NI 43-101 Preliminary Economic Assessment - Verde Potash

Verde Potash Plc 18-2
Cerrado Verde Project
NI 43-101 Preliminary Economic Assessment
production will be sold to market area Mato Grosso at a unit price of US$130.13/t. The average
sales unit price for 1.1Mtpa case is US$151.82/t.
Revenue for the 2.2Mtpa production rate is based on multiple product streams. The average
sales unit price for the 2.2Mtpa production rate is US$133.23/t. The breakdown of products to
be sold for both production rates are contained in Table 18.2.
Table 18.2: Sales Unit Price/t for 1.1Mtpa and 2.2Mtpa Production Cases
1.1Mtpa
2.2Mtpa
Market Area
% US$/t % US$/t
Minas Gerais 70% 160.04 36% 160.04
Mato Grosso 30% 130.13 28% 130.13
Mato Grosso do Sul 8% 122.2
Goias 16% 112.98
Bahia 10% 93.98
Sao Paulo 2% 90.92
Average Sales Price 100% 151.82 100% 133.23
18.1 Taxes and Royalties
In Brazil, the DNPM, Brazil’s Department of Mines and Energy, monitors exploration, mining,
and mineral processing. This body also administers mineral exploration licenses and mining
concessions. Mineral exploration licenses are issued by DNPM and mining concessions by the
Ministry of Mining and Energy.
Exploration licenses are granted for a maximum period of three years. As prerequisite, the
requestor should provide all requirements and the area of interest does not overlap with an
existing license. There is an annual fee of R$2.02 per hectare during the initial period. It is
possible to request for an extension, situation that increase this annual tax (TAH) to R$3.06
during this extension period. Those values are in force since March 2010, before that it was
respectively R$1.90 and R$2.87. That mineral rights tax should to be paid to the Brazilian
government. Exploration licenses can be extended for a second period no longer than three
years. DNPM has the discretion of the whether requested renewal.
Until the final expiry date of the exploration license, concessions can be applied for following a
final exploration report. This one should be submitted to, and approved by the DNPM. The
report must conclude and demonstrate that an economic mineral resource has been delineated
and measured. According to the protocol of the DNPM, a mining plan and feasibility study must
be presented within a year. A license of installation and a license of operations are then issued
by the applicable environmental agency as a prerequisite to the granting of the mining
concession. A mining concession is granted for a period covering the mine life until the mineral
reserves of the deposit are exhausted. A mining concession does not convey title to a mineral
deposit but provides the holder with the right to extract, process, and sell minerals extracted from
the deposit in accordance with a plan approved by the DNPM and environmental authorities.
A mining concession leads a royalty payment to the federal government. It is the Financial
Compensation for the Exploitation of Mineral Resources ("CFEM"), which is established at 2%
of the net sales of fertilizers. There is also a royalty to the landowner, if the surface rights do not
belong to the mining titleholder – that is the case of the Cerrado Verde Project. This royalty
amounts to 50% of CFEM. However, it is common practice to negotiate a separate
SRK Consulting (U.S.), Inc. September 16, 2011
Cerrado Verde_NI 43-101 PEA_343500.020_007_KG