Itafos Reports Q4 and Full Year 2019 Financial Results and Operational
ITAFOS REPORTS Q4 AND FULL YEAR 2019 FINANCIAL RESULTS AND OPERATIONAL
HIGHLIGHTS
TORONTO, ON – March 27, 2020 – Itafos (TSX-V: IFOS) (the “Company”) reported today its Q4 and
full year 2019 financial results and operational highlights. Th e Company’s financial statements and
management’s discussion and analysis for the three months and year ended December 31, 2019 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 December 31, 2019, the Company’s financial highlights were as follows:
generated adjusted EBITDA of $(1 ,926), representing a 163% dec rease year-over-year
primarily due to significant and continued downward pressure on fertilizer prices in key markets
including North America and Brazil;
incurred net loss of $(88,465), representing a 43% decrease ye ar-over-year primarily due to
lower impairments of non-current assets of Itafos Arraias, Itaf os Farim and Itafos Santana
($65,094 during 2019 compared to $146,627 during 2018);
recorded an impairment of $47,544 at Itafos Arraias primarily due to a longer expected ramp-
up to optimal capacity utilization and increased associated upfront capital expenditures;
recorded impairments of $15,662 and $1,888 at Itafos Farim and Itafos Santana, respectively,
primarily due to the decline in m ultiples of comparable publicl y traded companies and
transactions during 2019;
completed a $36,000 capital rais e with CL Fertilizer Holding L LC (“CLF”) including a non-
brokered private placement f inancing of $15,000 and an amendmen t to increase the
availability of a previously i ssued unsecured subordinated prom issory note by $21,000, of
which $5,000 was drawn;
closed a $20,000 secured worki ng capital facility (the “Revolving Facility”) at Itafos Conda;
executed an amended and restated credit and guaranty agreement (the “ A&R Credit
Agreement”), replacing the existing credi t and guaranty agreement dated May 18, 2018,
including prior amendments, and further amended certain terms to provide the Company with
additional financial flexibility including deferring the testing of financial covenants and reducing
cash interest payable in 2020; and
implemented an aggressive corpor ate wide cost savings and deferral of spending initiatives.
For the three months ended December 31, 2019, the Company’s business highlights were as follows:
continued strong operational performance at Itafos Conda with overall production volumes of
140,683t, representing a 2% decrease year-over-year;
generated adjusted EBITDA of $7,909 at Itafos Conda, represent ing a 60% decrease year-
over-year primarily due to higher input costs and significant and continued downward pressure
on diammonium phosphate (“ DAP”) New Orleans (“ NOLA”) to which MAP sales prices are
linked;
incurred net loss of $(1,590) at Itafos Conda, representing a 111% decrease year-over-year
primarily due to significant and continued downward pressure on DAP NOLA to which MAP
sales prices are linked;
completed the technical report titled “NI 43-101 Technical Rep ort on the Itafos Conda and
Itafos Paris Hills Mineral Projects, Idaho, USA” and dated as of July 1, 2019 (the “Itafos Conda
Technical Report”), concluding one and a half to two years of additional mine life from existing
mines and defining Husky 1/North Dry Ridge (“ H1/NDR”) as the Company’s path forward for
mine life extension;
idled Itafos Arraias and suspended the previously announced re purpose plan (the “Repurpose
Plan”) as part of a disciplined approach to capital allocation cons idering the significant and
continued downward pressure on global fertilizer prices and the additional capital requirements
to complete the Repurpose Plan; and
advanced the development of It afos Farim including advancing o fftake agreement
negotiations, completing front-end design and engineering, fina lizing the mining contractor
tender evaluation and advancing project financing.
For the three months ended December 31, 2019, the Company’s other highlights were as follows:
announced the resignation of Br ent de Jong as Chairman and mem ber of the Company’s
Board of Directors and appointment of Anthony Cina to serve as Chairman on an interim basis;
and
repurchased and cance lled 9,500 shares through the Normal Course Issuer Bid (“NCIB”) for
an aggregate amount of $3.
