11:53:44 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



Encanto Potash Corp
Symbol EPO
Shares Issued 278,209,798
Close 2013-02-01 C$ 0.24
Market Cap C$ 66,770,352
Recent Sedar Documents

Encanto Potash's Muskowekwan NPV at $3.63-billion

2013-02-04 09:33 ET - News Release

Mr. James Walchuck reports

ENCANTO ANNOUNCES POSITIVE PRE-FEASIBILITY STUDY FOR MUSKOWEKWAN PROPERTY

Encanto Potash Corp. has completed an independent positive prefeasibility study prepared by Novopro Projects Inc. for the Muskowekwan property in Southern Saskatchewan.

The prefeasibility study confirms that the project has significant positive economics and that the resource is of sufficient size as well as grade to support primary and secondary mining for over 50 years with muriate of potash production rate of 2.8 million tonnes per year.

The prefeasibility study's economic model for the project generated an internal rate of return of 19.1 per cent (20.4 per cent before taxes) and a net present value of $3.63-billion ($4.47-billion before taxes), yielding a project payback period of five years. A list of assumptions used in the model are shown in the attached table.

                          SUMMARY OF FINANCIAL MODEL

Realized potash price (FOB Vancouver)                              $460/t standard
                                                                   $485/t granular
Discount rate                                                                  10%
Inflation rate                                                                  2%
Operating expenditures at full capacity                              
(includes utilities, labour, maintenance, 
reagents, fuel, insurances and municipal taxes)                           $54.32/t
Sustaining capital cost
(includes brine field and tailing management 
area extensions)                                                          $32.21/t
Logistics costs (rail and port)                                           $50.50/t
Taxes and royalties                                                     
(includes potash production tax, Crown royalty 
and Saskatchewan resource surcharge, average 
over the life of the project)                                             $64.76/t
Initial capital expenditures                                         $2.86-billion
(includes contingency and escalation)
Deferred capital expenditures                                         $130-million
All capex and opex costs are in Canadian dollars; 
revenues are in U.S. dollars 
(U.S.-dollar-to-Canadian-dollar 
exchange assumed as one)
Annual production rate                                       2.8 million tonnes of 
                                                         K62-grade potash (98% KCl)
Construction start date                                                   Q2, 2014
Mine start-up                                                             Q1, 2017
Lifespan of project                                                  50 years plus

Jim Walchuck, Encanto's president and chief executive officer, commented: "This prefeasibility study confirms the economic robustness of the Muskowekwan project and highlights our flagship property as an attractive potash project. This is a major milestone in the company's intention to develop the Muskowekwan project into a significant producing potash mine. I would like to express the company's sincere appreciation to the company's employees and consultants who worked on the study, and made it possible to move the project towards the next stage of its development."

Capital and operating cost estimates were generated with a target accuracy of plus or minus 20 per cent, typical for this level of study. The initial capital expenditure estimate for the plant is $2.86-billion, and includes estimates for water supply, gas pipeline and a cogeneration plant, and includes a contingency and escalation of $460-million.

The operating costs were estimated at $54.32 per tonne at full-production capacity. This number includes utilities, labour, maintenance, reagents (including fuel), insurances and municipal taxes. It does not include royalties, potash production taxes or federal/provincial income taxes, which are estimated at $64.76 per tonne. The logistical costs estimates of $50.50 per tonne were provided by existing carriers and port facilities with capacity to serve this project. Sustaining capital costs were estimated at $32.21 per tonne at full production, and include well-field extension and tailing management area.

Novopro is a Canadian-based project development and implementation company servicing the mining and metallurgical industries, specializing in the potash sector with industry-leading expertise in solution-mining-related projects.

Mineral reserve estimate and mineral resource update

The attached table presents proven and probable potassium chloride (KCl) reserves of 161.96 million tonnes. The mineral reserves shall be discussed in more detail in a National Instrument 43-101 report that supports this news release as required by the Canadian securities regulation.

              PROVEN AND PROBABLE RESERVES
                   (in millions of tonnes)

Member                          In-place KCl(1) KCl reserves(2)

Patience Lake
Proven                                   20.77           18.65
Probable                                 82.17           70.67
Belle Plaine 
Proven                                   17.35           15.58
Probable                                 66.36           57.07
Total proven reserves                    38.13           34.23
Total probable reserves                 148.54          127.74
Proven and probable reserves            186.66          161.96

(1) Based on cavern tonnages minus 15-per-cent 
    cavern recovery loss;
(2) Reserves account for unknown anomalies (5 per cent
    for proven and 9 per cent for probable) and plant 
    recovery of 94.5 per cent (including downstream 
    losses). These reserves are based on 100 per cent
    KCl and do not account for the K2O or KCl grade 
    of the product actually sold.
Notes:
- Proven radius of influence of 800 metres;
- Probable radius of influence of 2,000 metres.

