April 2017 Shareholder Update Brazil Po ta sh Corp, Sui t e 8 00, 6 5 Que e n St re et West, Toronto, O n M 5H 2 M5 www.potassio do bra s il.co m. br Dear Shareholders, During the first quarter of 2017, the Brazil Potash team has continued advancing the Autazes project towards development and has worked to increase its profile with potential international investors. Having come through what we believe is the bottom of the commodity cycle we now see a number of factors aligning that are positive for the Autazes project: a. Potash prices have improved over the past nine months and are up 17% from the ten-year cycle low experienced mid-2016. This upward trend appears to be continuing as outlined below. b. The US$36 billion merger of Potash Corporation with Agrium and Mosaic s acquisition of Vale Fertilizers are putting control of global fertilizers supply into even fewer hands. c. The Belarusian and Russian producers are considering the re-establishment of their potash sales cooperation agreement which will bring further discipline to the market and in the past has led to material price improvements. d. The progress in Brazil to address political and economic instability is viewed very positively by investors and addressing these issues is expected to return the country to a path of growth and prosperity. As always, we are keenly aware of the implications the development of the Autazes project will have for shareholders and the local community in which we operate. Later in this update we explain some of the recent activities our team has undertook in our ongoing engagement with stakeholders. The Next Major Milestone for Brazil Potash Our main objective in 2017 is to bring the project to a construction ready state with the main goal being to work towards obtaining the Installation License (LI) for the Autazes project. Obtaining the LI will be a major milestone for Brazil Potash as it provides the necessary Governmental approvals to initiate construction. The table below explains the key components for each phase of licensing necessary to become an operational mine in Brazil.
BPC Shareholder Update Page 2 To obtain the LI there are a number of key components to be completed, including the following: Fulfillment of the Preliminary License (LP) conditions The LP was granted to the Autazes project by the Environmental Protection Agency of the Amazonas State (IPAAM) in July 2015. The LP laid out 42 conditions that we are currently working to satisfy. These conditions are wide ranging including items such as noise and water level monitoring through to implementing training programs to upgrade skills in the local communities to provide employment. Approval of the mine development plan (PAE) The PAE finalizes the engineering and processing plans laid out in the Bankable Feasibility Study and re-confirms the economic feasibility of the future mine and processing plant. The PAE is reviewed and approved by the Brazilian Mineral Agency (DNPM) and we expect to present it in mid-2017. Approval of the Basic Environmental Plan (PBA) The PBA contains a detailed set of plans for the implementation of all required social and environmental policies for both construction and ongoing operation. These plans include issues such as gender equality, local hiring and training, local supplier training program, cultural heritage program, etc. Preparation of the PBA is currently 90% complete. Archeological Study - Another key component in the application for the LI is completion of a comprehensive archeological field study at both the plant and port sites. Current Status of the Preliminary License (LP) The LP was granted by IPAAM in July 2015 after an extensive process that included numerous public hearings organized by government officials for Brazil Potash management in the communities surrounding the project site. There was widespread participation by over 1,600 people from the local communities at the hearings. We have incorporated feedback from these meetings into our plans to ensure local concerns are addressed. These
BPC Shareholder Update Page 3 community consultations were reviewed by IPAAM along with a comprehensive Environmental Impact Assessment as part of the LP application and deemed satisfactory, resulting in the grant of the LP. Recently, we became aware that a constituent within the local indigenous community felt they had not been sufficiently consulted on the project development, despite being invited to the hearings in which other Indigenous community members attended, and raised this concern to the Federal Ministry of Public Prosecution (MPF) who are required by law to investigate. Through constructive dialog with all impacted government agencies (i.e. IPAAM, MPF, DNPM natural resources, FUNAI indigenous protection), Brazil Potash made a proactive decision supported by these agencies and endorsed by an Amazon State judge to temporarily place our LP on hold for six months based on a requirement for FUNAI to arrange further indigenous consultations during this period. This temporary LP hold has no impact on our project s development timeline including the ability to conduct the archeological field survey and other actions outlined above to apply for the LI. In our view, the community consultation process that Brazil Potash undertook as part of the LP application is best practice. It included quarterly meetings held over a number of years with a 16 member stakeholder group with representation from the local community, religious leaders, indigenous leaders and government resulting in several educational pamphlets being created and distributed. Several week of potash events were held with over 4,400 attendees to educate local community members and their children on how potash is mined and used to grow crops that ultimately feed their family. Finally, dedicated meetings were held with over 200 people representing several different indigenous groups to inform and receive feedback on our project. Potash Week with community attendees Potash Week with school attendees Meetings with indigenous people Public Hearings attendees
