NI 43-101 Preliminary Economic Assessment - Verde Potash
NI 43-101 Preliminary Economic Assessment - Verde Potash
NI 43-101 Preliminary Economic Assessment - Verde Potash
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<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Cerrado <strong>Verde</strong> Project<br />
Minas Gerais, Brazil<br />
Prepared for:<br />
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
47 Colborne Street, Suite 307<br />
Toronto, Ontario M5E 1P8<br />
Prepared by:<br />
7175 W. Jefferson Ave.<br />
Suite 3000<br />
Lakewood, Co 80235<br />
SRK Project Number: 3<strong>43</strong>500.020<br />
Effective Date: August 3, 2011<br />
Report Date: September 16, 2011<br />
Endorsed by Qualified Persons:<br />
Neal Rigby, CEng, MIMMM, PhD<br />
Rob Bowell, PhD, C.Chem MRSC, C. Geol FGS<br />
Volodymyr Myadzel, MAIG, PhD
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
i<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table of Contents<br />
1 INTRODUCTION (ITEM 2) ........................................................................................... 1-1<br />
1.1 Terms of Reference and Purpose of the Report ................................................... 1-1<br />
1.2 Reliance on Other Experts (Item 4) ..................................................................... 1-1<br />
1.2.1 Sources of Information ......................................................................... 1-2<br />
1.3 Qualifications of Consultants ............................................................................... 1-2<br />
1.3.1 SRK ....................................................................................................... 1-2<br />
1.3.2 BNA Consultoria e Sistemas ................................................................ 1-3<br />
1.3.3 ECM ...................................................................................................... 1-3<br />
1.3.4 AgroConsult Consultoria & Marketing ................................................ 1-3<br />
1.3.5 Site Visit................................................................................................ 1-3<br />
1.3.6 Effective Date ....................................................................................... 1-3<br />
2 PROPERTY DESCRIPTION AND LOCATION (ITEM 4) ........................................... 2-1<br />
2.1 Property Location................................................................................................. 2-1<br />
2.2 Mineral Titles ....................................................................................................... 2-1<br />
2.3 Location of Mineralization .................................................................................. 2-4<br />
2.4 Royalties, Agreements and Encumbrances .......................................................... 2-4<br />
2.5 Environmental Liabilities and Permitting ............................................................ 2-5<br />
3 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND<br />
PHYSIOGRAPHY (ITEM 5) ...................................................................................................... 3-1<br />
3.1 Topography, Elevation and Vegetation ............................................................... 3-1<br />
3.2 Climate and Length of Operating Season ............................................................ 3-1<br />
3.3 Physiography........................................................................................................ 3-1<br />
3.4 Access to Property ............................................................................................... 3-2<br />
3.5 Surface Rights ...................................................................................................... 3-2<br />
3.6 Local Resources and Infrastructure ..................................................................... 3-2<br />
4 HISTORY (ITEM 6) ........................................................................................................ 4-1<br />
5 GEOLOGICAL SETTING AND MINERALIZATION (ITEM 7) ................................. 5-1<br />
5.1 Regional Geology ................................................................................................ 5-1<br />
5.2 Local and Project Geology ................................................................................... 5-1<br />
5.2.1 The <strong>Verde</strong>te Unit................................................................................... 5-1<br />
5.2.2 Structure ................................................................................................ 5-1<br />
5.2.3 Elevation and Erosion Level ................................................................. 5-2<br />
5.3 Mineralization ...................................................................................................... 5-2<br />
5.3.1 Mineralized Zones ................................................................................ 5-2<br />
5.3.2 Surrounding Rock Types ...................................................................... 5-3<br />
6 DEPOSIT TYPE (ITEM 8) .............................................................................................. 6-1<br />
7 EXPLORATION (ITEM 9) ............................................................................................. 7-1<br />
8 DRILLING (ITEM 10) .................................................................................................... 8-1<br />
8.1 Type and Extent of Drilling for Funchal Norte Target ........................................ 8-1<br />
8.1.1 Reverse Circulation (RC) Sampling ..................................................... 8-1<br />
8.1.2 Logging ................................................................................................. 8-1<br />
8.1.3 Bulk Density ......................................................................................... 8-1<br />
8.2 Type and Extent of Drilling for Targets 4, 6, 7, 10 and 11 .................................. 8-2<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
ii<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
8.2.1 Logging ................................................................................................. 8-3<br />
8.2.2 Recovery ............................................................................................... 8-3<br />
8.2.3 Reverse Circulation (RC) Sampling ..................................................... 8-4<br />
8.2.4 DDH Sampling...................................................................................... 8-4<br />
8.2.5 Bulk Density ......................................................................................... 8-4<br />
9 SAMPLE PREPARATION, ANALYSES AND SECURITY (ITEM 11) ...................... 9-1<br />
9.1 Sample Preparation and Assaying Methods for Funchal Norte Target ............... 9-1<br />
9.2 Sample Preparation and Assaying Methods for Targets 4, 6, 7, 10 and 11 ......... 9-1<br />
9.2.1 Quality Controls and Quality Assurance .............................................. 9-3<br />
9.2.2 Adequacy of Procedures for Targets 4, 6, 7 10 and 11 ......................... 9-3<br />
10 DATA VERIFICATION (ITEM 12) ............................................................................. 10-1<br />
10.1 Funchal Norte Target ......................................................................................... 10-1<br />
10.1.1 Bureau Veritas Pulp Duplicates .......................................................... 10-2<br />
10.1.2 Adequacy of Procedures ..................................................................... 10-2<br />
10.1.3 Limitations .......................................................................................... 10-2<br />
10.2 Targets 4, 6, 7, 10 and 11 ................................................................................... 10-2<br />
10.2.1 QA/QC Results ................................................................................... 10-2<br />
10.2.2 Data Import and Validation ................................................................ 10-4<br />
11 MINERAL PROCESSING, METALLURGICAL TESTING AND RECOVERY<br />
METHODS (ITEMS 13 AND 17) ............................................................................................. 11-1<br />
11.1 Summary of Proposed Process ........................................................................... 11-1<br />
11.1.1 Overview ............................................................................................. 11-1<br />
11.1.2 Project Scenarios and Capital Costs ................................................... 11-2<br />
11.1.3 Product Specification and Application ............................................... 11-3<br />
11.1.4 Results of Agronomic Testwork ......................................................... 11-4<br />
11.1.5 Summary, Residual Issues and Recommendations ............................. 11-6<br />
12 MINERAL RESOURCE ESTIMATE (ITEM 14) ........................................................ 12-1<br />
12.1 Funchal Norte Target ......................................................................................... 12-1<br />
12.1.1 Geological Modeling .......................................................................... 12-1<br />
12.1.2 Block Model Development ................................................................. 12-1<br />
12.1.3 Statistical Analysis .............................................................................. 12-2<br />
12.1.4 Variography ........................................................................................ 12-3<br />
12.1.5 Grade Estimation ................................................................................ 12-4<br />
12.1.6 Resource Reporting ............................................................................. 12-5<br />
12.2 Targets 4, 6, 7, 10 and 11 ................................................................................... 12-7<br />
12.2.1 Statistical Analyses of Geological Exploration .................................. 12-8<br />
12.2.2 Interpretation ..................................................................................... 12-10<br />
12.2.3 Triangulation ..................................................................................... 12-10<br />
12.2.4 Data Selection ................................................................................... 12-11<br />
12.2.5 Modeling ........................................................................................... 12-11<br />
12.2.6 Geostatistical Analysis ...................................................................... 12-12<br />
12.2.7 Grade Estimation and Resources Classification ............................... 12-12<br />
12.2.8 Assignment of Density Values to the Block Model .......................... 12-14<br />
12.2.9 Block Model Validation .................................................................... 12-14<br />
12.2.10 Resources Evaluation Results ........................................................... 12-15<br />
12.3 Mineral Resource Estimate .............................................................................. 12-16<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
iii<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
13 MI<strong>NI</strong>NG METHODS (ITEM 16) .................................................................................. 13-1<br />
13.1 Mining Operations ............................................................................................. 13-1<br />
13.1.1 Pit Optimization .................................................................................. 13-1<br />
13.1.2 Whittle Parameters .......................................................................... 13-1<br />
13.1.3 Pit Optimization Analysis ................................................................... 13-3<br />
13.1.4 Pit Design ............................................................................................ 13-4<br />
13.1.5 Production Schedule ........................................................................... 13-5<br />
13.1.6 Recovery ............................................................................................. 13-7<br />
14 PROJECT INFRASTRUCTURE (ITEM 18) ................................................................ 14-1<br />
14.1 Access Road and Transportation ....................................................................... 14-1<br />
14.2 Power Supply ..................................................................................................... 14-1<br />
14.3 Water Supply ..................................................................................................... 14-2<br />
14.3.1 Rainwater Drainage ............................................................................ 14-2<br />
14.3.2 Hydraulic Sizing ................................................................................. 14-2<br />
14.4 Buildings and Ancillary Facilities ..................................................................... 14-3<br />
14.5 Potential Processing Plant Sites ......................................................................... 14-3<br />
14.6 Potential Tailings Storage Area ......................................................................... 14-3<br />
14.7 Potential Waste Disposal Area ........................................................................... 14-3<br />
14.8 Manpower .......................................................................................................... 14-4<br />
14.9 Other Surface Rights .......................................................................................... 14-4<br />
15 MARKET STUDIES AND CONTRACTS (ITEM 19) ................................................ 15-1<br />
15.1 Market Studies ................................................................................................... 15-1<br />
15.1.1 Introduction ......................................................................................... 15-1<br />
15.1.2 Methodology ....................................................................................... 15-1<br />
15.1.3 Determining the Crop Portfolio and Formulas ................................... 15-2<br />
15.1.4 Formula Optimization Process ............................................................ 15-3<br />
15.1.5 Thermo<strong>Potash</strong> Pricing Process ........................................................... 15-4<br />
15.1.6 Process to Determine the Potential Market for Thermo<strong>Potash</strong> ........... 15-5<br />
15.2 Contracts ............................................................................................................ 15-5<br />
16 ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMU<strong>NI</strong>TY<br />
IMPACT (ITEM 20) .................................................................................................................. 16-1<br />
17 CAPITAL AND OPERATING COSTS (ITEM 21) ..................................................... 17-1<br />
17.1 Capital Costs ...................................................................................................... 17-1<br />
17.1.1 Payback ............................................................................................... 17-2<br />
17.2 Operating Costs .................................................................................................. 17-2<br />
18 ECONOMIC ANALYSIS (ITEM 22) ........................................................................... 18-1<br />
18.1 Taxes and Royalties ........................................................................................... 18-2<br />
18.2 Sensitivity .......................................................................................................... 18-3<br />
18.3 Mine Life ........................................................................................................... 18-3<br />
19 ADJACENT PROPERTIES (ITEM 23) ........................................................................ 19-1<br />
20 OTHER RELEVANT DATA AND INFORMATION (ITEM 24) ............................... 20-1<br />
21 INTERPRETATION AND CONCLUSIONS (ITEM 25) ............................................ 21-1<br />
22 RECOMMENDATIONS (ITEMS 26) .......................................................................... 22-1<br />
22.1 Recommended Work Programs ......................................................................... 22-1<br />
22.1.1 Resources ............................................................................................ 22-1<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
iv<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
23<br />
24<br />
22.1.2 Metallurgical ....................................................................................... 22-1<br />
22.1.3 Mining ................................................................................................. 22-1<br />
22.1.4 Costs .................................................................................................... 22-2<br />
REFERENCES (ITEM 27) ............................................................................................ 23-1<br />
GLOSSARY .................................................................................................................. 24-1<br />
24.1 Mineral Resources ............................................................................................. 24-1<br />
24.2 Mineral Reserves ............................................................................................... 24-1<br />
24.3 Glossary ............................................................................................................. 24-2<br />
24.4 Abbreviations ..................................................................................................... 24-3<br />
List of Tables<br />
Table 1: Grade Tonnage Report Cerrado <strong>Verde</strong> <strong>Potash</strong> Project .................................................. IV<br />
Table 2: Indicative <strong>Economic</strong>s ....................................................................................................... V<br />
Table 3: Recommended Prefeasibility Work Program Cost Estimate (US$000’s) ....................... V<br />
Table 2.2.1: Cerrado <strong>Verde</strong> <strong>Potash</strong> Project Tenement Schedule ................................................ 2-1<br />
Table 8.1.1: Cerrado <strong>Verde</strong> <strong>Potash</strong> Project Summary Drilling Statistics ................................... 8-1<br />
Table 8.2.1: Drilling Statistics .................................................................................................... 8-3<br />
Table 8.2.2.1: Summarizes the Recovery Statistics .................................................................... 8-4<br />
Table 9.2.1: Detection Limits of XRF Analysis ......................................................................... 9-2<br />
Table 10.1.1: Standards Utilized by Bureau Veritas ................................................................. 10-2<br />
Table 11.1.2.1: Results of Carbon Speciation Analysis on Two Samples from the Scoping Level<br />
Pilot Plant ....................................................................................................................... 11-3<br />
Table 11.1.4.1: K content in soil (Mehlich 1) After 60 Days of Incubation with Different<br />
Sources of Potassium in a Clay Soil. ............................................................................. 11-4<br />
Table 11.1.4.2: K Content in Soil (Mehlich 1) After 60 Days of Incubation with Different<br />
Sources of Potassium in a Sandy Soil. ........................................................................... 11-4<br />
Table 11.1.4.3: Exchangeable Ca in the Soil After 60 Days of Incubation with Different Sources<br />
of Potassium in A Clay Soil ........................................................................................... 11-5<br />
Table 11.1.4.4: Exchangeable Ca in the Soil After 60 Days of Incubation with Different Sources<br />
of Potassium in a Sandy Soil ......................................................................................... 11-5<br />
Table 11.1.4.5: Exchangeable Mg in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in a Clay Soil .............................................................................. 11-5<br />
Table 11.1.4.6: Exchangeable Mg in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in a Sandy Soil ............................................................................ 11-6<br />
Table 12.1.2.1: Block Model Summary .................................................................................... 12-2<br />
Table 12.1.3.1: Summary Statistic – 2m Composites ............................................................... 12-2<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
v<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 12.1.4.1: Cerrado <strong>Verde</strong> Deposit Unweathered and Weathered Mineralized Domain<br />
Variogram Models ......................................................................................................... 12-3<br />
Table 12.1.6.1: Cerrado <strong>Verde</strong> Project Confidence Levels of Key Categorization Criteria .... 12-6<br />
Table 12.1.6.2: Cerrado <strong>Verde</strong> Deposit –February 27, 2010 Inferred Resource Grade Tonnage<br />
Report Ordinary Kriging Estimate 100mE x 100mN x 5mRL Selective Mining Unit . 12-6<br />
Table 12.2.1: Data Presentation ................................................................................................ 12-8<br />
Table 12.2.1.1: Descriptive Statistics Data for K 2 O of Target 4 .............................................. 12-9<br />
Table 12.2.1.2: Descriptive Statistics Data for K 2 O of the Target ........................................... 12-9<br />
Table 12.2.1.3: Descriptive Statistics Data for K 2 O of the Target 7 ........................................ 12-9<br />
Table 12.2.1.4: Descriptive Statistics Data for K 2 O of the Target 10 ...................................... 12-9<br />
Table 12.2.1.5: Descriptive Statistics Data for K2O of the Target 11 .................................... 12-10<br />
Table 12.2.5.1: Block Models Parameters .............................................................................. 12-12<br />
Table 12.2.6.1: Cross Validation Verification Results ........................................................... 12-12<br />
Table 12.2.7.1: Search Ellipse Parameters to Interpolate the Grades by the IDW And Kriging<br />
Methods of Target 6 ..................................................................................................... 12-13<br />
Table 12.2.7.2: Ellipse Search Parameters Used to Interpolate the Grades by the IDW Method<br />
for Target 4, 7, 10 and 11 ............................................................................................. 12-13<br />
Table 12.2.9.1: Comparison of metal tones and average K2O grade of the model, obtained by<br />
kriging and IDW2 methods to Target 6 ....................................................................... 12-14<br />
Table 12.2.9.2: Comparison of metal tonnes and average K2O grades, obtained by the Kriging<br />
method, the target to target 6 and by IDW2 for other targets, and polygonal solids<br />
evaluate by the "weighting intervals" method ............................................................. 12-15<br />
Table 12.2.10.1: Grade Tonnage Report for Target 6. Inverse Distance Weighting with power<br />
two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL) 7.5% K 2 O cut off<br />
utilized.......................................................................................................................... 12-15<br />
Table 12.2.10.2: Grade Tonnage Report for Target 7. Inverse Distance Weighting with power<br />
two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL) 7.5% K2O cut off<br />
utilized.......................................................................................................................... 12-16<br />
Table 12.2.10.3: Grade Tonnage Report for Target 4, Target 10 and Target 11. Inverse Distance<br />
Weighting with power two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL)<br />
7.5% K2O cut off utilized ............................................................................................ 12-16<br />
Table 12.3.1: Grade Tonnage Report Cerrado <strong>Verde</strong> <strong>Potash</strong> Project ..................................... 12-16<br />
Table 13.1.2.1: Whittle Block Model Dimensions ............................................................... 13-2<br />
Table 13.1.2.2: Whittle Parameters ....................................................................................... 13-3<br />
Table 13.1.3.1: Whittle Results ............................................................................................. 13-4<br />
Table 13.1.4.1: Pit Design Parameters ...................................................................................... 13-4<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
vi<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 13.1.5.1: First 10 Years of 1.1Mtpa Production Schedule .............................................. 13-5<br />
Table 13.1.5.2: First 10 Years of 2.2Mtpa Production Schedule .............................................. 13-6<br />
Table 13.1.5.3: 1.1Mtpa Product Mine Fleet and Annual Estimated Cost ............................... 13-6<br />
Table 13.1.5.4: 2.2Mtpa Product Mine Fleet and Annual Estimated Cost ............................... 13-7<br />
Table 15.1.3.1: Example of Fertilizing System Adopted for Each Crop Analyzed .................. 15-3<br />
Table 15.1.4.1: Price Composition of Raw Materials at the Uberaba Center ........................... 15-4<br />
Table 15.1.4.2: Raw Material Nutrient Levels ......................................................................... 15-4<br />
Table 15.1.4.3: Content Used and Status of Products Evaluated.............................................. 15-4<br />
Table 17.1.1: Summary Capital Cost by Facility in Reals and United States Dollars in thousands,<br />
Including Applicable Taxes for a 1.1Mtpa Operation ................................................... 17-1<br />
Table 17.1.2 Summary Capital Cost by Facility in Reals and United States Dollars in thousands,<br />
Including Applicable Taxes for a 2.2Mtpa Operation ................................................... 17-2<br />
Table 17.2.1: Summary of Operational Costs, 1.1Mtpa Using Petroleum Coke ...................... 17-3<br />
Table 17.2.2: Summary of Operational Costs, 2.2Mtpa using Petroleum Coke ....................... 17-3<br />
Table 18.1: Indicative <strong>Economic</strong>s ............................................................................................. 18-1<br />
Table 18.2.1: Sensitivity Analysis ............................................................................................ 18-3<br />
Table 22.1.4.1: Recommended Prefeasibility Work Program Cost Estimate (US$000’s) ....... 22-2<br />
Table 24.3.1: Glossary .............................................................................................................. 24-2<br />
Table 24.4.1: Abbreviations ...................................................................................................... 24-3<br />
List of Figures<br />
Figure 2-1: Location Map of Cerrado <strong>Verde</strong> <strong>Potash</strong> Project ...................................................... 2-6<br />
Figure 3-1: Cerrado <strong>Verde</strong> Project Site ...................................................................................... 3-4<br />
Figure 5-1: Cerrado <strong>Verde</strong> Regional Setting .............................................................................. 5-4<br />
Figure 5-2: Cerrado <strong>Verde</strong> Stratigraphic Chart According to LIMA, 2005 ............................... 5-5<br />
Figure 7-1: Reverse Circulation and Diamond Drilling Program for Targets 4 and 6 ............... 7-2<br />
Figure 7-2: Reverse Circulation and Diamond Drilling Program for Targets 7, 10 and 11 ....... 7-3<br />
Figure 8-1: Drillhole Location Plan ............................................................................................ 8-6<br />
Figure 8-2: RC Drilling Flowchart ............................................................................................. 8-7<br />
Figure 11-1: Conceptual Flowsheet for Cerrado <strong>Verde</strong> ThermoFertilizer Project ................... 11-7<br />
Figure 12-1: Vertical Sections Location ................................................................................. 12-17<br />
Figure 12-2: Cross Section (Section 4) ................................................................................... 12-18<br />
Figure 12-3: Cross Section (Section 5) ................................................................................... 12-19<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc<br />
Cerrado <strong>Verde</strong> Project<br />
vii<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Figure 12-4: Weathered (Transition Zone) Domain – 3 Dimensions ..................................... 12-20<br />
Figure 12-5: Unweathered Domain – 3 Dimensions .............................................................. 12-21<br />
Figure 12-6: Sample Length Distribution ............................................................................... 12-22<br />
Figure 12-7: Basic Statistics – 2m Composite Unweathered K 2 O ......................................... 12-23<br />
Figure 12-8: Basic Statistics – 2m Composite Weathered K 2 O ............................................. 12-24<br />
Figure 12-9: K 2 O % Estimation Steps – Plan View ............................................................... 12-25<br />
Figure 12-10: Block Model Domains High and Weathered ................................................... 12-26<br />
Figure 12-11: Grade Tonnage Curve – Domain Unweathered - Inferred Resource ............... 12-27<br />
Figure 12-12: Grade Tonnage Curve –Weathered- Inferred Resource ................................... 12-28<br />
Figure 12-13: Comparative Statistics Unweathered % K 2 O ................................................... 12-29<br />
Figure 12-14: Comparative Statistics % K 2 O Weathered ....................................................... 12-30<br />
Figure 12-15: Modeled Semi-variogram of the Top Grid ...................................................... 12-31<br />
Figure 12-16: Modeled Semi-variogram of the Base Grid ..................................................... 12-32<br />
Figure 12-17: Geologic Interpretation of Target 6 .................................................................. 12-33<br />
Figure 12-18: Geologic Interpretation of the Top and Base surfaces (Kriging method) ......... 12-34<br />
Figure 12-19: Geologic Interpretation of the Top and Base Surfaces of the Target 7 (IDW<br />
method with Power 2) .................................................................................................. 12-35<br />
Figure 12-20: Target 6 Mineralized Body Divided in Oxidized (Red) and Fresh (Green) Areas12-36<br />
Figure 12-21: Target 7 Mineralized Body Divided in Oxidized (Red) and Fresh (Green) areas12-37<br />
Figure 12-22: Search Ellipse (Radius 1) to Interpolate the Grades by the IDW and Kriging<br />
Methods to Target 6 ..................................................................................................... 12-38<br />
Figure 12-23: Search Ellipse (radius 2) to Interpolate the Grades by the IDW Method for Target<br />
4, 7, 10 and 11, and the Ore Body of the Target 7 ....................................................... 12-39<br />
Figure 12-24: Histogram and Probability Plot of the K 2 O Distribution of the Composite Samples<br />
(left) and the Block Model Interpolated by the IDW2 Method (right) of the Target 6 12-40<br />
Figure 12-25: Histogram and Probability Plot of the K 2 O Distribution of the Composite Samples<br />
(left) and the Block Model Interpolated by the IDW2 Method (right) of the Target 7 12-41<br />
Figure 12-26: Comparison of K 2 O Grades in the Samples and Blocks, Interpolated by the<br />
Kriging Method, of the Target 6 (central part .............................................................. 12-42<br />
Figure 12-27: Comparison of K 2 O Grades in the Samples and Blocks, Interpolated by the<br />
Kriging Method, of the Target 6 .................................................................................. 12-<strong>43</strong><br />
Figure 13-1: <strong>Preliminary</strong> Pit Design ......................................................................................... 13-8<br />
Figure 18-1: Annual Production and Cashflow for the 1.1Mtpa Production Case ................... 18-4<br />
Figure 18-2: Annual Production and Cashflow for the 2.2Mtpa Production Case ................... 18-5<br />
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List of Appendices<br />
Appendix A: Certificate of Author Forms<br />
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Summary (Item 3)<br />
SRK Consulting (U.S.), Inc. (“SRK”) was mandated by <strong>Verde</strong> <strong>Potash</strong> Plc (“<strong>Verde</strong>”), formerly<br />
Amazon Mining Holding Plc, to prepare a National Instrument <strong>43</strong>-<strong>101</strong> (“<strong>NI</strong> <strong>43</strong>-<strong>101</strong>”)<br />
<strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> (“PEA”) on the Cerrado <strong>Verde</strong> Project (the “Project”) located<br />
in Minas Gerais, Brazil.<br />
This document provides a report on the results of mining, processing and a preliminary economic<br />
assessment of the potential project development. An update was made to the overall project<br />
resources, which now include Targets 4, 6, 7, 10 and 11. Targets 4, 6, 7, 10 and 11 resources are<br />
reported in addition to the existing Funchal Norte Target resources. The preliminary economic<br />
assessment is based only on the mineral resource estimate for the Funchal Norte Target as of<br />
March 1, 2011.<br />