For the year ended December 31, 2019, the Company’s financial highlights were as follows:
generated adjusted EBITDA of $1, 149, representing a 96% decrease year-over-year primarily
due to significant and continued downward pressure on fertilize r prices in key markets
including North America and Brazil;
incurred net loss of $(144,171), r epresenting a 27% increase year-over-year primarily due to
significant and continued downward pressure on fertilizer prices in key markets including
North America and Brazil and higher finance expense at corporate, which were partially
offset by lower impairments of non-current assets of Itafos Arraias, Itafos Farim and Itafos
Santana ($65,094 during 2019 compared to $146,627 during 2018) and lower current
income tax expense at Itafos Conda;
recorded an impairment of $47,544 at Itafos Arraias primarily due to a longer expected ramp-
up to optimal capacity utilization and increased associated upfront capital expenditures;
recorded impairments of $15,662 and $1,888 at Itafos Farim and Itafos Santana, respectively,
primarily due to the decline in m ultiples of comparable publicl y traded companies and
transactions during 2019;
completed capital raises wit h CLF totalling $51,000 including $15,000 in the form of convertible
unsecured promissory not es issued to CLF (the “ CLF Promissory Note ”), a non-brokered
private placement financing of $15,000 and an amendment to incr ease the availability of the
CLF Promissory Note by $21,000, of which $5,000 was drawn;
closed the Revolving Fa cility at Itafos Conda;
executed the A&R Credit Agreement, replacing the existing cred it and guaranty agreement
dated May 18, 2018, including prio r amendments, and further ame nded certain terms to
provide the Company with additi onal financial flexibility inclu ding deferring the testing of
financial covenants and reducing cash interest payable in 2020; and
implemented an aggressive corpor ate wide cost savings; and deferral of spending initiatives.
For the year ended December 31, 2019, the Company’s business highlights were as follows:
continued strong operational performance at Itafos Conda with overall production volumes of
575,948t, representing a 6% increase year-over-year;
generated adjusted EBITDA of $39,469 at Itafos Conda, represen ting a 38% decrease year-
over-year primarily due to higher input costs and significant and continued downward pressure
on DAP NOLA to which MAP sales prices are linked;
generated net income of $1,724 at Itafos Conda, representing a 98% decrease year-over-year
primarily due to the gain recogni zed on the fair valuation of I tafos Conda in 2018 as well as
higher input costs and significant and continued downward pressure on DAP NOLA to which
MAP sales prices are linked, and higher depreciation;
demonstrated sustained environm ental, health and safety excellence at Itafos Conda including
achievement of one year without a reportable injury (prior to o ne contract worker reportable
injury occurring during Q3 2019 and one employee reportable injury occurring during Q4 2019)
and continued avoidance of any chemical releases during 2019;
completed the Itafos Conda Tec hnical Report concluding one and a half to two years of
additional mine life from existing mines and defining H1/NDR as the Company’s path forward
for mine life extension;
launched a micronutrient enhanced pr oduct MAP+, representing t he Company’s entry into
semi-specialty fertilizer products at Itafos Conda;
idled Itafos Arraias and suspended the previously announced Re purpose Plan as part of a
disciplined approach to capital a llocation considering the cont inued downward pressure on
global fertilizer prices and the additional capital requirements to complete the Repurpose Plan;
and
advanced the development of It afos Farim including securing al l operational and
environmental permits required to c ommence construction, signin g two memorandums of
understanding for offtake, completing front-end design and engi neering, finalizing works
contractors and procurement packages and advancing project financing.
For the year ended December 31, 2019, the Company’s other highlights were as follows:
announced the resignation of Brian Zatarain as Chief Executive Officer (“ CEO”) and
appointment of Dr. Mhamed Ibnabdeljalil to serve as CEO on an interim basis;
announced the resignation of Br ent de Jong as Chairman and mem ber of the Company’s
Board of Directors and appointment of Anthony Cina to serve as Chairman on an interim basis;
and
repurchased and cancel led 1,781,000 shares through the NCIB fo r an aggregate amount of
$1,031.
