TSX : PRK OTCQX : POTRF March Premium Potash Project Driven by a Proven Management Team

Transcription

1 TSX : PRK OTCQX : POTRF March 2014 Premium Potash Project Driven by a Proven Management Team

2 FORWARD LOOKING STATEMENTS Certain statements in this presentation may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Potash Ridge Corporation (the "Corporation"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this presentation, such statements use such words as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate" and other similar terminology. These statements reflect the Corporation's current expectations regarding future events and operating performance and speak only as of the date of this presentation. Forward-looking statements involve significant risks and uncertainties, which include, but are not limited to the factors discussed under A Cautionary Note Regarding Forward Looking Statements and "Risk Factors" in the Corporation s Annual Information Form dated March 27, 2013, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Although the forward-looking statements contained in this presentation are based upon what management of the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this presentation and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Corporation assumes no obligation to update or revise them to reflect new events or circumstances. 2

3 Focused on near term sulphate of potash ( SOP ) production at its Blawn Mountain property in Utah SOP 645,000 tons average per annum 40 year Project Life backed by reserves 3

4 EXPERIENCED AND PROVEN MANAGEMENT Jeff Hillis Chief Financial Officer Chartered Accountant; 10 years mining sector finance, including CFO of several public mining companies Iberian Minerals, Excellon, Falconbridge Guy Bentinck President & CEO Chartered Accountant; 20 years mining/resource experience Sherritt: CFO and SVP Capital Projects Ross Phillips Chief Operating Officer 10 years experience in large resource and energy sector projects Sherritt, Capital Power Laura Nelson VP, Government and Regulatory Affairs Extensive experience in government relations, permitting and power planning, including the successful permitting a large mine in Utah Red Leaf Resources, Utah Government Paul Hampton VP, Project Management Geologist and Metallurgical Engineer; ~30 years experience in design, construction, start-up and management of mineral processing facilities SNC, Washington Group, Outotec OVER 80 YEARS COMBINED EXPERIENCE 4

5 COMPETITIVE ADVANTAGES 40 year mine life, with mineral reserves of 426 million tons of ore Large mineral deposit containing premium-quality potash and alumina rich material 645,000 tons of SOP per annum over life of mine Mining friendly jurisdiction, established infrastructure nearby, designated development lands and efficient state permitting PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR; excludes potential revenue from alumina rich material Historical work expedites project development; proven production process Lower risk surface mining deposit; expected low cost producer 5

6 6 POTASH OVERVIEW

7 POTASH: ESSENTIAL TO THE WORLD S FOOD SUPPLY No known substitute Increasing world population Growing per capita income Decreasing arable land Increasing use of biofuels 7 POTASH WORLD DEMAND +5% EXPECTED ANNUAL DEMAND TO 2016; SOP HIGHER GROWTH POTENTIAL

8 SOP: PREMIUM FERTILIZER Sulphate of Potash (SOP) Muriate of Potash (MOP) 50% K 2 O Equivalent 60% K 2 O Equivalent 17% S 0% S Consumption of SOP restricted by limited production capacity, with little expansion potential SOP share of potash market: Current: 5 Mt Potential: Mt <1.0% Cl 45% Cl 4.8 million tonnes sold in million tonnes sold in Improves yield, quality, taste and enhances shelf life 1 Crop quality/yield diminish as chloride builds up 1 Trend toward high nutrient fertilizers Trend towards pricing of SOP based on incremental revenue through yield/quantity improvements vs. premiums over MOP POTASSIUM AND SULPHUR ARE ESSENTIAL NUTRIENTS 8 1 CRU 2013 Chemical makeup assumes 92.5% K 2 SO 4 and 95% KCl product

9 SOP A DISTINCT & VALUABLE POTASH PRODUCT Especially valued for chloride sensitive crops, SOP improves yields on high value crops such as: Fruits Vegetables Nuts Horticultural Plants Tobacco Tea Coffee Dry/Salty soil 9

10 SOP MARKET DYNAMICS Existing SOP Production by Process SOP Consumption by Region Region Process Method China/ Europe Mannheim 2.3Mt 43% Europe China/ USA/ Chile MOP and Kieserite Salt Lakes World Capacity Process Inputs Products Avg Cost Future / Ton 1 Outlook 1.2Mt 22% 1.9Mt 35% MOP Sulfuric Acid Energy MOP Kieserite Energy Lake Brines Energy SOP Hydrochloric Acid SOP Magnesium Chloride SOP Magnesium Chloride Sodium Chloride $453 $440 $381 High Cost/byproduct limits growth No additional deposits No additional suitable lakes Africa 5% RoW 9% China 49% Europe 24% N. America 7% C & S America 6% New sources of SOP from these existing processes are unlikely due to lack of primary sources and difficulties surrounding secondary source production. CRU predicts SOP consumption of 9,500,000 tonnes per annum by 2019 where will this production come from? 10 1 CRU 2013

