Passport Potash Inc.: News Release
As a result of a review by the British Columbia Securities Commission (BCSC), we are issuing the following news release to clarify our disclosure.
The BCSC has expressed concern that the Company may be in possession of the results of an economic analysis for the Holbrook project that had not been disclosed through a news release and material change report. In support of their position, the BCSC cited a slide from the Company’s Corporate Presentation (CP). In its materials the Company included a slide from its PowerPoint presentation (slide #19 of the CP), entitled “Production Comp,” where it used pro forma projections of projected sales, projected costs per ton, projected revenue and a projected market cap based on the pro forma numbers, in order to make a comparison with a current potash producer. The Company would like to clarify that the numbers in this slide are not based on any formal economic analysis of the project, and therefore the Company retracts the disclosure and has removed the slide from its CP.
The BCSC requested clarification of the way the Company is disclosing estimates of exploration potential. In its materials the Company has referenced the 2008 Open File report prepared and published by the Arizona Geological Survey (AGS) delineating the potash potential in the Holbrook basin. Based on a review of historic exploration materials, the author of that report noted that “Recent analysis of subsurface data indicates a resource containing from 0.7 to 2.5 billion tonnes of potash in the Holbrook basin of east-central Arizona…” The Company would like to make the following clarifications:
- The BCSC is concerned that the Company may have been representing the AGS estimate of potential as a resource. The Company would like to clarify its understanding that the AGS figure is an estimate of exploration potential of the Holbrook basin and does not meet the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definition of a mineral resource. The AGS has postulated that the range of potash potential in the Holbrook basin is from 0.7 to 2.5 billion tonnes. (Open File Report OFR 08-07, Arizona Geologic Survey, p. 1)° Slide 14 of the Corporate Presentation contains a detailed table from the AGS report outlining the calculations used in determining the “Historic Potash Deposit.” The disclosure is not compliant with NI 43-101 because it does not state on the slide that the estimate is for potential only and does not delineate a resource.
° The Corporate Factsheet states in bold letters “2.5 billion tons of potash.” This disclosure is not compliant with NI 43-101 section 2.3(2) because the estimate is not expressed as a range, does not state the basis for the estimate and does not provide the cautionary language that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource; and fails to state the basis on which the disclosed potential quantity and grade has been determined. (1)
The Company is modifying its CP to comply.
- The BCSC is concerned that disclosing the exploration potential for the basin, based on the AGS report, is misleading because the Company’s disclosure: 1) omits key information; and 2) the Company does not clearly differentiate between the potential of the Holbrook basin and the Company’s current land holdings. Specifically, the BCSC cites the following examples:° The Corporate Factsheet states “Potential of 2.5 Billion tons of Potash” under the heading “Competitive Advantage”. This disclosure is not compliant with NI 43-101 section 2.3(2) because the estimate is not expressed as a range, does not state the basis for the estimate and does not provide the cautionary language that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource; and fails to state the basis on which the disclosed potential quantity and grade has been determined. Further, it is the BCSC’s position that the disclosure does not clearly differentiate between the potential of the entire basin and the Company’s current land holdings. The Company would like to clarify that the AGS estimate is for the total potash contained within the Holbrook basin, which covers an area comprising approximately 600 sq. miles. The Company’s land holdings currently comprise only approximately 140 sq. miles within that area (23%). The Company has recently announced that it has entered into an LOI to purchase the Fitzgerald ranch, which would increase their land holdings in the basin to 190 sq. miles (32%).
° A Stockhouse Alert headline dated August 17, 2011 reads, “Basin holds up to 2.5 billion tons of Potash potential”. For the foregoing reasons this disclosure is also non-compliant with NI 43-101.
° The BCSC is also concerned that the Company’s disclosure do not account for the variations in potash thickness throughout the basin. They note that, according to the AGS ispoach map, the thickest parts of the deposit do not appear to be located on properties held by the Company. The Company would like to clarify that the percentage of the land held by the Company refers only to the surface area of the land held within the basin. The isopach map, which the AGS included in their report, shows that the thickness of the potash beds within the basin on which the Company’s properties lie can vary from 10 to 30 feet.
- The AGS report provides two estimates for the total volume of the potash contained within the Holbrook basin. The estimates were calculated using different volume estimation methods. The lower of the estimates, which the author of the report notes is the preferred estimate, shows that the resource volume ranging from 682 million to 2.27 billion metric tons at average grades ranging from 6% to 20%, while the higher of the estimates shows the resource volume ranging between 775 million to 2.85 billion metric tons at average grades ranging from 6% to 20%.
- The potential quantity and grade of the potash from the AGS report is conceptual in nature. There has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource.
- The potential quantity and grade of the potential potash deposit delineated by the AGS report has been determined solely from historical exploration records.