Subsequent to the year ended December 31, 2019, the Company’s overall highlights were as follows:
issued 5,000,000 shares to lender s pursuant to the A&R Credit Agreement 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 Leverage Ratio is equal to 4.00:1.00 at the
end of such quarter;
announced the appointment of Dr . Mhamed Ibnabdeljalil as CEO;
announced the appointment of Anth ony Cina as Chairman of the C ompany’s Board of
Directors;
announced the appointment of Rory O’Neill and Ricardo de Armas to the Company’s Board of
Directors, as delegated by CLF; and
completed the idling plan at Itafos Arraias, completed third party reviews of Itafos Arraias’ mine
and beneficiation plant and secured important long-term tax incentives for Itafos Arraias.
Financial Highlights
For the three months and years ended December 31, 2019 and 2018 , the Company’s financial
highlights were as follows:
(in thousands of US Dollars
For the three months ended
December 31,
For the years ended
December 31,
except for volumes and prices) 2019 2018 2019 2018
Revenues $ 81,431 $ 100,597 $ 339,430 $ 302,182
Operating loss (80,617) (151,485) (115,049 ) (142,786)
Net loss (88,465) (155,157) (144,171 ) (113,487)
Adjusted EBITDA (1,926) 3,050 1,149 30,767
Maintenance capex $ 12,291 $ 8,358 $ 29,942 $ 39,467
Growth capex 4,598 4,912 20,560 24,023
Basic loss per share $ (0.63) $ (1.09) $ (1.02 ) $ (0.82)
Fully diluted loss per share $ (0.63) $ (1.09) $ (1.02 ) $ (0.82)
For the three months ended December 31, 2019 and 2018, the Company’s financial highlights were
explained as follows:
revenues were down year-over-year primarily due to lower MAP a nd SPA sales volumes and
lower realized MAP prices at Itafos Conda, which were partially offset by higher revenue
contributions from Itafos Arraias;
net loss was down year-over-year primarily due to lower impair ments of non-current assets of
Itafos Arraias, Itafos Farim and Itafos Santana;
adjusted EBITDA was down year-over-year primarily due to signi ficant and continued
downward pressure on fertilizer prices in key markets including North America and Brazil;
maintenance capex was up year-over-year primarily due to gyp s tack expansion at Itafos
Conda during 2019; and
growth capex was down year-over-year primarily due to reduced spend at Itafos Arraias during
2019, which was partially offset b y mine life extension initiat ives at Itafos Conda related to
H1/NDR.
For the years ended December 31, 2019 and 2018, the Company’s financial highlights were explained
as follows:
revenues were up year-over-year primarily due to higher MAP an d SPA sales volumes as well
as higher realized SPA prices, which were partially offset by l ower realized MAP prices, at
Itafos Conda and higher revenue contributions from Itafos Arraias during 2019, which had not
achieved commercial production during H1 2018;
net loss was up year-over-year primarily due to lower impairme nts of non-current assets of
Itafos Arraias, Itafos Farim and Itafos Santana and higher finance expense at corporate, which
were partially offset by lower current income tax expense at Itafos Conda;
adjusted EBITDA was down year-over-year primarily due to highe r input costs at Itafos Conda
and constrained production due to the implementation of the Repurpose Plan at Itafos Arraias
during 2019, which had not achieved commercial production during H1 2018;
maintenance capex was down year -over-year primarily due to a p artial planned plant
turnaround at Itafos Conda during 2019 compared to a full plann ed plant turnaround at Itafos
Conda during 2018; and
growth capex was down year-over-year primarily due to the capi talization of costs at Itafos
Arraias during H1 2018 ahead of achieving commercial production, which were partially offset
by development activities at Itafos Farim and mine life extensi on initiatives at Itafos Conda
related to H1/NDR.
