RE:RE:RE:talked to the CFOAfter trying many many times to reach him, I finally got to talk to Mr Pinto, MBAC's CFO
- He insisted that he can not give me any info that is not considered public and that he can not disclose any insiders info.
- I asked about how long it will take for the strategic alternatives and if they are in talks to anyone regarding selling the company or some assets; he said that they are in talks with strategic partners but nothing is binding yet, once there is something binding ity will be released to the public.
- I asked about the recents acquisitions in brazil, there had been some major acquisitions in the fertilizers market by ICL, Yara, Mosaic ...etc. has anyone of these companies approached MBAC ? he said that he can not disclose any info, he mentioned that some of the companies will consider them a project company and some will consider MBAC a producing company, so it is hard to put a valuation to the company. One of the acquisitions were to Yara taking a 60% equity stake in Galvani ( a private fertilizer company) this company been in business for 20 years and they are the major competitor to MBAC, they produce SSP (about 1 million tons per year).
here is some info about the Galvani acquisition by Yara
https://www.bloomberg.com/news/2014-08-05/yara-expands-in-south-america-with-318-million-galvani-purchase.html
- I asked about the problems in the benefication plant, he said that every new plants need some adjustment and tweaking and in order to do that, the plant has to run full time for a certain period of time, and with this comes breakage of small parts, replacements of some parts and working capital, they were very close in September to acheive this but then they ran out of money and the planting season was close to its end. He said that the plant has no technical problems preventing it from operating, they just have to operate it full time for specific period of time and they dont have that amount of capital, thats why they started importing rock phosphate from other suppliers.
- When I asked how much money does the company need to stand on its feet again, he said that he can not give me an answer because the info is not made public, but the company had disclosed back in April that it needs about $40 million and he has no reason to believe that the number has changed since then.
- When I asked about the tax return that they announced in the previous conference call, he said that Brazil has one of the most complicated tax systems in the world, he said that the government recognizes that they owe MBAC $26 million and that they will get it but as to when he isn't sure, they are in talks with the brazillian authorities on a daily basis and they keep asking for some info ...etc.
- When I asked about insiders selling, he mentioned that Mr Marrone still has a substantial shares in the company, close to 4 million shares as far as he knows, the selling by insiders were done for tax purposes as he understands.
- I asked about banks support, he said that one of the banks had not sold any shares yet and that they still have about 10 million shares in the company, so they are not just lenders, but shareholders as well and they are very interested to see the company succeed. Banks have mandates and they are governed by these mandates, they are working diligently with the company to solve their working capital problem.
From what I got, it looks like the company still needs about $40 million to get out of the constraining capital they were put under. I believe that the reduced price of SSP and spare parts defeciency had put the company under this not-so-good situation. I tried to put a price on Galvani's acquisition price, it looks like they produce 1 million tons of SSP, they have a $160 million in debt and Yara purchased 60% of the company for $318 million USD. from what I can gather, the whole Galvani company is priced at about $700 million, part is for the running plant and part is for their green/brown field projects. they produce about 1 million tons of SSP, but there is a huge transportation cost ( according to CFO) because there plant is far from their 2 mines. Either way, MBAC should not be sold for less that $1 and this is my opinion.
I do believe that teh company will exit this aweful situation and that they will have a solution to the problem before the next selling season begins ( which is March). everyone wants the company to succeed; government, banks, the company and all shareholders. I am betting big one it.
Another company to look at is GER, it looks like they will have a big turnaround very soon, 2 gold small plants which should generate about $8 million in net income in 2015, which should give a valuation to the company at 50 cents a share in my opinion.