Potash Ridge Corporation - Blawn Mountain presentation, March 2014


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Potash Ridge Corporation (TSX: PRK) is a Canadian based exploration and development company with a unique opportunity to develop a mine and processing facility to produce SOP and a bauxite-type material. SOP is a premium priced potash fertilizer and bauxite is a mixture of hydrated aluminum oxides used in the production of alumina.
Potash Ridge has a highly qualified and proven management team in place with significant financial, project management and operation experience and the ability to take projects into production.

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Potash Ridge Corporation - Blawn Mountain presentation, March 2014

  1. 1. Premium Potash Project Driven by a Proven Management Team TSX : PRK OTCQX : POTRF March 2014
  2. 2. FORWARD LOOKING STATEMENTS 2 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.
  3. 3. Focused on near term sulphate of potash (“SOP”) production at its Blawn Mountain property in Utah 3 SOP 645,000 tons average per annum 40 year Project Life backed by reserves
  4. 4. EXPERIENCED AND PROVEN MANAGEMENT OVER 80 YEARS COMBINED EXPERIENCE 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 Jeff Hillis Chief Financial Officer Chartered Accountant; 10 years mining sector finance, including CFO of several public mining companies Iberian Minerals, Excellon, Falconbridge 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 4 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
  5. 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
  7. 7. No known substitute Increasing world population Growing per capita income Decreasing arable land Increasing use of biofuels POTASH WORLD DEMAND +5% EXPECTED ANNUAL DEMAND TO 2016; SOP HIGHER GROWTH POTENTIAL POTASH: ESSENTIAL TO THE WORLD’S FOOD SUPPLY 7
  8. 8. POTASSIUM AND SULPHUR ARE ESSENTIAL NUTRIENTS SOP: PREMIUM FERTILIZER Sulphate of Potash (SOP) Muriate of Potash (MOP) 50% K2O Equivalent 60% K2O Equivalent 17% S 0% S <1.0% Cl 45% Cl 4.8 million tonnes sold in 20131 50 million tonnes sold in 20131 Improves yield, quality, taste and enhances shelf life1 Crop quality/yield diminish as chloride builds up1 1 CRU 20138 Chemical makeup assumes 92.5% K2SO4 and 95% KCl product Consumption of SOP restricted by limited production capacity, with little expansion potential SOP share of potash market: Current: 5 Mt Potential: 10-12 Mt Trend toward high nutrient fertilizers Trend towards pricing of SOP based on incremental revenue through yield/quantity improvements vs. premiums over MOP
  9. 9. SOP – A DISTINCT & VALUABLE POTASH PRODUCT Fruits Vegetables Nuts Horticultural Plants Tobacco Tea Coffee Dry/Salty soil Especially valued for chloride sensitive crops, SOP improves yields on high value crops such as: 9
  10. 10. SOP MARKET DYNAMICS 1CRU 201310 Europe 24% N. America 7% C & S America 6% China 49% Africa 5% RoW 9% SOP Consumption by Region Region Process Method World Capacity Process Inputs Products Avg Cost / Ton1 Future Outlook China/ Europe Mannheim 2.3Mt 43%  MOP  SOP $453 High Cost/by- product limits growth  Sulfuric Acid  Hydrochloric Acid  Energy Europe MOP and Kieserite 1.2Mt 22%  MOP  SOP $440 No additional deposits  Kieserite  Magnesium Chloride  Energy China/ USA/ Chile Salt Lakes 1.9Mt 35%  Lake Brines  SOP $381 No additional suitable lakes  Energy  Magnesium Chloride  Sodium Chloride Existing SOP Production by Process 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?
  11. 11. - 200.0 400.0 600.0 800.0 1,000.0 1,200.0 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 Q4 2007 2008 2009 2010 2011 2012 2013 POT - North America (MOP) CMP - (SOP) CURRENT PREMIUM 145% FOR SOP IN US SOP PREMIUM PRICE TRENDS U.S. $/tonne 11 1 Compass Minerals Q4 2013 Report, 2 Potash Corp Q4 2013 Report Compass Q4/13 realized price $690/tonne1 Potash Corp Q4/13 realized price $282/tonne2 Recent quotes from blenders in Uberaba, Brazil $1,110/tonne
  12. 12. SIGNIFICANT GROWTH POTENTIAL EASY ACCESS TO LOCAL MARKETS SOP MARKET TARGETS 12 1 CRU 2013 2 From PRK Study August 2013, based on crops that are best suited for SOP United States SOP consumption: 385,000 tons1 Potential consumption: 920,000 tons2 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. Brazil SOP consumption: 42,000 tons per year2 (0.4% of total potash consumption) Potential consumption: 2.1 million tons2 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. China SOP consumption 1.9 million tons per year1 Potential consumption: 4 million tons per year2 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 20121, with large untapped growth potential.
