Q1 2023 RESULTS
HOUSTON, TX – May 10, 2023 – Itafos Inc. (TSX-V: IFOS) (the “Company”) re ported today its Q1 2023 financial and operational
highlights. The Company’s financial statements and management’s discussion and analysis for the three months ended March 31, 2023
are available under the Company’s profile at www.sedar.com and on the Company’s website at www.itafos.com. All figures are in
thousands of US Dollars except as otherwise noted.
CEO Commentary
“We are pleased to report strong financial results and a continuation of our record safety performance in Q1 2023. In Q1 2023 our reported
revenues of $119.6 million and Adjusted EBI TDA of $43.0 million reflected lower phosphate prices compared with 2022 but remain well
above the historical norms. We remain opt imistic about the fundamentals of the agriculture sector and fertilizer demand in the North
American markets we serve.”
“The Record of Decision issued on April 24th for the Husky 1/No rth Dry Ridge (“H1/NDR”) mine project followed by the receipt of the
Notice to Proceed for H1/NDR, were the final steps to allow us to achieve our strategic goal of extending Conda’s mine life. The permit
will allow us to work to continue to serve the North American fertilizer market through 2037 with potential to further extend t he resource
life through leases and third-party arrangements. The Itafos team at Conda is quickly mobilizing resources and operations to be gin the
development of H1/NDR.”4
“The process to explore and evaluate various strategic alternatives to enhance value for all Itafos shareholders announced by our Board
in Q1 2023 is on-going. At the same time, we remained focused on running the Company to support our customers, maintain our saf ety
performance and deliver on our financial results” said G. David Delaney, CEO of Itafos.
Q1 2023 Key Highlights
revenues of $119.6 million
Adjusted EBITDA of $43.0 million 1
net income of $28.2 million
basic earnings of C$0.20/share
free cash flow of $19.9 million 1
March 31, 2023 Key Highlights
trailing 12 months Adjusted EBITDA of $207.3 million 1
net debt of $73.2 million 1
net leverage ratio of 0.4x 1
Maintained FY 2023 Guidance
Adjusted EBITDA guidance of $140 to $180 million
net income guidance of $35 to $65 million
basic earnings guidance of C$0.25 to C$0.45/share
maintenance capex guidance of $15 to $25 million 1
growth capex guidance of $40 to $50 million 1
free cash flow guidance of $70 to $100 million
1 Adjusted EBITDA, trailing 12 months Adjusted EBITDA, maintenance capex, growth capex, net debt, net leverage ratio and free cas h flow are each a
non-IFRS financial measure. For additional information on non-IFRS and other financial measures, see “Non-IFRS financial measures” below. International
Financial Reporting Standards (“IFRS”).
Q1 2023 Market Highlights
Diammonium phosphate (“DAP”) New Orleans (“NOLA”) prices averaged $615/st in Q1 2023 compared to $794/st in Q1 2022, down
23% year-over-year. Specific factors driving the year-over-year decline in DAP NOLA were as follows:
weakened demand in response to historically high 2022 phosphate prices;
the softening of global ammonia and sulphur prices;
the softening of historically high crop prices; and
increased phosphate exports out of Russia.
Q1 2023 Financial Highlights
For Q1 2023, the Company’s financial highlights were as follows:
revenues of $119.6 million in Q1 2023 compared to $149.9 million in Q1 2022;
Adjusted EBITDA of $43.0 million in Q1 2023 compared to $60.4 million in Q1 2022;
net income of $28.2 million in Q1 2023 compared to $33.0 million in Q1 2022;
basic earnings of C$0.20/share in Q1 20 23 compared to C$0.22/share in Q1 2022; and
free cash flow of $19.9 million in Q1 2023 compared to $54.4 million in Q1 2022.
The decrease in the Company’s Q1 2023 financial performance compared to Q1 2022 was primarily due to lower realized prices off the
commodity cycle highs of the prior year, coupled with lower sales volumes at Conda, which were partially offset by higher sulfu ric acid
sales at Arraias.
