An anonymous director reports

MBAC FERTILIZER PROVIDES UPDATE ON ITS STRATEGIC REVIEW PROCESS AND ADVISES OF LAWSUIT CLAIMS AGAINST ITAFOS

Following the receipt of non-binding proposals disclosed previously, MBAC Fertilizer Corp. has now received revised proposals from third parties active in the fertilizer and agriculture sectors. The company and its lenders are currently evaluating the proposals and defining next steps. Upon final settlement the chosen proposal is expected to address MBAC's liquidity requirements together with all other issues described below and result in the resumption of operations at its Itafos Arraias operations.

As disclosed previously, MBAC is conducting a strategic process in collaboration with its senior lenders. Options under consideration include, but are not limited to, securing a strategic partner, the sale of the company or its assets as well as other potential value-maximizing transactions. There can be no assurances that the company will complete a business transaction or sale under its strategic process, nor that a business transaction or sale will provide any value to all or any stakeholders.

MBAC also reports that two lawsuits have been filed against its wholly owned subsidiary, Itafos Mineracao Ltda., in Brazil by the Labour Public Ministry and the Arraias City Hall, respectively. The company wishes to advise that it is defending its claims, that certain rulings rendered thus far are being challenged and that protocols for the rehiring of employees will be followed once the strategic review process is completed.

The first lawsuit relates to a combination of a class action and individual claims from former employees for severance payments stemming from the company's cost-cutting restructuring initiative that resulted in the Itafos Arraias operations being put on care and maintenance. The total value claimed by the class action and the individual claims amounts to approximately $13.1-million (U.S.). This amount includes the original outstanding severance amount of approximately $1.6-million (U.S.) and damages of approximately $11.5-million (U.S.).

MBAC has already settled 120 individual claims heard to date using a working capital facility of $400,000 (U.S.) obtained from one of its senior lenders for this purpose. Once all individual claims are settled, MBAC expects to be able to significantly reduce the total amount of penalties and damages that are being claimed.

In connection with the lawsuit, the labour judge of the State of Tocantins has placed certain of company's fixed and non-fixed assets (valued at $2.7-million (U.S.)) in escrow to cover payments related to the claims and has ruled that the assets be sold by way of auction on June 30, 2015. These assets however are pledged to Itafos's lenders as part of the security package under the company's project loan financing. As a result, the lenders are working to stop the auction.

The second lawsuit relates to a notification received on June 10 of a tax claim from the Arraias City Hall relating to municipal services taxes (ISS). The claim states that the ISS associated with all services rendered to Itafos should be remitted to the City of Arraias regardless of whether the services were rendered locally or remotely. The total ISS amount being claimed is approximately $1.9-million (U.S.), plus penalties and interest of $1.6-million (U.S.) for a total of $3.5-million (U.S.). The company believes that it has remitted ISS correctly in the appropriate jurisdictions, and will vigorously defend this lawsuit.

The company will provide updates on its strategic review process and legal activities as material developments occur.

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