Property Description and Location<br />
The Project is located in the Alto Paranaiba region of Minas Gerais State, Brazil. The<br />
boundaries of the concessions have not been surveyed as this is not a requirement of Brazil's<br />
mining code. The tenement boundaries are defined by UTM coordinates with the datum of<br />
SAD69 (Centered around coordinates 394,525 East and 7,856,531 North).<br />
Ownership<br />
Cerrado <strong>Verde</strong> mineral rights were originally requested by <strong>Verde</strong>, by means of applications for<br />
exploration licenses filed with DNPM between 2008 and 2010. Several Cerrado <strong>Verde</strong> mineral<br />
rights have been granted exploration licenses as presented in this report.<br />
<strong>Verde</strong> applied for the mineral rights directly to the DNPM. There was no prior ownership of<br />
mineral rights.<br />
Geology and Mineralization<br />
The region is mainly underlain by Neoproterozoic and Cretaceous rock units, which are partly<br />
covered by Cenozoic sandstones, lateritic sediments and soils. The oldest rocks, occurring in the<br />
southwestern portion of the region, are represented by a nucleus of calcoschists and diamictites<br />
of the Ibiá Formation (Araxá Group) surrounded by an undivided domain of the Canastra Group<br />
(quartzites, phyllites and micaschists). A model age of 1,000m.y. ( 207 Pb/ 206 Pb) has been<br />
determined for the Canastra Group, which was metamorphosed together with the Araxá Group<br />
during the Brasiliano Orogeny (600m.y.). The sequence is followed by the Bambuí Group (600-<br />
550m.y.), which comprises the marine deposits of the Paraopeba Formation, the Serra de Santa<br />
Helena Formation and the Serra da Saudade Formation, including the <strong>Verde</strong>te unit, all these units<br />
being dominated by variegated metasiltstones, and the overlying arkoses of the Três Marias<br />
Formation. After deposition of the Bambuí Group, and the Brasiliano Orogeny, the region was<br />
exposed to erosion during the Paleozoic, Triassic and Jurassic periods, giving rise to the<br />
development of a remarkable peneplane. In addition, the flat lying surface, the terrigenous<br />
sediments of the Areado Group was deposited during the Lower Cretaceous. The next<br />
stratigraphic phase is recorded by the extensive and dominantly pyroclastic kamafugitic<br />
volcanism of the Mata da Corda Group of Upper Cretaceous age.<br />
With some exceptions the <strong>Verde</strong>te unit, a potash rich rock are dominantly lying on top of the<br />
Serra da Saudade Formation and underlying the Areado sandstone. Its apparent thickness varies<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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from approximately 20m in the southernmost domain to over 50m in the northern half of the<br />
Serra da Saudade and up to 80m on the northern end where it started to be covered by younger<br />
sediments. The lower contact with the slates and metapelites of the Serra de Santa Helena<br />
Formation is transitional.<br />
Exploration<br />
<strong>Verde</strong> has completed remote sensing targeting exercise followed by regional mapping and grab<br />
samples. In addition, <strong>Verde</strong> completed a preliminary survey using an Innov-X portable XRF<br />
unit. The portable XRF unit was then correlated to pulp standards and showed good precision<br />
although returned a positive bias in the order of
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Resource grades vary physically from an Unweathered zone on the western extent to a lower<br />
grade zone in the east. The grade distribution suggests two pits and multiple working faces can<br />
be open at all times for blending purposes feeding the process plant at a consistent 8.5% K 2 O.<br />
Two production scenarios were considered by SRK whereby 1.1Mtpa and alternately 2.2Mtpa of<br />
product would be produced annually. SRK conducted a pit optimization, pit design and<br />
production schedules to independently test the assumptions made in mine costing and reported in<br />
the economic model.<br />
Given the course nature of the resource model, the ability to sensitize or understand potential<br />
challenges to future mining operations is difficult to quantify. With a more refined and detailed<br />
block model containing lithology, grade and product distribution, the confirmation that the mine<br />
will produce the appropriate process plant feedstock can be verified and accurately estimated.<br />
This PEA is preliminary in nature. It includes inferred mineral resources that are considered too<br />
speculative geologically to have the economic considerations applied to them that would enable<br />
them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do<br />
not have demonstrated economic viability. There is no certainty that the preliminary assessment<br />
will be realized.<br />
To accurately predict grade and quality of plant feedstock provided by the mine, a more<br />
complete understanding of the resource is required. In particular, the effect of K 2 O grade and<br />
mass yield calculations will effect what part of the mine is mined when and in what quantities.<br />
With a detailed infill drill program, continuation of metallurgical testing and further engineering<br />
studies SRK recommends additional work be dedicated to effect of mine dilution, possible effect<br />
of deleterious elements, construction of mining costs from first principles, RoM production<br />
targets, waste dump design and haul profiles for contractor estimation. This can be included as<br />
part prefeasibility study and will be required for any reserve generation in the future.<br />
Mineral Resource Estimate<br />
Volodymyr Myadzel, of BNA Consultoria e Sistemas Ltda (“BNA”) verified the Funchal Norte<br />
resource estimate provided by Coffey Mining as described in Section 12.1. SRK also verified<br />
this resource estimate on March 1, 2010.<br />
In addition, Dr. Myadzel constructed the geologic and resource model for Targets 4, 6, 7, 10 and<br />
11 as discussed in Section 12.2. Dr. Myadzel is responsible for the resource estimation<br />
methodology and the resource statement. Dr. Myadzel is independent of the issuer applying all<br />
of the tests in Section 1.5 of the <strong>NI</strong> <strong>43</strong>-<strong>101</strong>.<br />
The resource estimate has been undertaken in compliance with accepted Canadian Institute of<br />
Mining, Metallurgy and Petroleum (CIM) definitions for indicated and inferred resources in<br />
accordance with <strong>NI</strong> <strong>43</strong>-<strong>101</strong> Standards of Disclosure for Mineral Projects.<br />
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Table 1: Grade Tonnage Report Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Target Cutoff grade (%K 2 O) Tonnage (Mt) Average Grade (% K 2 O)<br />
Indicated<br />
Target 6 7.5 23.25 8.83<br />
Target 7 7.5 50.79 9.39<br />
Total Indicated 74.04 9.22<br />
Inferred<br />
Target 4 7.5 74.<strong>43</strong> 9.20<br />
Target 6 7.5 47.85 8.84<br />
Target 7 7.5 873.59 9.45<br />
Target 10 7.5 28.50 10.10<br />
Target 11 7.5 46.79 8.27<br />
Funchal Norte 10 64.39 11.17<br />
Total Inferred 1,135.55 9.47<br />
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.<br />
Inverse Distance Weighting with power two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL).<br />
Effective date of Targets 4, 6, 7, 10 and 11 is August 3, 2011.<br />
Effective date of Funchal Norte is March 1, 2010.<br />
Indicative <strong>Economic</strong>s<br />
This document provides a report on the results of mining, processing and a preliminary economic<br />
assessment of the potential project development. An update was made to the overall project<br />
resources, which now include Targets 4, 6, 7, 10 and 11. Targets 4, 6, 7, 10 and 11 resources are<br />
reported in addition to the existing Funchal Norte Target resources. The preliminary economic<br />
assessment is based only on the mineral resource estimate for the Funchal Norte Target as of<br />
March 1, 2011.<br />
The indicative economics for the 1.1Mtpa (Base Case) and 2.2Mtpa production rates are<br />
presented in Table 2. This clearly demonstrates the very encouraging economics for the Cerrado<br />
<strong>Verde</strong> Projects based on the cost projections and price assumptions as presented in this PEA.<br />
However, readers are cautioned that this analysis is only a PEA based on indicated and inferred<br />
mineral resources, which are considered to be highly speculative geologically. Since there is no<br />
estimate of proven or probable reserves for the Project, this assessment cannot include cash flow<br />
forecasts on an annual basis.<br />
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Table 2: Indicative <strong>Economic</strong>s<br />
Production Rate 1.1Mtpy 2.2Mtpy<br />
Average Sales Price US$151.82/t US$133.23/t<br />
Total Production (40 year plan) 44,700kt 89,370kt<br />
Revenue US$6,786.6M US$11,906.8M<br />
Cashflow US$3,065.6M US$5,449.2M<br />
NPV (10%) US$445.5M US$844.1M<br />
NPV (12%) US$331.6M US$642.0M<br />
IRR 32.7% 40.0%<br />
Opex US$41.80/t US$36.36<br />
Initial Capex US$155.3M US$218.4M<br />
Contingency (15%) US$23.3M US$32.8M<br />
Pre-construction US$18.2M US$18.2M<br />
Total Capex US$196.8M US$269.4M<br />
Payback 2.38yrs 1.87yrs<br />
*Note: The above figures include a sustaining capital provision of 2% per annum of direct capital costs commencing in year 4.<br />
Conclusions and Recommendations<br />
Given the extensive resource base available; albeit all of which is in the indicated and inferred<br />
category, a mine life of 40 years has been assumed for both the 1.1Mtpa and 2.2Mtpa production<br />
rates.<br />
This clearly demonstrates the encouraging economics for the Cerrado <strong>Verde</strong> Projects based on<br />
the scoping study concepts, cost projections and price assumptions as presented in this PEA.<br />
SRK recommends that the Project be advanced in one phase of work to the prefeasibility level of<br />
evaluation and design. The cost estimate for the recommended work program is shown in Table<br />
3.<br />
Table 3: Recommended Prefeasibility Work Program Cost Estimate (US$000’s)<br />
Description<br />
Cost<br />
Infill Drilling 300<br />
Metallurgical Testwork 800<br />
Engineering Studies 500<br />
Environmental Baseline 150<br />
Other 250<br />
Total 2,000<br />
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1<br />
Introduction (Item 2)<br />
SRK Consulting (U.S.), Inc. (“SRK”) were mandated by <strong>Verde</strong> <strong>Potash</strong> Plc (“<strong>Verde</strong>”), formerly<br />
Amazon Mining Holding Plc, to prepare a National Instrument <strong>43</strong>-<strong>101</strong> (“<strong>NI</strong> <strong>43</strong>-<strong>101</strong>”)<br />
<strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> (“PEA”) on the Cerrado <strong>Verde</strong> Project (the “Project”) located<br />
in Minas Gerais, Brazil.<br />
1.1 Terms of Reference and Purpose of the Report<br />
This PEA is intended for the use of <strong>Verde</strong> to fulfill applicable securities obligations. This<br />
document provides a PEA of the Project, prepared according to <strong>NI</strong> <strong>43</strong>-<strong>101</strong> guidelines. Form <strong>NI</strong><br />
<strong>43</strong>-<strong>101</strong>F1 was used as the format for this report.<br />
This report is prepared using the industry accepted Canadian Institute of Mining, Metallurgy and<br />
Petroleum (CIM) “Best Practices and Reporting Guidelines” for disclosing mineral exploration<br />
information, the Canadian Securities Administrators revised regulations in <strong>NI</strong> <strong>43</strong>-<strong>101</strong> (Standards<br />
of Disclosure For Mineral Projects) and Companion Policy <strong>43</strong>-<strong>101</strong>CP, and CIM Definition<br />
Standards for Mineral Resources and Mineral Reserves (November 27, 2010).<br />
This document provides a report on the results of mining, processing and a preliminary economic<br />
assessment of the potential project development. An update was made to the overall project<br />
resources, which now include Targets 4, 6, 7, 10 and 11. Targets 4, 6, 7, 10 and 11 resources are<br />
reported in addition to the existing Funchal Norte Target resources. The preliminary economic<br />
assessment is based only on the mineral resource estimate for the Funchal Norte Target as of<br />
March 1, 2011.<br />
The PEA is based on inferred and indicated mineral resources only that are considered too<br />
speculative geologically to have the economic considerations applied to them that would enable<br />
them to be categorized as mineral reserves, and there is no certainty that the preliminary<br />
assessment will be realized. Mineral resources that are not mineral reserves do not have<br />
demonstrated economic viability.<br />
1.2 Reliance on Other Experts (Item 4)<br />
Section 15 of this report relies on AgroConsult Consultoria & Marketing (AgroConsult) for price<br />
and market analysis. AgroConsult prepared in depth analyses on the various agribusiness<br />
segments with a view to formulating short, medium and long term market trend reports on the<br />
main agricultural commodities as well as to developing customized studies and projects. In<br />
order to reach an average price per mixing center, the Thermo<strong>Potash</strong> benchmark price for each of<br />
the crops was weighted in accordance with the relevant demand potential. However, the average<br />
weighted price obtained reflects individual prices per crop. Consequently, the price would<br />
exceed the maximum price for some crops and the product would be too expensive. Therefore,<br />
the price was realigned to cater to 95% of the potential market. In this case, the resulting price is<br />
the potential price for Thermo<strong>Potash</strong> at the mixing center. Its complete results could be verified<br />
in the report prepared for <strong>Verde</strong> “Price and competitiveness survey for introducing<br />
Thermo<strong>Potash</strong> on the Brazilian fertilizer market” published in November of 2010.<br />
<strong>Verde</strong> provided geological data and information to BNA for Sections 5 through 9. The<br />
information provided was verified by BNA and accepted for the use in this report.<br />
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<strong>Verde</strong> <strong>Potash</strong> retained Mr. Beau Nicholls, geologist, Dr. Gaspar Korndorfer, agronomist, Mr.<br />
Lupercio Oliveira, chemical engineer, and Mr. Ricardo Bandeira, lawyer, to provide scientific<br />
consulting services with respect to the Cerrado <strong>Verde</strong> Project.<br />
Mr. Beau Nicholls, MAIG consulting geologist to VERDE is the Qualified Person with respect<br />
to <strong>NI</strong> <strong>43</strong>-<strong>101</strong> at the Project.<br />
Mr. Lupércio Oliveira, chemical engineer, is pioneer in the studies of thermofertilizers and has<br />
been senior researcher in CETEC and past professor in Universidade Federal de Minas Gerais,<br />
Brazil. <strong>Verde</strong> <strong>Potash</strong> relies on Lupércio Oliveira on the conduction of the pilot plant where<br />
thermopotash has been produced.<br />
Dr. Gaspar Korndörfer is currently a Professor of Agriculture at the Universidade Federal de<br />
Uberlandia. He has a Post-Doctorate from University of Florida, US, and has earned his<br />
Doctorate on Soils and Plant Nutrition from ESALQ of the Universidade de São Paulo, Brazil.<br />
The company relies on Gaspar Korndörfer as agronomy consultancy and conductor of some<br />
agronomic tests.<br />
Mr. Ricardo Bandeira has worked with <strong>Verde</strong> <strong>Potash</strong> since the company was founded. He holds<br />
a Master’s degree in Civil Law from Pontifícia Universidade Católica de Minas Gerais, Brazil a<br />
Specialization degree in Strategic Management and Bachelor degree in Law from Universidade<br />
Federal de Minas Gerais, Brazil. He is a member of Brazilian Bar Associations. The company<br />
relies on Ricardo Bandeira as supervisor of legal matters including mineral rights and<br />
environmental permits.<br />
1.2.1 Sources of Information<br />
Information presented in this report has been provided by <strong>Verde</strong> and its consultants. Particularly<br />
for Sections 5 to 9. BNA has provided comment and reviewed the data and information<br />
provided and after all clarifications were made, accepted it. SRK has accepted this information<br />
and has provided comment and review of the data and information provided. Sources of<br />
information are provided in References Section 23.<br />
1.3 Qualifications of Consultants<br />
Listed below are the contributors to the PEA. Qualified Persons (“QP”) for this report are Dr.<br />
Neal Rigby and Dr. Rob Bowell of SRK, and Dr. Volodymyr Myadzel of BNA Consultoria e<br />
Sistemas Ltda (“BNA”). Descriptions of qualifications and responsibilities are presented below.<br />
1.3.1 SRK<br />
SRK is an independent, international consulting practice that provides focused advice and<br />
solutions to clients, mainly from earth and water resource industries. For mining projects, SRK<br />
offers services from exploration through feasibility, mine planning, and production to mine<br />
closure. Formed in 1974, SRK now employs more than 1,000 professionals internationally in 38<br />
permanent staffed offices on six continents.<br />
Dr. Neal Rigby<br />
Dr. Rigby is responsible for Sections 1 through 4, 10, 13 through 24 of this PEA.<br />
Dr. Rob Bowell<br />
Dr. Bowell is responsible for Sections 11 of this PEA.<br />
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1.3.2 BNA Consultoria e Sistemas<br />
BNA Consultoria e Sistemas is a company dedicated to applying high technology to the mineral<br />
sector transforming it into sounding solutions. BNA offer effective solutions that consist of<br />
software systems and consulting services. Comprised of an experienced team of professionals<br />
with outstanding performance in the Brazilian mineral sector, having actively participated in<br />
relevant and important mine projects in Brazil.<br />
Dr. Volodymyr Myadzel<br />
Volodymyr Myadzel is responsible for Sections 5 through 9 and 12 of this PEA.<br />
1.3.3 ECM<br />
ECM, founded in 1984, is a Brazilian engineering company with extensive experience in<br />
developing multidisciplinary industrial projects of all sizes, including project design for the<br />
minerals and mining industry, from feasibility studies to plant commissioning. ECM has about<br />
550 employees and has been involved in significant mining projects over the past decade in<br />
Brazil.<br />
1.3.4 AgroConsult Consultoria & Marketing<br />
AgroConsult Consultoria & Marketing is a leading consulting company focused on agribusiness<br />
founded in 2000. Clients include: BHP Billiton, Bunge, Fosfertil, Petrobras, Heringer, Bayer,<br />
Santander, Citibank, John Deere, Banco do Brasil and Syngenta. AgroConsult’s team is<br />
comprised of a multi-disciplinary group of professionals who follow the market closely, prepare<br />
in depth analyses on the various agribusiness segments with a view to formulating short, medium<br />
and long term market trend reports on the main agricultural commodities as well as to<br />
developing customized studies and projects.<br />
1.3.5 Site Visit<br />
Mr. Volodymyr Myadzel, BNA Consultant, visited the Project site on March 15, 2011 and July<br />
20-22, 2011.<br />
1.3.6 Effective Date<br />
The effective date of this report is August 3, 2011.<br />
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2<br />
Property Description and Location (Item 4)<br />
2.1 Property Location<br />
The Cerrado <strong>Verde</strong> <strong>Potash</strong> Project is situated in the Alto Paranaiba region of the State of Minas<br />
Gerais, Brazil (Figure 2-1). The project can be accessed from Belo Horizonte, the State capital<br />
to the town of Matutina in a distance of 320km, via a good quality paved road (BR-262). From<br />
Matutina the project area is accessed by a number of secondary gravel roads that connect the<br />
farming region.<br />
The project consists of sixty-four exploration licenses. The UTM Geographic zone is 23K and<br />
the Datum used for the area is World Geographic System 1984. The center of the project is<br />
approximately at longitude 46°00’W and latitude 19°20’S.<br />
2.2 Mineral Titles<br />
The Project comprises sixty four tenements, covering an aggregate area of 106,762ha as shown<br />
in Table 2.2.1 and Figure 2-1.<br />
Once an exploration license is granted, <strong>Verde</strong> must make annual fee payments to maintain the<br />
license, as explained in Section 17.6 of this report.<br />
Table 2.2.1: Cerrado <strong>Verde</strong> <strong>Potash</strong> Project Tenement Schedule<br />
Process Number Holder Size (Ha) Status of Mining Right Comments Mineral<br />
833329/2009 FVS 41.07 Exploration License valid until FVS informed the existence of<br />
Diamond<br />
29/10/2012<br />
potassium rocks at the area on<br />
833284/2008 FVS 1468.97 Exploration License valid until<br />
3/12/2012<br />
833264/2008 FVS 1511.58 Exploration License valid until<br />
18/11/2012<br />
833270/2008 FVS 1991.78 Exploration License valid until<br />
10/11/2012<br />
833276/2008 FVS 1334.71 Exploration License valid until<br />
18/11/2012<br />
833271/2008 FVS 1524.17 Exploration License valid until<br />
3/12/2012<br />
833252/2008 FVS 1993.71 Exploration License valid until<br />
3/12/2012<br />
833272/2008 FVS 1587.61 Exploration License valid until<br />
3/12/2012<br />
833256/2008 FVS 1994.32 Exploration License valid until<br />
3/12/2012<br />
833259/2008 FVS 1476.58 Exploration License valid until<br />
3/12/2012<br />
833266/2008 FVS 1230.03 Exploration License valid until<br />
3/12/2012<br />
833267/2008 FVS 1663.21 Exploration License valid until<br />
3/12/2012<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
833269/2008 FVS 1771.42 Exploration License valid until FVS informed the existence of Diamond<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 2-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Process Number Holder Size (Ha) Status of Mining Right Comments Mineral<br />
3/12/2012 potassium rocks at the area on<br />
28/01/2010.<br />
833290/2008 FVS 1678.42 Exploration License valid until<br />
3/12/2012<br />
833293/2008 FVS 1793.65 Exploration License valid until<br />
3/12/2012<br />
833294/2008 FVS 1492.78 Exploration License valid until<br />
3/12/2012<br />
833320/2008 FVS 1886.15 Exploration License valid until<br />
3/12/2012<br />
833331/2008 FVS 1366.49 Exploration License valid until<br />
3/12/2012<br />
833333/2008 FVS 1501.36 Exploration License valid until<br />
3/12/2012<br />
833328/2008 FVS 1790.21 Exploration License valid until<br />
3/12/2012<br />
833324/2008 FVS 1932.31 Exploration License valid until<br />
3/12/2012<br />
833335/2008 FVS 1575.41 Exploration License valid until<br />
3/12/2012<br />
833332/2008 FVS 1854.81 Exploration License valid until<br />
3/12/2012<br />
833334/2008 FVS 1914.94 Exploration License valid until<br />
3/12/2012<br />
833336/2008 FVS 1662.51 Exploration License valid until<br />
3/12/2012<br />
833647/2008 FVS 1907.6 Exploration License valid until<br />
13/11/2012<br />
833648/2008 FVS 1784.49 Exploration License valid until<br />
22/12/2012<br />
833330/2008 FVS 1464.51 Exploration License valid until<br />
3/12/2012<br />
833329/2008 FVS 41.07 Exploration License valid until<br />
24/3/2013<br />
833274/2008 FVS 1994.84 Exploration License valid until<br />
4/1/2013<br />
833253/2008 FVS 1716.04 Exploration License valid until<br />
12/3/2013<br />
833268/2008 FVS 966.82 Exploration License valid until<br />
12/3/2013<br />
833275/2008 FVS 1994.06 Exploration License valid until<br />
4/1/2013<br />
833277/2008 FVS 1992.24 Exploration License valid until<br />
4/1/2013<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
833278/2008 FVS 1993.88 Exploration License valid until FVS informed the existence of Diamond<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 2-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Process Number Holder Size (Ha) Status of Mining Right Comments Mineral<br />
4/1/2013 potassium rocks at the area on<br />
15/10/2010.<br />
833279/2008 FVS 1952.53 Exploration License valid until<br />
4/1/2013<br />
833285/2008 FVS 1993.69 Exploration License valid until<br />
4/1/2013<br />
833286/2008 FVS 19<strong>43</strong>.82 Exploration License valid until<br />
4/1/2013<br />
833297/2008 FVS 1985.37 Exploration License valid until<br />
4/1/2013<br />
833307/2008 FVS 1993.77 Exploration License valid until<br />
4/1/2013<br />
833311/2008 FVS 1993.88 Exploration License valid until<br />
4/1/2013<br />
833308/2008 FVS 1990.91 Exploration License valid until<br />
4/1/2013<br />
833316/2008 FVS 1994.21 Exploration License valid until<br />
4/1/2013<br />
833315/2008 FVS 1992.07 Exploration License valid until<br />
4/1/2013<br />
833325/2008 FVS 1916.57 Exploration License valid until<br />
4/1/2013<br />
833321/2008 FVS 1138.08 Exploration License valid until<br />
12/3/2013<br />
833319/2008 FVS 1993.72 Exploration License valid until<br />
4/1/2013<br />
833322/2008 FVS 1992.70 Exploration License valid until<br />
4/1/2013<br />
833327/2008 FVS 1916.57 Exploration License valid until<br />
4/1/2013<br />
831008/2009 FVS 244.98 Exploration License valid until<br />
1/6/2013<br />
833273/2008 FVS 1994.32 Exploration License valid until<br />
4/1/2013<br />
833292/2008 FVS 1935.96 Exploration License valid until<br />
4/1/2013<br />
833257/2008 FVS 1993.84 Exploration License valid until<br />
26/8/2012<br />
833263/2008 FVS 1844.23 Exploration License valid until<br />
29/10/2012<br />
833280/2008 FVS 1742.04 Exploration License valid until<br />
29/10/2012<br />
833295/2008 FVS 1571.46 Exploration License valid until<br />
29/10/2012<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
15/10/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
28/01/2010.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Phosphate<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
833306/2008 FVS 1712.36 Exploration License valid until FVS informed the existence of Diamond<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 2-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Process Number Holder Size (Ha) Status of Mining Right Comments Mineral<br />
29/10/2012 potassium rocks at the area on<br />
25/11/2009.<br />
833309/2008 FVS 1559.42 Exploration License valid until<br />
29/10/2012<br />
833326/2008 FVS 1920.21 Exploration License valid until<br />
29/10/2012<br />
833289/2008 FVS 1928.55 Exploration License valid until<br />
29/10/2012<br />
833305/2008 FVS 1555.92 Exploration License valid until<br />
29/10/2012<br />
833317/2008 FVS 1551,02 Exploration License valid until<br />
29/10/2012<br />
833323/2008 FVS 1536.42 Exploration License valid until<br />
29/10/2012<br />
83<strong>43</strong>89/2010 <strong>Verde</strong> 980.19 Exploration License valid until<br />
15/12/2013<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS filed the “Positive Final Research<br />
Report” on 04/08/2011, which is the<br />
first document that backed the company<br />
to make an application for exploitation.<br />
On 08/08/2011 <strong>Verde</strong> also filed a<br />
request for a<br />
“Trial Mining” (in literal translation,<br />
the document that allows this trial<br />
exploitation is called by the Brazilian<br />
legislation as “Guide for utilization”).<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
FVS informed the existence of<br />
potassium rocks at the area on<br />
25/11/2009.<br />
Normal procedural progress – no<br />
comment<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Diamond<br />
Phosphate<br />
2.3 Location of Mineralization<br />
The potash mineralized zones of the Cerrado <strong>Verde</strong> Project are located within <strong>Verde</strong>te green<br />
metasiltstone of the Serra da Saudade Formation. The known mineralization is located in the<br />
concessions owned by <strong>Verde</strong>.<br />
2.4 Royalties, Agreements and Encumbrances<br />
The tenements are owned 100% by FVS Mineração Ltda. that is a subsidiary of <strong>Verde</strong>. The<br />
Cerrado <strong>Verde</strong> Project was staked in the third quarter of 2008. <strong>Verde</strong>’s subsidiary Amazon<br />
Pesquisa Mineral e Mineração Ltda (“APMM” – as of December 30, 2010, the name of this<br />
subsidiary has changed to <strong>Verde</strong> Fertilizantes Ltda) entered into a discovery contract (the<br />
“Cerrado <strong>Verde</strong> Project Discovery Contract”) dated September 29, 2008 (with retroactive term<br />
for July 26, 2008) with Ysao Munemassa (“Ysao”) pursuant to which Ysao performed, at<br />
<strong>Verde</strong>’s expense, preliminary geological surveys and research studies on the Cerrado <strong>Verde</strong><br />
Project area and the Cerrado <strong>Verde</strong> Project. The Cerrado <strong>Verde</strong> Project Discovery Contract was<br />
subsequently amended on July 27, 2010 to provide that APMM shall pay to Ysao: (a) 100,000<br />
Stock Options one year after the application for exploration permits over the Cerrado <strong>Verde</strong><br />
Project area to the National Department of Mineral Production (“DNPM”), (b) US$500,000 upon<br />
approval of a bankable feasibility study, and (c) a 3% royalty on the net result of production.<br />
APMM has the right to purchase the royalties due to Ysao at a cost of US$1,000,000 for each 1%<br />
of the protected right of royalty to Ysao.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 2-5<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
2.5 Environmental Liabilities and Permitting<br />
The Project has no environmental liabilities and has begun the preparation of the environmental<br />
reports required for the licensing of the Project, as it is stated in Section 16 of this technical<br />
report.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Location Map<br />
File Name: Figure_2-1.docx Date: 09/15/2011 Approved: NR Figure: 2-1
<strong>Verde</strong> <strong>Potash</strong> Plc 3-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
3<br />
Accessibility, Climate, Local Resources,<br />
Infrastructure and Physiography (Item 5)<br />
3.1 Topography, Elevation and Vegetation<br />
The peneplane developed by the <strong>Verde</strong>te unit, i.e., the ground over which the Areado Group was<br />
deposited, undulates between the altitudes of 1,000m and 850m. Higher values are found in the<br />
southern part of the Serra da Saudade range. In the middle portion of the ridge, the peneplane is<br />
placed between 880m and 920m. Therefore, all the surface exposures of the <strong>Verde</strong>te unit were<br />
the result of the Tertiary erosion cycles that stripped off the Mesozoic rocks (Mata da Corda and<br />
Areado groups).<br />
The local vegetation consists of relicts of the primitive savanna ("cerrado") still preserved<br />
between soya and coffee plantations and industrially planted forests of eucalyptus and pine trees.<br />
The farms are mainly confined to the fertile soil of the Mata da Corda Group that forms plateaux<br />
around 1,000m.<br />
3.2 Climate and Length of Operating Season<br />
The climate of the region is classified, according to IBGE (2002) as half-humid warm tropical,<br />
with annual average temperatures of 22°C Annual rainfall in the area averages between 1,300mm<br />
and 1,800mm, 84% of which falls during the rainy season between October and March, with the<br />
highest rainfall between December and January. Operations can be year round.<br />
3.3 Physiography<br />
The region is inserted in the hydrographic basin of Indaiá River, a tributary river in the left<br />
margin of São Francisco River. According to SECTES – Secretaria do Estado de Ciência e<br />
Tecnologia de Minas Gerais – (1938), Indaiá River basin is part of the geomorphological unit<br />
São Francisco Plateau where the planning surfaces, the edges of the hills and the crests point dip<br />
to NE, with high structural control (COSTA-FILHO et al, 2007).<br />
The main drainages are the rivers Indaiá, Abaeté, Borrachudo and their tributary. The<br />
morphology of those rivers is the meandering channels and the drainage style is dendritic, mainly<br />
when installed over the pelites. In the north of the area is the Três Marias dam, main mouth of<br />
the region rivers. The water depth of the dam oscillates between the altitudes of 560 and 575m<br />
(LIMA, 2005).<br />
The main topographic feature is the Serra da Saudade ridge. The landscape can be separated into<br />
three domains that may be correlated to the South American Surfaces (King, 1956):<br />
<br />
<br />
Upper Surface: Older stage of the planning that expose the Areado Group Sandstones and<br />
Mata da Corda Group;<br />
Intermediate Surface: Refer to the second stage of the planning after de dissection of the<br />
Upper Surface, triggered by the resumption of the erosive process. The average altitude<br />
is of 750 to 850m. They are irregular surfaces stretched in N-S strike, developed over the<br />
Serra da Saudade Formation represented by psamitic lithotypes. Matches to the South<br />
American Surface I, mio-pliocene; and<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 3-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Basal Surface: the youngest, bordering the São Francisco River, with elevations from 570<br />
to 630m. Exposure occurs in pelites of the Serra de Santa Helena and Serra da Saudade<br />
formations.<br />
3.4 Access to Property<br />
The project can be accessed by air from Rio de Janeiro, São Paulo, Brasilia and other cities, to<br />
Belo Horizonte, and then overland from Belo Horizonte to Matutina (approximately 320km), via<br />
a good quality paved road (BR-262). From the town of Matutina the project area is accessed by<br />
a number of secondary gravel roads that connect the farming region.<br />