11 SOP PREMIUM PRICE TRENDS 1, , Recent quotes from blenders in Uberaba, Brazil $1,110/tonne Compass Q4/13 realized price $690/tonne POT - North America (MOP) CMP - (SOP) Potash Corp Q4/13 realized price $282/tonne 2 U.S. $/tonne Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q CURRENT PREMIUM 145% FOR SOP IN US 11 1 Compass Minerals Q Report, 2 Potash Corp Q Report

12 SOP MARKET TARGETS United States Brazil China SOP consumption: 385,000 tons 1 Potential consumption: 920,000 tons 2 Large scale production of chloride intolerant crops such as nuts in California and citrus fruits in Florida drive a large part of US SOP demand. Consumption of these crops continues e.g. Almond crops have grown by 7% per year since the mid 1990s. SOP consumption: 42,000 tons per year 2 (0.4% of total potash consumption) Potential consumption: 2.1 million tons 2 Brazil is the world s largest grower of coffee, soybeans and citrus fruits, all SOP crops. Low consumption is entirely due to lack of SOP availability. SOP consumption 1.9 million tons per year 1 Potential consumption: 4 million tons per year 2 China produces close to half of the world s fruits and vegetables, and nearly one-third of the world s tobacco and tea. SOP consumption almost doubled between 2007 and , with large untapped growth potential. 12 SIGNIFICANT GROWTH POTENTIAL EASY ACCESS TO LOCAL MARKETS 1 CRU From PRK Study August 2013, based on crops that are best suited for SOP

13 13 THE BLAWN MOUNTAIN PROJECT

14 PROJECT OVERVIEW Large alunite deposit, which is expected to be processed into SOP, and possible alumina rich material Average 645,000 tons of SOP per annum Historical work expedites project development Mineral deposit to be surface mined Proven process backed by extensive metallurgical testing ANTICIPATED INITIAL PRODUCTION IN

15 ORE TEST PIT 15

16 UTAH: AN ATTRACTIVE MINING JURISDICTION Major resource producer Existing potash production Best state for business 1 Top quartile mining jurisdiction 2 ALMOST 100 YEARS OF POTASH PRODUCTION 16 1 Forbes Magazine, December, Fraser Institute, April, 2013

17 OUR LAND ADVANTAGE State-owned land designated for development Efficient permitting process Leasehold and royalty agreements negotiated No known adverse environmental or social issues Sufficient water nearby rights application made Roads, rail, transmission and natural gas nearby Construction materials, equipment suppliers and skilled labour force MUNICIPAL AND STATE SUPPORT OF PROJECT 17

18 EXTENSIVE DEVELOPMENT COMPLETED IN 1970 s Approximately $25 million spent (~$100 million in today s dollars). Programs included: Drilling, Resource estimate, Feasibility Study, mine plan, Engineering, Permitting and 3-year operation of a pilot plant processing up to 11 tons per day. Alumina originally primary product; SOP was by-product Project ultimately shelved due to poor economic conditions in early 1980s Potash Ridge owns all historical data PREVIOUS WORK ACCELERATES PROJECT DEVELOPMENT 18

19 SIMPLE PROVEN FLOWSHEET Alunite Plant to process 10.4 million tons per annum Metallurgical testing on-going for Feasibility Study Crushing & Grinding Calcination SO 2 Acid Plant Sulphuric Acid Water Leach SOP Solution Crystallizing Drying, Compacting & Sizing SOP Alumina Rich Material Flowsheet similar to commercial-scale production processes historically used in US, Australia and Azerbaijan. RECENT EXTENSIVE TEST WORK CONFIRMS FLOWSHEET 19

20 PREFEASIBILITY STUDY SUMMARY Economic Indicators NPV (after tax, at 10%) $1.0 billion IRR (after tax) 20.5% Payback period (from commencement of operations) 5 years Average annual SOP production 645,000 tons Average annual sulphuric acid production 1,440,000 tons SOP price (average) $649/ton Sulphuric acid price (average) $135/ton Project life 40 years Initial capital cost (including 15% contingency) $1,124 million Operating cost (excluding royalties) $173/ton SOP The economic evaluation is based on the following assumptions: Site construction commences late 2015; Production ramp-up over 2 years ( ), reaching full production in 2019; SOP pricing from CRU forecast below current North American SOP prices; Average tax rate of 35%. Proven & Probable mineral reserves of 426 million tons; Reserves support 40 year mine life, with potential to increase life of operations through exploration of two additional zones of known mineralization; Project after tax Net Present Value ( NPV ) of $1.0 billion using a 10% discount rate: Total sales of 26 million tons of SOP over life of mine; Unlevered after tax internal rate of return ( IRR ) of 20.5%; payback period of 5 years after commencement of operations; Strong cash flow generation with cash flow from operations of $234 million per annum excluding the two year ramp up period; Approximately 28% of direct capital costs are supported by packaged quotes 20 1 Inclusive of by-product acid revenues and exclusive of royalties; no credit assumed for potential revenue from the sale of alumina rich material.

