Mr. Patricio Varas reports
WESTERN POTASH FILES UPDATED TECHNICAL REPORT ON SEDAR, ADVANCES EIS, AND UPDATES THE MEASURED INDICATED AND INFERRED POTASH RESOURCE AT MILESTONE
Western Potash Corp. has received receipt of an updated NI 43-101 technical report titled, "NI 43-101 Technical Report Summarizing the Preliminary Feasibility Study for a Potash Solution Mine on the Milestone Project (Subsurface Mineral Lease KLSA 008), Saskatchewan." The company confirms that this report has been filed on SEDAR on Dec. 15, 2011. The technical report includes an updated resource estimate and a summary of the company's prefeasibility study announced by news release dated Oct. 31, 2011. The prefeasibility study was completed by AMEC Americas Ltd. AMEC is a leading international engineering and project management company that currently manages multiple potash expansion projects in Saskatchewan with a capital value of several billion dollars.
The updated resource estimate slightly increases the Milestone recoverable Potash resource (Patience Lake, Belle Plaine and Esterhazy members, including the upper halite interbed) to 66.6 million tonnes of measured resource (contained potassium chloride), 186.9 million tonnes of indicated resource and 708.2 million tonnes of inferred resource. Inferred resources around the Milestone project plant site, land and associated infrastructure have been removed from the estimate. Purchase of the plant site land was announced by news release dated June 21, 2011. Mineral reserves were not reported within this updated technical report. Mineral reserves have not been estimated because the company is negotiating to obtain mineral leases for all the freehold mineral rights within the indicated and measured resource areas. These negotiations are expected to be completed within the next few months. Mineral reserves will be presented when acquisition of these mineral leases is substantially complete. The updated resource estimate at Milestone was prepared by Agapito Associates Inc. (AAI) of Grand Junction, Colo. The qualified persons for the Resource Estimate were Dr. Michael Hardy, PE (United States), PEng (SK), PG (U.S.), and Dr. Douglas Hambley, PE (U.S.), PEng (SK), PG (U.S.).
A detailed summary of the measured, indicated and inferred mineral resources within Crown and leased freehold areas are presented in the associated tables.
MEASURED MINERAL RESOURCE WITHIN CROWN AND LEASED FREEHOLD AREAS ONLY
Bed Average KCL In-place In-place KCL KCL
grade (%) tonnage (Mt) tonnage (Mt) resource (Mt)
Patience Lake 28.68 320.37 91.87 30.2
Halite interbed 4.72 144.2 6.81 2.24
Belle Plaine 30.16 131.52 39.67 13.04
Esterhazy 33.7 190.71 64.27 21.13
Total 25.75 786.8 202.63 66.6
INDICATED MINERAL RESOURCE WITHIN CROWN AND LEASED FREEHOLD AREAS ONLY
Bed Average KCL In-place In-place KCL KCL
grade (%) tonnage (Mt) tonnage (Mt) resource (Mt)
Patience Lake 28.6 935.65 267.58 84.25
Halite interbed 4.76 385.38 18.33 5.77
Belle Plaine 30 392.59 117.79 37.09
Esterhazy 33.64 538.76 181.23 59.57
Total 25.97 2,252.38 584.93 186.68
INFERRED MINERAL RESOURCE WITHIN CROWN AND LEASED FREEHOLD AREAS ONLY
Bed Average KCL In-place In-place KCL KCL
grade (%) tonnage (Mt) tonnage (Mt) resource (Mt)
Patience Lake 28.63 4,261.37 1,220.01 316.59
Halite interbed 4.66 1,793.31 83.59 21.69
Belle Plaine 30.07 1,972.32 593.02 153.89
Esterhazy 33.48 2,486.17 832.38 216
Total 25.96 10,513.16 2,729.00 708.18
AAI has made estimates of the measured, indicated and inferred mineral resources based on a radius of influence (ROI) similar to that applied by mine operators and peer group explorers working on solution mining properties in the region. Furthermore, the measured, indicated and inferred mineral resources were arrived at by discounting the overall calculated tonnage by loss factors of 5 per cent, 9 per cent and 25 per cent, respectively, to account for unknown geologic anomalies. The resulting potash quantity was further reduced using an extraction ratio factor of 34.6 per cent, which is the estimated potash available to be extracted for the life of an envisioned operation leaving sufficient material to support cavern stability. The resource estimate was prepared in accordance with the requirements of NI 43-101 of the Canadian securities regulators.
The recently completed prefeasibility study confirms that the Milestone project shows significant positive economics, and that the asset is of sufficient size and grade to support primary and secondary solution mining for more than 40 years at a production rate of 2.8 million tonnes per year. The study concluded that there are no known limitations that may prevent a successful and profitable project outcome. The feasibility study is in progress and will produce results which adhere to the AACE Class 3 classification for projects. Water sources are currently being evaluated for the project.
A summary of the assumptions and results of the prefeasibility study are:
Target annual production rate: 2.8 million tonnes per year
Life of mine: Greater than 40 years
Years of construction: Three
Construction start-up: 2013
Production start-up: 2016
Years to full secondary production: Six
Long-term potash price (FOB gate): $511 (U.S.)/tonne
Assumed exchange rate: $(U.S.)/$(Canadian) -- 1.00
Taxes and royalties: $28.90/tonne
Sustaining capex percentage rate: 2 per cent
Base case: 100-per-cent equity
Initial capex: $2,458-million
Port capex: $300-million
Total initial capex: $2,758-million
NPV (10): $4.14-billion
IRR: 22.70 per cent
Payback period: Five years
Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Milestone environmental impact statement update
The company also reports that all environmental baseline data required for the preparation of the EIS have now been collected. On Oct. 11, 2011, the company submitted a project proposal to the Saskatchewan Ministry of Environment. The project proposal provides a conceptual level description of the Milestone project and formally initiates the regulatory review process under the provincial Environmental Assessment Act. Upon review of the project proposal, the government of Saskatchewan will issue project-specific guidelines, which provide detailed information requirements to be included in the EIS. The EIS remains on schedule and on budget, with an anticipated EIS submission date of the third quarter of 2012. Golder Associates Ltd. of Saskatoon, Sask., continues to assist the company with the preparation of the environmental impact statement for the Milestone project. Golder is an employee-owned, global company providing consulting, design and construction services in earth, environment and related areas of energy. Golder was chosen by the company due to its commitment to technical excellence and its experience with environmental assessments for potash projects.
The 100-per-cent-owned Milestone property, comprising 500 square kilometres, is located 30 kilometres southeast of Regina and southeast of Mosaic's Belle Plaine mine, one of the largest producing potash solution mines in the world.
Brazil update
On July 28, 2008, the company signed an agreement with Amarillo Gold Corp., a company related by a common director, to acquire potash mineral rights in Brazil. Amarillo, through its Brazilian subsidiary, submitted applications on behalf of the company for 113 potash permits totalling 982,962 hectares within potash prospective portions of the Brazilian Amazon basin. The company is pleased to announce that these permits have now been granted by the Brazilian government. These potash permits are currently being transferred into the company's wholly owned Brazilian subsidiary, Potassio Ocidental Mineracao Ltd. The subsidiary has also, since its incorporation in December, 2008, submitted its own applications for an additional 53 potash permits totalling 91,245 hectares. These additional permits are located in the Amazon basin and have been granted to the subsidiary by the Brazilian government.
We seek Safe Harbor.
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