BPC Shareholder Update Page 4 Capital Raising Plans Brazil Potash shareholders have approved a plan to raise $20 million to create further shareholder value by bringing the project to a shovel ready state. These funds will be used to: Complete all studies required to obtain the LI including the archeological survey, mine development plan (PAE) and basic environmental plan (PBA) plus ensuring the 42 conditions of our current LP remain in compliance. Conduct an Environmental Impact Assessment for the power transmission line connecting the project site and several communities along the powerline to the national power grid located near Manaus. It is anticipated that such a powerline will allow over 100,000 people access to the grid and a sustainable source of much lower cost electricity, generated from 75% renewable energy. Complete optimization studies, particularly for the process plant design and shaft sinking. For example, since electricity consumption accounts for roughly half of the operating costs, there is potential to utilize a hybrid flowsheet in which crushed ore is first floated to concentrate prior to utilizing the energy intensive hot leach process to produce a saleable grade product. We are also examining optimization of the shaft sinking and construction process with the aim of reducing the timeline to production from the current five years to less than four years. Shareholders interested to participate in this round of financing should reach out to me directly for further information. In addition to this US$20 million raise, ongoing discussions continue to be held with several major agriculture companies interested in our project, many of whom have been to site. Discussions are also being held with several government funded export credit agencies on debt financing which will be used to reduce the amount of equity raised. Finally, there are several strategic investors and construction companies that are interested in our project given the strength and stability of Brazil s agriculture export industries. Closing remarks 2017 will be a busy year for our team as we bring the project to a shovel ready state by completing further permitting work, optimize the plant design plus construction schedule and continue discussions with numerous interested parties on construction financing. We are committed to ensuring our stakeholder engagement and project technical work are done properly to ensure we develop a long term, efficient, profitable and sustainable business that will benefit all stakeholders for decades. Yours truly, Matt Simpson CEO Brazil Potash Qualified Person David Gower, an Officer of the Company and a qualified person under NI 43-101, has reviewed the scientific and technical information herein. Cautionary Note Regarding Forward-Looking Statements All statements, other than statements of historical fact, contained in this shareholder update constitute forward-looking statements and are based on the reasonable expectations, estimates and projections of the Company as of the date of this
BPC Shareholder Update Page 5 letter. The words plans, expects, or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates, or does not anticipate, or believes, or variations of such words and phrases or statements that certain actions, events or results may, could, would, might, or will be taken, occur or be achieved and similar expressions identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding future potash prices, timing of the temporary hold on the preliminary license, the completion of studies and assessments, the receipt of the installation licence, advancing construction finance, raising capital, completing an initial public offering, completing a strategic transaction with a third party, environmental or community benefits, electricity sources, job creation and skills training for local communities,, the growth of the phosphate market, expected industry demands, the Company s business strategy, currency fluctuations, government regulation and environmental regulation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates and assumptions contained in this letter, which may prove to be incorrect, include, but are not limited to, the various assumptions of the company set forth herein. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to fluctuations in the supply and demand for potash, changes in competitive pressures, including pricing pressures, timing and amount of capital expenditures, changes in capital markets and corresponding effects on the Company s investments, changes in currency and exchange rates, unexpected geological or environmental conditions, changes in and the effects of, government legislation, taxation, environmental regulations, controls and regulations and political or economic developments in jurisdictions in which the Company carries on its business or expects to do business, success in retaining or recruiting officers and directors for the future success of the Company s business, officers and directors allocating their time to other ventures; success in obtaining any required additional financing to make target acquisition or develop the Autazes project; employee and community relations, and risks associated with obtaining any necessary licenses or permits. Many of these uncertainties and contingencies can affect the company s actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All of the forward-looking statements made in this letter are qualified by these cautionary statements. These factors are not intended to represent a complete list of the factors that could affect the Company. The Company disclaims any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law. The reader is cautioned not to place undue reliance on forwardlooking statements.