The unpaved roads are in reasonable condition although some sections require improvement.<br />
3.5 Surface Rights<br />
According to Brazilian law, surface rights are separate from mining rights. Therefore, land<br />
owner has no title to the minerals contained in the soil or in the sub-soil, which are deemed a<br />
property of the Federal Government, which grant to private companies or individuals rights to<br />
exploration or exploitation.<br />
Private companies or individuals holding an Exploration Permit are supposed to enter into an<br />
agreement with the land owner allowing its access to the area in order to conduct exploration<br />
activities. In case an agreement is not reached, Brazilian Mining Code establishes a judicial<br />
procedure by means of which the mining company or individual secures access to the area by<br />
paying to the land owner compensation for damages in her/his property and loss of income due<br />
to exploration.<br />
<strong>Verde</strong> has agreements with the land owners to allow it to perform exploration in the targets<br />
selected by the company to research in the area located in the following DNPM Processes:<br />
833.263/2008, 833.270/2008, 833.274/2008, 833.280/2008, 833.287/2008, 833.289/2008,<br />
833.295/2008, 833.306/2008, 830.383/2008 and 833.323/2008. Private companies or individuals<br />
holding a Mining Concession are entitled to surface rights on the area necessary for the mine and<br />
ancillary structures. Such surface rights are obtained by agreement with the land owner,<br />
providing for compensation for the price of the land and additional losses caused by the<br />
occupation. In case such agreement is not reached, surface rights are granted by the local Court<br />
upon previous deposit by the mining company or individual of the amount judicially determined<br />
for such compensation.<br />
In addition to compensation for damages, the land owner is entitled to a royalty equal to 50% of<br />
CFEM. CFEM is federal royalty, which is established at 3.0% of the net sales of potash.<br />
However, it is common practice to negotiate a separate compensation agreement that is<br />
satisfactory to both parties.<br />
VERDE has not yet started to negotiate agreements with land owners for establishing<br />
exploitation and production activities.<br />
3.6 Local Resources and Infrastructure<br />
São Gotardo and Matutina are the closest towns with a significant population to provide<br />
manpower for a mining operation, having population around 40,000 combined. São Gotardo<br />
also has good infrastructure, with domestic power and telephone service available. Also, the<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 3-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
project is very close to Patos de Minas (129km away), the main city in the Alto Paranaiba area,<br />
which has a strong economic, cultural, educational and social environment.<br />
Belo Horizonte, located about 320km from the project site, is the capital and also the largest city<br />
in the state, with a population above 4 million. It is the major center for the Brazilian mining<br />
industry, with infrastructure for mining equipment and services available. There is a large<br />
commercial airport with domestic and international flights services. Several state and federal<br />
government agencies are based here, in addition to private businesses that provide services to the<br />
mining industry. Skilled labor is readily available in Belo Horizonte as well as at the towns of<br />
São Gotardo and Matutina near the site of the Project.<br />
Further discussion on project infrastructure is contained in Section 14.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Cerrado <strong>Verde</strong> Project Site<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_3-1 Date: 09/15/2011 Approved: NR Figure: 3-1
<strong>Verde</strong> <strong>Potash</strong> Plc 4-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
4<br />
History (Item 6)<br />
Cerrado <strong>Verde</strong> Mineral Rights were originally requested by <strong>Verde</strong>, by means of applications for<br />
exploration licenses filed with DNPM between 2008 and 2010. Several Cerrado <strong>Verde</strong> Mineral<br />
Rights have already been granted exploration licenses.<br />
<strong>Verde</strong> applied for the mineral rights directly to the DNPM. There was no prior ownership of<br />
mineral rights. The areas were available and <strong>Verde</strong> just had to make the necessary applications.<br />
<strong>Verde</strong> does not have data with respect to past owners or any prior exploration work. <strong>Verde</strong> is not<br />
aware of any historical resource estimation work on the property. There has been no historical<br />
mining on the property.<br />
There has been no prior exploration or development previous to the current owner. No historical<br />
resource estimates have been released. No historical mining of the <strong>Verde</strong>te has been undertaken.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
5<br />
Geological Setting and Mineralization (Item 7)<br />
5.1 Regional Geology<br />
The region is mainly underlain by Neoproterozoic and Cretaceous rock units, which are partly<br />
covered by Cenozoic sandstones, lateritic sediments and soils. The oldest rocks, occurring in the<br />
southwestern portion of the region, are represented by a nucleus of calcoschists and diamictites<br />
of the Ibiá Formation (Araxá Group) surrounded by an undivided domain of the Canastra Group<br />
(quartzites, phyllites and micaschists). A model age of 1,000m.y. ( 207 Pb/ 206 Pb) has been<br />
determined for the Canastra Group, which was metamorphosed together with the Araxá Group<br />
during the Brasiliano Orogeny (600m.y.). The sequence is followed by the Bambuí Group (600-<br />
550m.y.), which comprises the marine deposits of the Paraopeba Formation, the Serra de Santa<br />
Helena Formation and the Serra da Saudade Formation, including the <strong>Verde</strong>te unit, all these units<br />
being dominated by variegated slates, and the overlying arkoses of the Três Marias Formation.<br />
Following the deposition of the Bambuí Group, and the Brasiliano Orogeny, the region was<br />
exposed to erosion during the Paleozoic, Triassic and Jurassic periods, giving rise to the<br />
development of a remarkable peneplane. In addition, the flat lying surface, the terrigenous<br />
sediments of the Areado Group was deposited during the Lower Cretaceous. The next<br />
stratigraphic phase is recorded by the extensive and dominantly piroclastic kamafugitic<br />
volcanism of the Mata da Corda Group of Upper Cretaceous age.<br />
5.2 Local and Project Geology<br />
5.2.1 The <strong>Verde</strong>te Unit<br />
The <strong>Verde</strong>te unit occurs mainly at the top of the Serra da Saudade Formation and underlies the<br />
Areado Group sandstone. The Serra da Saudade Formation consists of carbonate and siliciclastic<br />
sediments that were deposited in an epicontinental platform in the late Neoproterozoic (700 –<br />
600Ma). The <strong>Verde</strong>te occurs in extensive outcrops, along both banks of Indaiá River, in a trend<br />
approximately 120km x 20km. It covers the regions of municipalities of Santa Rosa da Serra,<br />
São Gotardo and Guarda dos Ferreiros (SW), Matutina, Quartel São João and Cedro do Abaeté<br />
(centre), Paineiras and Biquinhas (NE), in the State of Minas Gerais.<br />
The thickness of the <strong>Verde</strong>te unit varies from 15 to 80m in the southernmost domain to over 50m<br />
in the northern half of the Serra da Saudade range. The lower contact with the metasiltstone of<br />
the Serra da Saudade Formation is transitional within 2-3m.<br />
The Serra da Saudade Formation was eroded during the Gondwana Cycle (King, 1956) of<br />
probably Jurassic age, and it was over this extensive peneplain that the cretaceous sandstone<br />
beds of the Areado Group were deposited.<br />
The upper contact is transitional with rhythmic intercalations of <strong>Verde</strong>te and metasiltstone with<br />
various colors (predominantly pink when weathered), defined informally as the Transition Zone.<br />
These intercalations vary from millimeters to meters in thickness.<br />
The lower contact with the metasiltstone of the Serra da Saudade Formation is transitional within<br />
2 to 3m, and contains intercalations of limestone lenses and calciferous metasiltstone.<br />
5.2.2 Structure<br />
The <strong>Verde</strong>te unit and the Transition Zone underwent two main phases of folding. The first<br />
resulted in the development of pervasive concentric and chevron folds, in which the axial planes<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
dip NNW. The strike of the foliation is NNE. The second phase formed folds with nearly<br />
vertical axial planes and sub-horizontal folding axis. In a regional scale, the folded <strong>Verde</strong>te and<br />
the transition zone display a sub-horizontal behavior.<br />
The largest extension of the <strong>Verde</strong>te unit occurs where the erosion has been less intense, and is<br />
marked by the presence of remnants of the Areado Group sandstones. This occurs mainly in the<br />
central part of the unit.<br />
5.2.3 Elevation and Erosion Level<br />
The peneplane developed by the <strong>Verde</strong>te unit, i.e., the ground over which the Areado Group was<br />
deposited, undulates between the elevation of 1,000m and 850m. Higher elevations are found in<br />
the southern part of the Serra da Saudade. In the middle portion of the ridge, the peneplane is<br />
placed between 880m and 920m. Therefore, all the surface exposures of the <strong>Verde</strong>te unit were<br />
the result of the Tertiary erosion cycles that stripped off the Mesozoic rocks (Mata da Corda and<br />
Areado groups).<br />
5.3 Mineralization<br />
<strong>Verde</strong>te is the rock-type with high content of K 2 O. It is pelitic sediment, metamorphosed in the<br />
greenschist facies. It displays a lepidoblastic texture and preserves relicts of the original fabric.<br />
Petrographically, it is classified as a metasiltstone, and has a green color due to chlorite. The<br />
chlorite was formed by the intense alteration of biotite. Biotite can still be observed locally in<br />
small plates forming massive aggregates. It also occurs in the cores of muscovite.<br />
The <strong>Verde</strong>te shows millimetric to centimetric bands rich in chlorite, interbedded with quartz-rich<br />
layers.<br />
A sample of <strong>Verde</strong>te containing 10.7% K 2 O showed the following modal composition: quartz<br />
(10%), microcline (20%), biotite-chlorite (60%) and muscovite (10%). Samples submitted for<br />
X-ray diffraction showed the following minerals: quartz, muscovite-fengite, microclineorthoclase<br />
and clinochlore (magnesium chlorite).<br />
The K 2 O content ranging from 5-6% to 13% is due to the presence of microcline-orthoclase and<br />
muscovite-fengite.<br />
This PEA is preliminary in nature. It includes inferred mineral resources that are considered too<br />
speculative geologically to have the economic considerations applied to them that would enable<br />
them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do<br />
not have demonstrated economic viability. There is no certainty that the preliminary assessment<br />
will be realized.<br />
5.3.1 Mineralized Zones<br />
As stated previously, potash mineralization occurs associated with the microcline-orthoclase and<br />
muscovite-fengite minerals that are constituents of the <strong>Verde</strong>te.<br />
The <strong>Verde</strong>te held within the <strong>Verde</strong> tenements can be traced for the entire 120km strike length<br />
with a potential width up to 500m wide. Grab samples along the entire strike length range from<br />
5% to 12% K 2 O.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 5-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
5.3.2 Surrounding Rock Types<br />
The <strong>Verde</strong>te unit is partially covered by a thin layer of sandstone of Cretaceous age in its central<br />
part. To the east it is intercalated with red to yellow metapelites (argillites, rhythmites and<br />
siltstones), which forms the transition zone. The transition zone is the basal part of the <strong>Verde</strong>te<br />
unit and crops out by a combination of folding and erosion. To the west the <strong>Verde</strong>te is eroded by<br />
a N-S running creek which exposes the underlying carbonatic slate. To the north the <strong>Verde</strong>te<br />
unit is again intercalated with metapelites. To the south the <strong>Verde</strong>te is abruptly eroded,<br />
occurring only as the metapelites and slates.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Cerrado <strong>Verde</strong> Regional Setting<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_5-1.docx Date: 09/15/2011 Approved: NR Figure: 5-1
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Cerrado <strong>Verde</strong> stratigraphic<br />
chart according LIMA, 2005<br />
File Name: Figure_5-2.docx Date: 09/15/2011 Approved: NR Figure: 5-2
<strong>Verde</strong> <strong>Potash</strong> Plc 6-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
6<br />
Deposit Type (Item 8)<br />
No geological model has yet been proposed for the potash-rich <strong>Verde</strong>te metasiltstone. It is a<br />
unique type of mineralization that is known only in the Serra da Saudade Formation in the<br />
western part of the State of Minas Gerais. Presently, the <strong>Verde</strong>te is not a commercial source of<br />
potash.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 7-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
7<br />
Exploration (Item 9)<br />
The present exploration work applies to the <strong>Verde</strong>te units known as Target-4, Target-6, Target-7,<br />
Target-10 and Target-11 (Figures 7-1 and 7-2).<br />
The exploration included field and laboratory studies; geological mapping in scales 1:25,000 and<br />
1:10,000; outcrop studies and their correlation; drilling on the <strong>Verde</strong>te body; systematic<br />
sampling; chemical and physical analysis of the rock samples and drill core samples; processing<br />
and characterization testing.<br />
Initially, it was performed a bibliographic compilation of all the material about the project and<br />
surrounding areas, along with studies of economic exploitation of the potash present in silicatic<br />
rocks such as the <strong>Verde</strong>te, including technological and market aspects. The maps used as a<br />
cartographic base were the topographic map SE-23-Y-D-II 1:100.000 (Dores do Indaiá Sheet)<br />
from IBGE (government institute), the geological maps SE-23-Y-D 1:250.000 (Bom Despacho<br />
Sheet) and SE-23-YD-II 1:100.000 (Dores do Indaiá Sheet) from the Projeto São Francisco, as<br />
well as maps from theses and dissertations.<br />
Afterwards, it was performed the integration of the geological, geophysical, and geochemical<br />
information in regional scale, developing analysis and interpretation of digital satellite images<br />
for the visualization of the regional structures and occurrences of <strong>Verde</strong>te.<br />
The outcrops of the <strong>Verde</strong>te unit can be distinguished on satellite images by their characteristic<br />
green color.<br />
In the preliminary survey, the targets were defined using Google Earth images and data from<br />
SRTM (Shuttle Radar Topography Mission). These data can be found freely available on the<br />
website of EMBRAPA (government company), in form of a land numerical model grid, with<br />
90m resolution.<br />
In the first field research, held in 2008, a mapping of the main rock types present in the region<br />
was performed, on a 1:25,000 scale, as well as a survey of the access, drainage and farms of the<br />
area. For this survey were used GPS devices from Garmin ® , model GPSMAP 76 CSX.<br />
A preliminary evaluation of the potash levels on outcrop samples was made through a portable<br />
X-ray fluorescence device, followed by chemical analysis at laboratory.<br />
Later stages of field work consisted of the performance of regional geological cross sections,<br />
especially in the areas of <strong>Verde</strong>te exposure, and semi-detail mapping campaigns for recognition<br />
of the main lithofacies, stratigraphic relations and structural aspects. During the mapping, the<br />
samples collected were used to make thin sections and lithochemical and mineralogical analysis.<br />
It was collected structural data and some stratigraphic sections surveys were made.<br />
Besides surface mapping, a drilling program was made, performing 142 drill holes by a<br />
rotopercussive reverse circulation drill and 5 twin drill holes by a diamond drill.<br />
The main chemical analyses were made at ALS Minerals, Bureau Veritas, FRX Service, SGS<br />
Geosol laboratories in Vespasiano and Belo Horizonte cities, Minas Gerais State, and at the<br />
Laboratório de Caracterização Tecnológica da Escola Politécnica da USP in São Paulo State.<br />
The office works consist of the data compilation and integration, followed by the resource<br />
calculation using ARCGIS ® and MICROMINE ® software.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Reverse circulation and diamond<br />
drilling program for targets 4 and<br />
6<br />
File Name: Figure_7-1 Date: 09/15/2011 Approved: NR Figure: 7-1
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Reverse circulation and diamond<br />
drilling program for targets 7, 10 and<br />
11<br />
File Name: Figure_7-2 Date: 09/15/2011 Approved: NR Figure: 7-2
<strong>Verde</strong> <strong>Potash</strong> Plc 8-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
8<br />
Drilling (Item 10)<br />
8.1 Type and Extent of Drilling for Funchal Norte Target<br />
A drilling program was undertaken in early 2010 and has targeted only a select portion of the<br />
regional <strong>Verde</strong>te within the <strong>Verde</strong> tenements as shown in Figure 2-1. Figure 8-1 shows the<br />
location of the 15 drillholes completed by <strong>Verde</strong>. All holes were successful in intersecting the<br />
<strong>Verde</strong>te.<br />
The principal methods used for exploration drilling at Cerrado <strong>Verde</strong> have been reverse<br />
circulation drilling (RC). Table 8.1.1 summarizes pertinent drilling statistics. The main zone has<br />
been drilled at a nominal spacing of 100m to 400m.<br />
Table 8.1.1: Cerrado <strong>Verde</strong> <strong>Potash</strong> Project Summary Drilling Statistics<br />
Company/Year Drillholes Meters Contractor Drill Rig Diameter<br />
<strong>Verde</strong> / 2010 19 997 Fuad Rassi Engenharia Indústria Prominas R1-H 4.5”<br />
e Comerécio Ltda<br />
All drillholes have been drilled vertical to an average of 52m deep. No downhole surveys have<br />
been completed due to the short vertical holes and scale of mineralization. The drilling has been<br />
completed perpendicular to mineralization and as such all intercepts reflect the true thickness.<br />
Drillhole collars were surveyed by <strong>Verde</strong> surveyors using a portable GPS with accuracy of +/-<br />
5m.<br />
Accuracy of the survey measurements (downhole and surface) meets acceptable industry<br />
standards for the style of mineralization.<br />
The drilling completed has been compiled into a 3D geological model as defined in section 15,<br />
Mineral Resources, interpretation of drilling is also covered in this section.<br />
8.1.1 Reverse Circulation (RC) Sampling<br />
The samples were taken on 2m intervals and riffle split down to 3kg samples. Sample weights<br />
were not recorded but recoveries were reported as good. The RC method of sampling is not<br />
optimal and SRK would recommend that a Jones Riffle Splitter be utilized in future RC sampling<br />
programs. Although the quartering technique used by <strong>Verde</strong> is not optimal the homogenous<br />
nature of the <strong>Verde</strong>te will remove any sampling bias created.<br />
8.1.2 Logging<br />
Drill samples were sieved during drilling and a small sample of the chips was stored in chip trays<br />
for future reference.<br />
Basic weathering and lithologies were recorded by the geologists and entered into a digital<br />
database.<br />
Detailed geologic logging of the chips should be done to determine subtle changes within the<br />
formation that could be correlated with changes in grade of K 2 O<br />
8.1.3 Bulk Density<br />
<strong>Verde</strong> utilized a consulting group, ConcreSolo, to undertake Bulk Density measurements.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Coffey Mining has reviewed the methodology used by ConcreSolo, and noted that the 22<br />
samples measured the saturated Bulk Density of grab samples collected from surface.<br />
Coffey Mining considers that given the apparent leached zone in the first 10m of drilling that<br />
down hole samples should be undertaken, to determine if there is any change in density with<br />
depth.<br />
Coffey Mining also considers that saturated bulk density measurements are not appropriate for<br />
resource estimation. Dry bulk density should be determined. Saturated bulk density<br />
measurements will result in a positive bias, as it is the weight of the rock plus the water that is<br />
absorbed into the rock. The result is an over estimation of the tonnage by the moisture content.<br />
Additional dry bulk density measurements are required.<br />
The dry bulk densities should be determined at several intervals down hole (across the thickness<br />
of the section) and specifically in reference to the weathered vs. the Unweathered portions of the<br />
deposit. A number of dry bulk densities should also be taken along strike and averaged to come<br />
up with a valid density to calculate tonnage.<br />
8.2 Type and Extent of Drilling for Targets 4, 6, 7, 10 and 11<br />
Two drilling campaigns were performed. Three reverse circulation drill rigs (RC), belonging to<br />
Geosedna Perfurações Especiais S/A were used in the first campaign, which started in January<br />
2011 and finished in June 2011. These three drills (Foremost, Prominas and Explorac), drilled a<br />
total of 9,059m in 142 holes. The second campaign, which started in February 2011 and April<br />
2011 drilling amounted to 412m in five twinned RC/diamond drill holes (DDH).<br />
The 142 RC boreholes were drilled using 4¾" and 5" hammers to an average depth of 58m in a<br />
400m x 400m grid (approximately).<br />
The purpose of the twinned holes was to confirm the geology and describe, in detail, the<br />
lithological and mineralogical variations of the intercepted units, besides providing material for<br />
density measurements. All holes were vertical, and drilled to an average depth of 82m.<br />
Drillhole diameter was HQ and NQ. The drill used was a Diakor II, belonging to ISOÁgua Ltda.<br />
Downhole deviation surveys are not required in view of the shallow depth to which the holes<br />
were drilled.<br />
The drilling was carried out perpendicular to the mineralization and reflects its true thickness.<br />
Table 8.2.1 represents the number of holes for each target, and the average depth reached.<br />
The coordinates of the holes were surveyed using a Trimble ® Pathfinder Pro XR differential<br />
GPS. The data had post-correction validated by the IBGE with reference to the Santiago &<br />
Cintra station in Belo Horizonte (vertex 93,621; East 608,308.23m, North 7,799,827.00m,<br />
879.06m altitude (HAE) – recording rate: 0.5s, C/ A code + L1). All azimuth, distances, areas<br />
and perimeters were calculated following the UTM planar projection system, SAD69 datum, MC<br />
–45W and 23K zone. The accuracy of the measurements (borehole and surface) is within<br />
acceptable standards, considering the type of mineralization. The accuracy is approximately 1<br />
cm after 45 minutes of satellites tracking.<br />
The drilling data are compiled into a 3D geological model, as described later in the chapter<br />
"Mineral Resource and Mineral Reserve Estimates", detailed in the Section 15 of this Technical<br />
Report. The interpretation of the drilling results will also be made in this section.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 8-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 8.2.1: Drilling Statistics<br />
RC Drilling<br />
DC Drilling<br />
Prospect<br />
Quantity<br />
of holes<br />
Average<br />
depth (m)<br />
Meters<br />
drilled<br />
Results Received<br />
(# holes)<br />
Results<br />
Received (m)<br />
Quantity<br />
of holes<br />
Average<br />
depth (m)<br />
Target-11 9 49 542.00 9 <strong>43</strong>2.00 0 -<br />
Target-10 5 50 250.00 5 250.00 0 -<br />
Target-7 77 65 6,345.00 77 5,147.00 3 87.00<br />
Target-4 7 72 509.00 7 509.00 0 -<br />
Target-6 22 57 1,255.00 22 1,255.00 2 76.00<br />
Total 120 58 8,901.00 120 7,593.00 5 82.00<br />
8.2.1 Logging<br />
The RC chip samples are sieved at the field and small amounts are stored in chip trays. Each<br />
tray has chips from 30m drilled. The chips are described by the lithology, and also by the color<br />
and degree of weathering. The DDH core is placed in core boxes.<br />
The weathering, regolith and lithology, including the petrographic features are recorded by the<br />
geologists, as well as the recording of basic geotechnical observations (RQD – rock quality<br />
designation, weathering degree and IRS – impact resistance degree) are entered into a digital<br />
database and the information stored on a log sheet. Logging is performed in the core shed where<br />
the cores are stored.<br />
After the core is logged the boxes are photographed as a precaution against accident as well as<br />
the deterioration of the core box. The core boxes are photographed in pairs. The photographs<br />
are taken over a fixed assembly holding a camera for consistency of lighting. The photographs<br />
are edited on the computer. The borehole identification, number of the core box and the interval<br />
contained are all recorded, the database has a file with all the photographs of every core boxes.<br />
8.2.2 Recovery<br />
In the reverse circulation drilling, the recovering determinations were made considering that the<br />
bag containing that interval is weighed and the weight is compared with the reference value,<br />
using the formula below:<br />
% Rec=<br />
∗ <br />
<br />
Where, the cylinder volume (Cv) is calculated by the formula:<br />
Cv = π* R 2 *h = 3.14* 6.35 2 *100 = 3.1415 * 40.32 * 100 = 12,666.5 cm 3 * 2.3 = 29.132 kg<br />
For DDH, the recovery determinations were made by a measuring tape. The value for the core<br />
measured is compared to the value noted on the wooden information tag. Each rush has an<br />
average of 1.5m. Using the formula: recovered core x 100 / run= recovered percentage. The<br />
maximum percentage was 100%. Table 8.2.2.1 summarizes the recovery statistics.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 8-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 8.2.2.1: Summarizes the Recovery Statistics<br />
Prospect Average Recovery (%)<br />
Target-4 88.0<br />
Target-6 89.8<br />
Target-7 88.9<br />
Target-10 96.9<br />
Target-11 94.1<br />
8.2.3 Reverse Circulation (RC) Sampling<br />
RC samples are collected every 1 to 3m rush, and placed in a large plastic bag, weighed on a<br />
balance, and the weight noted by the supervisor. A small sample is also taken from the bag and<br />
placed into a chip tray for visual inspection and future logging by the geologist. The main water<br />
intersections encountered by drilling are also captured by the supervisor on site. The cyclone is<br />
cleansed by compressed air after every rod drilled.<br />
The sampling intervals were selected after a preliminary analysis by the portable XRF<br />
spectrometer. The cover rocks are not sampling. <strong>Verde</strong>te intervals containing above 6% of K 2 O<br />
were selected. A safety margin was given in these intervals. This margin ranging from 1 to 5m,<br />
taking as reference the content of 6% of K 2 O and variations up to 2% below this level. The<br />
results obtained were integrated in a spreadsheet and passed via a personal digital assistant<br />
(PDA) to the sampling responsible at the shed.<br />
At the shed, the sample is split repeatedly in a riffle splitter until a representative sample of<br />
approximately 1.3kg is obtained. This sample is destined for preparation and laboratory<br />
analyses. The riffle splitter is beaten with a rubber mallet and cleaned with compressed air after<br />
every sample, to avoid sample contamination. The wet and moist samples are split using a<br />
hollow plastic cylinder with a sharpened tip. This cylinder is projected into the sample bag, in<br />
order to perforate it in several different places. The material from the bag that is returned within<br />
the cylinder is then sampled. Approximately six punches are sufficient to obtain a representative<br />
sample of the meter interval drilled (Figure 8-2). These samples are transported to the SGS<br />
Geosol laboratories for further processing.<br />
8.2.4 DDH Sampling<br />
After logging testing the drill core selected is cut. The core is cut lengthwise by a diamond saw.<br />
One half of the core is sent for analysis and the other is retained in the core box.<br />
The samples, with a length of 2m, are packed in a plastic bag, with the identification number<br />
written with a marker on the sample together with an identification tag. The bag is placed inside<br />
another, sealed with clamps and likewise identified. All data related to sampling are recorded in<br />
a log table for subsequent correlation with the analytical results.<br />
8.2.5 Bulk Density<br />
Density measurements are made on DDH core samples. After the geological description the drill<br />
core is sawn in half. The weathered and fresh lithological units are then chosen for dry density<br />
measurements. Intervals of 10cm to 15cm are selected from the half of the drill cores.<br />
The top and the base from each section of drill core are marked and the depth recorded on the<br />
density spreadsheets for each hole. The samples are placed in labeled aluminum trays and dried<br />
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in electric oven with temperature of approximately 90°C for 24 hours. Using half of the drill<br />
cores assures that all internal humidity is removed from the drill core.<br />
After cooling, each sample is wrapped in Boreda ® tinfoil transparent PVC film (vinyl<br />
polychloride resin) and weighed in air by a OHAUS Adventurer ® digital balance, approved by<br />
Inmetro (the National Institute of Metrology, Normalization and Industrial Quality), with a<br />
precision of at least 2 hundredths of a gram.<br />
The sample is then completely immersed in water through a suspended steel hook attached to the<br />
central beam of the balance. The immersed weight is then recorded. Thereafter, the sample is<br />
returned to its respective place in the drill core box. The dry density calculation is made using<br />
the Archimedes Principle.<br />
Density determinations were made at the sample preparation section at VERDE in 7 samples of<br />
weathered <strong>Verde</strong>te, obtaining an average density of 1.49g/cm 3 ; and in 65 samples of fresh<br />
<strong>Verde</strong>te, with an average density of 2.11g/cm 3 .<br />
Density determinations were also made at SGS Geosol Laboratories Ltda, located at km 24.5 of<br />
Highway MG 10, Vespasiano, Minas Gerais. Measurements were made in 2 samples of<br />
weathered <strong>Verde</strong>te, obtaining an average density of 1.85g/cm 3 ; and 22 samples of fresh <strong>Verde</strong>te,<br />
with an average density of 2.09g/cm 3 . The measurements are made using the same methodology<br />
than VERDE, spending the Archimedes Principle. The weigh is determinate by a SARTORIUS<br />
TE2145 ® digital balance, with includes calibration with <strong>NI</strong>ST traceable certification and a<br />
precision of at least 4 hundredths of a gram.<br />
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Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Drillhole Location Plan<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_8-1.docx Date: 09/16/11 Approved: NR Figure: 8-1
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
RC Drilling Flowchart<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_8-2.docx Date: 09/15/2011 Approved: NR Figure: 8-2
<strong>Verde</strong> <strong>Potash</strong> Plc 9-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
9<br />
Sample Preparation, Analyses and Security<br />
(Item 11)<br />
9.1 Sample Preparation and Assaying Methods for Funchal Norte<br />
Target<br />
All samples following drilling were sent via a <strong>Verde</strong> vehicle to the Bureau Veritas laboratory in<br />
Belo Horizonte for analysis. All sample reject, pulps and chip trays are stored at the <strong>Verde</strong> base<br />
in Belo Horizonte.<br />
All samples have been prepared and analyzed by Bureau Veritas in Belo Horizonte.<br />
The samples were received then dried, crushed to 2mm and riffle split; and<br />
Samples were analyzed by XRF for Fe 2 O 3 , SiO 2 , Al 2 O 3 , CaO, MgO, MnO, TiO 2 , Na 2 O,<br />
K 2 O, BaO, P 2 O 5 , Cr 2 O 3 , SrO and LOI.<br />
Bureau Veritas insert duplicates, blanks and certified standards at a rate of 5% to maintain their<br />
quality control.<br />
9.2 Sample Preparation and Assaying Methods for Targets 4, 6, 7, 10<br />
and 11<br />
The aliquots for the laboratory were prepared in the office. Initially, the six firsts holes drilled<br />
were sampled meter by meter and the others were made samples every 2m. The homogenization<br />
was the first stage of the preparation. In one corner of a tarpaulin of 2 x 2m were disposed<br />
samples of 1m (from the six first holes) or of 2m (for the other holes drilled). Next, the bulk was<br />
rolled in a unique way (clockwise or counter-clockwise) raising the edges of the tarpaulin until<br />
the sample became homogeneous in terms of distribution of color and granulometry. After<br />