The Company’s total capex2 spend in Q1 2023 was $2.8 million compared to $5.3 million in Q1 2022 with the decrease primarily due to
the capital additions expended in the prior year relating to the HFSA build out at Conda duri ng Q1 2022 and the Arraias sulfuri c acid
restart.
March 31, 2023 Highlights
As at March 31, 2023, the Company had trailing 12 months Adjusted EBITDA of $207.3 million compared to $224.8 million at the end of
2022 with the decrease primarily due to the same factors that resulted in lower revenues, which were partially offset by lower input costs
at Conda.
Also as at March 31, 2023, the Compan y had net debt of $73.2 million compar ed to $88.3 million at the end of 2022 , with the reduction
due to the repayment of principal debt outstanding from free cash flows generated and higher cash and cash equivalents. The Company’s
net debt as at March 31, 2023 was compris ed of $50.7 million in cash and $123.9 milli on in debt (gross of deferred financing co sts). As
at March 31, 2023 and the end of 2022, the Company’s net leverage ratio was 0.4x.
As at March 31, 2023, the Company had liquidity 3 of $73.4 million comprised of $50.7 million in cash and $22.7 million in ABL Facility
undrawn borrowing capacity.
Q1 2023 Operational Highlights
Environmental, Health and Safety (“EHS”)
Sustained EHS excellence, including no re portable environmental releases or recordable incidents, which resulted in a
consolidated total recordable incident frequency rate (“TRIFR”) of 0.12.
Conda
Produced 82,145 tonnes P 2O5 at Conda in Q1 2023 compared to 89,096 tonnes P 2O5 in Q1 2022 with the decrease primarily
due to lower throughput resulting from extreme winter conditions and unplanned downtime;
Generated revenues of $116.0 million at Conda in Q1 2023 com pared to $147.5 million in Q1 2022 primarily due to lower sales
volumes and lower realized prices; and
Generated Adjusted EBITDA at Co nda of $47.5 million in Q1 2023 compared to $ 64.4 million in Q1 2022 primarily due to the
same factors that resulted in lower revenues, which were partially offset by lower input costs.
2 Total capex is a non-IFRS financial measure. For additional information on non-IFRS and other financial measures, see “Non-IFRS financial measures”
below.
3 Liquidity is a non-IFRS financial measure. For additional information on non-IFRS and other financial measures, see “Non-IFRS f inancial measures”
below.
Q1 2023 Other Highlights
Produced 20,614 tonnes of sulfuric acid at Arraias in Q1 2023 compared to 9,651 in Q1 2022 with the increase due to a full
quarter of sulfuric acid production and sales in Q1 2023 compared to a partial quarter in Q1 2022 (the sulfuric acid plant was
restarted in February 2022);
Generated Adjusted EBITDA at Arraias of $0.2 million in Q1 2023 compared to $0.7 million loss in Q1 2022 with the increase
primarily due to higher revenues and lower selling, general and adm inistrative expenses, which were partially offset by higher
cost of goods sold; and
Continued evaluation of strategic alter natives for non-North American assets.
Subsequent Events
On April 10, 2023, the Company announced Evgenii Iorich st epped down as member of the Company's Board of Directors
effective as of April 6, 2023. Mr. Iorich served as a director of the Company since July 11, 2017.
On April 24,2023, the Company announced the Record of Decision for the H1/NDR mine development project. The H1/NDR
project will be internally funded and comprises primarily of infrastructure and mine development. Mineral resources from H1/NDR
are expected in 20264, providing an uninterrupted supply as Rasmussen Valley Mine reaches the end of its useful life.
On May 1, 2023, the Company issued 324,0 56 shares (net of 104,264 shares withheld to pay applicable taxes) due to vesting
under its RSU Plan.
On May 10, 2023, the Company announced the receipt of the Notice to Proceed for the H1/NDR mine development project.
Upon receipt of the Notice to Proceed, the Company has begun capital activities associated with the mine development project.