  14. 14. ANTICIPATED INITIAL PRODUCTION IN 2017 PROJECT OVERVIEW 14 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
  15. 15. ORE TEST PIT 15
  16. 16. ALMOST 100 YEARS OF POTASH PRODUCTION UTAH: AN ATTRACTIVE MINING JURISDICTION 1Forbes Magazine, December, 2012 2Fraser Institute, April, 2013 Major resource producer Existing potash production Best state for business1 Top quartile mining jurisdiction2 16
  17. 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 17 MUNICIPAL AND STATE SUPPORT OF PROJECT
  18. 18. PREVIOUS WORK ACCELERATES PROJECT DEVELOPMENT EXTENSIVE DEVELOPMENT COMPLETED IN 1970’s 18 • 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
  19. 19. SIMPLE PROVEN FLOWSHEET Alunite Calcination Water Leach Alumina Rich Material SOP Solution Crystallizing Drying, Compacting & Sizing SOP SO2 Acid Plant Sulphuric Acid 19 Flowsheet similar to commercial-scale production processes historically used in US, Australia and Azerbaijan. RECENT EXTENSIVE TEST WORK CONFIRMS FLOWSHEET • Plant to process 10.4 million tons per annum • Metallurgical testing on-going for Feasibility Study Crushing & Grinding
  20. 20. PREFEASIBILITY STUDY – SUMMARY • 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 1Inclusive of by-product acid revenues and exclusive of royalties; no credit assumed for potential revenue from the sale of alumina rich material. 20 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 (2017-2018), reaching full production in 2019; • SOP pricing from CRU forecast below current North American SOP prices; • Average tax rate of 35%.
  21. 21. SOP CAPITAL COST BREAKDOWN1 21 CAPITAL COST: $1.124 billion (15% contingency) 14% SOP Leaching, Crystallization and Drying 42% Calcination13% Crushing & Grinding 31% Contingency, Indirects and Infrastructure 1 Excludes utilities and other infrastructure not incurred by Potash Ridge ($641 million): Build-own-operate arrangements under negotiation. Acid Plant ($280 million) Natural Gas Line ($83 million) Water Treatment Plant ($60 million) Expect to access government funding programs Rail Spur ($76 million) Access road ($53 million) To be incurred by Mine Contractor Mine Capital ($89 million)
  22. 22. OPERATING COSTS: $173/TON OF SOP 22 7% Other ($14M) 14% Royalties ($33M) Excludes credit for potential alumina rich material revenue. Includes 15% contingency (excluding non-energy and labour costs). Total Cash Production Costs Annual Average Cost($)/Ton SOP (Constant 2013 $US) Direct Plant and Mine Cash Production Cost $414 Credit for Value of Acid $(302) Subtotal of Direct Plant and Mine Cash Production Cost $112 Site G&A, Property Taxes & Corporate Overhead $27 3rd Party Facility Charges $34 Total before royalty $173 Royalties $45 Total Cash Production Cost $218 Potash Ridge Salt Lakes MOP/ Sulphate Salts Mannheim Process Cash Production Costs Avg Cost/Ton $381 $440 $453 $173 Potash Ridge Expected In Production 1 CRU 2013 1 1 1
  23. 23. PREFEASIBILITY STUDY – RESERVES ESTABLISHED Drilling to date has focused only on two of the four areas within the 15,400 acre land parcel Supports 40 years of operations Reserves demonstrate the economic and technical viability of the Project 23 Reserve Category Total Proven ('000 tons) Probable ('000 tons) Alunite Ore (ROM tons) 136,254 289,540 425,794 Ore (average K2O (%) grade) 3.56 3.49 3.51 Ore (average K2SO4 (%) grade) 6.59 6.46 6.49 SOP (tons) 8,457 17,970 26,427 Sulphuric Acid (tons) @ 98% Purity 18,888 40,136 59,024 Mineral Reserves by Category November 6, 2013
  24. 24. SULPHURIC ACID 24 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
  25. 25. • 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 25 UPSIDE POTENTIAL FROM LEACH RESIDUE 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
  26. 26. MILESTONES 26 EXPECTED 43-101 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 Large Mining Permit approval Issue Feasibility Study Receive final permits Construction start up Ramp up a a a a a a a 2017 End 2015 End 2015 Early-Mid 2015 Q2 2014 End 2014 Q3 2014 Note: Timelines are based on obtaining sufficient financing to advance Feasibility Study 2014 to End 2015
  27. 27. CAPITAL STRUCTURE 27 Millions Common Shares 81.7 Non-voting Common Shares 5.0 Total Shares Outstanding 86.7 Warrants – $ 0.50 10.7 Warrants – $1.00 5.0 Broker options/warrants 3.4 Stock options 7.0 Total Fully Diluted Shares 112.9 As at December 31, 2013 INSIDERS HOLD 5%, 10% FULLY DILUTED
  28. 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. 29. CONTACT US 29 Toronto office: 3 Church Street, Suite 600 Toronto, Ontario M5E 1M2 Phone: 416-362-8640 ext 101 Salt Lake City office: 170 S. Main Street, Suite 500 Salt Lake City, UT 80101 Phone: 801-433-6027 www.potashridge.com info@potashridge.com