21 SOP CAPITAL COST BREAKDOWN 1 31% Contingency, Indirects and Infrastructure 14% SOP Leaching, Crystallization and Drying CAPITAL COST: $1.124 billion (15% contingency) 13% Crushing & Grinding 42% Calcination 1 Excludes utilities and other infrastructure not incurred by Potash Ridge ($641 million): Build-own-operate arrangements under negotiation. Expect to access government funding programs To be incurred by Mine Contractor Acid Plant ($280 million) Natural Gas Line ($83 million) Water Treatment Plant ($60 million) Rail Spur ($76 million) Access road ($53 million) Mine Capital ($89 million) 21

22 OPERATING COSTS: $173/TON OF SOP Annual Average Total Cash Production 7% Costs Cost($)/Ton SOP Other (Constant 2013 $US) ($14M) Direct Plant 14% and Mine Cash Production $414 Cost Royalties Credit for ($33M) Value of Acid $(302) Subtotal of Direct Plant and Mine Cash Production Cost Site G&A, Property Taxes & Corporate Overhead $112 $27 3 rd Party Facility Charges $34 Total before royalty $173 Royalties $45 Total Cash Production Cost $218 Cash Production Costs Avg Cost/Ton $173 $381 $440 $453 Excludes credit for potential alumina rich material revenue. Includes 15% contingency (excluding non-energy and labour costs). Potash Ridge Salt Lakes1 MOP/ Sulphate Salts Expected In Production Mannheim Process CRU 2013

23 PREFEASIBILITY STUDY RESERVES ESTABLISHED Mineral Reserves by Category November 6, 2013 Reserve Category Proven ('000 tons) Probable ('000 tons) Total Alunite Ore (ROM tons) 136, , ,794 Ore (average K 2 O (%) grade) Drilling to date has focused only on two of the four areas within the 15,400 acre land parcel Supports 40 years of operations Ore (average K 2 SO 4 (%) grade) SOP (tons) 8,457 17,970 26,427 Sulphuric Acid 98% Purity 18,888 40,136 59,024 Reserves demonstrate the economic and technical viability of the Project 23

24 SULPHURIC ACID Driven by local US Market prices dependent on supply and proximity Mountain West US market approximately 5.6 million tons per annum Expected increase in this market from mine expansions and new mine development Potash Ridge will provide stable supply to consumers MOU in place for 20% of acid production 24

25 UPSIDE POTENTIAL FROM LEACH RESIDUE Leaching process leaves alumina rich material which, with beneficiation, may be used as a substitute to bauxite as a feedstock into a Bayer alumina production facility. Metallurgical testing confirmed the alumina in this material is soluble in high temperature caustic solutions May also be acceptable as a raw material feed for low temperature refineries Further testing is underway to determine whether the alumina rich material could meet specifications for feed material in the production of ceramic proppants in North America. PFS economics do not include revenue from the sale of alumina rich material SOURCES OF SMELTER FEED TO CHINA Blawn Mountain, Utah Boke, Guinea Trombetas, Brazil Kingston, Jamaica Distance to Shandong Province, China (nm) 5,744 11,128 10,815 9,051 Port Long Beach Conakry Aratu Jamaica 25

26 MILESTONES Measured and Indicated Resource to support 30-year mine life Issue Preliminary Economics Assessment Commence metallurgical test program Commence Pilot Plant Test work & produce SOP from test work Complete baseline environmental surveys Issue Prefeasibility Study supporting 40-year mine live Submit Large Mining Permit Application Complete metallurgical test program Water Rights application approval Air Quality Permit filed a a a a a a a EXPECTED 2014 to End 2015 Q End Large Mining Permit approval Issue Feasibility Study Receive final permits Construction start up Ramp up Note: Timelines are based on obtaining sufficient financing to advance Feasibility Study Q Early-Mid 2015 End 2015 End

27 CAPITAL STRUCTURE Millions Common Shares 81.7 Non-voting Common Shares 5.0 Total Shares Outstanding 86.7 Warrants $ Warrants $ Broker options/warrants 3.4 Stock options 7.0 Total Fully Diluted Shares As at December 31, 2013 INSIDERS HOLD 5%, 10% FULLY DILUTED 27

28 COMPETITIVE ADVANTAGES 40 year mine life, with mineral reserves of 426 million tons of ore Large mineral deposit containing premium-quality potash and alumina rich material 645,000 tons of SOP per annum over life of mine Mining friendly jurisdiction, established infrastructure nearby, designated development lands and efficient state permitting PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR; excludes potential revenue from alumina rich material Historical work expedites project development; proven production process Lower risk surface mining deposit; expected low cost producer 28

29 CONTACT US Toronto office: 3 Church Street, Suite 600 Toronto, Ontario M5E 1M2 Phone: ext 101 Salt Lake City office: 170 S. Main Street, Suite 500 Salt Lake City, UT Phone: info@potashridge.com 29