Market Outlook
Although 2023 prices have moderated off the historically high 20 22 prices, the Company expects relatively stable market fundamentals
and global agriculture and phosphate fertilizer fundamentals to continue. Accordingly, the Company expects continued durability in pricing
and volume fundamentals in the phosphate fertilizer markets.
Specific factors the Company expects to support the continued strength in the global phosphate fertilizer markets through 2023 are as
follows:
no significant phosphate supply capacity additions;
sustained crop prices;
improved phosphate application following lower demand associated with historically high pricing; and
ongoing phosphate export restrictions from China.
The Company expects the sulfur and sulfuric acid market to remain under pressure globally through 2023 due to increased refinery activity
and softer demand from phosphate producers and metals consumers.
Financial Outlook
The Company maintained its guidance for 2023 as follows:
(in millions of US Dollars
except as otherwise noted) FY 2023
Adjusted EBITDA $ 140-180
Net income 35-65
Basic earnings (C$/share) 0.25-0.45
Maintenance capex 15-25
Growth capex 40-50
Free cash flow 70-100
Business Outlook
The Company continues to focus on the following key objectives to drive long-term value and shareholder returns:
improving financial and operational performance;
deleveraging the balance sheet;
executing on the requisite infrastr ucture and civil works required for the mine development for H1/NDR; and
4 Timeline for H1/NDR based on management estima tes and subject to certain assumptions , including successful permitting and devel opment activities.
The H1/NDR mine life extension is based on a Preliminary Econom ic Assessment (“2019 PEA”) included in the Conda Technical Repor t (as defined
below). The 2019 PEA on the H1 and NDR properties is preliminary in nature and includes inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty
that the 2019 PEA will be realized. Readers are referred to t he Conda Technical Report for the applicable qualifications and as sumptions in connection
with its 2019 PEA.
conducting the strategic review process (including evaluating potential strategic alternatives for the company as outlined in the
news release dated March 13, 2023).
About Itafos
The Company is a phosphate and specialty fertilizer company. The Company’s businesses and projects are as follows:
Conda – a vertically integrated phosphate fertilizer business loca ted in Idaho, US with production capacity as follows:
- approximately 550kt per year of monoammonium phosphate (“M AP”), MAP with micronutrients (“MAP+”), superphosphoric
acid (“SPA”), merchant grade phosphoric acid (“MGA”) and ammonium polyphosphate (“APP”); and
- approximately 27kt per year of hy drofluorosilicic acid (“HFSA”);
Arraias – a vertically integrated phosphate fertilizer business lo cated in Tocantins, Brazil with production capacity as follows:
- approximately 500kt per year of single superphosph ate (“SSP”) and SSP with micronutrients (“SSP+”); and
- approximately 40kt per year of excess sulfuric acid (220kt per year gross sulfuric acid production capacity);
Farim – a high-grade phosphate mine project located in Farim, Guinea-Bissau;
Santana – a vertically integrated high- grade phosphate mine and fertilizer plant project located in Pará, Brazil; and
Araxá – a vertically integrated rare earth elements and niobium mine and extraction plant project located in Minas Gerais, Brazil.
In addition to the businesses and projects described above, the Co mpany also owns Mantaro (Junin, Peru), which is a phosphate m ine
project that is in process of being wound down.
The Company is a Delaware corporation that is headquartered in Houston, TX. The Company’s shares trade on the TSX Venture
Exchange (“TSX-V”) under the ticker symbol “IFOS”. The Company’s principal shareholder is CL Fertilizers Holding LLC (“CLF”). CLF is
an affiliate of Castlelake, L.P., a global private investment firm.
For more information, or to join the Comp any’s mailing list to receive notification of future news releases, please visit the C ompany’s
website at www.itafos.com.