As at December 31, 2019 and 2018, the Company’s financial highlights were as follows:
As at December 31,
(in thousands of US Dollars) 2019 2018
Total assets $ 510,764 $ 576,419
Total liabilities 368,505 304,640
Net debt 182,201 152,088
Adjusted net debt 136,964 128,335
Total equity 142,259 271,779
As at December 31, 2019 and 2018, the Company’s financial highlights were explained as follows:
total assets were down year-over-year primarily due to decreas es in receivables and inventory
at Itafos Conda, impairments of non-current assets of Itafos Ar raias, Itafos Farim and Itafos
Santana and increases in depreciati on of assets in service duri ng 2019, which were partially
offset by an increase in propert y, plant and equipment related to the application of IFRS 16
during 2019 and gyp stack expansion at Itafos Conda during 2019;
total liabilities were up year-o ver-year primarily due to increases as a result of the recognition
of lease liabilities related to the application of IFRS 16, increases in long-term provisions due
to additions to asset retirement obligations at Itafos Conda, h igher taxes payable primarily at
Itafos Conda and higher trade payables during 2019;
net debt was up year-over-year primarily due to additional deb t from the CLF Promissory Note
and the Revolving Facility and paid-in-kind interest expense related to the Facility, which was
partially offset by higher cash and cash equivalents;
adjusted net debt was up year-o ver-year primarily due to addit ional debt from the Revolving
Facility and paid-in-kind interest expense related to the secur ed term credit facility (the
“Facility”), which was partially offset by higher cash and cash equivalents; and
total equity was down year-over-year primarily due to an incre ase in deficit due to the net loss
during 2019, which was partially offset by the non-brokered pri vate placement financing with
CLF.
Itafos Conda Highlights
In 2019, Itafos Conda continued its strong operational performa nce with overall production volumes
up year-over-year. In addition, Itafos Conda sustained environm ental, health and safety excellence
including achievement of a notable milestone by exceeding one year without a reportable injury (prior
to one contract worker reportable injury occurring during Q3 2019 and one employee reportable injury
occurring during Q4 2019) and continued avoidance of any chemical releases during 2019. Unusually
cold and wet weather conditions across key growing regions affe cted short-term fertilizer buying
patterns in the US and caused many growers to defer fertilizer purchases. These developments have
elevated inventories to near his toric highs, putting significan t and continued downward pressure on
fertilizer prices in the short-term. SPA production and sales w ere constrained due to increased
amounts of unfavorable ore elemen ts, shortage of finished produ ct rail cars and lack of sulfuric acid
availability, which were impact ed by weather and logistical cha llenges and correspondingly resulted
in a shift to incremental MAP production. The increase in unfav orable ore elements, most notably
magnesium oxide, resulted in eva poration capacity limitations, which negatively impacted SPA
production. To mitigate the potential impact of unfavorable ore elements affecting future periods, Itafos
Conda is taking steps to further optimize ore blending and eval uating selective beneficiation
processes.
Itafos Conda’s margins were compr essed year-over-year primarily due to higher input costs, most
notably purchased sulfuric acid, ore and natural gas. The highe r input costs were related to sulfuric
acid contract repricing in 2019, h igher ore feed costs driven b y reduced ore volumes due to mine
sequencing and a spike in natural gas price driven by a supply disruption due to an off-site pipeline
explosion, which negatively impacted the Sumas index in late 20 18. To mitigate the potential impact
of input costs affecting future periods, Itafos Conda made operational improvements to improve mining
efficiencies during Q3 2019 and entered into a two-year fixed p rice natural gas supply agreement
during Q4 2019.
During 2019, Itafos Conda completed a pilot production run of a new semi-specialty fertilizer product,
MAP+. The Company expects that production and sales of MAP+ will improve Itafos Conda’s margin
profile by reducing exposure to DAP NOLA price fluctuations, requiring less P2O5 per tonne and limiting
the commercial impact of lower near-term SPA production. Also d uring Q3 2019, Itafos Conda
completed a significant amount o f exploratory drilling work in support of the Itafos Conda Technical
Report and environmental baselines in support of the permitting process for H1/NDR.
Also during 2019, Itafos Conda completed a partial planned plan t turnaround compared to a full
planned plant turnaround during 2018. For the year ended Decemb er 31, 2018, Itafos Conda’s
business highlights consider the period from the date of acquis ition on January 12, 2018 through
December 31, 2018.