mixing, the sample was divided into four equal parts (splitting). In this fourth part of the sample<br />
aliquots were separated for the lab, for archive (chips). To collect the first two aliquots, a quarter<br />
of the material was distributed on the tarpaulin in a linear shape, and then small portions were<br />
collected randomly with a shovel. These aliquots were properly packaged, labeled and weighed<br />
between 2kg and 2.5kg. Something around 1kg to 2kg was separated to 5mm, and the fraction<br />
upper than 5mm was filed in core boxes, identified with name of the hole, size and number of<br />
laboratory sample. The fraction under 5mm was discarded. The other three quarters of the<br />
sample were archived.<br />
The aliquots for the laboratory were prepared in the shed at the project site, by the VERDE<br />
technicians and sent in a <strong>Verde</strong> vehicle to the SGS Geosol Laboratórios Ltda (“SGS”), laboratory<br />
with ISO 9001:2008 and ISO 14001:2004 certifications, located at km 24.5 of Highway MG 10,<br />
Vespasiano, Minas Gerais State, for analysis. All sample reject, pulps and chip trays are stored<br />
at the <strong>Verde</strong> base in Matutina.<br />
After receiving the samples at the SGS, the request for analysis and the inclusion in the CCLAS<br />
system, the samples are checked. Physical preparation quality controls are introduced by the<br />
laboratory, which include a preparation blank (quartz) and duplicate at every 20 samples. The<br />
samples are dried at 105±5°C and passed through the crusher with 95% of the sample passing at<br />
2mm. Afterwards the fractionation of the sample is made to approximately 600g (RSD or Riffles<br />
depending on the mass to fractionate). The powdering is made with 95% passing at 150#,<br />
forming the laboratory aliquot and the reserved pulp. At this stage, the laboratory quality control<br />
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is obtained by the inclusion of a reagent blank, certified reference materials and a laboratory<br />
duplicate within each analytical run. The blank is inserted at the beginning, standards at every<br />
20 samples and duplicate are inserted at random intervals. If necessary, additional quality<br />
control samples can be added. All data gathered for quality control samples is automatically<br />
captured by the CCLAS software, sorted and retained in the QA/QC database. The SGS quality<br />
management system complies with the requirements of International Standards ISO 9001:2008.<br />
After the loss on ignition (LOI) analysis, the analytical aliquot preparation is made by fusion<br />
with lithium tetraborate in the fusion machine with oxygen enriched flame – Phoenix ® (XRF<br />
Scientific). In this method, a calcined sample (0.5g) is added to the lithium borate fusion (50%<br />
Li 2 B 4 O 7 – 50% LiBO 2 ), mixed and fused between 1,050° and 1,100° C. The machine uses a<br />
mold which incorporates a crucible shape in which both mixing and mixing and molding is<br />
performed. When mixing is complete the molten material is cooled in the moldable and the bead<br />
is then removed using a suction cup. The analysis of the fused tablet is made by X-Ray<br />
Fluorescence Spectrometer – Axios mAX -Minerals ® (PANalytical). The samples were analyzed<br />
for Fe 2 O 3 , SiO 2 , Al 2 O 3 , CaO, MgO, MnO, TiO 2 , Na 2 O, K 2 O, P 2 O 5 , and LOI. The detection<br />
limits are described in Table 9.2.1.<br />
Sample<br />
Dry (105°C)<br />
Crush (95% @ 2mm)<br />
Fractionate<br />
Powder (95% @ 150#)<br />
LOI analysis<br />
Fusion with lithium tetraborate<br />
X‐ray flourescence analysis<br />
Quality control<br />
Table 9.2.1: Detection Limits of XRF Analysis<br />
Item Al 2 O 3 CaO Fe 2 O 3 K 2 O MgO MnO Na 2 O P 2 O 5 SiO 2 TiO 2<br />
Limit of Detection (%)
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9.2.1 Quality Controls and Quality Assurance<br />
At the time of the drilling for Funchal Norte Target, <strong>Verde</strong> did not have appropriate internal<br />
QA/QC systems. Future drilling should include at least one twinned hole from the existing set<br />
that has good QA/QC in place that could be used to verify the values from the present reverse<br />
circulation drilling program.<br />
In May 2010, <strong>Verde</strong> introduced a QA/QC program. For the internal control reference, at every<br />
20 routine samples, a certified standard, a powder blank and a duplicate was inserted and sent to<br />
laboratory.<br />
Initially, duplicates were prepared from the splitting of previous sample pulp. After analysis at<br />
SGS laboratory, the pulp were returned and forwarded to analysis at the ALS Brasil Ltda<br />
laboratory, located at Vespasiano, Minas Gerais State. From there, the pulps were sent to ALS<br />
laboratory located in Lima, Peru for analysis. The pulps are analyzed by XRF and LOI. The<br />
ALS quality management system complies with the requirements of the International Standards<br />
ISO 9001:2008 and ISO/IEC 17025:2005. Quality control samples are inserted within each<br />
analytical run. Form XRF methods, the minimum number of QA/QC samples are 2 standards, 1<br />
duplicate and 1 blank, introduced every 39 samples. The blank is inserted at the beginning,<br />
standards are inserted at random intervals, and duplicates are analyzed at end of the batch. Every<br />
batch of samples are analyzed has a dual approval and review process. The individual analytical<br />
runs are monitored and approved by the analyst. The results are compared with the initial values<br />
of SGS in graphics for duplicate controls like Thompson and Howarth, QQ and Correlation plots.<br />
This procedure was adopted until sample CV-RCS-2151.<br />
From March 2011 on, starting at the sample CV-RCS-2171, the duplicate was obtained by<br />
quartering the routine sample, verifying, in that way, the whole laboratory sample preparation<br />
process.<br />
For the accuracy control, the Australian GeoStats Phosphate certified reference material and<br />
Brazilian Instituto de Pesquisas Tecnológicas reference material were used. There were<br />
submitted to SGS for conventional XRF analysis. The standards certificates are attached at the<br />
end of this report.<br />
The blank material was prepared from pulverized quartz obtained from a Brazilian laboratory<br />
Sulfal Química Ltda. At the time, the company did not have appropriate internal contamination<br />
control. Gravel blank composed by quartz will be provided to verify the contamination of the<br />
sample preparation.<br />
For the external control reference, after analysis at the SGS laboratory, pulps were selected from<br />
routine samples, spaced 20 by 20 and sent to analysis at ALS.<br />
9.2.2 Adequacy of Procedures for Targets 4, 6, 7 10 and 11<br />
The Geosol SGS laboratory, which were performed the preparation and the chemical analysis of<br />
the bulk samples, was inspected in July 12. The inspection of the sample preparation room<br />
confirmed that the procedure described above is satisfactory. The preparation rooms and<br />
equipment are kept clean, and upon the completion of each shift, these rooms are cleaned up. All<br />
laboratories and each equipment is provided with ventilation system and exhaust fans. All<br />
instruments are in serviceable condition. The laboratory operates according to international<br />
standards and the risk of error in chemical analysis can be assessed as low.<br />
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Cerrado <strong>Verde</strong> Project<br />
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10<br />
Data Verification (Item 12)<br />
10.1 Funchal Norte Target<br />
<strong>Verde</strong> did not carry out a proper QA/QC program. The current QA/QC analysis is the internal<br />
Bureau Veritas program.<br />
5% of samples sent to the Bureau Veritas were then sent to SGS in Belo Horizonte to undertake<br />
an umpire sample.<br />
In the QA/QC program implemented by <strong>Verde</strong> in May 2010, as the analytical results are<br />
received, they are immediately imported into the respective sampling spreadsheets, where any<br />
undesirable analytical deviations of standards, blanks, duplicates, or inconsistency between the<br />
sample result and its respective lithology can be easily compared. Simple inversions of sample<br />
results and typing errors of the spreadsheets after receiving the certificates, are also common and,<br />
therefore, all the results of all samples must be checked one by one and not only the control<br />
samples introduced.<br />
The accuracy, precision and contamination of the analysis should be evaluated.<br />
All reference materials require validation, to check the level of accuracy and reliability of the<br />
laboratories. The mistakes detected in the analytical procedures are identified and evaluated<br />
having as reference the precision of the method.<br />
The results for the certified reference materials (standard samples) must be between the limits of<br />
2.SD (twice the standard deviation).<br />
The validation method of the blank samples consists in verifying the presence of the analyte.<br />
Therefore it is necessary to observe the detection limit of the method.<br />
If there is any analysis deviation of the control samples or inconsistencies with the respective<br />
lithologies, the batches should be re-examined and eventually re-sampled. Depending on the<br />
situation, and certifying that there could not have been any mistake on sampling (which is<br />
common), the costs of re-examination will be on the laboratory. If the blank values are very<br />
high, the method of sample preparation should be checked. If all values for the standards are off<br />
the defined limits, the digestion method of the samples should be checked. When the results of<br />
standards and blanks are following a same trend, higher or lower than expected, the analysis for<br />
all the batch of samples sent should be repeated, including the reference ones.<br />
Besides the analysis of the results obtained, an unannounced visit to the laboratory is<br />
programmed to check the conditions of the analysis.<br />
Only after all results from each batch of samples are checked and validated, can information be<br />
fed into the database.<br />
The final validation of the results obtained is performed by an independent consultant (Qualified<br />
Person).<br />
Coffey Mining has reviewed the QA/QC results returned by Bureau Veritas as presented in Table<br />
10.1.1.<br />
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Table 10.1.1: Standards Utilized by Bureau Veritas<br />
Standard<br />
Expected<br />
ValueK 2 0% +/-10% (EV) Failed<br />
IPT 146 0.04 0.034 and<br />
0.042<br />
No of<br />
Analyses Minimum (%) Maximum(%) Mean (%)<br />
5 6 0 .07 0.05<br />
IPT 53 12.1 10.89 and 0 6 11.95 12.61 12.18<br />
13.31<br />
IPT53+IPT146 6.07 5.46 and 6.67 0 6 5.84 6.36 6.07<br />
Pulp Blank 0
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Information about internal quality control was presented as a single data batch, without<br />
separation of the samples by grade ranges. Two evaluation methods were used, simple linear<br />
regression and QQ (Quantile Quantile) plot.<br />
One of the parameter used in the results analyzes was the precision. Precision is a measure of<br />
how well the Y value represents the X value. It is most commonly used in assay quality control,<br />
where X is the first assay value and Y is the matching repeat assay. A perfect result has a<br />
precision of zero. Values of greater than zero represent an increasing amount of deviation; for<br />
example a precision of 10% indicates that the difference between X and Y varies by around 10%<br />
of X. The tests for K 2 O, P 2 O 5 , Al 2 O 3 , Fe 2 O 3 , SiO 2 , MgO and TiO 2 , had a high quality and<br />
accuracy in the statistical analysis, with precision accuracy lower than 5%. For MnO and Na 2 O,<br />
the tests showed a precision accuracy lower than 15%, and for CaO, the tests showed a precision<br />
accuracy higher than 15%. The numbers of tests provided are statistically representative.<br />
Precision of the Chemical Analysis<br />
The sampling precision was evaluated using the method of repeated analysis for K 2 O, P 2 O 5 ,<br />
CaO, Al 2 O 3 , Fe 2 O 3 , SiO 2 , MgO, TiO 2 , MnO, Na 2 O and LOI. In a total of 3244 samples, 108<br />
were re-examined, representing 3.3% of the total number of tests.<br />
Information on internal quality control was presented as a single data batch, without separation<br />
of the samples by grade ranges. Was used two evaluation methods, simple linear regression and<br />
QQ (Quantile Quantile) plot.<br />
In general, the tests for K 2 O, Al 2 O 3 , Fe 2 O 3 , MgO, TiO 2 and SiO 2 , had a high quality and<br />
accuracy in the statistical analysis, with accuracy higher than 5%. To P 2 O 5 , CaO, MnO and<br />
Na 2 O, tests showed a precision up to 12%.<br />
The correlation coefficient of the samples values of regular control is above 0.9, allowing it to<br />
conclude that tests for the most important elements for the mineralization in study were<br />
conducted with a satisfactory and acceptable accuracy.<br />
Inaccuracy<br />
The inaccuracy was determined as a difference in Fe 2 O 3 , SiO 2 , Al 2 O 3 , P 2 O 5 , Mn, TiO 2 , CaO,<br />
MgO, K2O, Na2O e LOI in samples, between the values determined by SGS and those<br />
determined by an independent laboratory ALS.<br />
The external control was conducted for the purpose of determination of systematic inaccuracy in<br />
the results of principal analytical laboratory. The value of the systematic inaccuracy was<br />
estimated by the same formula as used for the internal control.<br />
The number of repeated tests is 119, which is 3.6% from the total number of tests 3244.<br />
In whole, the analysis of data for each laboratory demonstrates good precision of data with high<br />
coefficient of correlation R > 0.98.<br />
The total number of control external tests is sufficient. According to the analysis of external<br />
control data, the accuracy of principal laboratories can be rated as satisfactory.<br />
Standards<br />
For quality control were used 174 standard samples, which represent 5.3% of the total number of<br />
analyzed samples.<br />
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Standard GPO-11 (<strong>43</strong> analysis results);<br />
Standard GPO-12 (<strong>43</strong> analysis results);<br />
Standard GPO-13 (54 analysis results);<br />
Standard GIOP-27 (8 analysis results);<br />
Standard IPT-53 (21 analysis results); and<br />
Standard IPT-72 (5 analysis results).<br />
Four types of standard GPO-11, GPO-12, GPO-13 and IPT-53 were analyzed, and the results<br />
were analyzed using the Shewhart Control Chart. Statistical analysis was performed for the<br />
following elements Fe 2 O 3 , SiO 2 , Al 2 O 3 , P 2 O 5 , MnO, TiO 2 , CaO, MgO, K 2 O and Na 2 O.<br />
The analyzed results, provided by SGS, present problems when compared with known results.<br />
Blank Samples<br />
For quality control were used 174 blank samples, representing 5.3% of the total number of<br />
samples analyzed.<br />
When discussing the use methodologies of the blank samples with <strong>Verde</strong> Fertilizantes Ltda.<br />
team, it was certified that powder material was sent to the laboratory.<br />
The purpose of using blank samples is attempting to quantify the contamination of samples<br />
during the preparation process. This objective was not achieved whereas the blank samples were<br />
sent to a laboratory as powder, not subject to potential contamination involved in the preparation<br />
process and reduction of other samples. This makes it unnecessary to analyze the results<br />
obtained for the blank samples to quantify the possible errors in the preparation of other samples.<br />
Conclusions<br />
It was certified that the tests relating to duplicate samples were conducted with an acceptable and<br />
satisfactory accuracy to the most important elements of the mineralization under study.<br />
There are possibilities of error in the methodology of sample analysis. Therefore, the results of<br />
sample analysis with known grades were not within the expected mean range.<br />
The methodology for the use of blank samples, as has been said, is not correct.<br />
Despite the unsatisfying results for the standards samples and the incorrect methodology used for<br />
the blank samples, the risk of errors in chemical analysis can be assessed as low.<br />
10.2.2 Data Import and Validation<br />
Data Local Validation<br />
The client did not provide information about the data local validation, so this procedure was not<br />
performed by BNA Consultoria e Sistemas.<br />
Data Validation Performed in MICROMINE Software<br />
The analytical database was exported to the format *.xls, and then imported into MICROMINE ®<br />
software. After this process, the imported database was validated using specific processes to find<br />
the following possible errors:<br />
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<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
The drillhole name is present in the collar coordinate file, but is missing in the analytical<br />
database;<br />
The drillhole name is present in the analytical database, but is missing in the collar<br />
coordinate file;<br />
The drillhole name appears repeated in the analytical database and in the collar<br />
coordinate file;<br />
The drillhole name is not present in the collar coordinate file and in the analytical<br />
database;<br />
One or more coordinates notes are missing from the collar coordinate file;<br />
From or to are not present in database analysis;<br />
From > to in analytical database;<br />
Sampling intervals are not continuous in analytical database (there are breaks between the<br />
records);<br />
Sampling intervals are overlapping in the analytical database;<br />
The first sample does not correspond to 0 m in the database analysis;<br />
The azimuth is not in the range from 0 to 360 degrees;<br />
The dip angle is not in the range from 0 to 90 degrees;<br />
Azimuth or dip angle of the drillhole is missing; and<br />
The drillhole total depth is less than the depth of the last sample.<br />
The topography and cartography geological files in *.shp format were converted to the<br />
MICROMINE ® formats.<br />
Although the data do not provide a suitable structure, the validation results were satisfactory,<br />
being found only one error in the entire database.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 11-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
11<br />
Mineral Processing, Metallurgical Testing<br />
and Recovery Methods (Items 13 and 17)<br />
The Project's objective is to produce a thermo-fertilizer in the form of calcined potassium pellets,<br />
with diameters between 2 and 4mm, to be produced at <strong>Verde</strong> facilities, located at São Gotardo –<br />
MG. The primary feed material is a metasiltstone (<strong>Verde</strong>te) that typically contains 8 to 10%<br />
K 2 O The project base case is the production of 1.1Mt of thermo-fertilizer per year 8.34% K 2 O<br />
with an expected life of around 100 years at this level of production.<br />
The process approach is summarized in the conceptual flowsheet in Figure 11-1. Recovery is<br />
discussed in Section 13.1.6.<br />
11.1 Summary of Proposed Process<br />
11.1.1 Overview<br />
<strong>Verde</strong>te is mechanically extracted from the quarry is reclaimed by front loaders which load a 25-<br />
50t truck fleet. Prior blasting is regarded to be unnecessary for the majority of the quarry<br />
extension, due to the friability of the ore.<br />
Fragments up to 500mm will be discharged into a 60m 3 capacity bin, and will be screened in a<br />
75mm fixed grizzly. Oversized ore will be retained at this grizzly and then will be disaggregated<br />
through a jaw crusher. Material passing from the grizzly, finer than 75mm, along with the<br />
primary crusher product feed will be conveyed into the secondary crushing circuit.<br />
Material is fed to a 40m 3 bin which feeds a vibrating screen from which ore in the -75 to +16mm<br />
fraction will feed a secondary cone type crusher. The product from the crusher, with p 80 less<br />
than 20mm, is conveyed to a storage hall to be chevron stacked, in order to improve stockpile<br />
homogeneity.<br />
Finely crushed <strong>Verde</strong>te from the storage hall is reclaimed and fed to a dosing bin in the raw meal<br />
grinding department.<br />
Limestone, max 5% passing 1 inch, is received from an external quarry, and stacked in a conical<br />
pile with a volume of 1300m 2 . The material is transferred via truck loader to a hopper to a<br />
dosing bin in the raw meal grinding department.<br />
Both crushed <strong>Verde</strong>te and limestone are proportioned and fed to a vertical roller mill grinding<br />
circuit, nominal rate of 169t/h dry basis, comprising of a belt feeder, integrated dynamic<br />
separator, bag filter, bucket elevators for both internal circulation and final product transport.<br />
The installed power will be 1360kW.The raw meal produced in the grinding circuit is stocked in<br />
a storage silo, where the material will be homogenized pneumatically.<br />
Raw meal finely ground at 10%+170 mesh, along with recirculating off-spec fines generated in<br />
different steps of the process and agglomerator (necessary for the pelletizing step) will be fed to<br />
an 215 t/h continuous intensive vertical mixer (commercial reference adopted is RV24K Eirich).<br />
The blend will be fed via belt conveyors to pelletizing gate feeders to the pelletizing area,<br />
comprising of three 5.5m diameter disk pelletizer lines at a nominal dry basis rate of 72t/h each,<br />
where water is continuously injected (up to 18% humidity). After pelletizing, the green pellets<br />
are classified and off-spec pellets will be returned to the mixer.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 11-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Green pellets will feed a grizzly car at a rate of 210t/h wet basis. There will be approximately 7<br />
min residence time and at this time the pellets are dried in ascending and descending areas with<br />
hot air from the preheating zone. The total effective length of the grizzly car will be<br />
approximately 40m with a width of 3m.<br />
The dust generated at the grizzly car will be collected by a dust collector and will return the<br />
heated and clean air to the pellets drying areas. Fines collected return through pneumatic<br />
conveying to the fines dosing system, making part of the load that feeds the mixer. The fines<br />
generated along the bed of the grizzly car will be transported back to the bins in the mixing area.<br />
After drying the pellets feed the rotary kiln at a rate of 172t/h dry basis, 12% filling degree, 60<br />
minutes residence time, max temperature 1300C. Power supply demand for the kiln and all its<br />
auxiliary equipment will be about 3700KW. Reaction temperature will be approximately<br />
1300ºC.<br />
After roasting, thermopotash is formed and must be quickly quenched. Quenching is performed<br />
in a water reservoir. After this treatment the pellets will be extracted from the bottom of the<br />
reservoir and dried in a rotary dryer. Evaporated steam will be collected and condensed and<br />
returned to the quench circuit. Evaporation losses in the pellets drying condenser and cooling<br />
tower will be compensated with makeup water added at the cooling tower basin.<br />
From the rotary dryer thermopotash is sent to a final grinding area, where its size is reduced to<br />
100% passing 100 mesh. After classification, the product is repelletized and conveyed to a final<br />
classification step using a vibrating screen. The pellets within the specification range, -4 + 2mm,<br />
will be dried and conveyed by belt to the storage warehouse where the final product will be<br />
stored and further dispatched by trucks.<br />
The product is a potassium source only sparingly water soluble, and recovery is anticipated to be<br />
better than 90% of the 8% potassium as K 2 O.<br />
In the proposed process the purpose of calcining is to thermally release potassium from <strong>Verde</strong>te,<br />
so that potassium becomes readily exchangeable for agriculture.<br />
11.1.2 Project Scenarios and Capital Costs<br />
For this project, three potential scenarios for heating the kiln have been identified:<br />
1. Petroleum Coke heating directly in the kiln with the <strong>Verde</strong>te;<br />
2. A dead roaster for utilizing any fuel with heat exchange to the kiln (i.e., no transfer of<br />
residue); and<br />
3. Natural Gas heating.<br />
The scenarios are summarized in Table 11.1.2.1. As can be observed although capital cost is<br />
lowest for option 3 the operating cost is double options 1 and 2.<br />
Option 1 presents the middle capital cost and lowest operating cost but <strong>Verde</strong> cannot yet confirm<br />
that petroleum products do not contaminate the product during the kiln roasting and as such<br />
cautious has to be applied in advocating this process option. However, it has been stated by Dr.<br />
Gaspar Korndorfer, University of Uberlandia that even if residual organics from combustion<br />
were absorbed by the pellets, there will be a positive effect regarding agronomic efficiency.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 11-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Dead burnt carbon has beneficial properties, increasing water retention in the soil, ensuring<br />
better fertilizer retention (negative surface charge), therefore reducing deleterious elements<br />
leaching. In the case of residual hydrocarbons adsorbed by the pellets, in minor quantities, it will<br />
be hard to determine any negative effect. Indeed, in some applications of the fertilizer industries<br />
waste oil was applied to fertilizer to provide mechanical particle stability. This supports the<br />
application of option 1 or 2 for heating but requires confirmation.<br />
Option 2 would have the benefit that any fuel source could be utilized in a dead roaster up front<br />
of the kiln and transfer heat to the kiln ensuring there would be no mix of fuel and product in the<br />
kiln keeping the product pure. Although this option has the highest capital cost, the operational<br />
cost is similar to the direct petroleum coke application in the calcine and a small incremental<br />
increase in operating costs (
<strong>Verde</strong> <strong>Potash</strong> Plc 11-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
11.1.4 Results of Agronomic Testwork<br />
The available K in the soil shown in Table 11.1.4.1 and 11.1.4.2 indicated that there is no<br />
difference between the water soluble K source (KCl) and Thermo-K, 60 days after application in<br />
sandy and clay soil, using dosage applications of 200 and 400kg/ha K 2 O.<br />
This result shows that the thermal treatment applied to the <strong>Verde</strong>te (raw material used in the<br />
manufacture of Thermo-K) was very efficient from an agronomic point of view. This can be<br />
seen when comparing the results against those of the pure <strong>Verde</strong>te, without heat treatment. In<br />
this case, the K in the soil did not differ from the control standard which means that virtually no<br />
potassium from the <strong>Verde</strong>te was released to the soil, indicating a low efficiency of this material<br />
as a source of potassium for plants.<br />
Table 11.1.4.1: K content in soil (Mehlich 1) After 60 Days of Incubation with Different<br />
Sources of Potassium in a Clay Soil.<br />
Dose K 2 O<br />
K – Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 -- -- -- 0,07<br />
200 0,24 * a B 0,23 * a B 0,07 ns b A 0,18<br />
400 0,36 * a A 0,32 * b A 0,07 ns c A 0,25<br />
Average 0,30 0,27 0,07<br />
CV% = 9,40<br />
DMS dose = 0,03; DMS source = 0,03; DMS Dunnet = 0,04<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance;<br />
Table 11.1.4.2: K Content in Soil (Mehlich 1) After 60 Days of Incubation with Different<br />
Sources of Potassium in a Sandy Soil.<br />
Dose K 2 O<br />
Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 0,04<br />
200 0,25 * a B 0,24 * a B 0,04 ns b A 0,18<br />
400 0,41 * a A 0,38 * a A 0,04 ns b A 0,28<br />
Average 0,33 0,31 0,<strong>43</strong><br />
CV% = 12,89<br />
DMS dose = 0,04; DMS source = 0,05; DMS Dunnet = 0,05<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance;<br />
In addition to potassium addition the application of Thermo-K also appears to increase available<br />
Ca and Mg in the soil after 60 days of incubation. Presumably, magnesium is also released from<br />
clays in the <strong>Verde</strong>te and Ca is present as lime from calcining of limestone in the kiln (Tables<br />
11.1.4.3 through 11.1.4.6). Further with a higher application mass of Thermo-K (400kg/ha)<br />
greater availability of Ca and Mg was also observed. Potassium chloride did not affect the Ca<br />
and Mg in the soil because it simply does not have these elements in their composition.<br />
The <strong>Verde</strong>te, however, despite containing Ca and Mg in its composition, did not increase the<br />
levels of these elements in the soil, strengthening the conclusion that the <strong>Verde</strong>te has low<br />
reactivity and is not able to release nutrients to the soil in the short term.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 11-5<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
When comparing the doses of 200 and 400kg/ha K 2 O, only Thermo-K showed an increase in the<br />
nutrient content in the soil, which further demonstrates the high reactivity of the product even<br />
when analyzed in the short term.<br />
Table 11.1.4.3: Exchangeable Ca in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in A Clay Soil<br />
Dose K 2 O<br />
K-Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 --- --- --- 0,09<br />
200 0,08 ns b A 1,40 * a B 0,10 ns b A 0,52<br />
400 0,09 ns b A 2,20 * a A 0,10 ns b A 0,80<br />
Average 0,08 1,79 0,10<br />
CV% = 6,70<br />
DMS dose = 0,07 ; DMS source = 0,06 ; DMS Dunnet = 0,08<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance<br />
Table 11.1.4.4: Exchangeable Ca in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in a Sandy Soil<br />
Dose K 2 O<br />
K-Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 --- --- --- 0,09<br />
200 0,08 ns b A 1,54 * a B 0,14 ns b A 0,58<br />
400 0,12 ns b A 2,26 * a A 0,11 ns b A 0,83<br />
Average 0,10 1,90 0,12<br />
CV% = 8,84<br />
DMS dose = 0,08 ; DMS source = 0,1 ; DMS Dunnet =0,11<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance;<br />
Table 11.1.4.5: Exchangeable Mg in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in a Clay Soil<br />
Dose K 2 O<br />
K-Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 --- --- --- 0,04<br />
200 0,04 ns b A 0,<strong>43</strong> * a B 0,05 ns b A 0,17<br />
400 0,05 ns b A 0,69 * a A 0,04 ns b A 0,26<br />
Average 0,04 0,56 0,04<br />
CV% = 5,54<br />
DMS dose = 0,016 ; DMS source = 0,019 ; DMS Dunnet = 0,02<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance;<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 11-6<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 11.1.4.6: Exchangeable Mg in the Soil After 60 Days of Incubation with Different<br />
Sources of Potassium in a Sandy Soil<br />
Dose K 2 O<br />
K-Source<br />
kg ha -1 KCl Thermo-K <strong>Verde</strong>te<br />
Average<br />
0 --- --- --- 0,05<br />
200 0,05 ns b A 0,48 * a B 0,05 ns b A 0,19<br />
400 0,05 ns b A 0,64 * a A 0,04 ns b A 0,24<br />
Average 0,04 0,60 0,05<br />
CV% = 12,75<br />
DMS dose = 0,04 ; DMS source = 0,04 ; DMS Dunnet = 0,05<br />
Averages followed by distinct letters, lowercase on the line and uppercase in the column, differ by Tukey test at 0.05 significance; ns not<br />
significant by the Dunnett test at 0.05 significance, * significant by the Dunnett test at 0 05 significance;<br />
This initial testwork indicates that Thermo-K provides a potentially superior source of nutrient<br />
enrichment in soils not only for potassium but also for calcium and magnesium. In addition,<br />
the source of potash is a non-chloride, non-sulfate source of potash and thus will not adversely<br />
impact soil pH or salinity. In addition, <strong>Verde</strong> conducted mass balance testwork, which<br />
demonstrated that Thermo-K is practically insoluble in water. Ergo, Thermo-K also provides a<br />
superior source of fertilizer as it would be a slow release source of nutrients which is important<br />
in climates with notably wet and dry seasons where traditional fertilizers have been weathered<br />
from soils during seasonally heavy meteoric events and unavailable during the dry season<br />
reducing the quality of agricultural soils.<br />
11.1.5 Summary, Residual Issues and Recommendations<br />
The testwork undertaken to date demonstrates that this unique process and product are<br />
potentially a valuable contribution to agriculture, particularly in regions where soils have a low<br />
natural exchangeable nutrient component. In addition although Thermo-K is relatively<br />
expensive when compared to similar potassium concentrations from salar salts it has the distinct<br />
advantages that:<br />
<br />
<br />
<br />
The source of salts is a non-chloride, non-sulfate source of salt and thus will not<br />
adversely impact soil pH or salinity components;<br />
Additional nutrients such as calcium, magnesium and silicon are present; and<br />
The nutrient source is slow release and as such more sustainable than traditional sources<br />
of fertilizer and thus will have lower usage costs for farmers as less frequent applications<br />
will be required.<br />
However residual issues remain with the product that need to be addressed in further studies.<br />
The rate of water solubilization of nutrients from the calcined product needs to be established<br />
through rinse tests simulating the quench step post calcining and long term exposure to meteoric<br />