Forward-Looking Information
Certain information contained in this news release constitutes forward-looking information, including statements with respect to: the timing
for commencement of operations at H1 / N DR; the expected resource life of H1 / ND R; the sources of f unding to be used for the
development of H1 / NDR; economic and market trends with respect to the global agriculture and p hosphate fertilizer markets. Al l
information other than information of histor ical fact is forward-looking information . Statements that address activities, event s or
developments that the Company believes, expects or anticipates will or may occur in the future include, but are not limited to, statements
regarding estimates and/or assumptions in respect of the Company’s financial and business outlook are forward-looking information. The
use of any of the words “intend”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “would”, “believe”,
“predict” and “potential” and similar expressions are intended to identify forward-looking information.
The forward-looking information contained in this news release is based on the opinions, assumptions and estimates of management set
out herein, which management believes are reasonable as at t he date the statements are made. Those opinions, assumptions and
estimates are inherently subject to a variety of risks and uncert ainties and other known and unknow n factors that could cause a ctual
events or results to differ materially from those projected in the forward-looking information. These include the Company’s expectations
and assumptions with respect to the following: commodity prices; operating results; safety risks; changes to the Company’s mine ral
reserves and resources; risk that timing of expected permitting will not be met; changes to mine development and completion; fo reign
operations risks; changes to regulation; environmental risks; t he impact of adverse weather and climate change; general economi c
changes, including inflation and foreign exchange rates; the actions of the Company’s competitors and counterparties; financing, liquidity,
credit and capital risks; the loss of key personnel; impairment risks; cybersecurity risks; risks relating to transportation and infrastructure;
changes to equipment and suppliers; adverse litigation; changes to permitting and licensing; loss of land title and access rights; changes
to insurance and uninsured risks; the potential for malicious acts; market volatility; changes to technology; changes to tax la ws; the risk
of operating in foreign jurisdictions; and the risks posed by a controlling shareholder and other conflicts of interest. Readers are cautioned
that the foregoing list of risks, uncertainties and assumptions is not exhaustive.
Although the Company has attempted to identify crucial factors that could cause actual actions, events or results to differ materially from
those described in forward-looking information, there may be other factors that cause actions, events or results not to be as anticipated,
estimated or intended. Additional risks and uncertainties affecting the forward-looki ng information contained in this news rele ase are
described in greater detail in the Company’s current Annual Information Form and current Management’s Discussion and Analysis
available under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at www.itafos.com. There can be
no assurance that forward-looking information will prove to be a ccurate, as actual results and fu ture events could differ mater ially from
those anticipated in such information. The reader is cautioned not to place undue reliance on forward-looking information. The Company
undertakes no obligation to update forward-l ooking statements if circumst ances or management’s estimates, assumptions or opinions
should change, except as required by applicable securities law. The forward-looking information included in this news release is expressly
qualified by this cautionary statement and is made as of the date of this news release.
This news release contains future oriented financial information and financial outlook information (together, “FOFI”) about the Company’s
prospective results of operations, includi ng statements regarding expected adjusted EBITD A, net income, basic earnings per shar e,
maintenance capex, growth capex and free cash flow. FOFI is subject to the same assumptions, risk factors, limitations and qualifications
as set forth in the above paragraph. The Company has included the FOFI to provide an outlook of management’s expectations regarding
anticipated activities and results, and such information may no t be appropriate for other purposes. The Company and management
believe that the FOFI has been prepared on a reasonable basis, reflecting management’s reasonable estimates and judgements;
however, actual results of operations and the resulting financial results may vary from the amounts set forth herein. Any financial outlook
information speaks only as of the date on which it is made and th e Company undertakes no obligation to publicly update or revis e any
financial outlook information except as required by applicable securities laws.
NEITHER THE TSX-V NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX-
V) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.
