EDITOR: | February 4th, 2013

Encanto Announces Positive Pre-Feasibility Study for Muskowekwan Property

| February 04, 2013 | No Comments
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February 4, 2013 (Source: PRNewswire) Vancouver, BC — Encanto Potash Corp. (TSXV: EPO and OTCQX: ENCTF) is pleased to announce the completion of an independent positive Pre-Feasibility Study (the “PFS”) prepared by Novopro Projects Inc. (“Novopro”) for the Muskowekwan property (the “Project”) in southern Saskatchewan.

The PFS 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 tons per annum.

The PFS’ Economic Model for the Project generated an Internal Rate of Return of 19.1% (20.4% before taxes) and a Net Present Value of $3.63 billion ($4.47 billion before taxes) yielding a Project payback period of 5.0 years.  A list of assumptions used in the model are shown in Table 1:

encanta1Jim Walchuck, Encanto’s President and CEO commented: “This pre-feasibility 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 ±20%, typical for this level of study.  The initial CAPEX 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/t 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/t.  The logistical costs estimates of $50.50/t were provided by existing carriers and port facilities with capacity to serve this Project.  Sustaining Capital costs were estimated at $32.21/t at full production and include well field extension, and Tailing Management Area (TMA).

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

Mineral Reserve Estimate and Mineral Resource Update

Table 2 presents Proven and Probable KCl Reserves of 161.96 MMT.  The mineral reserves shall be discussed in more detail in a NI 43-101 report that supports this news release as required by the Canadian securities regulation.

Encanta2

Notes:

  1. Proven Radius of Influence of  800 meters
  2. Probable Radius of Influence of 2000 meter

The Mineral Reserve estimate was prepared by Agapito Associates Inc. (“AAI”) of Grand Junction, under the direction of Qualified Person Dr. Michael P. Hardy P.E., P. Eng.

The Mineral Reserves discussed above 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 Table 3:
Encanta3

Notes:

  1. MMT = Million Metric Tonnes
  2. Density of Sylvinite = 2.08 T/m3
  3. In-Place Sylvinite is calculated based on Area x Thickness x Density (2080kg/m3)
  4. Net Resource based on 41.6% extraction ratio and 20% plant and cavern loss
  5. Weighted average thickness and KCl are weighted to In-Place Tonnage
  6. 8-14 interbed salt was thin so it was included in the PLM resource interval.
  7. Indicated Resource Radius of Influence of 2000 meters
  8. Inferred Resource Radius of Influence of 5000 meters

The resource estimate was provided by Saskatchewan-based North Rim Exploration Limited, qualified person Tabetha Stirrett, P.Geo.

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 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 PFS 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 Limited (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 (Geo-mechanical Test-Work).  Using these specialised companies resulted in a PFS that is both detailed and thorough.

An Environmental Impact Study (EIS) has been initiated to capture all environmental, heritage and historic aspects required by the regulators to obtain construction permitting.  The EIS is scheduled for completion in Q3 2013. The PFS is based on environmental constraints mapping of the available Muskowekwan First Nation (“MFN”) 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 towards a Feasibility Study as soon as possible.


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