rinsing. In addition, this testwork needs to also address potential mobilization of aluminum,<br />
manganese and iron as well as trace metals from the Thermo-K product that would adversely<br />
impact crop quality or yield. From preliminary studies <strong>Verde</strong> does not consider this to be a<br />
problem but more testwork needs to be undertaken before definitive conclusions can be made.<br />
In addition during prefeasibility assessment frequent samples to demonstrate consistency in<br />
product production and to demonstrate lack of impurities need to be undertaken.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Conceptual Flowsheet for<br />
Cerrado <strong>Verde</strong> ThermoFertlizer<br />
Project<br />
File Name: Figure_11-1 Date: 09/15/2011 Approved: RB Figure: 11-1
<strong>Verde</strong> <strong>Potash</strong> Plc 12-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
12<br />
Mineral Resource Estimate (Item 14)<br />
Volodymyr Myadzel, of BNA verified the Funchal Norte resource estimate provided by Coffey<br />
Mining as described in Section 12.1. SRK also verified this resource estimate on March 1, 2010.<br />
In addition, Dr. Myadzel constructed the geologic and resource model for Targets 4, 6, 7, 10 and<br />
11 as discussed in Section 12.2. Dr. Myadzel is responsible for the resource estimation<br />
methodology and the resource statement. Dr. Myadzel is independent of the issuer applying all<br />
of the tests in Section 1.5 of the <strong>NI</strong> <strong>43</strong>-<strong>101</strong>.<br />
The resource estimate has been undertaken in compliance with accepted Canadian Institute of<br />
Mining, Metallurgy and Petroleum (CIM) definitions for indicated and inferred resources in<br />
accordance with <strong>NI</strong> <strong>43</strong>-<strong>101</strong> Standards of Disclosure for Mineral Projects.<br />
12.1 Funchal Norte Target<br />
Coffey Mining was commissioned by <strong>Verde</strong> <strong>Potash</strong> plc to complete a resource estimate for the<br />
Project. Coffey Mining has estimated the Mineral Resource for the Project as at February 27,<br />
2010. All grade estimation was completed using Ordinary Kriging (“OK”) for <strong>Potash</strong>.<br />
This estimation approach was considered appropriate based on review of a number of factors,<br />
including the quantity and spacing of available data, the interpreted controls on mineralization,<br />
and the style of mineralization. The estimation was constrained with mineralization<br />
interpretations.<br />
12.1.1 Geological Modeling<br />
Based on grade information and geological observations from Coffey Mining and site based<br />
<strong>Verde</strong> geologists, one Unweathered domain and one Weathered domain (transition zone) have<br />
been interpreted using E-W oriented vertical sections.<br />
Interpretation and digitizing of all constraining boundaries has been undertaken on cross sections<br />
orientated at 90° (drill line orientation). The interpretation was completed using 8 vertical<br />
sections. Figure 12-1 shows the vertical sections location. The resultant digitized boundaries<br />
have been used to construct wireframe defining the three-dimensional geometry of each<br />
interpreted feature. The interpretation and wireframe models have been developed using the<br />
Gemcom Surpac mine planning software package.<br />
As the drill holes collars were surveyed using a portable GPS the RL values of each one were<br />
defined by Coffey draping those collars to the 3D topography surface.<br />
For the purpose of the resource estimation, 2 mineralized domains were interpreted and modeled<br />
to the <strong>Verde</strong>te which is characterized by the green glauconitic mineralization. Cross section<br />
examples are shown in Figures 12-2 through 12-3.<br />
Figures 12-4 and 12-5 show the two domain wireframes interpreted in 3 dimensions.<br />
12.1.2 Block Model Development<br />
A three-dimensional block model was constructed for the Cerrado <strong>Verde</strong> deposit, covering all the<br />
interpreted mineralization zones and including suitable additional waste material to allow later<br />
pit optimization studies. The block model has been developed using Gemcom Surpac Mine<br />
planning software.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 12-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
A parent block size of 100mE x 100mN x 10mRL has been used for all materials with subblocking<br />
to 50mE x 50mN x 5mRL to allow adequate volume resolution. To obtain a robust<br />
flagging of the wireframe in the block model, a percent model technique was used which<br />
calculates the percentage of the block inside the Unweathered wireframe. This provides a more<br />
accurate volume estimate. Bulk density has been coded to the block model based on the defined<br />
density values provided by <strong>Verde</strong>.<br />
The Table 12.1.2.1 shows the summary of the block model created.<br />
Table 12.1.2.1: Block Model Summary<br />
Item Y X Z<br />
Minimum Coordinates 7,868,000 407,500 600<br />
Maximum Coordinates 7,871,500 409,500 1,050<br />
User Block Size 100 100 10<br />
Min Block Size 50 50 5<br />
Rotation 0 0 0<br />
12.1.3 Statistical Analysis<br />
The drillhole database was composited to a 2m downhole composite interval, recording. The 2m<br />
composites were used for all statistical, geostatistical and grade estimation studies. The decision<br />
to use 2m composites was based the raw sample lengths of sampled intervals (Figure 12-6).<br />
Statistical analysis of the composite datasets was completed within the Weathered and<br />
Unweathered domains. Descriptive statistics are presented in Table 12.1.3.1.<br />
Table 12.1.3.1: Summary Statistic – 2m Composites<br />
Domain Item K 2 0(%)<br />
Count 244<br />
Minimum 7.09<br />
High Grade Domain Maximum Mean 13.02<br />
Std. Dev. 10.95<br />
CV 1.09<br />
Count 174<br />
Minimum 3.31<br />
Low Grade Domain Maximum 10.74<br />
Mean 6.62<br />
Std. Dev. 1.69<br />
CV 0.26<br />
"Box and whisker" plots for the mineralized intervals were compiled for Unweathered and<br />
Weathered K 2 O in Figures 12-7 and 12-8, respectively.<br />
Based on the statistical review a top cut was applied to Weathered mineralization based on the<br />
97.5 percentile which included only one Unweathered assay being reduced to 10.73% K 2 O.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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12.1.4 Variography<br />
Introduction<br />
Variography is used to describe the spatial variability or correlation of an attribute. The spatial<br />
variability is traditionally measured by means of a variogram, which is generated by determining<br />
the averaged squared difference of data points at a nominated distance (h), or lag (Srivastava and<br />
Isaacs, 1989). The averaged squared difference (variogram or v(h)) for each lag distance is<br />
plotted on a bivariate plot, where the X-axis is the lag distance and the Y-axis represents the<br />
average squared differences (v(h)) for the nominated lag distance.<br />
Several types of variogram calculations are employed to determine the directions of the<br />
continuity of the mineralization:<br />
Traditional variograms are calculated from the raw assay values;<br />
Log-transformed variography involves a logarithmic transformation of the assay data;<br />
Gausssian variograms are based on the results after declustering and a transformation to a<br />
Normal distribution;<br />
Pairwise-relative variograms attempt to 'normalize' the variogram by dividing the<br />
analyses; and<br />
Correlograms are 'standardized' by the variance calculated from the sample values that<br />
contribute to each lag.<br />
Fan variography involves the graphical representation of spatial trends by calculating a range of<br />
variograms in a selected plane and contouring the variogram values. The result is a contour map<br />
of the grade continuity within the domain.<br />
The variography was calculated and modeled in the mining planning software, Gemcom Surpac<br />
Software. The rotations are tabulated as input into Gemcom Surpac Software (geological<br />
convention), with X representing the bearing, Y representing dip and Z representing plunge. Dip<br />
and dip direction of major, semi-major and minor axes of continuity are also referred to in the<br />
text.<br />
Grade variography was generated to enable grade estimation via OK. Interpreted anisotropy<br />
directions correspond well with the modeled geology and overall geometry of the interpreted<br />
domain. The results are show in Table 12.1.4.1.<br />
Table 12.1.4.1: Cerrado <strong>Verde</strong> Deposit Unweathered and Weathered Mineralized Domain<br />
Variogram Models<br />
K2O<br />
Nugget<br />
(CO)<br />
Bearing<br />
Rotation Structure 1 Structure 2<br />
Dip Plunge<br />
Sill 1<br />
(C1)<br />
Major<br />
Range (m)<br />
Semi-<br />
Major Minor<br />
Sill 2<br />
(C2)<br />
Major<br />
Range (m)<br />
Semi<br />
Major Minor<br />
Low Grade 0.21 180 -10 0 0.34 200 100 16.53 1.20 400 200 33.06<br />
High Grade 0 21 180 -10 0 0.34 200 100 16.53 1.20 400 200 33.06<br />
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12.1.5 Grade Estimation<br />
Resource estimation for the Cerrado <strong>Verde</strong> mineralization was completed using Ordinary<br />
Kriging (OK) within the Weathered and Unweathered mineralized domain.<br />
OK is the most commonly used type of kriging. It assumes a constant but unknown mean.<br />
Typical ordinary kriging assumptions.<br />
The typical assumptions for the practical application of ordinary kriging are:<br />
Intrinsic stationarity or wide sense stationarity of the field; and<br />
Enough observations to estimate the variogram.<br />
The mathematical condition for applicability of ordinary kriging is:<br />
The mean E[Z(x)] = u is unknown but constant<br />
The variogram v(x,y) = E[(Z(x) - Z(y))2] of Z(x) is known. Ordinary Kriging equation<br />
Ordinary Kriging equation<br />
The kriging weights of ordinary kriging fulfill the unbiasedness condition<br />
and are given by the ordinary kriging equation system:<br />
the additional parameter µ is a Lagrange multiplier used in the minimization of the kriging error<br />
to honor the unbiasedness condition.<br />
Ordinary kriging interpolation<br />
The interpolation by ordinary kriging is given by:<br />
Ordinary kriging error<br />
The kriging error is given by:<br />
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Properties of kriging (Cressie 1993, Chiles & Delfiner 1999, Wackernagel 1995)<br />
<br />
<br />
The kriging estimation is unbiased:<br />
The kriging estimation honors the actually observed value:<br />
The kriging estimation assumptions hold. However (e.g. Cressie 1993):<br />
As with any method: If the assumptions do not hold, kriging might be bad.<br />
There might be better nonlinear and/or biased methods.<br />
No properties are guaranteed, when the wrong variogram is used. However typically still<br />
a 'good' interpolation is achieved.<br />
Best is not necessarily good: e.g. In case of no spatial dependence the kriging<br />
interpolation is only as good as the arithmetic mean.<br />
Kriging provides correctness of the variogram.<br />
Additional to the drilling samples, channel composites samples, from complementary sampling<br />
campaign were used, after a test of adequacy of support. Figure 12-9 shows the estimation steps<br />
undertaken in the Cerrado <strong>Verde</strong> estimation.<br />
12.1.6 Resource Reporting<br />
The grade estimates for all domains have been classified as Inferred based on the confidence<br />
levels of the key criteria that were considered during the resource estimation. Key criteria are<br />
tabulated below. A summary of confidence levels of the several items involved for the resources<br />
estimation for the Cerrado <strong>Verde</strong> deposit is provided in Table 12.1.6.1 below, reflecting the<br />
updated resources for Targets 4, 6, 7, 10 and 11.<br />
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Table 12.1.6.1: Cerrado <strong>Verde</strong> Project Confidence Levels of Key Categorization Criteria<br />
Items Discussion Confidence<br />
Drilling Techniques Reverse Circulation drilling is Industry standard approach. High<br />
Logging Standard nomenclature and apparent good quality. High<br />
Drill Sample Recovery Good recovery recorded. High<br />
Sub-sampling Techniques<br />
Industry standards of sampling technique and preparation Moderate<br />
and Sample Preparation<br />
Quality of Assay Data<br />
have been used for the new targets.<br />
Has filed duplicates for pulp, adequate number of samples<br />
and good results, however, methodology for the use of<br />
blank and standard samples was not satisfactory.<br />
Moderate<br />
Verification of Sampling and Assaying 119 samples were analyzed at the ALS lab and the High<br />
comparative results were very good.<br />
Location of Sampling Points Differential GPS was used for the new sample locations. High<br />
Data Density and Distribution Approximately 200m x 400m spaced drilling Moderate<br />
Audits or Reviews None N/A<br />
Database Integrity<br />
Assay hard copy sheets were randomly checked against High<br />
the digital database with no errors identified<br />
Geological Interpretation Simple geology, two domains defined. High<br />
Estimation and Modeling Techniques Ordinary Kriging has been used to obtain estimates of<br />
K2O % grade.<br />
High<br />
The Inferred resource has been classified based on blocks estimated until step 5 with a maximum<br />
range of 1,000m.<br />
The total Inferred resource estimate is shown in Table 12.1.6.2 utilizing different cut off grades.<br />
The additional figures are different views of the model as used in the validation process. Mineral<br />
resources that are not mineral reserves do not have demonstrated economic viability. Quantity<br />
and grade or quality is an estimate and should be rounded to reflect approximation.<br />
Table 12.1.6.2: Cerrado <strong>Verde</strong> Deposit –February 27, 2010 Inferred Resource Grade<br />
Tonnage Report Ordinary Kriging Estimate 100mE x 100mN x 5mRL Selective Mining<br />
Unit<br />
Domain Cutoff Grade (% K 2 0) Million Tonnes Average Grade (% K 2 0)<br />
0 67.82 6.22<br />
3 G7.82 6.22<br />
4 67.45 6.23<br />
Low Grade 5 55.85 6.41<br />
6 33.19 7 T<br />
7 14 7.78<br />
8 6.49 8.52<br />
9 1.01 9.<strong>43</strong><br />
0 92.74 10.61<br />
7 92.74 10.61<br />
8 92.20 10.63<br />
High Grade 9 86.55 10.76<br />
10 64.39 11.17<br />
11 35.71 11.61<br />
12 8.24 12.33<br />
Total Low Grade + High Grade 0 160.56 0.75<br />
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There are no mineral reserves at the Cerrado <strong>Verde</strong> property at this time. All mineral resources<br />
are classified as inferred. The mineral resource estimates may be influenced by a range of<br />
factors including environmental, permitting, legal, title, taxation, socio-economic, marketing,<br />
political and other issues. However, such influences cannot be determined at this time.<br />
The resource estimate has been classified as inferred mainly due to the low confidence in the<br />
Bulk Density determinations, data density of distribution and the limited QA/QC program<br />
provided by <strong>Verde</strong>. The actual model shows relative homogeneity and is a simple geological<br />
model.<br />
Figures 12-11 and 12-12 show the grade and tonnage curve for the high and low domains.<br />
Validation<br />
Validation of the grade estimate was completed with a comparative Nearest Neighbor estimation.<br />
Validation consists of a comparative statistical analysis over inferred results for Weathered and<br />
Unweathered mineralized intervals. In addition, an interactive visual validation utilizing the drill<br />
holes and the block model was completed in plan and cross section (Figures 12-13 and 12-14).<br />
The visual validation of the OK model shows a good correlation, considering the inferred level<br />
of resource classification, between the blocks estimated and the original samples.<br />
The use of OK and the simple block model method for determining resource is the accepted<br />
practice and appears to have been applied correctly in the Coffey resource estimation. The<br />
caveat is that the underlying database is weak in that the influence of the individual drill holes<br />
varies across the deposit and in the northern section do not have any east-west component to use<br />
in the model. This has the result that there is insufficient data, other than geologic inference, to<br />
construct the blocks in those areas. Given that the deposit appears to be geologically highly<br />
predictable gives the results some credence, but more drilling should be done and the assay<br />
values should be inserted into the model before assigning more than low credibility to the<br />
tonnage and grade inferred by this exercise.<br />
12.2 Targets 4, 6, 7, 10 and 11<br />
The resource estimation of the <strong>Verde</strong>te mineralization from the areas Target-4, Target-6, Target-<br />
7, Target-10 and Target-11 were performed using the K 2 O values obtained from samples<br />
collected in drill holes. Information about the initial data is presented in the Table 12.2.1.<br />
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Table 12.2.1: Data Presentation<br />
Description<br />
Areas<br />
Target 4 Target 6 Target 7 Target 10 Target 11<br />
Diamond drill holes 0 2 3 0 0<br />
Reverse circulation drillholes 7 22 77 5 9<br />
Notes of drillholes sampling 197 10<strong>43</strong> 1894 98 185<br />
Notes on the drillhole geological database 509 1274 5177 250 447<br />
K 2 O chemical analyses 187 1023 1765 95 174<br />
P 2 O 5 chemical analyses 187 1023 1764 95 174<br />
CaO chemical analyses 185 <strong>101</strong>6 1737 95 163<br />
Al 2 O 3 chemical analyses 187 1023 1765 95 174<br />
Fe 2 O 3 chemical analyses 187 1023 1765 95 174<br />
SiO 2 chemical analyses 187 1023 1765 95 174<br />
MgO chemical analyses 186 1023 1765 95 174<br />
TiO 2 chemical analyses 187 1023 1765 95 174<br />
MnO chemical analyses 187 1023 1765 95 174<br />
Na 2 O chemical analyses 1<strong>43</strong> 767 1765 88 129<br />
LOI chemical analyses 187 1023 1765 95 174<br />
Density analyses SGS GEOSOL 0 10 15 0 0<br />
Density analyses VERDE 0 14 56 0 0<br />
The methodology used to evaluate the resources included several routine phases of computer<br />
manuals works. It was necessary to refine the geological interpretation of the mineralized bodies<br />
and create three-dimensional wireframe models. Then the topographic digital terrain model<br />
(DTM) was imported. After this stage, was built a block model for the interpreted mineralized<br />
body, creating blocks with size of 50 m (X) by 50 m (Y) by 10 m (Z), and refines them into subblocks<br />
with smaller size, 5 m (X) by 5 m (Y) by 1 m (Z).<br />
As the main interpolation method for the mineralized body block model of the area Target 6, was<br />
adopted the Kriging method. For the other targets was used the method Inverse Distance<br />
Weighting (IDW) with power 2. The block model with the interpolated grades was used to<br />
evaluate the resources of the <strong>Verde</strong>te deposit.<br />
Software used: MICROMINE (12.0.4).<br />
Using this software was performed the formatting and verification of all data, the construction of<br />
wireframe and block models, and the data preparation for the final report.<br />
12.2.1 Statistical Analyses of Geological Exploration<br />
This report used a classical statistical analysis to perform the following tasks:<br />
<br />
<br />
<br />
Evaluate the need of separate populations to K 2 O grades, if exist more than one<br />
population;<br />
Evaluate the effect of populations mixing;<br />
Determine the grade distribution.<br />
Initially, the statistical analysis was performed for all drilling samples, not grouped, for the K 2 O<br />
element for the entire data. Then, was performed a statistical analysis for the samples that are<br />
part of the selected mineralization area. A statistical analysis of the samples length determined<br />
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that the optimal composed sample size was 1m. After that a statistical analysis was performed<br />
again for the samples grouped into 1m (composite). The results of the statistical analysis are<br />
shown in Table 12.2.1.1 to 12.2.1.5.<br />
Determine a cutoff grade for interpretation was not the purpose of this statistical analysis.<br />
Table 12.2.1.1: Descriptive Statistics Data for K 2 O of Target 4<br />
Samples<br />
Quantity Minimum Maximum Mean Median Variance<br />
Standard<br />
Deviation<br />
Element<br />
All samples<br />
K 2 O 187 0.94 11.2 8.44 9.10 3.82 1.95<br />
Samples inside the mineralized bodies<br />
K 2 O 153 5.27 11.20 9.13 9.47 1.33 1.15<br />
Samples composited inside the mineralized bodies<br />
K 2 O 153 5.27 11.20 9.13 9.47 1.33 1.15<br />
Table 12.2.1.2: Descriptive Statistics Data for K 2 O of the Target<br />
Samples<br />
Quantity Minimum Maximum Mean Median Variance<br />
Standard<br />
Deviation<br />
Element<br />
All samples<br />
K 2 O 1023 2.67 11.40 7.12 7.18 4.46 2.11<br />
Samples inside the mineralized bodies<br />
K 2 O 720 4.11 11.40 8.14 8.12 2.54 1.59<br />
Samples composited inside the mineralized bodies<br />
K 2 O 808 4.11 11.40 8.22 8.15 2.53 1.59<br />
Table 12.2.1.3: Descriptive Statistics Data for K 2 O of the Target 7<br />
Samples<br />
Quantity Minimum Maximum Mean Median Variance<br />
Standard<br />
Deviation<br />
Element<br />
All samples<br />
K 2 O 1765 1.03 11.80 8.72 9.05 4.35 2.08<br />
Samples inside the mineralized bodies<br />
K 2 O 1501 1.03 11.80 9.30 9.53 2.57 1.60<br />
Samples composited inside the mineralized bodies<br />
K 2 O 1547 1.03 11.80 9.29 9.52 2.56 1.60<br />
Table 12.2.1.4: Descriptive Statistics Data for K 2 O of the Target 10<br />
Samples<br />
Quantity Minimum Maximum Mean Median Variance<br />
Standard<br />
Deviation<br />
Element<br />
All samples<br />
K 2 O 95 4.30 11.60 9.58 10.60 3.99 2.00<br />
Samples inside the mineralized bodies<br />
K 2 O 93 4.30 11.60 9.65 10.60 3.86 1.97<br />
Samples composited inside the mineralized bodies<br />
K 2 O 107 4.30 11.60 9.76 10.76 3.57 1.89<br />
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Table 12.2.1.5: Descriptive Statistics Data for K2O of the Target 11<br />
Samples<br />
Quantity Minimum Maximum Mean Median Variance<br />
Standard<br />
Deviation<br />
Element<br />
All samples<br />
K 2 O 174 3.77 11.40 7.68 7.59 3.27 1.81<br />
Samples inside the mineralized bodies<br />
K 2 O 124 5.35 11.40 8.46 8.21 1.96 1.40<br />
Samples composited inside the mineralized bodies<br />
K 2 O 124 5.35 11.40 8.46 8.21 1.96 1.40<br />
12.2.2 Interpretation<br />
In the mineralized domains interpretation were used the drillhole data and the geologic mapping<br />
data. The drillhole grid in the area is characterized by irregularities. In the deposit interpretation<br />
was used the Top and Base Grid method. The Kriging method was chosen for the Grid<br />
interpolation for the Target 6; and IDW with power 2 was chosen for the others areas. The<br />
modeled semi-variograms for the body top and base are represented in the Figures 12-15 and 12-<br />
16.<br />
Then the Grids were transformed in Digital Terrain Model (DTM). This method was chosen<br />
because the body is sub-horizontal, Figure 12-19.<br />
Interpreting the geologic limits of the mineralized bodies the interpretation was performed on the<br />
half of the distance of the exploration grid of each area keeping the mineralized body thickness.<br />
In the mineralized bodies interpretation the following conditions were used:<br />
The interpretation was performed to the K 2 O;<br />
Some low grades were selectively included in the mineralization, when the grade data<br />
logically were part of the mineralization body;<br />
The interpretation was performed up to the half of the distance of the exploration grid.<br />
For the Target 6 and Target 7 the mineralized body was divided in two areas: oxidized and fresh.<br />
In the data interpreting the geological description of the holes were used for the construction of<br />
the grid. Similar interpolation parameters to those used in the construction of top and bottom of<br />
the mineralization areas were used.<br />
12.2.3 Triangulation<br />
The *.shp data files (that represent the topographic surface SRTM of the deposit area with 5m<br />
contours) were used in the construction of the topographic digital terrain model (DTM). The file<br />
was imported to the Micromine system, interconnected and then, using the obtained contours, the<br />
topographic surface was constructed.<br />
To build the mineralization body solid were used Boolean operations. At the beginning was built<br />
a solid (“box”) inside the mapped geologic limits of the mineralization zone. Then, this box was<br />
cut by base and top surfaces and by the topographic surface. As result, we get the exact solid of<br />
the mineralization body.<br />
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12.2.4 Data Selection<br />
The drillhole data selection is a standard procedure of certification. It is essential that, in the<br />
classic statistical analysis, geostatistics and in the grades interpolation process, are used the<br />
correct samples. To the selection of the drillhole samples were used solids of the element to be<br />
analyzed.<br />
Analyzing the collected samples to each target is noted that for the Target 6 the majority samples<br />
have a length of 1 m, and to the other targets the majority has 2 m length. To use the same<br />
methodology to all the targets was assumed a 1 m length samples for the composites. The<br />
creation process of the composed intervals began on the drillhole collar continuing on the<br />
perforation way (down).<br />
The samples with high and low K 2 O grades were divided into composed samples of 1 m. Then,<br />
files of the composed samples were encoded by the mineralization body solid. To each<br />
composed interval was assigned a value in the field ORE, being ORE=1 if the composed interval<br />
is inside the mineralized body solid, and ORE=0 if not.<br />
12.2.5 Modeling<br />
The blocks models were created in order to intersect the tridimensional solids and represent then,<br />
in defined dimensioned blocks. The blocks parameters are listed below, Table 12.2.5.1.<br />
The block model process of the solid includes the sub-blocks process. Initially, the model was<br />
filled with blocks of 50(X), 50(Y) and 10(Z) meters, that were divided into smaller subunits,<br />
with a factor for the subdivision of 10, at the contact with the three-dimension solid that limit<br />
them.<br />
As result, at the limit with the solid, the size of the blocks became 5(X), 5(Y) and 1(Z) meters.<br />
The initial size of the blocks was chosen based on the morphology of the mineralized bodies and<br />
the dimension of the exploration grid (1/4 of the grid). The Model of the Target 4 has 16.786<br />
blocks, Target 6 has 28.037 blocks, Target 7 has 193.382 blocks, Target 10 has 10.114 blocks<br />
and Target 11 has 23.889 blocks.<br />
The solid was used to create a block model inside the geologic mineralized body. This solid was<br />
used to encode this blocks. The digital model of the topographic surface was used to limit the<br />
block models by the vertical axis.<br />
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Table 12.2.5.1: Block Models Parameters<br />
Target<br />
Target 4<br />
Target 6<br />
Target 7<br />
Target 10<br />
Target 11<br />
Extension (m)<br />
Block Models<br />
Block size Sub-block minimum Number of<br />
Minimum Maximum<br />
Directions<br />
(m)<br />
size (m) primaries blocks<br />
East 387000 390000 50 5 61<br />
North 7855000 7859000 50 5 81<br />
RL 750 1100 10 1 36<br />
East 390000 392000 50 5 41<br />
North 7856000 7859000 50 5 61<br />
RL 800 1100 10 1 31<br />
East 403000 409000 50 5 121<br />
North 7865000 7874000 50 5 181<br />
RL 750 1000 10 1 25<br />
East 408500 410500 50 5 41<br />
North 7873500 7876500 50 5 61<br />
RL 800 1000 10 1 21<br />
East 409000 415000 50 5 121<br />
North 7874000 7879000 50 5 <strong>101</strong><br />
RL 750 1100 10 1 36<br />
12.2.6 Geostatistical Analysis<br />
The target chosen to geostatistic study is target 6, because it is relative regularity of the grid<br />
exploration, amount of data (802 samples), and isometric body shape. Semi Variograms were<br />
built for this target. For the construction of semi variogram were used the composite samples<br />
file.<br />
Cross-validation process was used to check the variogram, showing a low statistical error in data<br />
interpolation. The results of verification by Cross Validation are presented in Table 12.2.6.1. A<br />
diagram of linear dependency was also built between the samples file data and the interpolated<br />
K 2 O obtained by the cross-validation process. Results were satisfactory, presenting a correlation<br />
coefficient of 0.73 and accuracy of 13.5%.<br />
Table 12.2.6.1: Cross Validation Verification Results<br />
Analysis var K 2 0<br />
Transformation<br />
None<br />
Number of points 802<br />
Mean<br />
Std Dev<br />
Raw Data 8.1965 1.5967<br />
Estimate 8.2081 1.4248<br />
Standard error 0.82398 0.24225<br />
Error statistic -0.007620 1.2884<br />
12.2.7 Grade Estimation and Resources Classification<br />
To target 6 the element K 2 O was interpolated to the empty block model by the methods Kriging<br />
and IDW (Inverse Distance Weighted).<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 12-13<br />
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<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
For the mineralization in question the IDW method was used with the search ellipse defined by<br />
the axis of the geostatistical analysis. Was used the ellipse divided into four sectors. The search<br />
radius were determined by semi variogram models. The parameters of the search ellipse radius<br />
are presented in Table 12.2.7.1.<br />
Table 12.2.7.1: Search Ellipse Parameters to Interpolate the Grades by the IDW And<br />
Kriging Methods of Target 6<br />
Radius Azimuth Factor Dip Factor Thickness Factor Min. Points by Sector Min. Count Fields<br />
0.6667 324 222 30 3 2<br />
1 324 222 30 2 2<br />
2 324 222 30 2 1<br />
3 324 222 30 1 1<br />
4 324 222 30 1 1<br />
100 324 222 30 1 1<br />
After comparing the results of Kriging interpolation and IDW2 methods for target Target 6<br />
(Table 12.2.9.1), it was decided to use IDW2 as the main interpolation method for the other<br />
bodies. Search ellipse parameters used to interpolate the grades for the other targets are shown<br />
in Table 12.2.7.2.<br />
Table 12.2.7.2: Ellipse Search Parameters Used to Interpolate the Grades by the IDW<br />
Method for Target 4, 7, 10 and 11<br />
Radius Azimuth Factor Dip Factor Thickness Factor Min. Points by Sector Min. Count Fields<br />
0.6667 150 100 15 3 2<br />
1 150 100 15 2 2<br />
2 150 100 15 2 2<br />
3 150 100 15 1 1<br />
4 150 100 15 1 1<br />
100 150 100 15 1 1<br />
The blocks for each zone of the mineralization were interpolated using only composite samples<br />
belonging to the corresponding part of the body. During the interpolation process was used the<br />
discretization process for each block, using a factor 4 for the X and Y axis, and a factor 2 for Z<br />
axis. This makes it possible to evaluate each block in four positions and assign to the center of<br />
the block the average of these values. This increases the accuracy of estimating the grade of<br />
each block.<br />
The constraints presented by each ellipse search sector were: the maximum number of points in<br />
the sector - 5 and the minimum point total for the interpolation, which varied depending on the<br />
size of the ellipse (from 3 to 1). Thus, the maximum total number of samples involved in the<br />
interpolation was 20.<br />
In the resources classification was used some parameters, as: the ellipse search radius (based on<br />
geostatistical studies), the kriging variance and the minimum drillhole number used in the block<br />
interpolation. In the resources classification of Target 6, inferred and indicated resources have<br />
been allocated. For the indicated resource was allocated blocks interpolated by the first and<br />
second search ellipses, with kriging variance less than 2, drillhole grid in the area about 200 by<br />
200 m, and used in the samples interpolation at least two different drillholes.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 12-14<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
For indicated resource in Target 7 was allocated blocks interpolated by the first three search<br />
ellipses, with a drillhole grid about 300 by 300 m and with outcrops sampling approximately 100<br />
by 100 m.<br />
12.2.8 Assignment of Density Values to the Block Model<br />
The density value was allocated directly for each block of the block model. The value of<br />
1.49t/m 3 was allocated to the oxidized <strong>Verde</strong>te blocks, and the value of 2.11t/m 3 was allocated to<br />
the fresh <strong>Verde</strong>te blocks.<br />
12.2.9 Block Model Validation<br />
The block model with grades interpolated was submitted to a visual and statistics check.<br />
Histograms and probability plots were constructed to the interpolated grades. Then, the<br />
interpolated grades were compared with the same histograms and probability plots of the<br />
composite samples. Histograms and graphics of the interpolated grades and composite samples<br />
were similar, which confirmed the validity and consistency of the block model built.<br />
In addition, the grades interpolated were displayed and compared with the grades of the drillhole<br />
samples. This comparison show an approximate relation, indicating the accuracy of the block<br />
model built. Thus, several sections were built showing the grades of the block model and<br />
drillholes of Target 6.<br />
The average grade of the model was compared with the average grade of the drillhole samples.<br />