For further information, please contact:
Matthew O’Neill
Itafos Investor Relations
713-242-8446
Scientific and Technical Information
The scientific and technical information contained in this news release related to Mineral Resources for Conda and Farim has be en
reviewed and approved by Jerry DeWolfe, Professional Geologist (P.Geo.) with the Association of Professional Engineers and
Geoscientists of Alberta. Mr. DeWolfe is a full-time employee of WSP Canada Inc. and is independent of the Company. The scientific and
technical information contained in this news release related to Mineral Reserves for Conda and Farim has been reviewed and approved
by Edward Minnes, Professional Engineer (P.E.) licensed by the State of Missouri. Mr. Minnes is a part-time employee of WSP USA Inc.
and is independent of the Company. The Company’s latest technical report in respect of Conda is entitled, “NI 43-101 Technical Report
on Itafos Conda and Paris Hills Mineral Projects, Idaho, USA,” with an effective date of July 1, 2019 (the “Conda Technical Report”) and
is available under the Company’s website at www.itafos.com and under the Company’s profile on SEDAR at www.sedar.com.
Non-IFRS Financial Measures
This press release contains both IFRS and certain non-IFRS m easures that management consi ders to evaluate the Company’s
operational and financial performance. Non-IFRS measures are a numerical measure of a company’s performance, that either include or
exclude amounts that are not normally includ ed or excluded from the most directly co mparable IFRS measures. Management believes
that the non-IFRS measures provide useful supplemental information to investors, analysts, lenders and others. In evaluating non-IFRS
measures, investors, analysts, lenders and others should consider that non-IFRS measures do not have any standardized meaning under
IFRS and that the methodology applied by t he Company in calculating such non-IFRS measures may differ among companies and
analysts. Non-IFRS measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared
in accordance with IFRS. Definitions and reconciliations of non-IFRS measures to the most directly comparable IFRS measures are
included below.
DEFINITIONS
The Company defines its non-IFRS measures as follows:
Non-IFRS
measure
Definition Most directly comparable IFRS
measure
Why the Company uses the
measure
EBITDA Earnings before interest, taxes,
depreciation, depletion and
amortization
Net income (loss) and operating income
(loss)
EBITDA is a valuable indicator of
the Company’s ability to generate
operating income
Adjusted EBITDA EBITDA adjusted for non-cash,
extraordinary, non-recurring and other
items unrelated to the Company’s core
operating activities
Net income (loss) and operating income
(loss)
Adjusted EBITDA is a valuable
indicator of the Company’s ability
to generate operating income
from its core operating activities
normalized to remove the impact
of non-cash, extraordinary and
non-recurring items. The
Company provides guidance on
Adjusted EBITDA as useful
supplemental information to
investors, analysts, lenders, and
others
Trailing 12
months Adjusted
EBITDA
Adjusted EBITDA for the current and
preceding three quarters
Net income (loss) and operating income
(loss) for the current and preceding three
quarters
The Company uses the trailing 12
months Adjusted EBITDA in the
calculation of the net leverage
ratio (non-IFRS measure)
Total capex Additions to property, plant, and
equipment and mineral properties
adjusted for additions to asset
retirement obligations, additions to
right-of-use assets and capitalized
interest
Additions to property, plant and
equipment and mineral properties
The Company uses total capex in
the calculation of total cash capex
(non-IFRS measure)
Maintenance
capex
Portion of total capex relating to the
maintenance of ongoing operations
Additions to property, plant and
equipment and mineral properties
Maintenance capex is a valuable
indicator of the Company’s
required capital expenditures to
sustain operations at existing
levels
Growth capex Portion of total capex relating to the
development of growth opportunities
Additions to property, plant and
equipment and mineral properties
Growth capex is a valuable
indicator of the Company’s capital
expenditures related to growth
opportunities.
Net debt Debt less cash and cash equivalents
plus deferred financing costs (does not
consider lease liabilities)
Current debt, long-term debt and cash
and cash equivalents
Net debt Debt less cash and
cash equivalents plus deferred
financing costs (does not
consider lease liabilities) Current
debt, long-term debt and cash
and cash equivalents Net
debt is a valuable indicator of the
Company’s net debt position as it
removes the impact of deferring
financing costs.
Net leverage ratio Net debt divided by trailing 12 months
Adjusted EBITDA
Current debt, long-term debt and cash
and cash equivalents; net income (loss)
and operating income (loss) for the
current and preceding three quarters
The Company’s net leverage ratio
is a valuable indicator of its ability
to service its debt from its core
operating activities.