The mineral reserve estimate was prepared by Agapito Associates Inc. of Grand Junction under the direction of qualified person Dr. Michael P. Hardy, PE, PEng.

The mineral reserves discussed in the table were obtained from a mine plan covering the areas of measured and indicated resources surrounding seven of the eight wells advanced for this project. Mineral resources outside the areas containing reserves are presented in the attached table.

 
                       RESOURCE SUMMARY

          SOLUTION-MINING RESOURCE SUMMARY (INDICATED)  
           
Member                      Weighted         In-place       Net KCl 
                         average KCl        sylvinite      resource
                            grade (%)   resource (mmt)         (mmt)

Patience Lake                  26.74           217.92         19.40
Belle Plaine                   30.71           116.55         11.91
Total excluding interbed                       334.47         31.31
Weighted average 
excluding interbed             28.12      

           SOLUTION-MINING RESOURCE SUMMARY (INFERRED)

Member                      Weighted         In-place       Net KCl 
                         average KCl        sylvinite      resource
                            grade (%)   resource (mmt)         (mmt)
 
Patience Lake                  29.57           838.08         82.48
Belle Plaine                   29.48           776.68         76.21
Total excluding interbed                     1,614.76        158.69
Weighted average
excluding interbed             29.53      

Notes:
1. Mmt refers to millions of metric tonnes;
2. Density of sylvinite equals 2.08 tonnes per cubic metre;
3. In-place sylvinite is calculated based on area 
   multiplied by thickness multiplied by density (2,080 
   kilograms per cubic metre);
4. Net resource is based on a 41.6-per-cent extraction ratio 
   and 20-per-cent plant-and-cavern loss;
5. Weighted average thickness and KCl are weighted to 
   in-place tonnage;
6. The 8-14 interbed salt was thin so it was included in 
   the PLM resource interval;
7. Indicated resource radius of influence of 2,000 metres;
8. Inferred resource radius of influence of 5,000 metres.

The resource estimate was provided by Saskatchewan-based North Rim Exploration Ltd., and the qualified person is Tabetha Stirrett, PGeo.

The study includes all facilities, infrastructure and utilities to produce potash via the solution-mining method. This includes a two-train hybrid evaporation plant, a crystallization plant, drying, storage and a load-out facility. The project also includes a cogeneration plant to produce both the electricity and steam, which improves efficiency and allows for a lower overall carbon footprint. The design details are sufficient to allow the capital-cost estimate to adhere to the requirement of AACE (Association for the Advancement of Cost Engineers) Class 4 standard.

The prefeasibility study provides a high degree of project definition, building on the preliminary economic assessment completed in 2011. Study experts were retained by Encanto and Novopro to refine the project, including Agapito Associates Inc. (mining design and reserve estimate), North Rim Exploration Ltd. (resource estimate), Stantec Consulting Inc. (environmental impact assessment), MDH Engineered Solutions Corp., a member of SNC-Lavalin Group (tailing management area design), NG Consulting (dissolution test work), Institut fur Gebirgsmechanik GmbH (IfG) and RESPEC Consulting Services (geomechanical test work). Using these specialized companies resulted in a prefeasibility study that is both detailed and thorough.

An environmental impact study has been initiated to capture all environmental, heritage and historic aspects required by the regulators to obtain construction permitting. The environmental impact study is scheduled for completion in the third quarter of 2013. The prefeasibility study is based on environmental constraints mapping of the available Muskowekwan First Nation lands to site the plant, which was complemented by the following trade-off studies: 1) site selection alternatives, 2) solution-mining cavern temperature, 3) evaporation crystallization process, 4) cogeneration, and 5) logistics and port.

No significant limitations were identified, and the strong economic outcome results in a recommendation to fast-track toward a feasibility study as soon as possible.

The technical content of this news release has been reviewed by Jim Walchuck, PEng, a qualified person as defined by NI 43-101.

We seek Safe Harbor.

© 2024 Canjex Publishing Ltd. All rights reserved.