Comparing the IDW with power 2 and the kriging methods to the Target 6, was verified a<br />
relative difference of 1.09% between them, as shown in Table 12.2.9.1.<br />
A data comparison was made between a polygonal provisional estimate by the weighting<br />
"intervals" method and the data obtained by the Kriging and IPD2 interpolation method. These<br />
comparisons are presented in Table 12.2.9.2. The difference between the average K 2 O grades<br />
and of metal tones in relative percentage is approximately 1.26%, which also confirms the good<br />
convergence and high reliability of the block model data. The 0.03% difference between the<br />
volumes of solids and the block model are due to the use of different methods of limitations,<br />
since the block model was constrained by the method of contour.<br />
Table 12.2.9.1: Comparison of metal tones and average K2O grade of the model, obtained<br />
by kriging and IDW2 methods to Target 6<br />
Relative difference Relative difference<br />
Tonnes KRIG Tonnes IDW2 KRIG IDW2<br />
KRIG – IDW2 KRIG – IDW2<br />
Cut Off<br />
Mt<br />
Mt K 2 O K 2 O<br />
K<br />
% %<br />
2 O<br />
Tonnes<br />
Relative % Relative %<br />
6 95.9 94.87 8.2796 8.3695 1.09 1.07<br />
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<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 12.2.9.2: Comparison of metal tonnes and average K2O grades, obtained by the<br />
Kriging method, the target to target 6 and by IDW2 for other targets, and polygonal solids<br />
evaluate by the "weighting intervals" method<br />
Targets Type Volume Mm 3 K 2 O %<br />
Solid 36.16 9.14<br />
Target 4<br />
Block Model (IDW2) 36.17 9.15<br />
Relative difference in % 0.03769 0.13<br />
Solid 47.27 8.22<br />
Target 6<br />
Block Model (KRIG) 47.26 8.26<br />
Relative difference in % 0.01726 0.56<br />
Solid 484.83 9.30<br />
Target 7<br />
Block Model (IDW2) 484.84 9.22<br />
Relative difference in % 0.00303 0.83<br />
Solid 14.62 9.76<br />
Target 10<br />
Block Model (IDW2) 14.63 9.82<br />
Relative difference in % 0.05190 0.55<br />
Solid 27.56 8.44<br />
Target 11<br />
Block Model (IDW2) 27.57 8.08<br />
Relative difference in % 0.04510 4.27<br />
12.2.10 Resources Evaluation Results<br />
The resources evaluation results based on the <strong>Verde</strong>te block model, with Cut Off 7.5% of K 2 O,<br />
are presented in Table 12.2.10.1 through 12.2.10.3.<br />
Table 12.2.10.1: Grade Tonnage Report for Target 6. Inverse Distance Weighting with<br />
power two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL) 7.5% K 2 O cut off<br />
utilized<br />
Cut Off K 2 O% Class Type Density (t/m3) Tonnes (Mt) K 2 O (%)<br />
Fresh 2.11 20.37 8.83<br />
Indicated Weathered 1.49 2.88 8.85<br />
Total 2.01 23.25 8.83<br />
7.5<br />
Fresh 2.11 <strong>43</strong>.98 8.84<br />
Inferred<br />
Weathered 1.49 3.87 8.89<br />
Total 2.04 47.85 8.84<br />
Total 2.03 71.10 8.84<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 12-16<br />
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Table 12.2.10.2: Grade Tonnage Report for Target 7. Inverse Distance Weighting with<br />
power two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL) 7.5% K2O cut off<br />
utilized<br />
Cut Off K2O% Class Type Density (t/m3) Tonnes (Mt) K 2 O (%)<br />
Fresh 2.11 50.64 9.39<br />
Indicated Weathered 1.40 0.14 8.80<br />
Total 2.11 50.79 9.39<br />
7.5<br />
Fresh 2.11 857.42 9.45<br />
Inferred Weathered 1.49 16.16 9.29<br />
Total 2.09 873.59 9.45<br />
Total 2.09 924.37 9.44<br />
Table 12.2.10.3: Grade Tonnage Report for Target 4, Target 10 and Target 11. Inverse<br />
Distance Weighting with power two (IDW2) estimate (Block Model - 50mE X 50mN X<br />
10mRL) 7.5% K2O cut off utilized<br />
Target Cut Off K 2 O% Class Density (t/m 3) Tonnes (Mt) K 2 O (%)<br />
Target 4 7.5<br />
Inferred 2.11 74.<strong>43</strong> 9.20<br />
Total 2.11 74.<strong>43</strong> 9.20<br />
Target 10 7.5<br />
Inferred 2.11 28.50 10.10<br />
Total 2.11 28.50 10.10<br />
Target 11 7.5<br />
Inferred 2.11 46.79 8.27<br />
Total 2.11 46.79 8.27<br />
12.3 Mineral Resource Estimate<br />
The Mineral Resource statement is presented in Table 12.3.1. The resource estimate has been<br />
undertaken in compliance with accepted CIM definitions for indicated and inferred resources in<br />
accordance with <strong>NI</strong> <strong>43</strong>-<strong>101</strong> Standards of Disclosure for Mineral Projects.<br />
Table 12.3.1: Grade Tonnage Report Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Target Cutoff grade (%K 2 O) Tonnage (Mt) Average Grade (% K 2 O)<br />
Indicated<br />
Target 6 7.5 23.25 8.83<br />
Target 7 7.5 50.79 9.39<br />
Total Indicated 7.5 74.04 9.22<br />
Inferred<br />
Target 4 7.5 74.<strong>43</strong> 9.20<br />
Target 6 7.5 47.85 8.84<br />
Target 7 7.5 873.59 9.45<br />
Target 10 7.5 28.50 10.10<br />
Target 11 7.5 46.79 8.27<br />
Funchal Norte 10 64.39 11.17<br />
Total Inferred 7.64 1,135.55 9.47<br />
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.<br />
Inverse Distance Weighting with power two (IDW2) estimate (Block Model - 50mE X 50mN X 10mRL) 7.5% K2O cut off utilized.<br />
Effective date of Targets 4, 6, 7, 10 and 11 is August 3, 2011.<br />
Effective date of Funchal Norte is March 3, 2011.<br />
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Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Vertical Sections Location<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_12-1 Date: 09/15/2011 Approved: BS Figure: 12-1
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
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Cross Section (Section 4)<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
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Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
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Cross Section (Section 5)<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
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Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
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Weathered (Transition Zone)<br />
Domain – 3 Dimensions<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_12-4 Date: 09/15/2011 Approved: BS Figure: 12-4
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Unweathered Domain – 3<br />
Dimensions<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_12-5 Date: 09/15/2011 Approved: BS Figure: 12-5
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Sample Length Distribution<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_12-6 Date: 09/15/2011 Approved: BS Figure: 12-6
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
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Basic Statistics – 2m Composite<br />
Unweathered K 2 O<br />
File Name: Figure_12-7 Date: 09/15/2011 Approved: BS Figure: 12-7
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Basic Statistics – 2m Composite<br />
Weathered K 2 O<br />
File Name: Figure_12-8 Date: 09/15/2011 Approved: BS Figure: 12-8
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
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K 2 O% Estimation Steps – Plan<br />
View<br />
File Name: Figure_12-9 Date: 09/15/2011 Approved: BS Figure: 12-9
SRK Project No.: 3<strong>43</strong>500.020<br />
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Minas Gerais, Brazil<br />
Block Model Domains High and<br />
Weathered<br />
File Name: Figure_12-10 Date: 09/15/2011 Approved: BS Figure: 12-10
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Grade Tonnage Curve – Domain<br />
Unweathered – Inferred Resource<br />
File Name: Figure_12-11 Date: 09/15/2011 Approved: BS Figure: 12-11
SRK Project No.: 3<strong>43</strong>500.020<br />
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Grade Tonnage Curve -<br />
Weathered – Inferred Resource<br />
File Name: Figure_12-12 Date: 09/15/2011 Approved: BS Figure: 12-12
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Comparative Statistics<br />
Unweathered % K 2 O<br />
File Name: Figure_12-13 Date: 09/15/2011 Approved: BS Figure: 12-13
SRK Project No.: 3<strong>43</strong>500.020<br />
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Comparative Statistics % K 2 O<br />
Weathered<br />
File Name: Figure_12-14 Date: 09/15/2011 Approved: BS Figure: 12-14
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Modeled semi-variogram of the<br />
top grid<br />
File Name: Figure_12-15 Date: 09/15/2011 Approved: NR Figure: 12-15
SRK Project No.: 3<strong>43</strong>500.020<br />
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Modeled Semi-variogram<br />
of the Base Grid<br />
File Name: Figure_12-16 Date: 09/15/2011 Approved: NR Figure: 12-16
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Geologic interpretation of the<br />
Top and Base surfaces (Kriging<br />
method)<br />
File Name: Figure_12-17 Date: 09/15/2011 Approved: NR Figure: 12-17
SRK Project No.: 3<strong>43</strong>500.020<br />
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Geologic interpretation of the Top<br />
and Base surfaces of the Target 7<br />
(IDW method with Power 2)<br />
File Name: Figure_12-18 Date: 09/15/2011 Approved: NR Figure: 12-18
SRK Project No.: 3<strong>43</strong>500.020<br />
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Target 6: Mineralized body<br />
divided in oxidized (red) and<br />
fresh (green) areas<br />
File Name: Figure_12-19 Date: 09/15/2011 Approved: NR Figure: 12-19
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Target 7: Mineralized body<br />
divided in oxidized (red) and<br />
fresh (green) areas<br />
File Name: Figure_12-20 Date: 09/15/2011 Approved: NR Figure: 12-20
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Search Ellipse (radius 1) to<br />
Interpolate the Grades by the IDW<br />
and Kriging Methods to Target 6<br />
File Name: Figure_12-22.docx Date: 09/15/2011 Approved: NR Figure: 12-22
SRK Project No.: 3<strong>43</strong>500.020<br />
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Search Ellipse (radius 2) to<br />
Interpolate the Grades by the IDW<br />
Method for Target 4, 7, 10 and 11,<br />
and the Ore Body of the Target 7<br />
File Name: Figure_12-23.docx Date: 09/15/2011 Approved: NR Figure: 12-23
SRK Project No.: 3<strong>43</strong>500.020<br />
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Minas Gerais, Brazil<br />
Histogram and Probability Plot of the K 2 O<br />
Distribution of the Composite Samples<br />
(left) and the Block Model Interpolated by<br />
the IDW2 Method (right) of the Target 6.<br />
File Name: Figure_12-24.docx Date: 09/15/2011 Approved: NR Figure: 12-24
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Histogram and Probability Plot of the K 2 O<br />
Distribution of the Composite Samples<br />
(left) and the Block Model Interpolated by<br />
the IDW2 Method (right) of the Target 7<br />
File Name: Figure_12-25.docx Date: 09/15/2011 Approved: NR Figure: 12-25
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Target 7: Mineralized body<br />
divided in oxidized (red) and<br />
fresh (green) areas<br />
File Name: Figure_12-26.docx Date: 09/15/2011 Approved: NR Figure: 12-26
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Comparison of K2O Grades in the<br />
Samples and Blocks, Interpolated by<br />
the Kriging Method, of the Target 6<br />
File Name: Figure_12-27.docx Date: 09/16/11 Approved: NR Figure: 12-27
<strong>Verde</strong> <strong>Potash</strong> Plc 13-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
13<br />
Mining Methods (Item 16)<br />
This report is preliminary in nature, it includes inferred mineral resources that are considered too<br />
speculative geologically to have the economic considerations applied to them that would enable<br />
them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do<br />
not have demonstrated economic viability. There is no certainty that the preliminary assessment<br />
will be realized. Additional core drilling and assaying, with adequate QA/QC, is needed to bring<br />
this property to a level where a reliable resource can be used to do the next stage of <strong>Economic</strong><br />
<strong>Assessment</strong>.<br />
13.1 Mining Operations<br />
Mining operations at Cerrado <strong>Verde</strong> will consist of small mining equipment liberating potentially<br />
minable resources hosted in gently undulating topography over a wide surface extent.<br />
It is expected that mining will be conducted by a local 3rd party mining contractors with <strong>Verde</strong><br />
staff acting as mine owners. Initial static costing for mining operations is based on a<br />
combination of excavator’s, support equipment and 20t haul trucks.<br />
Resource grades vary physically from an Unweathered zone on the western extent to a lower<br />
grade zone in the east. The grade distribution suggests two pits and multiple working faces can<br />
be open at all times for blending purposes feeding the process plant at a consistent 8.5% K 2 O.<br />
Two production scenarios were considered by SRK whereby 1.1Mtpa and alternately 2.2Mtpa of<br />
product would be produced annually. SRK conducted a pit optimization, pit design and<br />
production schedules to independently test the assumptions made in mine costing and reported in<br />
the economic model.<br />
13.1.1 Pit Optimization<br />
Pit optimization was carried out on the Cerrado <strong>Verde</strong> deposit using Whittle v4.3 pit<br />
optimization software in conjunction with Maptek’s Vulcan (v8) general-purpose mine<br />
planning package.<br />
This PEA includes the inferred mineral resources that are considered too speculative geologically<br />
to have the economic considerations applied to them that would enable them to be categorized as<br />
mineral reserves. There is no certainty that the preliminary assessment will ever be realized.<br />
Mineral resources that are not mineral reserves do not have demonstrated economic viability.<br />
13.1.2 Whittle Parameters<br />
Table13.1.2.1 illustrates the parameters and dimensions of the Vulcan block model exported to<br />
Whittle for pit optimization.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 13-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 13.1.2.1: Whittle Block Model Dimensions<br />
Whittle Parameter Type Value<br />
Base Units<br />
Inferred Unit Product Tonnes<br />
Block Model Dimensions<br />
Geological<br />
X 100<br />
Y 100<br />
Z 10<br />
No. X 20<br />
No. Y 35<br />
No. Z 45<br />
Slope<br />
Bearing<br />
Slope Angle<br />
All Walls 0 45<br />
As part of the preliminary analysis of the Cerro <strong>Verde</strong> deposit, <strong>Verde</strong> will evaluate the cost<br />
benefit analysis of building a 1.1Mpta versus 2.2mpta process plant. Due to changes in market<br />
conditions, economies of scale and operating costs based on production, SRK performed a<br />
Whittle analysis of both operating conditions. These parameters are detailed in Table 13.1.2.2.<br />
Recoveries used in the pit optimization represent the mass yield of plant feed to product<br />
produced.<br />
The Whittle parameters are estimated before the final economic model is constructed and may<br />
require further iterations in the future.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 13-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 13.1.2.2: Whittle Parameters<br />
Whittle Parameter Type Value<br />
Mining Cost<br />
Price Reference Mining Cost 2<br />
Mining Recovery Fraction 1<br />
Mining Dilution Factor 1<br />
Processing Cost 1.1 Mt<br />
Rock Type Process Name PRCS<br />
Rocktype 1<br />
HG<br />
Rocktype 2<br />
LG<br />
Process Cost ($/ore.t) Ore Selection Method Cash Flow<br />
Process Cost (1.1 Mtpa) 41.8<br />
Process Cost (2.2 Mtpa) 36.4<br />
Recoveries Mass Product Recovery (HG) 0.83<br />
Mass Product Recovery (LG) 0.83<br />
Revenue and Selling Cost<br />
Product<br />
unit<br />
Product Price (1.1 Mtpa)<br />
$151.82/prod.t<br />
Product Price (2.2 Mtpa)<br />
$133.23/prod.t<br />
Optimization<br />
Revenue factor range<br />
0.01-.99 50 factors<br />
Operational Scenario - Time Costs<br />
(Really sustaining) Initial Capital Cost (1.1 Mtpa) $ 197,000,000<br />
Initial Capital Cost (2.2 Mtpa) $ 269,000,000<br />
Discount Rate Per period 10<br />
Operational Scenario – Limits<br />
Mining Limit<br />
na<br />
Processing Method Limit (1.1 Mtpa)<br />
1,111,968 prod.t<br />
Processing Method Limit (2.2 Mtpa)<br />
2,223,158 prod.t<br />
13.1.3 Pit Optimization Analysis<br />
The results achieved through the process of pit optimization, indicated that there is minimal<br />
variability or selectivity for mining related decisions within the orebody block model at this time<br />
(2010). Given the size of block (100mx100mx10m), consistent strip ratio and profitability each<br />
block model block contains (using input parameters), the Whittle analysis is better suited as an<br />
independent check on production rate, mine life and NPV (Table 13.1.3.1).<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 13-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 13.1.3.1: Whittle Results<br />
Production Rate Units 1.1 Mtpa 2.2 Mtpa<br />
Potentially Mineable Resources t 152,411,794 152,411,794<br />
Waste t 46,206,355 46,206,355<br />
SR w:o 0.30 0.30<br />
Product Tonnes t 126,501,784 126,501,784<br />
Initial Capital US$ 197,000,000 269,000,000<br />
Sales Price US$ 152 133<br />
NPV US$ 881,992,227 1,647,723,559<br />
Life yr 137 57<br />
Payback yr 1.82 1.41<br />
IRR % 54 71<br />
*This PEA includes the inferred mineral resources that are considered too speculative geologically to have the economic considerations applied<br />
to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary assessment will ever be realized.<br />
Mineral resources that are not mineral reserves do not have demonstrated economic viability<br />
It must be stressed that the results reported in Table 13.1.3.1 are for comparative purposes to<br />
check effect of production rate. If compared to the economic model, the NPV number will vary<br />
considerably given lack of taxes, duties, depreciation and other miscellaneous expenses. The<br />
mine life achieved for both cases re-enforce that resource inventory for feed stock is not a<br />
limiting factor for the potential operation.<br />
13.1.4 Pit Design<br />
Pit designs for the Cerrado <strong>Verde</strong> deposit were constructed using Vulcan 8 general-purpose<br />
mine planning package. The final pit design used was based on pit optimization results as a<br />
guide for toe and crest location. No Ramps were added given the preliminary nature of the block<br />
model and because the majority of the resource daylights within current valley systems on site.<br />
Pit Dimensions<br />
SRK used default pit parameters illustrated in Table 13.1.4.1.<br />
Table 13.1.4.1: Pit Design Parameters<br />
Dump Parameter<br />
Value<br />
Batter/Bench Face Angle 64º<br />
Berm Width 2.5m<br />
Bench Height<br />
5m<br />
Overall Slope 45º<br />
SRK constructed three pit designs representing three phases used in construction of a preliminary<br />
production schedule. Figure 13-1 illustrates the final pit design layout and tonnage basis for the<br />
production schedule.<br />
SRK did not construct any form of dump design. Given the low stripping ratio and abundance of<br />
land that waste can be placed, SRK does not consider creating a waste dump design material for<br />
the project at this stage.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 13-5<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
13.1.5 Production Schedule<br />
SRK produced a mine production schedule based on the resource block model and phased pit<br />
design. Using a target rate of either 1.1 or 2.2Mt of produced product, the RoM tonnage and<br />
variable stripping ratio of the deposit was calculated for each case. A simple pancake extraction<br />
method of benches within each phase made up the mining sequence.<br />
As the mine life was so extensive, the first 10 years of the production schedule for the 1.1 and<br />
2.2Mpta cases have been illustrated in Tables 13.1.5.1 and 13.1.5.2 respectively.<br />
Table 13.1.5.1: First 10 Years of 1.1Mtpa Production Schedule<br />
Period 1 2 3 4 5 6 7 8 9 10<br />
Target Tpd 3,940 3,940 3,940 3,940 3,940 3,940 3,940 3,940 3,940 3,940<br />
Target 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720<br />
Accumulation 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720<br />
Accumulated Grade 8.66 9.00 8.74 8.62 8.65 8.86 8.86 9.38 8.61 8.80<br />
TargetGradeK 2 0 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50<br />
Stripping Ratio 2.<strong>43</strong> 1.20 0.63 0.66 0.75 0.65 0.65 0.46 0.32 0.35<br />
Total Tpd 13,530 8,674 6,415 6,524 6,911 6,489 6,489 5,759 5,217 5,327<br />
BK 2 O 8.66 9.00 8.74 8.62 8.65 8.86 8.86 9.38 8.61 8.80<br />
BK 2 O_MASS 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720 1,339,720<br />
TOTAL_MASS 4,600,230 2,949,073 2,181,106 2,218,264 2,349,726 2,206,411 2,206,411 1,957,952 1,773,900 1,811,074<br />
HGBK 2 O 10.32 10.76 10.69 10.61 10.61 10.89 10.89 10.89 10.89 10.85<br />
HGBK 2 O_MASS 895,600 847,423 718,<strong>43</strong>2 695,448 695,448 709,445 709,445 851,334 558,060 629,961<br />
HGTOTAL_MASS 895,600 847,423 718,<strong>43</strong>2 695,448 695,448 709,445 709,445 851,334 558,060 629,961<br />
WASTETOTAL_VOLUME 1,212,085 598,272 312,783 326,596 375,467 322,190 322,190 229,826 161,405 175,224<br />
WASTETOTAL_MASS 3,260,510 1,609,353 841,385 878,5<strong>43</strong> 1,010,005 866,690 866,690 618,231 <strong>43</strong>4,180 471,353<br />
LGBK 2 O 5.33 5.97 6.48 6.48 6.53 6.57 6.57 6.75 6.98 6.98<br />
LGBK 2 O_MASS 444,121 492,298 621,289 644,273 644,273 630,276 630,276 488,387 781,660 709,760<br />
LGTOTAL_MASS 444,121 492,298 621,289 644,273 644,273 630,276 630,276 488,387 781,660 709,760<br />
*This PEA includes the inferred mineral resources that are considered too speculative geologically to have the economic considerations applied<br />
to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary assessment will ever be realized.<br />
Mineral resources that are not mineral reserves do not have demonstrated economic viability<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 13-6<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 13.1.5.2: First 10 Years of 2.2Mtpa Production Schedule<br />
Period 1 2 3 4 5 6 7 8 9 10<br />
Target Tpd 7,878 7,878 7,878 7,878 7,878 7,878 7,878 7,878 7,878 7,878<br />
Target 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504<br />
Accumulation 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504<br />
Accumulated Grade 9.47 9.12 8.83 8.86 9.17 9.08 9.92 9.78 9.32 9.24<br />
TargetGradeK 2 0 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50 8.50<br />
Stripping Ratio 1.67 0.79 0.51 0.65 0.45 0.36 0.28 0.28 0.36 0.40<br />
Total Tpd 21,042 14,133 11,900 12,973 11,414 10,683 10,106 10,091 10,716 11,044<br />
BK 2 O 9.47 9.12 8.83 8.86 9.17 9.08 9.92 9.78 9.32 9.24<br />
BK 2 O_MASS 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504 2,678,504<br />
TOTAL_MASS 7,154,331 4,805,259 4,045,860 4,410,934 3,880,893 3,632,330 3,<strong>43</strong>6,012 3,<strong>43</strong>0,840 3,6<strong>43</strong>,504 3,755,079<br />
HGBK 2 O 10.57 10.61 10.89 10.89 10.85 10.85 10.91 10.91 10.92 10.92<br />
HGBK 2 O_MASS 2,113,730 1,738,619 1,418,890 1,418,890 1,551,163 1,453,635 2,003,330 1,905,802 1,587,025 1,521,407<br />
HGTOTAL_MASS 2,113,730 1,738,619 1,418,890 1,418,890 1,551,163 1,453,635 2,003,330 1,905,802 1,587,025 1,521,407<br />
WASTETOTAL_VOLUME 1,663,876 790,615 508,311 644,026 446,985 354,582 281,601 279,679 358,736 400,214<br />
WASTETOTAL_MASS 4,475,827 2,126,755 1,367,356 1,732,<strong>43</strong>0 1,202,389 953,826 757,508 752,336 964,999 1,076,575<br />
LGBK 2 O 5.33 6.36 6.50 6.57 6.85 6.98 6.98 6.98 7.00 7.02<br />
LGBK 2 O_MASS 564,774 939,885 1,259,614 1,259,614 1,127,341 1,224,869 675,174 772,702 1,091,479 1,157,097<br />
LGTOTAL_MASS 564,774 939,885 1,259,614 1,259,614 1,127,341 1,224,869 675,174 772,702 1,091,479 1,157,097<br />
*This PEA includes the inferred mineral resources that are considered too speculative geologically to have the economic considerations applied<br />
to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary assessment will ever be realized.<br />
Mineral resources that are not mineral reserves do not have demonstrated economic viability<br />
Given the limited amount of drill hole information for such a large resource, the development of<br />
a specific mine fleet is somewhat premature. For the purposes of this report, standard operating<br />
procedures, costing and equipment sizing for a deposit of this nature has been considered.<br />
Mining will consist of clear and grubbing, waste stripping and extraction of potential resource;<br />
using front-end-loaders suitable for 20t highway trucks. The need for drill and blast operations<br />
has not been considered at this stage.<br />
<strong>Verde</strong> has indicated that a mine contractor will be employed to haul mineralized material from<br />
the mine face to the process plant facility. ECM has suggested a static mining cost per year.<br />
This static cost has been estimated over the SRK production schedule to determine a reference<br />
mining cost for comparison purposes.<br />
Along with a suggested mining fleet the total annual cost is detailed in Tables 13.1.5.3 and<br />
13.1.5.4.<br />
Table 13.1.5.3: 1.1Mtpa Product Mine Fleet and Annual Estimated Cost<br />
Equipment Model Amount Operating Costs (US$/year 000’s)<br />
Truck Scania 420 4 1,340<br />
Track Excavators R964 2 1,390<br />
Tractor D9-T 2 1,005<br />
Motor Grader 16G 1 251<br />
Truck Scania 40t 2 558<br />
Wheel Loaders 980G 2 894<br />
Mitsubishi L200 2 107<br />
Truck M.Benz 1315C/48 1 102<br />
Truck M.Benz/Lubrication 1315C/48 1 102<br />
Water Truck Scania 40t 2 371<br />
Total $6,120<br />
Source: ECM S/A Projectos Industrias, 623-01-0000-N-H25-0102, 2010<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 13-7<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
SRK is of the opinion that this cost is conservative when applied over 1.3Mtpa of RoM<br />
production at a strip ratio of 0.4 (for the 1.1Mtpa base case). Over the life of the mine this would<br />
equate to a mining cost of approximately $3.3/t moved.<br />
Table 13.1.5.4: 2.2Mtpa Product Mine Fleet and Annual Estimated Cost<br />
Equipment Model Amount Operating Costs (US$/year 000’s)<br />
Truck Scania 420 6 2,010<br />
Track Excavators R964 3 2,085<br />
Tractor D9-T 3 1,508<br />
Motor Grader 16G 1 251<br />
Truck Escânia 40t 2 558<br />
Wheel Loaders 980G 2 894<br />
Mitsubishi L200 2 107<br />
Truck M.Benz 1315C/48 1 102<br />
Truck M.Benz/Lubrication 1315C/48 1 102<br />
Water Truck Escânia 40t 2 371<br />
Total $7,988<br />
Source: ECM S/A Projectos Industrias, 623-01-0000-N-H25-0104, 2010<br />
SRK is of the opinion that this cost is conservative when applied over 2.6Mtpa of RoM<br />
production at a strip ratio of 0.4 (for the 2.2Mtpa base case). Over the life of the mine this would<br />
equate to a mining cost of approximately $2.5/t moved. While closer to expected contract rates<br />
in Brazil, but this is still quite expensive.<br />
13.1.6 Recovery<br />
<strong>Verde</strong>te deposits owned by <strong>Verde</strong> are essential outcropping, leading to a very low stripping ratio.<br />
In the scoping study, a stripping ratio of 0.1:1 was assumed, and open pit operation is being<br />
foreseen.<br />
Researches were carried out to determine an Unweathered <strong>Verde</strong>te area close to which plant site<br />
will be erected.<br />
During Thermo<strong>Potash</strong> processing, all the run-of-mine is supposed to be used for grinding the raw<br />
meal to heat treatment. Intensive quality control during processing ensures. Therefore, losses of<br />
RoM <strong>Verde</strong>te are not expected.<br />
In all pellet handling steps, dust is expected to be generated due to superficial friction. The dust<br />
is to be collected and sent to raw preparation area for recycling.<br />
As a result of this, recoverability is assumed to be in the range of 90 to 100%.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
*Map image not to scale. For illustrative purposes only.<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
<strong>Preliminary</strong> Pit Design<br />
SRK Project No.: 3<strong>43</strong>500.020<br />
File Name: Figure_13-1 Date: 09/15/2011 Approved: BS Figure: 13-1
<strong>Verde</strong> <strong>Potash</strong> Plc 14-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
14<br />
Project Infrastructure (Item 18)<br />
14.1 Access Road and Transportation<br />
The principal access to the property are; the BR-262 and BR-354, MG-235. Primary access is by<br />
gravel roads that connect the farming region. The road upgrade costs are imbedded within the<br />
mine capital and operating costs.<br />
14.2 Power Supply<br />
Sections 14.2, 14.3, 14.3.1, and 14.7 have been extracted from the ECM, 2010 report.<br />
Cerrado <strong>Verde</strong> Project at São Gotardo is scheduled to be powered by CEMIG 138kV system,<br />
connected through an exclusive transmission line 23km long, from a substation close to the town<br />
of São Gotardo.<br />
In electrical terms the development of the beneficiation shall be considered middle size, with an<br />
estimated demand of around 25MW similar to a small town such as the São Gotardo and the<br />
surrounding places.<br />
The configuration set for the factory system, has the main 138kV receiving substation, lowers to<br />
13.8kV and distributes to the substations that will serve each of the main project areas.<br />
It is observed that over 70% of the demand will be concentrated in three areas, grinding,<br />
calcination kiln, and pellets quenching systems and as a result, the location of the main<br />
substation shall be as close to the grinding and regrinding substations.<br />
For the main substation two 138-13.8kV transformers are provided with 25/40MVA estimated<br />
power, with the load distributed between both, and if one of them fails to work, the other<br />
remaining transformer shall still supply the total demand at the forced ventilation stage.<br />
According to CEMIG (governmental electrical energy agency) regulations harmonic<br />
compensation and power factor systems shall be forecasted so that the operational performance<br />
of large equipment/heavy loads do not affect the basic system network and other consumers.<br />
From the main substation power will be distributed to area substations through 13.8kV feeders,<br />
by means of radial-type simple system, and according to the need cable racks may be used for<br />
beneficiation, aerial lines for distant facilities and piping network at the operational and<br />
administrative support areas or where for safety reasons the use of aerial systems is not possible.<br />
The area substation will be constructed in its majority at masonry buildings, and there will be a<br />
few armored substations, housing all the electrical equipment to receive power at 13.8kV, lowers<br />
it and feed all the electrical charges of the area (s) and / or buildings served by it.<br />
To meet the equipment electrical supply that cannot stop operating in case of electrical failure,<br />
emergency power supply system is provided with diesel generator and an automatic generator<br />
group, mainly targeting the auxiliary grinding systems, some pumps, a compressor for pneumatic<br />
conveying, for emergency lighting and the noble parts of the supervision, control and<br />
communication systems.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 14-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
14.3 Water Supply<br />
Essentially, the water system that serves the beneficiation shall be divided into the following<br />
parts:<br />
Process Water - is part of raw water intended for industrial use, which will be stocked at<br />
the reservoir located on the site highest plateau, next to the raw water reservoir and then<br />
distributed as make up water for burnt pellets quenching system at the cooling tower<br />
tank, to process route consumption, for services and general cleaning, including the<br />
central maintenance workshop; and<br />
Raw Water - is the new water which intake will be performed from Indaiá River and<br />
stored at a tank; the intake from the river will be at dry well, with horizontal pumps, sand<br />
filter box and is located approximately 9km from the raw water reservoir. The raw water<br />
will be used for the following purposes:<br />
For pumps sealing;<br />
For pellets quenching system make up;<br />
For circulating at the heat exchangers of equipment refrigeration systems;<br />
For dust removing systems;<br />
For pelletizing;<br />
For fresh water generation by the Water Treatment Station; and<br />
For firefighting system.<br />
14.3.1 Rainwater Drainage<br />
The drainage system shall be designed to comprise all devices designed to intercept, intake and<br />
dispose of run-offs that flow to the plateaus, terraces, accesses and buildings, leading them to the<br />
point of final release.<br />
The plateaus, berms and access designed in different elevations, will be drained and its<br />
contribution will be sent to a sedimentation basin and damping.<br />
The embankment stools slopes (cut / landfill) will be cross slope to collect contributions from<br />
longitudinal discharge and sections with concrete gutters, unloading at water flowing downhill<br />
sent for intake boxes and sequentially to the drainage system.<br />
14.3.2 Hydraulic Sizing<br />
The following criteria and methods shall be considered in establishing the methodology of the<br />
hydraulic design of the devices:<br />
Physical characterization of the Area - Location, type of relief, occupation and land<br />
cover;<br />
Climate Characterization - climate is classified according to the International System of<br />
Köppen;<br />
Studies of heavy rainfall - shall be used Gumbel statistical methods and CETESB rain<br />
disaggregation;<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 14-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