Liquidity Cash and cash equivalents plus
undrawn committed borrowing
capacity
Cash and cash equivalents Liquidity is a valuable indicator of
the Company’s liquidity
Free cash flow Cash flows from operating activities,
which excludes payment of interest
expense, plus cash flows from
investing activities less cash growth
capex
Cash flows from operating activities and
cash flows from investing activities
Free cash flow is a valuable
indicator of the Company’s ability
to generate cash flows from
operations after giving effect to
required capital expenditures to
sustain operations at existing
levels. Free cash flow is a
valuable indicator of the
Company’s cash flow available
for debt service or to fund growth
opportunities. The Company
provides guidance on free cash
flow as useful supplemental
information to investors, analysts,
lenders, and others.
EBITDA, ADJUSTED EBITDA AND TRAILING 12 MONTHS ADJUSTED EBITDA
For the three months ended March 31, 2023 and 2022
For the three months ended March 31, 2023, the Company had EBITDA and Adjusted EBITDA by segment as follows:
(unaudited in thousands of US Dollars) Conda Arraias
Development
and
exploration Corporate Total
Net income (loss) $ 27,985 $ (248) $ 70 $ 400 $ 28,207
Finance (income) expense, net 1,702 (136) 84 3,836 5,486
Current and deferred income tax expense
(recovery) 8,416 — — (12,598) (4,182 )
Depreciation and depletion 9,384 681 3 47 10,115
EBITDA $ 47,487 $ 297 $ 157 $ (8,315) $ 39,626
Unrealized foreign exchange (gain) loss — (76) (401) 488 11
Share-based payment expense — — — 2,700 2,700
Transaction costs — — — 711 711
Other income, net (17) (32) (38) — (87 )
Adjusted EBITDA $ 47,470 $ 189 $ (282) $ (4,416) $ 42,961
(unaudited in thousands of US Dollars) Conda Arraias
Development
and
exploration Corporate Total
Operating income (loss) $ 38,088 $ (492) $ (285) $ (7,875) $ 29,436
Depreciation and depletion 9,384 681 3 47 10,115
Realized foreign exchange loss (2) — — 1 (1 )
Share-based payment expense — — — 2,700 2,700
Transaction costs — — — 711 711
Adjusted EBITDA $ 47,470 $ 189 $ (282) $ (4,416) $ 42,961
For the three months ended March 31, 2022, the Company had EBITDA and Adjusted EBITDA by segment as follows:
(unaudited in thousands of US Dollars) Conda Arraias
Development
and
exploration Corporate Total
Net income (loss) $ 49,735 $ (544) $ (687) $ (15,495) $ 33,009
Finance expense, net 1,206 226 2 8,258 9,692
Current and deferred income tax expense
(recovery) 15,379 — — (3,334) 12,045
Depreciation and depletion 6,454 372 4 49 6,879
EBITDA $ 72,774 $ 54 $ (681) $ (10,522) 61,625
Unrealized foreign exchange (gain) loss — (718) 406 (19) (331 )
Share-based payment expense — — — 5,935 5,935
Transaction costs — — 30 205 235
Non-recurring compensation expenses — — — 1,282 1,282
Other (income) expense, net (8,386) 11 10 — (8,365 )
Adjusted EBITDA $ 64,388 $ (653) $ (235) $ (3,119) $ 60,381
(unaudited in thousands of US Dollars) Conda Arraias
Development
and
exploration Corporate Total
Operating income (loss) $ 57,935 $ (1,025) $ (269) $ (10,582) $ 46,059
Depreciation and depletion 6,454 372 4 49 6,879
Realized foreign exchange gain (1) — — (8) (9 )
Share-based payment expense — — — 5,935 5,935
Transaction costs — — 30 205 235
Non-recurring compensation expenses — — — 1,282 1,282
Adjusted EBITDA $ 64,388 $ (653) $ (235) $ (3,119) $ 60,381