NI 43-101 Preliminary Economic Assessment - Verde Potash

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Verde Potash Plc 3-1 Cerrado Verde Project NI 43-101 Preliminary Economic Assessment 3 Accessibility, Climate, Local Resources, Infrastructure and Physiography (Item 5) 3.1 Topography, Elevation and Vegetation The peneplane developed by the Verdete unit, i.e., the ground over which the Areado Group was deposited, undulates between the altitudes of 1,000m and 850m. Higher values are found in the southern part of the Serra da Saudade range. In the middle portion of the ridge, the peneplane is placed between 880m and 920m. Therefore, all the surface exposures of the Verdete unit were the result of the Tertiary erosion cycles that stripped off the Mesozoic rocks (Mata da Corda and Areado groups). The local vegetation consists of relicts of the primitive savanna ("cerrado") still preserved between soya and coffee plantations and industrially planted forests of eucalyptus and pine trees. The farms are mainly confined to the fertile soil of the Mata da Corda Group that forms plateaux around 1,000m. 3.2 Climate and Length of Operating Season The climate of the region is classified, according to IBGE (2002) as half-humid warm tropical, with annual average temperatures of 22°C Annual rainfall in the area averages between 1,300mm and 1,800mm, 84% of which falls during the rainy season between October and March, with the highest rainfall between December and January. Operations can be year round. 3.3 Physiography The region is inserted in the hydrographic basin of Indaiá River, a tributary river in the left margin of São Francisco River. According to SECTES – Secretaria do Estado de Ciência e Tecnologia de Minas Gerais – (1938), Indaiá River basin is part of the geomorphological unit São Francisco Plateau where the planning surfaces, the edges of the hills and the crests point dip to NE, with high structural control (COSTA-FILHO et al, 2007). The main drainages are the rivers Indaiá, Abaeté, Borrachudo and their tributary. The morphology of those rivers is the meandering channels and the drainage style is dendritic, mainly when installed over the pelites. In the north of the area is the Três Marias dam, main mouth of the region rivers. The water depth of the dam oscillates between the altitudes of 560 and 575m (LIMA, 2005). The main topographic feature is the Serra da Saudade ridge. The landscape can be separated into three domains that may be correlated to the South American Surfaces (King, 1956): Upper Surface: Older stage of the planning that expose the Areado Group Sandstones and Mata da Corda Group; Intermediate Surface: Refer to the second stage of the planning after de dissection of the Upper Surface, triggered by the resumption of the erosive process. The average altitude is of 750 to 850m. They are irregular surfaces stretched in N-S strike, developed over the Serra da Saudade Formation represented by psamitic lithotypes. Matches to the South American Surface I, mio-pliocene; and SRK Consulting (U.S.), Inc. September 16, 2011 Cerrado Verde_NI 43-101 PEA_343500.020_007_KG
Verde Potash Plc 3-2 Cerrado Verde Project NI 43-101 Preliminary Economic Assessment Basal Surface: the youngest, bordering the São Francisco River, with elevations from 570 to 630m. Exposure occurs in pelites of the Serra de Santa Helena and Serra da Saudade formations. 3.4 Access to Property The project can be accessed by air from Rio de Janeiro, São Paulo, Brasilia and other cities, to Belo Horizonte, and then overland from Belo Horizonte to Matutina (approximately 320km), via a good quality paved road (BR-262). From the town of Matutina the project area is accessed by a number of secondary gravel roads that connect the farming region. The unpaved roads are in reasonable condition although some sections require improvement. 3.5 Surface Rights According to Brazilian law, surface rights are separate from mining rights. Therefore, land owner has no title to the minerals contained in the soil or in the sub-soil, which are deemed a property of the Federal Government, which grant to private companies or individuals rights to exploration or exploitation. Private companies or individuals holding an Exploration Permit are supposed to enter into an agreement with the land owner allowing its access to the area in order to conduct exploration activities. In case an agreement is not reached, Brazilian Mining Code establishes a judicial procedure by means of which the mining company or individual secures access to the area by paying to the land owner compensation for damages in her/his property and loss of income due to exploration. Verde has agreements with the land owners to allow it to perform exploration in the targets selected by the company to research in the area located in the following DNPM Processes: 833.263/2008, 833.270/2008, 833.274/2008, 833.280/2008, 833.287/2008, 833.289/2008, 833.295/2008, 833.306/2008, 830.383/2008 and 833.323/2008. Private companies or individuals holding a Mining Concession are entitled to surface rights on the area necessary for the mine and ancillary structures. Such surface rights are obtained by agreement with the land owner, providing for compensation for the price of the land and additional losses caused by the occupation. In case such agreement is not reached, surface rights are granted by the local Court upon previous deposit by the mining company or individual of the amount judicially determined for such compensation. In addition to compensation for damages, the land owner is entitled to a royalty equal to 50% of CFEM. CFEM is federal royalty, which is established at 3.0% of the net sales of potash. However, it is common practice to negotiate a separate compensation agreement that is satisfactory to both parties. VERDE has not yet started to negotiate agreements with land owners for establishing exploitation and production activities. 3.6 Local Resources and Infrastructure São Gotardo and Matutina are the closest towns with a significant population to provide manpower for a mining operation, having population around 40,000 combined. São Gotardo also has good infrastructure, with domestic power and telephone service available. Also, the SRK Consulting (U.S.), Inc. September 16, 2011 Cerrado Verde_NI 43-101 PEA_343500.020_007_KG
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NI 43-101 Preliminary Economic Assessment - Verde Potash

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