Surface runoff studies - comprising the analysis of the physiographic features of the basin<br />
and its coverage;<br />
Determination of the Project Flow - shall be developed according to the Rational Method;<br />
Surface Runoff Coefficient - shall be considered depending on the type of area to be<br />
drained and surface coverage;<br />
Concentration Time - shall be calculated using the Kirpich formula;<br />
Rainfall intensity - shall be calculated for the rainfall post of the region;<br />
Rainfall Calculation - rain duration (tc) = 2.0 hours shall be adopted;<br />
Precipitation per square meter - the duration of rain (tc) = 2.0 hours shall be adopted;<br />
Precipitation per square meter that drains - the runoff coefficient = 0.90 shall be adopted;<br />
and<br />
Time Period of Return and Recurrence - (TR) = 10 years.<br />
14.4 Buildings and Ancillary Facilities<br />
There are no buildings or other facilities on the property, besides a rented small shelter for field<br />
activities support in the city of Matutina, and the main office in Brazil in Belo Horizonte. Plant,<br />
Mill, office, and mine building will be constructed as part of the mine development in the area.<br />
14.5 Potential Processing Plant Sites<br />
Among the several possibilities for site location, <strong>Verde</strong> is considering to install the plant close to<br />
Matutina, a small town close to the City of Sao Gotardo, which is a local pole. Two sites are<br />
being considered, Target 7 and Funchal Norte Target.<br />
14.6 Potential Tailings Storage Area<br />
Tailings from process are generated due to:<br />
Inadequate particle size, as the product has to be produced in a 2-4mm diameter range.<br />
Tailings are those materials which do not comply with such specification, mainly dust<br />
from pellet handling; and<br />
Unburned or not sufficiently burned material, produced mainly from flushes during kiln<br />
operation.<br />
Both are to be stored in Storage & Reclaiming stockpile, to be reprocessed. Therefore, no tailing<br />
accumulation or landfilling is foreseen for tailings. The Storage & Reclaiming stockpile area has<br />
not yet been defined.<br />
14.7 Potential Waste Disposal Area<br />
The design criteria adopted for the landfill areas (location not yet defined), shall include the<br />
implementation of the materials deposit, whether from cuts, or loan, within the limits of design<br />
sections ("offset") at the project influence areas facilities.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 14-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Confirmation of geotechnical condition will provide evaluation of classification, distribution and<br />
quantification of material to be selected from the 1st and 2nd categories, with the quality and the<br />
allocation provided, during elaboration of detailed earthworks design.<br />
Preliminarily, the following criteria were adopted for the classification, distribution and<br />
geometry of the landfill slopes, until geotechnical surveys geotechnical surveys campaigns to be<br />
programmed are carried out:<br />
Compacted landfills at a minimum 95%: 70%;<br />
Compacted landfills at a minimum 100%: 30%;<br />
degree of blistering: 30%;<br />
Landfill slopes: V=1 / H=1,5;<br />
Berms balance width: 4.0m, with cross slope of 5% and 0.5% longitudinal; and<br />
Maximum height between stools: 5.0m.<br />
The basic design shall present forms for plant restoration, as well as methods of restoration and /<br />
or protection of exposed areas (slopes, areas of loans, stools, water cuts, gutters, ditches, etc.) as<br />
per erosion resistance conditions.<br />
14.8 Manpower<br />
São Gotardo and Matutina are the closest towns with a significant population to provide<br />
manpower for a mining operation, having population around 40,000 combined.<br />
Also, the project is very close to Patos de Minas, main city in Alto Paranaiba area which has<br />
strong economic, cultural, educational and social environment.<br />
14.9 Other Surface Rights<br />
The project is at the exploration phase and surface rights for processing plant site, tailing storage<br />
and waste disposal areas have yet to be acquired.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 15-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
15<br />
Market Studies and Contracts (Item 19)<br />
15.1 Market Studies<br />
15.1.1 Introduction<br />
The goal of AgroConsult study is to analyze the economic feasibility of using Thermo<strong>Potash</strong><br />
(8% K2O) as a source of potassium for fertilizing activities in the states of Minas Gerais, Mato<br />
Grosso, Mato Grosso do Sul, São Paulo, Paraná, Goiás and Bahia.<br />
In order to determine a market potential of Thermo<strong>Potash</strong>, was conducted a comparative analysis<br />
of its pricing competitiveness in relation to traditional raw materials. The project looked at<br />
possible uses for Thermo<strong>Potash</strong> as a source of potassium in the main NPK formulas most<br />
commonly used on each crop (soybeans, cotton, sugarcane, summer corn, second crop corn, dry<br />
rice, irrigated rice, beans, potatoes, coffee, pasture, reforestation, wheat, sorghum and fruit and<br />
vegetables) in each state.<br />
Today, Brazil is the world's fourth-largest consumer of fertilizers. In 2009, 22.5Mt of fertilizer<br />
were used in Brazil and this figure is expected to rise to 23.58 million in 2010. (Source: 2009<br />
Statistical Yearbook of the Fertilizer Industry from ANDA – Associação Nacional para Difusão<br />
de Adubos – Nacional Association for Promotion of Fertilizer) Fertilizer application is vital for<br />
the performance of the farming industry and is likely to remain important for the foreseeable<br />
future. However, more than half of the fertilizer consumed in Brazil is imported, which<br />
represents a fundamental weakness for local agribusiness. There is an even greater dependence<br />
on potash, which is supplied as potassium chloride, more than 90% of which has to be imported.<br />
Since 2008, the government, the private sector and Brazilian agribusiness leaders have been<br />
playing closer attention to this issue. There is clear agreement that Brazil needs to reduce its<br />
dependence on imported fertilizers. To do so, Brazil needs to take two steps: expand raw<br />
material production and develop new sources of nutrients.<br />
In this case, introducing Thermo<strong>Potash</strong> as a new source of potassium on the Brazilian fertilizer<br />
market is a timely move, in line with government, private sector and producer concerns.<br />
Was used the forecast data for 2010 fertilizer deliveries estimated at 23.58Mt of product and 3.97<br />
million K 2 O, 82% of which is consumed as NPK formulas and 18% on its own. Using the same<br />
information, the states included in this survey represent 76% of the fertilizer market and 76.1%<br />
of Brazilian K 2 O consumption.<br />
The following sections will provide information on the Brazilian agribusiness and fertilizer<br />
markets, the methodology adopted these results by the survey as well as the price and market<br />
potential for Thermo<strong>Potash</strong> in each state.<br />
15.1.2 Methodology<br />
The goal of this study is to analyze the economic feasibility of using Thermo<strong>Potash</strong> (8% K 2 O) in<br />
the main fertilizer formulas marketed in Minas Gerais, Mato Grosso, Mato Grosso do Sul, São<br />
Paulo, Paraná, Goiás and Bahia.<br />
To do so, we evaluated the fertilizer markets in the selected regions during 2010 and estimated<br />
fertilizer delivery volumes by crop and nutrient (N, P e K 2 O). The data was taken from the<br />
AgroConsult database, which is frequently updated with market information.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 15-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
These results from the database were validated by comparing fertilizer volumes, nutrient<br />
volumes and the average formula with information from the National Association for Fertilizer<br />
Diffusion – ANDA. Furthermore, we verified that nutrient consumption by crop was compatible<br />
with estimated or actual productivity. The final results are converted into raw material<br />
consumption and consolidated figures for Brazil are compared with the supply and demand<br />
figures.<br />
Based on this data, after building an optimization model based on linear programming, we<br />
initially calculated the costs of traditional formulas (not including Thermo<strong>Potash</strong>) based on the<br />
best combination (lowest cost) of raw material mixtures best suited to expected productivity<br />
levels in each region.<br />
Subsequently, was used the same procedure including Thermo<strong>Potash</strong> with 8% K 2 O at a price of<br />
zero to determine the maximum product volume in NPK formulas. Based on the formula<br />
compositions obtained by the model, we estimated a price for Thermo<strong>Potash</strong> so that the cost of<br />
the differentiated formula was identical to the traditional formula. This allows us to calculate the<br />
average quantity of Thermo<strong>Potash</strong> per ton of fertilizer and by applying this to the planted area<br />
for each crop; we were able to estimate potential demand for Thermo<strong>Potash</strong> in the main fertilizer<br />
formulas used in each state.<br />
The raw materials were priced at market value for September/2010, based on an AgroConsult<br />
survey. In this case, the product cost at each mixing center also took into account domestic<br />
shipping as well as breakage and inventory costs. The exchange rate used was 1.8 BRL/US<br />
dollars.<br />
15.1.3 Determining the Crop Portfolio and Formulas<br />
The project took into account the fertilizer technology for the following groups of crops:<br />
<br />
Major Crops: These crops are present around 97% of the market and include pasture,<br />
soybeans, summer corn and second crop corn, rice (dry and irrigated), beans (3 types),<br />
wheat, reforestation, sugarcane, cotton, coffee and potatoes (three crops); and<br />
Other crops: These crops represent 3% of the market and include bananas, cocoa, grapes,<br />
avocados, pineapples, ramie, sisal, figs, pears, apples, melons, watermelons, strawberries,<br />
guava, guaraná, mango, passion fruit, cashew, coconuts, peanuts, other fruits, vegetables<br />
and fibers, sunflowers, sorghum and tobacco.<br />
The survey looked at the fertilizer technology adopted in each state based on the fertilizer system<br />
used. We analyzed the main formulas and dosages used to adequately fertilize in line with<br />
productivity expectations, for each crop (Table 15.1.3.1).<br />
In each region, we looked at the six main formulas used for each crop, the proportional<br />
relationship between the formulas and optimization of each formula in relation to its raw material<br />
composition.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 15-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 15.1.3.1: Example of Fertilizing System Adopted for Each Crop Analyzed<br />
Cotton Soybean Sugar Cane Corn Corn (Winter) Rice (Dry) Rice (IRR)<br />
05.20.15 00.20.20 05.25.25 03.16.16 08.16.16 04.20.20 04.20.20<br />
08.25.15 02.20.18 20.05.20 08.20.20 08.25.15 04.20.15 04.20.15<br />
05.25.15 00.18.18 14.07.28 08.25.15 12.15.15 04.22.15 05.25.15<br />
08.28.16 00.20.10 15.05.15 06.30.15 08.20.20 04.25.15 04.25.15<br />
20.00.20 02.20.10 20.00.20 20.00.20 20.00.20 20.00.20 20.00.20<br />
36.00.12 00.20.18 36.00.12 36.00.12 36.00.12 36.00.12 36.00.12<br />
Source: AgroConsult<br />
15.1.4 Formula Optimization Process<br />
The optimization model, structured by linear programming, takes into account:<br />
List of the main raw materials available at mixing centers;<br />
Raw material nutrient levels;<br />
Chemical incompatibility between raw materials;<br />
Nutrient supplies (primary, secondary and micronutrients);<br />
Lowest cost; and<br />
Market price system. For nitrogenous fertilizer and potash prices, imported raw materials<br />
were taken into account. For phosphates, imported and domestic prices for used, given<br />
the level of supply in the Minas Gerais and Catalão, GO regions.<br />
The formulas were optimized using the following criteria:<br />
Conventional formula not including Thermo<strong>Potash</strong>;<br />
The same formula using Thermo<strong>Potash</strong> at zero price, in order to determine the maximum<br />
volume of the product in the composition;<br />
A likely end price for Thermo<strong>Potash</strong> was determined so that the formula including<br />
Thermo<strong>Potash</strong> cost the same as the formula without Thermo<strong>Potash</strong>; and<br />
We then determined the average dose of Thermo<strong>Potash</strong> per ton and per crop.<br />
For raw material prices; the price composition in each mixing center was calculated based on<br />
raw material cost, transport value and breakage and inventory expenses. As an example, the<br />
prices from the Uberaba center are shown in Table 15.1.4.1. The exchange rate used was 1.8<br />
BRL/US dollars.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 15-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 15.1.4.1: Price Composition of Raw Materials at the Uberaba Center<br />
Raw Material Freight Cost at Break Storage<br />
Blender Raw Material Origin<br />
Cost (domestic) Factory (%) (%) Total Cost<br />
UREIA Importada 310.00 51.35 361.35 1.00 0.4 366.42<br />
SAMGR Importada 209.82 42.11 251.93 1.00 1.6 258.52<br />
Nitrato de Amonio Fosfertil 506.00 3.46 509.46 0.50 0.4<br />
Uberaba MAP GR Fosfertil 403.68 3.46 407.14 0.50 0.4 410.81<br />
TSP GR Fosfertil 247.35 3.46 250.81 0.50 0.4 253.07<br />
SSP GR BPI - 226.00 3.46 229.46 0.50 0.4 231.53<br />
Cubatao<br />
KCL GR Importada 462.80 42.11 504.91 0.50 1.6 515.55<br />
Source: Survey data<br />
The N, P and K levels in the raw materials used during optimization are listed in Table 15.1.4.2.<br />
Table 15.1.4.2: Raw Material Nutrient Levels<br />
Element SAM Urea NAM Term K SSP STP MAP DAP KCI<br />
N 20.0% 16.0% 34.5% 0.0% 10.5% 16.0%<br />
P 20.0% 46,0% 54.0% 45.0%<br />
K 8.0% 60.0%<br />
Source: Survey data<br />
The levels of K 2 O, CaO, SiO 2 , MgO and S, as well as the status of each of the three products<br />
evaluated are listed in Table 15.1.4.3.<br />
Table 15.1.4.3: Content Used and Status of Products Evaluated<br />
Elements<br />
Content (%)<br />
Product 01 Product 02 Product 03<br />
K 2 O 8.00% 8.00% 8.00%<br />
CaO 30.00% 19.50% 30.00%<br />
SiO 2 40.00% 32.70% 40.00%<br />
MgO 2.30% 8.60% 2.30%<br />
S 10.00%<br />
Status Product used in the study Product with Ca and Mg<br />
included in balancing<br />
Product undergoing<br />
technological development<br />
Source: Survey data<br />
15.1.5 Thermo<strong>Potash</strong> Pricing Process<br />
After conducting the optimization process, the model provides us with the demand for<br />
Thermo<strong>Potash</strong> and the product price, so that the differentiated formula costs the same as the<br />
traditional formula.<br />
Based on these prices, AgroConsult calculated a weighted Thermo<strong>Potash</strong> price for each of the<br />
crops based on proportion of each of the formulas in the fertilizing system. Then, in order to<br />
reach an average price per mixing center, the Thermo<strong>Potash</strong> benchmark price for each of the<br />
crops was weighted in accordance with the relevant demand potential. The assumption that<br />
formula costs would be the same was applied during this stage.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 15-5<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
However, the average weighted price obtained reflects individual prices per crop. Consequently,<br />
the price would exceed the maximum price for some crops and the product would be too<br />
expensive. Therefore, the price was realigned to cater to 95% of the potential market. In this<br />
case, the resulting price is the potential price for Thermo<strong>Potash</strong> at the mixing center.<br />
Then, discounting transport and ICMS costs, we obtained an adjusted Thermo<strong>Potash</strong> price at<br />
source (São Gotardo-Minas Gerais).<br />
15.1.6 Process to Determine the Potential Market for Thermo<strong>Potash</strong><br />
Was calculated the potential market for Thermo<strong>Potash</strong> for each of the crops and the results were<br />
then added together to calculate the potential in each state.<br />
In this calculation, the data was based on 2010 fertilizer demand for each crop in each state.<br />
Then, based on frequent market surveys carried out by AgroConsult, we defined the market share<br />
of each of the six formulas selected during the fertilizer process, totaling 100%. This is how we<br />
obtained the fertilizer volume used in each of the formulas.<br />
Based on the proportion of Thermo<strong>Potash</strong> in each of these formulas (1,000kg), obtained using<br />
the optimization process, we calculated the Thermo<strong>Potash</strong> potential for each formula. In this<br />
case, we multiplied the proportion of Thermo<strong>Potash</strong> by the volume of fertilizer in each of the<br />
formulas.<br />
Total Thermo<strong>Potash</strong> potential for each of the six formulas provides us with the potential market<br />
for each crop. Market potential by state is obtained by adding together the results from each<br />
crop.<br />
15.2 Contracts<br />
<strong>Verde</strong> does not yet have any contracts in place at the time of this report.<br />
The QP has reviewed data and information provided by ArgoConsult and finds that the<br />
assumptions made are reasonable.<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 16-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
16<br />
Environmental Studies, Permitting and<br />
Social or Community Impact (Item 20)<br />
Mining concessions can be applied for following a final exploration report to be submitted to,<br />
and approved by the Brazil’s Department of Mines and Energy (DNPM) by the final expiry date<br />
of the exploration license. The report must conclude and demonstrate that an economic mineral<br />
resource has been delineated and measured. Normally, a mining plan and feasibility study must<br />
be presented within a year. That is the moment for the environmental licenses. Those of<br />
installation and a license of operations are then issued by the applicable environmental agency as<br />
a prerequisite to the granting of the mining concession. A mining concession is granted for a<br />
period covering the mine life until the mineral reserves of the deposit are exhausted. A mining<br />
concession does not convey title to a mineral deposit but provides the holder with the right to<br />
extract, process, and sell minerals extracted from the deposit in accordance with a plan approved<br />
by the DNPM and environmental authorities.<br />
Environmental Regulation General environmental rules and obligations are relatively similar to<br />
those applicable in Canada. The Brazilian environmental policy is the responsibility of the<br />
Ministry of the Environment and is executed at three levels: federal, state, and municipal.<br />
SRK performed an independent review of the current regulatory context of exploration activities<br />
in Brazil. SRK also consulted with “Silva Martins, Vilas Boas, Lopes e Frattari Advogados”<br />
(SMVBLFA), a law firm with prior knowledge of the environmental permitting activities of<br />
<strong>Verde</strong>.<br />
Based on the SRK review and consultation with SMVBLFA, the requirements stipulated in the<br />
environmental legislation for the mining activities, when <strong>Verde</strong> is in this stage, is basically<br />
consolidated in the following:<br />
Study of Environmental Impacts ("EIA");<br />
Previous License ("LP");<br />
Installation License ("LI");<br />
Operational License (“LO”); and<br />
Rehabilitation Plan for Degraded Areas ("PRAD").<br />
An EIA is required as a condition for obtaining the LP for any activity which potentially causes<br />
substantial environmental impact. The LP, LI and LO are mandatory for installing, expanding,<br />
and operating any mining activity, except exploration, under the systems of mining concession or<br />
licensing. A PRAD requires suitable technical solutions to rehabilitate the soil and other aspects<br />
of the environment that might be degraded by mining operations. In recognition that the<br />
preparation of an EIA can represent a substantial financial burden for a smaller projects, a<br />
company can undertake a less detailed form of EIA called an "Environmental Diagnostic Report"<br />
in certain cases.<br />
Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováreis, the federal<br />
environmental agency, is in charge of the licensing of activities with environmental impacts in<br />
more than one state or in federal waters, while SUPRAM is in charge of the licensing of<br />
activities with environmental impacts within the State of Minas Gerais. The determination of<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 16-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
competence between the two environmental bodies may cause overlap which may result in some<br />
cases in problems and delays for mining companies.<br />
The proposed project, while in this phase of exploration, at first, will not require an<br />
environmental license. Parallel, the environmental reports that will be necessary to the<br />
application of the exploitation are already been prepared (EIA).<br />
The EIA is ongoing during 2011. <strong>Verde</strong> has hired the specialized company SSMA Assesoria de<br />
Consultoria LTDA (SSMA) to do all the EIA, which should be finished by the end of 2011.<br />
SSMA is in the course of preparing the study of environmental impacts (in Brazilian legislations<br />
it is named: EIA – Estudo de Impactos Ambienta) and the plan for the restoration of degraded<br />
areas (in Brazilian legislations it is named: PRAD – Plano de Recuperação de Áreas<br />
Degradadas), which is a requirement for filing the application for the Provisional License.<br />
The company filed the Description of the Activity Form (in Brazilian legislations it is named:<br />
Formulário de Caracterização do Empreendimento – FCE) on May 25, 2011, which is the first<br />
step of the environmental licensing procedure. Based on such form, the Minas Gerais<br />
Environmental Agency (which is named: Secretaria de Estado de Meio Ambiente e<br />
Desenvolvimento Sustentável – SEMAD) issued the Basic Instructions Form (in Brazilian<br />
legislations it is named: Formulário de Orientações Básicas – FOB) on September 13, 2011,<br />
which contains instructions on the issues to be addressed by the study of environmental impacts<br />
and the manners it should be prepared.<br />
Based on records available for review, <strong>Verde</strong> operates in accordance with Brazil legislation.<br />
With the completion of this Scoping Study, <strong>Verde</strong> will formalize reliable information of the<br />
project and have elements to complete the preparation of the necessary reports for obtaining the<br />
environmental permits.<br />
The selection of SSMA, a company qualified and specialized in making those reports, with<br />
experience and commitment to the observance of legal standards and best practices for<br />
implementing this will mitigate the risk of future remediation costs.<br />
It is difficult to determine the exact amounts which will be required to complete all land<br />
reclamation activities in connection with Cerrado <strong>Verde</strong> Project.<br />
The project is in an exploration phase and the reclamation bonds and other forms of financial<br />
assurance represent only a portion of the total amount of money that will be spent on reclamation<br />
activities over the life of a potential mine. Accordingly, it may be necessary to make a complete<br />
planned expenditures and operating plans in order to fund reclamation activities.<br />
As the Project seems to have a good recoverability, it appear won`t going to have the usual<br />
potential future liability for cleanup of tailings deposited on the expected future mining license<br />
areas and reprocessing. It is not possible to quantify at this time what the potential liability may<br />
be and detailed assessments need to be made to determine future land reclamation costs.<br />
The Project does not have a final Mine Plan of Operations and the conceptual level closure plan<br />
for the property, and therefore no reclamation and closure cost estimate budget due to the<br />
project’s preliminary nature.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 17-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
17<br />
Capital and Operating Costs (Item 21)<br />
17.1 Capital Costs<br />
Total capital costs are estimated at US$155.3 million for the 1.1Mtpa production rate and<br />
US$218.4 million for the 2.2Mtpa production rate. A detailed breakdown of the capital cost<br />
estimates is given in Table 17.1.1 and 17.1.2 respectively.<br />
Table 17.1.1: Summary Capital Cost by Facility in Reals and United States Dollars in<br />
thousands, Including Applicable Taxes for a 1.1Mtpa Operation<br />
Sub-area<br />
Total Price r$(000)<br />
Total Price us$(000)<br />
With Taxes<br />
With Taxes<br />
Total R$ 279,544 $155,302<br />
General area R$ 57,448 $31,915<br />
Primary crushing R$ 3,173 $1,763<br />
Secondary crushing R$ 5,253 $2,918<br />
Stockpile R$ 737 $409<br />
Limestone storage and dosing R$ 7,691 $4,273<br />
Grinding R$ 11,621 $6,456<br />
Pelletizing R$ 28,490 $15,828<br />
Furnace R$ 69,782 $38,768<br />
Quenching R$ 6,276 $3,487<br />
Pellets classification R$ 5,561 $3,089<br />
Bulk product classification,<br />
Storage, loading and shipping<br />
R$ 4,295 $2,386<br />
Raw water intake R$ 9,936 $5,520<br />
Fire fighting R$ 3,990 $2,217<br />
Compressed air R$ 6,702 $3,724<br />
Electrical substations R$ 33,254 $18,475<br />
Main substation and transmission line R$ 25,335 $14,075<br />
*Exchange Rate is R$1.80=USD1<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 17-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 17.1.2 Summary Capital Cost by Facility in Reals and United States Dollars in<br />
thousands, Including Applicable Taxes for a 2.2Mtpa Operation<br />
Sub-area<br />
Total Price R$(000)<br />
Total Price US$(000)<br />
With Taxes<br />
With Taxes<br />
Total R$ 393,131 $218,406<br />
General area R$ 57,448 $31,915<br />
Primary crushing R$ 6,204 $3,447<br />
Secondary crushing R$ 8,910 $4,950<br />
Stockpile R$ 1,965 $1,092<br />
Limestone storage and dosing R$ 9,531 $5,295<br />
Grinding R$ 20,010 $11,117<br />
Pelletizing R$ 40,138 $22,299<br />
Furnace R$ 139,563 $77,535<br />
Quenching R$ 12,552 $6,973<br />
Pellets classification R$ 8,119 $4,511<br />
Bulk product classification,<br />
storage, loading and shipping<br />
R$ 4,295 $2,386<br />
Raw water intake R$ 9,936 $5,520<br />
Fire fighting R$ 3,990 $2,217<br />
Compressed air R$ 6,702 $3,724<br />
Electrical substations R$ 38,<strong>43</strong>3 $21,352<br />
Main substation and transmission line R$ 25,335 $14,075<br />
*Exchange Rate is R$1.80=USD1<br />
17.1.1 Payback<br />
Based on the following economic evaluation for the two production rates, the 1.1Mtpa pellet<br />
production rate, project payback occurs in Year 3 of production. For the 2.2Mtpa production rate<br />
project payback occurs in Year 2 of production.<br />
17.2 Operating Costs<br />
For the production of fertilizer pellets with an estimated 8% to 10% K 2 O content, the 1.1Mtpa<br />
pellet production rate, operating costs are estimated at US$41.80/t of pellets, inclusive of General<br />
and Administrative costs. A summary breakdown of operating costs, excluding G&A, is<br />
presented in Table 17.2.1. For the 2.2Mtpa production rate operating costs are estimated at<br />
US$36.36/t of pellets produced, inclusive of G&A costs. A detailed breakdown of operating<br />
costs, excluding G&A, is presented in Table 17.2.2. Total operating costs are stated in both<br />
US$(000) and R$(000).<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
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<strong>Verde</strong> <strong>Potash</strong> Plc 17-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Table 17.2.1: Summary of Operational Costs, 1.1Mtpa Using Petroleum Coke<br />
ITEM<br />
TOTAL/ YEAR<br />
US$(000)<br />
% US$/t pellets<br />
ELECTRIC POWER 8,317 20.3% $7.48<br />
PETCOKE 12,197 29.7% $10.97<br />
LIMESTONE 2,525 6.1% $2.27<br />
WEAR MATERIAL 88 0.2% $0.08<br />
PARTS / MAINTENANCE MATERIAL 1,996 4.9% $1.80<br />
TOTAL COSTS VARIABLES (USD) 25,123 61.2% $22.59<br />
OWN WORK FORCE (USD) 9,823 23.9% $8.83<br />
MINE (USD) 6,120 14.9% $5.50<br />
TOTAL OPERATIONAL COSTS (USD) 41,066 100% $36.93<br />
TOTAL OPERATIONAL COSTS (R$) R$ 73,919 100% R$ 66.48<br />
Table 17.2.2: Summary of Operational Costs, 2.2Mtpa using Petroleum Coke<br />
ITEM<br />
TOTAL/ YEAR<br />
US$(000)<br />
% US$/t pellets<br />
ELECTRIC POWER $16,094 22.6% $7.24<br />
PETCOKE $24,378 34.2% $10.97<br />
LIMESTONE $7,575 10.6% $3.41<br />
WEAR MATERIAL $166 0.2% $0.07<br />
PARTS / MAINTENANCE MATERIAL $3,365 4.7% $1.51<br />
TOTAL COSTS VARIABLES (USD) $51,577 72.3% $23.20<br />
OWN WORK FORCE (USD) $11,766 16.5% $5.29<br />
MINE (USD) $7,988 11.2% $3.59<br />
TOTAL OPERATIONAL COSTS (USD) $71,331 100% $32.09<br />
TOTAL OPERATIONAL COSTS (R$) R$ 128,396 100% R$ 57.75<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 18-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
18<br />
<strong>Economic</strong> Analysis (Item 22)<br />
The following economic analysis shows the results of two production rates, 1.1Mtpa and<br />
2.2Mtpa rates for the production of fertilizer pellets and is based only on the mineral resource<br />
estimated as of March 1, 2010. The base case used in this economic analysis is the 1.1Mtpa<br />
scenario. The results do not include the project resources for Targets 4, 6,7,10 and 11 that were<br />
drill defined after completion of the PEA.<br />
Readers are cautioned that this analysis is only a preliminary assessment based on conceptual<br />
mine plans and process flowsheets and inferred mineral resources, which are considered to be<br />
highly speculative geologically. There is no certainty that this PEA will be realized. Since there<br />
is no estimate of proven or probable reserves for the Project, this assessment only include cash<br />
flow forecasts on an annual basis for the mineral resource estimated as of March 1, 2010.<br />
Figures 18-1 contains the estimated annual cashflow, in thousands of USD, and production rate,<br />
in ktonnes, for the 1.1Mtpa production rate over the projected 40 year plan. The plan includes a<br />
2 year pre-production period with product recovered starting in year 3 of the project. As stated<br />
earlier, payback is estimated to occur in the 3 rd year of production.<br />
Figures 18-2 contains the estimated annual cashflow, in thousands of USD, and production rate,<br />
in ktonnes, for the 2.2Mtpa production rate over the projected 40 year plan. The plan includes a<br />
2 year pre-production period with product recovered starting in year 3 of the project. As stated<br />
earlier, payback is estimated to occur in the 2 nd year of production.<br />
The indicative economics for the 1.1Mtpa and 2.2Mtpa production rates are presented in Table<br />
18.1. This clearly demonstrates the encouraging economics for the Cerrado <strong>Verde</strong> Projects<br />
based on the scoping study concepts, cost projections and price assumptions as presented in this<br />
PEA.<br />
Table 18.1: Indicative <strong>Economic</strong>s<br />
Production Rate 1.1Mtpy 2.2Mtpy<br />
Average Sales Price US$151.82/t US$133.23/t<br />
Total Production (40 year plan) 44,700kt 89,370kt<br />
Revenue US$6,786.6M US$11,906.8M<br />
Cashflow US$3,065.6M US$5,449.2M<br />
NPV (10%) US$445.5M US$844.1M<br />
NPV (12%) US$331.6M US$642.0M<br />
IRR 32.7% 40.0%<br />
Opex US$41.80/t US$36.36<br />
Initial Capex US$155.3M US$218.4M<br />
Contingency (15%) US$23.3M US$32.8M<br />
Pre-construction US$18.2M US$18.2M<br />
Total Capex US$196.8M US$269.4M<br />
Payback 2.38yrs 1.87yrs<br />
*Note: The above figures include a sustaining capital provision of 2% per annum of direct capital costs commencing in year 4.<br />
Revenue for the 1.1Mtpa production rate is based on two product streams. 70% of the<br />
production will be sold to market area Mina Gerais at a unit price of US$160.04/t and 30% of the<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 18-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
production will be sold to market area Mato Grosso at a unit price of US$130.13/t. The average<br />
sales unit price for 1.1Mtpa case is US$151.82/t.<br />
Revenue for the 2.2Mtpa production rate is based on multiple product streams. The average<br />
sales unit price for the 2.2Mtpa production rate is US$133.23/t. The breakdown of products to<br />
be sold for both production rates are contained in Table 18.2.<br />
Table 18.2: Sales Unit Price/t for 1.1Mtpa and 2.2Mtpa Production Cases<br />
1.1Mtpa<br />
2.2Mtpa<br />
Market Area<br />
% US$/t % US$/t<br />
Minas Gerais 70% 160.04 36% 160.04<br />
Mato Grosso 30% 130.13 28% 130.13<br />
Mato Grosso do Sul 8% 122.2<br />
Goias 16% 112.98<br />
Bahia 10% 93.98<br />
Sao Paulo 2% 90.92<br />
Average Sales Price 100% 151.82 100% 133.23<br />
18.1 Taxes and Royalties<br />
In Brazil, the DNPM, Brazil’s Department of Mines and Energy, monitors exploration, mining,<br />
and mineral processing. This body also administers mineral exploration licenses and mining<br />
concessions. Mineral exploration licenses are issued by DNPM and mining concessions by the<br />
Ministry of Mining and Energy.<br />
Exploration licenses are granted for a maximum period of three years. As prerequisite, the<br />
requestor should provide all requirements and the area of interest does not overlap with an<br />
existing license. There is an annual fee of R$2.02 per hectare during the initial period. It is<br />