For the three months and years ended December 31, 2019, and 201 8, Itafos Conda’s business
highlights were as follows:
(in thousands of US Dollars
For the three months ended
December 31, For the years ended December 31,
except for volumes and prices) 2019 2018 2019 2018
Production volumes (t)
MAP 95,990 89,341 381,316 360,004
MAP+ — — 9,028 —
SPA 36,794 38,156 145,848 148,235
MGA 199 72 1,277 353
APP 7,700 15,300 38,479 33,082
Total production volumes 140,683 142,869 575,948 541,674
Sales volumes (t)
MAP 85,156 101,652 392,162 327,851
MAP+ 2,329 — 2,329 —
SPA 35,795 41,079 132,070 128,369
MGA 272 113 1,350 394
APP 12,257 8,602 38,486 26,527
Total sales volumes 135,809 151,446 566,397 483,141
Realized price ($/t)
MAP $ 313 $ 473 $ 378 $ 439
MAP+ $ 375 $ — $ 375 $ —
SPA $ 996 $ 1,006 $ 986 $ 942
MGA $ 952 $ 1,106 $ 994 $ 985
APP $ 455 $ 396 $ 466 $ 420
Revenues ($)
MAP $ 26,681 $ 48,033 $ 148,182 $ 144,084
MAP+ $ 873 $ — $ 873 $ —
SPA, net $ 35,649 $ 41,337 $ 130,233 $ 120,925
MGA, net $ 259 $ 125 $ 1,342 $ 388
APP, net $ 5,579 $ 3,405 $ 17,921 $ 11,133
Total revenues $ 69,041 $ 92,900 $ 298,551 $ 276,530
Revenues per tonne P2O5 $ 808 $ 958 $ 850 $ 897
Cash costs per tonne P2O5 $ 704 $ 752 $ 725 $ 688
Adjusted EBITDA $ 7,909 $ 19,758 $ 39,469 $ 63,614
For the three months ended December 31, 2019 and 2018, Itafos C onda’s business highlights were
explained as follows:
MAP production volumes were up year-over-year primarily due to a shift to incremental MAP
production as a result of SPA production constraints;
MAP sales volumes were down year-over-year due to timing of sh ipments under the exclusive
long-term MAP offtake agreement with Nutrien;
MAP realized prices were down year-over-year primarily due to significant and continued
downward pressure on DAP NOLA to which MAP sales prices are linked ;
MAP+ production volumes were flat year-over-year due to timing of 2019 production runs;
MAP+ sales volumes were up ye ar-over-year due to the launch of MAP+ in 2019;
SPA production and sales volumes we re down year-over-year prim arily due to the presence
of unfavorable ore elements constraining production;
SPA realized prices were relativ ely flat year-over-year primarily due to pricing resiliency related
to liquid products in premium sales region;
revenues per tonne P 2O5 were down year-over-year primarily due to significant and continued
downward pressure on DAP NOLA to which MAP sales prices are linked; and
cash costs per tonne P 2O5 were down year-over-year primarily due to input costs declining in
line with the overall fertilizer market.
For the years ended December 31, 2019 and 2018, Itafos Conda’s business highlights were explained
as follows:
MAP production volumes were up year-over-year primarily due to a shift to incremental MAP
production as a result of SPA production constraints and shorte ned 2018 due to acquisition
timing and longer plant turnaround;
MAP sales volumes were up year-over-year despite delayed sprin g demand due to higher
MAP sales under the exclusive long-term MAP offtake agreement with Nutrien;
MAP realized prices were down year-over-year primarily due to significant and continued
downward pressure on DAP NOLA to which MAP sales prices are linked;
MAP+ production volumes were up year-over-year due to pilot pr oduction run during Q3 2019;
SPA production volumes were fla t year-over-year primarily due to production constraints
during 2019 and shortened 2018 due to acquisition timing and longer plant turnaround;
SPA sales volumes were up year-o ver-year primarily due to greater demand for liquid products
during 2019;
SPA realized prices were up year -over-year primarily due to pricing resiliency related to liquid
products in premium sales region;
revenues per tonne P 2O5 were down year-over-year primarily due to lower MAP realized prices
during 2019, which were partially offset by higher SPA realized prices during 2019; and
cash costs per tonne P 2O5 were up year-over-year primarily due to higher input costs in 2019.