TORONTO, ON – March 17, 2020 – Itafos (TSX-V: IFOS) (the “Company”) provided today an update on Itafos Arraias and announced the completion of the Company’s plan to idle Itafos Arraias considering the continued downward pressure on global fertilizer prices. In addition, the Company announced that it completed third party reports on Itafos Arraias’ mine and beneficiation plant and secured important long-term income tax incentives for Itafos Arraias.
“We have safely completed the idling of Itafos Arraias to manage the current fertilizer downcycle and preserve the value of the assets while we evaluate strategic alternatives for the business. We have also further validated the long-term viability of the assets by completing independent third party reviews of the mine and beneficiation plant that confirmed that restarting Itafos Arraias’ mine and beneficiation plant is viable,” said Dr. Wynand van Dyk, VP Engineering, R&D and Development at Itafos.
On November 21, 2019, the Company announced its decision to idle Itafos Arraias as part of a disciplined approach to capital allocation considering the continued downward pressure on global fertilizer prices. The Company has followed best practices in implementing its plan to idle Itafos Arraias to protect and preserve the value of the underlying assets. As of March 6, 2020, the Company has completed the employee layoffs and contractor terminations associated with the idling plan. In addition, the Company has successfully monetized its remaining inventory and raw materials to partially offset costs associated with the implementation of the idling plan. Notwithstanding the idling of Itafos Arraias, the Company will continue 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 existing regulations.
In parallel with its decision to idle Itafos Arraias, the Company 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, which were completed in January 2020, confirm that restarting Itafos Arraias’ mine and beneficiation plant is feasible and outline the respective timing and capex requirements.
Itafos Arraias is domiciled in Brazil and is subject to a federal tax rate of 34%, composed 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 administered by the Superintendência do Desenvolvimento da Amazônia (“SUDAM”). Created in 1966 to promote development of the Amazon region in Brazil, SUDAM offers tax incentives that allow eligible companies to reduce the federal tax rate of 34% to 15.25% by means of 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.