possible to request for an extension, situation that increase this annual tax (TAH) to R$3.06<br />
during this extension period. Those values are in force since March 2010, before that it was<br />
respectively R$1.90 and R$2.87. That mineral rights tax should to be paid to the Brazilian<br />
government. Exploration licenses can be extended for a second period no longer than three<br />
years. DNPM has the discretion of the whether requested renewal.<br />
Until the final expiry date of the exploration license, concessions can be applied for following a<br />
final exploration report. This one should be submitted to, and approved by the DNPM. The<br />
report must conclude and demonstrate that an economic mineral resource has been delineated<br />
and measured. According to the protocol of the DNPM, a mining plan and feasibility study must<br />
be presented within a year. A license of installation and a license of operations are then issued<br />
by the applicable environmental agency as a prerequisite to the granting of the mining<br />
concession. A mining concession is granted for a period covering the mine life until the mineral<br />
reserves of the deposit are exhausted. A mining concession does not convey title to a mineral<br />
deposit but provides the holder with the right to extract, process, and sell minerals extracted from<br />
the deposit in accordance with a plan approved by the DNPM and environmental authorities.<br />
A mining concession leads a royalty payment to the federal government. It is the Financial<br />
Compensation for the Exploitation of Mineral Resources ("CFEM"), which is established at 2%<br />
of the net sales of fertilizers. There is also a royalty to the landowner, if the surface rights do not<br />
belong to the mining titleholder – that is the case of the Cerrado <strong>Verde</strong> Project. This royalty<br />
amounts to 50% of CFEM. However, it is common practice to negotiate a separate<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 18-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
compensation agreement, if this amount may not be sufficient for the land owner. Surface rights<br />
in Brazil are distinct from mining rights and must be acquired separately. The land owner has no<br />
title to the subsoil or minerals contained therein. The Brazilian mining code provides for some<br />
form of expropriation of privately held surface rights subject to fair compensation. The holder of<br />
a mineral right is entitled to use the surface to conduct mining operations, including the<br />
construction of facilities required for such operations. The access to the land and reclamation of<br />
disturbed areas must be negotiated with each individual surface right holder. However, the<br />
landowners are obliged by law to provide access to the mineral license holder to conduct<br />
exploration. If an agreement cannot be reached by negotiation there are legal mechanisms in<br />
place to allow courts to lead an arrangement.<br />
18.2 Sensitivity<br />
The Cerrado <strong>Verde</strong> Project is most sensitive to the received Thermo<strong>Potash</strong> product price.<br />
Table 18.2.1: Sensitivity Analysis<br />
Simulation Rate Opex Capex Sales Price IRR range<br />
NPV range<br />
(US$M)<br />
Sim_1 12% -10% +10% -10% +30% -10% +10% 27.8% to 35.3% 281.2 to 380.4<br />
Sim_3 12% -10% +10% -10% +30% -30% +10% 23.1% to 34.5% 181.9 to 370.3<br />
Sim_4 12% -1% +50% -10% +30% -10% +10% 25.9% to 34.0% 239.9 to 359.5<br />
18.3 Mine Life<br />
Given the extensive resource base available; albeit all of which is in the inferred category, a mine<br />
life of 40 years has been assumed for both the 1.1Mtpa and 2.2Mtpa production rates.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Annual Production and Cashflow<br />
for the 1.1Mtpa production case<br />
File Name: Figure_18-1.docx Date: 09/15/2011 Approved: NR Figure: 18-1
SRK Project No.: 3<strong>43</strong>500.020<br />
Cerrado <strong>Verde</strong> <strong>Potash</strong> Project<br />
Minas Gerais, Brazil<br />
Annual Production and Cashflow<br />
for the 2.2Mtpa Production Case<br />
File Name: Figures 18-2 Date: 09/15/2011 Approved: NR Figure: 18-2
<strong>Verde</strong> <strong>Potash</strong> Plc 19-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
19<br />
Adjacent Properties (Item 23)<br />
There are no advanced potash properties in the immediate vicinity of the Cerrado <strong>Verde</strong> Project.<br />
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Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 20-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
20<br />
Other Relevant Data and Information (Item 24)<br />
There is no other relevant data and information that has not been presented within the<br />
appropriate sections of this report.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 21-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
21<br />
Interpretation and Conclusions (Item 25)<br />
The pertinent observations and interpretations which have been developed in producing this<br />
report are detailed in the sections above.<br />
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Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 22-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
22<br />
Recommendations (Items 26)<br />
22.1 Recommended Work Programs<br />
22.1.1 Resources<br />
The current resource estimate confidence can be improved by:<br />
Undertaking additional Bulk Density measurements on diamond core downhole and<br />
across the deposit focusing mainly on the weathered ore since fresh ore has already a<br />
good number of measurements;<br />
Improve the current surface topography using total station, or leaser;<br />
Improve current internal quality control procedures to enhance the methodology for<br />
utilization of sample blanks and standards;<br />
Additional drilling (core drilling) should be completed to improve confidence in grade<br />
continuity within the weathered and un-weathered zones and to enhance the control of<br />
these zone boundaries. The spacing of the drilling should conform to the size of the<br />
block model used for resource estimation, giving both down dip information as well as<br />
vertical constraints on the “ore” horizons; and<br />
Structural interpretations from the core holes will help in detailed mine planning as well<br />
as defining grade boundaries and controls within the deposit.<br />
22.1.2 Metallurgical<br />
It has to be confirmed at what level, if any, will contamination of the Thermo-K product by<br />
residual fuel components, particularly petroleum hydrocarbons, make the product unusable or<br />
limited in application across the agricultural industry. If this is the case, then a gas- or indirect<br />
dead roaster-fired solution is possible, the latter having the advantage of giving flexibility for<br />
low cost alternative fuel utilization. Due to the high temperatures (above 1100 o C) it is unlikely<br />
that any residual fuel will be present.<br />
The rate of water solubilization of nutrients from the calcined product needs to be established<br />
through rinse tests simulating the quench step post calcining and long term exposure to meteoric<br />
rinsing.<br />
22.1.3 Mining<br />
To accurately predict grade and quality of plant feedstock provided by the mine, a more<br />
complete understanding of the resource is required. In particular, the effect of K 2 O grade and<br />
mass yield calculations will effect what part of the mine is mined when and in what quantities.<br />
With a detailed infill drill program, continuation of metallurgical testing and further engineering<br />
studies SRK recommends additional work be dedicated to the effect of mine dilution, possible<br />
effect of deleterious elements, construction of mining costs from first principles, RoM<br />
production targets, waste dump design and haul profiles for contractor estimation. This can be<br />
included as part prefeasibility study and will be required for any reserve generation in the future.<br />
Given the course nature of the resource model, the ability to sensitize or understand potential<br />
challenges to future mining operations is difficult to quantify. With a more refined and detailed<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 22-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
block model containing lithology, grade and product distribution, the confirmation that the mine<br />
will produce the appropriate process plant feedstock can be verified and accurately estimate.<br />
22.1.4 Costs<br />
SRK recommends that the Project be advanced in one phase of work to the prefeasibility level of<br />
evaluation and design. The cost estimate for the recommended work program is shown in Table<br />
22.1.4.1.<br />
Table 22.1.4.1: Recommended Prefeasibility Work Program Cost Estimate (US$000’s)<br />
Description<br />
Cost<br />
Infill Drilling 300<br />
Metallurgical Testwork 800<br />
Engineering Studies 500<br />
Environmental Baseline 150<br />
Other 250<br />
Total 2,000<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 23-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
23<br />
References (Item 27)<br />
Agroconsult (2010). Price and competitiveness survey for introducing Thermo<strong>Potash</strong> on the<br />
Brazilian fertilizer market <strong>Verde</strong> Fertilizantes. Agroconsult Industry Surveys November<br />
2010. 198p.<br />
Coffey Mining, (2010). Cerrado <strong>Verde</strong> <strong>Potash</strong> Project, Brazil, Technical Report to Amazon<br />
Mining Holding Plc, March 2010.<br />
COSTA-FILHO, P. L. D. R., (2007). Estudo preliminar da vegetação da parte do médio curso<br />
do Rio Indaiá (MG) utilizando imagem ASTER. Anais XIII Simpósio Brasileiro de<br />
Sensoriamento Remoto, Florianópolis, Brasil, 21-26 abril 2007, INPE, p. 1631-1638.<br />
ECM (2010). General Project Description for Scoping Study. Report to AMAZON PESQUISA<br />
MINERAL E MINERAÇÃO LTDA. 59p.<br />
http://en.wikipedia.org/wiki/Kriging#Ordinary kriging.<br />
Jose Valarelli et al, (1992). Ardosias "<strong>Verde</strong>te" de CEdro do Abaete na Producao de<br />
Termofosfato Potassico Fundido e sua Eficiencia Agronomica.<br />
KING, L.C. 1956. A geomorfologia do Brasil oriental. Rev. Bras. Geogr.,18(2): 147-265.<br />
LIMA, O. N. B., (2005). Grupo Bambuí: Estratigrafia regional no Alto Rio São Francisco e<br />
geologia dos depósitos fosfáticos da Serra da Saudade - MG. Dissertação de Mestrado,<br />
Instituto de Geociências, Universidade Federal de Minas Gerais, 142 p.<br />
Luis A.M Da Costa et al, (2008). Potential of Potassium-Bearing Rock of the Cedro do Abaete<br />
Region, State of Minas Gerais, Brazil, Sept 2008.<br />
Persio Mandetta, (2009). Planejamento de Sondagem Exploratoria.<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 24-1<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
24<br />
Glossary<br />
24.1 Mineral Resources<br />
The mineral resources and mineral reserves have been classified according to the “CIM<br />
Standards on Mineral Resources and Reserves: Definitions and Guidelines” (November 27,<br />
2010). Accordingly, the Resources have been classified as Measured, Indicated or Inferred, the<br />
Reserves have been classified as Proven, and Probable based on the Measured and Indicated<br />
Resources as defined below.<br />
A Mineral Resource is a concentration or occurrence of natural, solid, inorganic or fossilized<br />
organic material in or on the Earth’s crust in such form and quantity and of such a grade or<br />
quality that it has reasonable prospects for economic extraction. The location, quantity, grade,<br />
geological characteristics and continuity of a Mineral Resource are known, estimated or<br />
interpreted from specific geological evidence and knowledge.<br />
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which quantity and grade<br />
or quality can be estimated on the basis of geological evidence and limited sampling and<br />
reasonably assumed, but not verified, geological and grade continuity. The estimate is based on<br />
limited information and sampling gathered through appropriate techniques from locations such<br />
as outcrops, trenches, pits, workings and drillholes.<br />
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or<br />
quality, densities, shape and physical characteristics can be estimated with a level of confidence<br />
sufficient to allow the appropriate application of technical and economic parameters, to support<br />
mine planning and evaluation of the economic viability of the deposit. The estimate is based on<br />
detailed and reliable exploration and testing information gathered through appropriate techniques<br />
from locations such as outcrops, trenches, pits, workings and drillholes that are spaced closely<br />
enough for geological and grade continuity to be reasonably assumed.<br />
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which quantity, grade or<br />
quality, densities, shape, physical characteristics are so well established that they can be<br />
estimated with confidence sufficient to allow the appropriate application of technical and<br />
economic parameters, to support production planning and evaluation of the economic viability of<br />
the deposit. The estimate is based on detailed and reliable exploration, sampling and testing<br />
information gathered through appropriate techniques from locations such as outcrops, trenches,<br />
pits, workings and drillholes that are spaced closely enough to confirm both geological and grade<br />
continuity.<br />
24.2 Mineral Reserves<br />
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral<br />
Resource demonstrated by at least a <strong>Preliminary</strong> Feasibility Study. This Study must include<br />
adequate information on mining, processing, metallurgical, economic and other relevant factors<br />
that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral<br />
Reserve includes diluting materials and allowances for losses that may occur when the material<br />
is mined.<br />
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some<br />
circumstances a Measured Mineral Resource demonstrated by at least a <strong>Preliminary</strong> Feasibility<br />
Study. This Study must include adequate information on mining, processing, metallurgical,<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 24-2<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
economic, and other relevant factors that demonstrate, at the time of reporting, that economic<br />
extraction can be justified.<br />
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource<br />
demonstrated by at least a <strong>Preliminary</strong> Feasibility Study. This Study must include adequate<br />
information on mining, processing, metallurgical, economic, and other relevant factors that<br />
demonstrate, at the time of reporting, that economic extraction is justified.<br />
24.3 Glossary<br />
The following general mining terms may be used in this report.<br />
Table 24.3.1: Glossary<br />
Term<br />
Assay:<br />
Capital Expenditure:<br />
Composite:<br />
Concentrate:<br />
Crushing:<br />
Cutoff Grade<br />
(CoG):<br />
Dilution:<br />
Dip:<br />
Fault:<br />
Footwall:<br />
Gangue:<br />
Grade:<br />
Hangingwall:<br />
Haulage:<br />
Hydrocyclone:<br />
Igneous:<br />
Kriging:<br />
Level:<br />
Lithological:<br />
LoM Plans:<br />
LRP:<br />
Material Properties:<br />
Milling:<br />
Mineral/Mining<br />
Lease:<br />
Mining Assets:<br />
Ongoing Capital:<br />
Ore Reserve:<br />
Pillar:<br />
RoM:<br />
Sedimentary:<br />
Shaft:<br />
Definition<br />
The chemical analysis of mineral samples to determine the metal content.<br />
All other expenditures not classified as operating costs.<br />
Combining more than one sample result to give an average result over a larger distance.<br />
A metal-rich product resulting from a mineral enrichment process such as gravity<br />
concentration or flotation, in which most of the desired mineral has been separated from<br />
the waste material in the ore.<br />
Initial process of reducing ore particle size to render it more amenable for further<br />
processing.<br />
The grade of mineralized rock, which determines as to whether or not it is economic to<br />
recover its gold content by further concentration.<br />
Waste, which is unavoidably mined with ore.<br />
Angle of inclination of a geological feature/rock from the horizontal.<br />
The surface of a fracture along which movement has occurred.<br />
The underlying side of an orebody or stope.<br />
Non-valuable components of the ore.<br />
The measure of concentration of gold within mineralized rock.<br />
The overlying side of an orebody or slope.<br />
A horizontal underground excavation which is used to transport mined ore.<br />
A process whereby material is graded according to size by exploiting centrifugal forces of<br />
particulate materials.<br />
Primary crystalline rock formed by the solidification of magma.<br />
An interpolation method of assigning values from samples to blocks that minimizes the<br />
estimation error.<br />
Horizontal tunnel the primary purpose is the transportation of personnel and materials.<br />
Geological description pertaining to different rock types.<br />
Life-of-Mine plans.<br />
Long Range Plan.<br />
Mine properties.<br />
A general term used to describe the process in which the ore is crushed and ground and<br />
subjected to physical or chemical treatment to extract the valuable metals to a concentrate<br />
or finished product.<br />
A lease area for which mineral rights are held.<br />
The Material Properties and Significant Exploration Properties.<br />
Capital estimates of a routine nature, which is necessary for sustaining operations.<br />
See Mineral Reserve.<br />
Rock left behind to help support the excavations in an underground mine.<br />
Run-of-Mine.<br />
Pertaining to rocks formed by the accumulation of sediments, formed by the erosion of<br />
other rocks.<br />
An opening cut downwards from the surface for transporting personnel, equipment,<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 24-3<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Term<br />
Sill:<br />
Smelting:<br />
Stope:<br />
Stratigraphy:<br />
Strike:<br />
Sulfide:<br />
Tailings:<br />
Thickening:<br />
Total Expenditure:<br />
Unweathered<br />
Variogram<br />
Weathered<br />
Definition<br />
supplies, ore and waste.<br />
A thin, tabular, horizontal to sub-horizontal body of igneous rock formed by the injection<br />
of magma into planar zones of weakness.<br />
A high temperature pyrometallurgical operation conducted in a furnace, in which the<br />
valuable metal is collected to a molten matte or doré phase and separated from the gangue<br />
components that accumulate in a less dense molten slag phase.<br />
Underground void created by mining.<br />
The study of stratified rocks in terms of time and space.<br />
Direction of line formed by the intersection of strata surfaces with the horizontal plane,<br />
always perpendicular to the dip direction.<br />
A sulfur bearing mineral.<br />
Finely ground waste rock from which valuable minerals or metals have been extracted.<br />
The process of concentrating solid particles in suspension.<br />
All expenditures including those of an operating and capital nature.<br />
Fresh rock or protolith that has not been subject to physical or chemical changes as a<br />
result of surface processes.<br />
A statistical representation of the characteristics (usually grade).<br />
Material has been influenced by surface geochemical and physical processes that have<br />
resulted in removal of some potassium and other leachable salts.<br />
24.4 Abbreviations<br />
Metric units are used throughout this report, unless otherwise specified. The following<br />
abbreviations are typical to the mining industry and may be used in this report.<br />
Table 24.4.1: Abbreviations<br />
Abbreviation<br />
Unit or Term<br />
A<br />
ampere<br />
AA<br />
atomic absorption<br />
A/m 2<br />
amperes per square meter<br />
ANFO<br />
ammonium nitrate fuel oil<br />
Ag<br />
silver<br />
Au<br />
gold<br />
AuEq<br />
gold equivalent grade<br />
°C degrees Centigrade<br />
CCD<br />
counter-current decantation<br />
CIL<br />
carbon-in-leach<br />
CoG<br />
cutoff grade<br />
cm<br />
centimeter<br />
cm 2<br />
square centimeter<br />
cm 3<br />
cubic centimeter<br />
cfm<br />
cubic feet per minute<br />
ConfC<br />
confidence code<br />
CRec<br />
core recovery<br />
CSS<br />
closed-side setting<br />
CTW<br />
calculated true width<br />
° degree (degrees)<br />
dia.<br />
diameter<br />
EIS<br />
Environmental Impact Statement<br />
EMP<br />
Environmental Management Plan<br />
FA<br />
fire assay<br />
ft<br />
foot (feet)<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 24-4<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Abbreviation<br />
ft 2<br />
ft 3<br />
g<br />
gal<br />
g/L<br />
g-mol<br />
gpm<br />
g/t<br />
ha<br />
HDPE<br />
hp<br />
HTW<br />
ICP<br />
ID2<br />
ID3<br />
IFC<br />
ILS<br />
K<br />
kA<br />
KCl<br />
kg<br />
km<br />
km 2<br />
koz<br />
kt<br />
kt/d<br />
kt/y<br />
kV<br />
kW<br />
kWh<br />
kWh/t<br />
L<br />
L/sec<br />
L/sec/m<br />
lb<br />
LHD<br />
LLDDP<br />
LOI<br />
LoM<br />
m<br />
m 2<br />
m 3<br />
masl<br />
MARN<br />
MDA<br />
mg/L<br />
Mm<br />
mm 2<br />
mm 3<br />
MME<br />
Moz<br />
Mt<br />
Mtpa<br />
MTW<br />
MW<br />
Unit or Term<br />
square foot (feet)<br />
cubic foot (feet)<br />
gram<br />
gallon<br />
gram per liter<br />
gram-mole<br />
gallons per minute<br />
grams per tonne<br />
hectares<br />
Height Density Polyethylene<br />
horsepower<br />
horizontal true width<br />
induced couple plasma<br />
inverse-distance squared<br />
inverse-distance cubed<br />
International Finance Corporation<br />
Intermediate Leach Solution<br />
Potassium<br />
kiloamperes<br />
potassium chloride, also known as muriate of potash<br />
kilograms<br />
kilometer<br />
square kilometer<br />
thousand troy ounce<br />
thousand tonnes<br />
thousand tonnes per day<br />
thousand tonnes per year<br />
kilovolt<br />
kilowatt<br />
kilowatt-hour<br />
kilowatt-hour per metric tonne<br />
liter<br />
liters per second<br />
liters per second per meter<br />
pound<br />
Long-Haul Dump truck<br />
Linear Low Density Polyethylene Plastic<br />
Loss On Ignition<br />
Life-of-Mine<br />
meter<br />
square meter<br />
cubic meter<br />
meters above sea level<br />
Ministry of the Environment and Natural Resources<br />
Mine Development Associates<br />
milligrams/liter<br />
millimeter<br />
square millimeter<br />
cubic millimeter<br />
Mine & Mill Engineering<br />
million troy ounces<br />
million tonnes<br />
million tonnes per annum<br />
measured true width<br />
million watts<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
<strong>Verde</strong> <strong>Potash</strong> Plc 24-5<br />
Cerrado <strong>Verde</strong> Project<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong><br />
Abbreviation<br />
Unit or Term<br />
m.y.<br />
million years<br />
NGO<br />
non-governmental organization<br />
<strong>NI</strong> <strong>43</strong>-<strong>101</strong> Canadian National Instrument <strong>43</strong>-<strong>101</strong><br />
OSC<br />
Ontario Securities Commission<br />
oz<br />
troy ounce<br />
% percent<br />
PLC<br />
Programmable Logic Controller<br />
PLS<br />
Pregnant Leach Solution<br />
PMF<br />
probable maximum flood<br />
ppb<br />
parts per billion<br />
ppm<br />
parts per million<br />
QA/QC<br />
Quality Assurance/Quality Control<br />
RC<br />
rotary circulation drilling<br />
RoM<br />
Run-of-Mine<br />
RQD<br />
Rock Quality Description<br />
SEC<br />
U.S. Securities & Exchange Commission<br />
sec<br />
second<br />
SG<br />
specific gravity<br />
SOP<br />
sulphate of potash<br />
SPT<br />
standard penetration testing<br />
st<br />
short ton (2,000 pounds)<br />
t<br />
tonne (metric ton) (2,204.6 pounds)<br />
t/h<br />
tonnes per hour<br />
t/d<br />
tonnes per day<br />
t/y<br />
tonnes per year<br />
TSF<br />
tailings storage facility<br />
TSP<br />
total suspended particulates<br />
µm micron or microns<br />
V<br />
volts<br />
VFD<br />
variable frequency drive<br />
W<br />
watt<br />
wt<br />
weight<br />
XRD<br />
x-ray diffraction<br />
y<br />
year<br />
SRK Consulting (U.S.), Inc. September 16, 2011<br />
Cerrado <strong>Verde</strong>_<strong>NI</strong> <strong>43</strong>-<strong>101</strong> PEA_3<strong>43</strong>500.020_007_KG
Appendix A<br />
Certificate of Author Forms
SRK Consulting (U.S.), Inc.<br />
7175 West Jefferson Avenue, Suite 3000<br />
Lakewood, CO<br />
USA 80235<br />
denver@srk.com<br />
www.srk.com<br />
Tel: 303.985.1333<br />
Fax: 303.985.9947<br />
CERTIFICATE OF AUTHOR<br />
I, Neal Rigby, CEng, MIMMM, PhD, do hereby certify that:<br />
1. I am Corporate Mining Engineer of:<br />
SRK Consulting (U.S.), Inc.<br />
7175 W. Jefferson Ave, Suite 3000<br />
Denver, CO, USA, 80235<br />
2. I graduated with a BSc degree in Mineral Exploitation with first class honors in 1974 and a PhD in<br />
Mining Engineering in 1977 both from the University of Wales, UK.<br />
3. I am a member of the Institute of Materials, Mining and Metallurgy.<br />
4. I have worked as a Mining Engineer for a total of 36 years since my graduation from university. My<br />
relevant work experience includes underground and open pit potash, phosphate and trona projects,<br />
open pit mines and quarries, project design and evaluation and cash flow modeling.<br />
5. I have read the definition of “qualified person” set out in National Instrument <strong>43</strong>-<strong>101</strong> (<strong>NI</strong> <strong>43</strong>-<strong>101</strong>) and<br />
certify that by reason of my education, affiliation with a professional association (as defined in <strong>NI</strong> <strong>43</strong>-<br />
<strong>101</strong>) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the<br />
purposes of <strong>NI</strong> <strong>43</strong>-<strong>101</strong>.<br />
6. I am responsible for the Sections 1-4, 10 and 13-24 of the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> titled <strong>NI</strong><br />
<strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong>, Cerrado <strong>Verde</strong> <strong>Potash</strong> Project, Minas Gerais, Brazil,<br />
August 3, 2011, and dated September 16, 2011 (the “<strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong>”) relating to<br />
the Cerrado <strong>Verde</strong> property. I have not visited the Cerrado <strong>Verde</strong> property.<br />
7. I have had prior involvement with the Cerrado <strong>Verde</strong> property that is the subject of the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong>. The nature of my prior involvement was as the qualified responsible for the<br />
preparation of Sections 5 through 12, 15, and 18 of the report titled, “<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong>, Cerrado <strong>Verde</strong> <strong>Potash</strong> Project, Minas Gerais, Brazil”, December 13, 2010.<br />
8. I am independent of the issuer applying all of the tests in section 1.5 of National Instrument <strong>43</strong>-<strong>101</strong>.<br />
9. I have read <strong>NI</strong> <strong>43</strong>-<strong>101</strong> and Form <strong>43</strong>-<strong>101</strong>F1, and the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> has been<br />
prepared in compliance with that instrument and form.<br />
Group Offices:<br />
Africa<br />
Asia<br />
Australia<br />
Europe<br />
North America<br />
South America<br />
Canadian Offices:<br />
Saskatoon 306.955.4778<br />
Sudbury 705.682.3270<br />
Toronto 416.601.1445<br />
Vancouver 604.681.4196<br />
Yellowknife 867.445.8670<br />
U.S. Offices:<br />
Anchorage 907.677.3520<br />
Denver 303.985.1333<br />
Elko 775.753.4151<br />
Fort Collins 970.407.8302<br />
Reno 775.828.6800<br />
Tucson 520.544.3688
SRK Consulting (U.S.), Inc. Page 2 of 2<br />
10. I consent to the filing of the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> with any stock exchange and other<br />
regulatory authority and any publication by them for regulatory purposes, including electronic<br />
publication in the public company files on their websites accessible by the public, of the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong>.<br />
11. As of the date of this certificate, to the best of my knowledge, information and belief, the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong> contains all scientific and technical information that is required to be disclosed<br />
to make the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> not misleading.<br />
Dated this 16 th day of September, 2011.<br />
“Signed”<br />
________________________________<br />
Dr. Neal Rigby, CEng, MIMMM, PhD<br />
Certificate_of_Author_NealRigby_Cerrado<strong>Verde</strong>PEA_20<strong>101</strong>213.docx
SRK Cardiff<br />
5th Floor<br />
Churchill House<br />
17 Churchill Way<br />
Cardiff, UK<br />
CF10 2HH<br />
Tel: +44 29 2034 8150<br />
Fax: +44 29 2034 8199<br />
CERTIFICATE OF AUTHOR<br />
I, Rob Bowell, Ph.D, C.Chem MRSC, C. Geol FGS, do hereby certify that:<br />
1. I am Corporate Consultant, (Geochemistry) of:<br />
SRK Consulting (UK) Ltd.<br />
Churchill House<br />
17 Churchill Way<br />
Cardiff, CF102HH<br />
UK<br />
2. I graduated with a degree in Geochemistry/Geology, with Class 1 Honours from the University of<br />
Manchester in 1987. In addition, I have obtained a Doctor of Philosophy from University of<br />
Southampton in 1991.<br />
3. I am a past President of the International Association of Applied Geochemists (2005-2009), VP<br />
(2003-2004). Member of the International Mine Water Association, Geological Society of London,<br />
Society of <strong>Economic</strong> Geology, Royal Society of Chemistry, Chartered Chemist, RSC (1997),<br />
Chartered Geologist, GSL (2001), Chartered Professional European Geologist (2002), Accreditation<br />
auditor, Cyanide code (2005), Visiting Research Associate, Division of materials and Minerals,<br />
Cardiff University 1998 – present, Aberystwyth University 2000-2006.<br />
4. I have worked as a Geochemist for a total of 23 years since my graduation from university. My<br />
relevant project work experience includes geochemistry of basement rocks identical to those in the<br />
project area, I have worked on potash deposits in the United Kingdom, Poland and the Congo, and<br />
other industrial mineral deposits in Brazil, United States, South Africa and Argentina.<br />
5. I have read the definition of “qualified person” set out in National Instrument <strong>43</strong>-<strong>101</strong> (<strong>NI</strong> <strong>43</strong>-<strong>101</strong>) and<br />
certify that by reason of my education, affiliation with a professional association (as defined in <strong>NI</strong> <strong>43</strong>-<br />
<strong>101</strong>) and past relevant work experience, I fulfill the requirements to be a “qualified person” for the<br />
purposes of <strong>NI</strong> <strong>43</strong>-<strong>101</strong>.<br />
6. I am responsible for the preparation of Section 11 of the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> titled “<strong>NI</strong><br />
<strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong>, Cerrado <strong>Verde</strong> Project, Minas Gerais, Brazil, <strong>Verde</strong><br />
<strong>Potash</strong> Plc”, August 03, 2011, and dated September 16, 2011 (the “<strong>Preliminary</strong> <strong>Economic</strong><br />
<strong>Assessment</strong>”) relating to the Cerrado <strong>Verde</strong> Property. I have not visited the Cerrado <strong>Verde</strong> property.<br />
7. I have had prior involvement with the Cerrado <strong>Verde</strong> property that is the subject of the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong>. The nature of my prior involvement was as qualified person for Sections 14<br />
Group Offices:<br />
Africa<br />
Asia<br />
Australia<br />
Europe<br />
North America<br />
South America<br />
Canadian Offices:<br />
Saskatoon 306.955.4778<br />
Sudbury 705.682.3270<br />
Toronto 416.601.1445<br />
Vancouver 604.681.4196<br />
Yellowknife 867.445.8670<br />
U.S. Offices:<br />
Anchorage 907.677.3520<br />
Denver 303.985.1333<br />
Elko 775.753.4151<br />
Fort Collins 970.407.8302<br />
Reno 775.828.6800<br />
Tucson 520.544.3688
SRK Consulting (U.S.), Inc. Page 2 of 2<br />
and 19 of the report titled, “<strong>NI</strong> <strong>43</strong>-<strong>101</strong> <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong>, Cerrado <strong>Verde</strong> <strong>Potash</strong><br />
Project, Minas Gerais, Brazil”, dated December 13, 2010.<br />
8. I am independent of the issuer applying all of the tests in section 1.5 of National Instrument <strong>43</strong>-<strong>101</strong>.<br />
9. I have read <strong>NI</strong> <strong>43</strong>-<strong>101</strong> and Form <strong>43</strong>-<strong>101</strong>F1, and the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> has been<br />
prepared in compliance with that instrument and form.<br />
10. I consent to the filing of the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> with any stock exchange and other<br />
regulatory authority and any publication by them for regulatory purposes, including electronic<br />
publication in the public company files on their websites accessible by the public, of the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong>.<br />
11. As of the date of this certificate, to the best of my knowledge, information and belief, the <strong>Preliminary</strong><br />
<strong>Economic</strong> <strong>Assessment</strong> contains all scientific and technical information that is required to be disclosed<br />
to make the <strong>Preliminary</strong> <strong>Economic</strong> <strong>Assessment</strong> not misleading.<br />
Dated this 16 th day of September, 2011.<br />
“Signed”<br />
________________________________<br />
Rob Bowell, PhD, C.Chem MRSC, C. Geol FGS<br />
Certificate_of_Author_RobBowell_Cerrado<strong>Verde</strong>PEA_20<strong>101</strong>213.docx