(1) The author of the AGS report describes his process as follows: “Thickness of potash was estimated from the interval between initial to final inflections of high gamma ray readings in 117 wells. There is essentially one main potential potash “pay zone.” Depth to the potash ranges from 700 to 2,000 ft. but the depth in most holes is between 1,000 to 1,450 ft. Structural mapping of the top of a regionally persistent anhydrite bed about 100 ft. above the potash zone indicates there are several small undulating structures across the extent of the potash deposit as depicted on Figure 2. (Rauzi, 2000, Plate 2)
Estimates of total potash in the potash zone of the Holbrook salt basin require an estimate of total volume and or potash grade. Total volume was estimated using the contour map of Figure 2 as follows: The contours were digitized using ESRI ArcGIS software and the area of each enclosed contour area was then calculated. Most of these areas have a boundary representing the minimum thickness (for example 10 feet) and maximum thickness (for example 20 feet). The simple approach to volume estimate for a particular contour interval is to use the intermediate thickness (in this example, 15 feet) and multiply it by the calculated area (Table 1A). However, for an approximately circular area, with a lower thickness on the outside of the circular area and a higher thickness on the inside, the average thickness is not the average of the minimum and maximum thicknesses, but rather is closer to the minimum. Specifically, the average thickness over a circular area with a cone-shaped sub-surface volume is one-third the height of the apex (not one half). Accordingly, we made a second estimate of potash volume by using, as average thickness for each calculated area between contours, a value equal to the lower contour value plus one-third of the contour interval. This resulted in a lower estimate of total volume (Table 1B). Even though the lower volume estimate is our preferred value, we include the higher volume estimate because the number of data (well) points is still sparse for the area and there is considerable uncertainty in the calculations.” (Open File Report OFR 08-07, Arizona Geological Survey, 2007)
The BCSC is concerned that the Company is omitting some of the risks associated with the Holbrook project. Specifically, the BCSC doesn’t feel that the Company has adequately addressed the risks associated with the proximity of the project to the Petrified Forest National Park. The Company does not feel that it has tried to downplay the potential problems in this area. As has been shown on maps that the Company has included in its materials, a portion of the potash deposits in the Holbrook basin lie beneath the Petrified Forest National Park (PFNP), which is currently closed to any mining activity. In 2004 the U.S. Government enacted legislation that would expand the boundaries of the PFNP. Portions of the Company’s Twin Buttes Ranch property would fall within the expanded park boundary. However, the enabling legislation for the expansion only allows the Secretary of the Interior to purchase private land from willing sellers. The Company views this risk as minimal. However, the proximity to the PFNP may have risks that are potentially material to the Company, including permitting issues, potential mining methods, and waste rock and tailings management.
Project Phase and Development Timelines
The BCSC is concerned that the Company is being overly promotional when referring to the current stage of the Holbrook project, and cites the following examples:
- A Resource World article linked to the Company website contains the headline “Passport Potash to become Arizona’s first potash producer”. While the goal of the Company is to become Arizona’s first potash producer, the project is still in its early exploration stages. Any implication that the economic viability of the project is proven and that mining activity is imminent is unintentional. Successful completion of the NI 43-101 technical report is merely one of the first steps towards production.
- A Stockhouse Alert dated August 17, 2011 stated, “Junior poised to become America’s largest Potash Producer”. As noted above, the Company is still at an early exploration stage, and any implication that the economic viability of the project is proven and that mining activity is imminent is premature.
- The Corporate Presentation contained a timeline to production without stating that it is contingent upon the successful completion of several key milestones, such as a current resource estimate. Slide 16 of the Corporate Presentation contains a timeline to production, which the BCSC feels does not state that each phase is contingent upon the successful completion of the prior phase. While the Company feels that the graphic representation of slide 16 shows how the phases of production relate to each other, it clarifies the following: 1) pre-feasibility cannot begin before the NI 43-101 is completed; 2) feasibility would follow pre-feasibility; 3) mine/plant construction cannot begin until permitting and licensing is completed; and 4) production cannot begin until the mine/plant is constructed.
- The Corporate Presentation compares the projected market cap, sales, and revenues of the Company to those of several potash producers. This disclosure appears to imply that the economic viability of the project is proven and imminent, which was unintentional. As noted above the project is still in its early exploration stage.
The BCSC questioned whether the Company is either not disclosing the results of the work it has completed in a timely manner, or not following through on work it has committed to carry out in its disclosure. As specific examples it cites the following:
- The Company announced on November 24, 2010, that it had retained SRK to produce an initial resource estimate on the Holbrook project. It was expected that the report would be completed by the first quarter of 2011. Due to delays in getting assay results on core samples completed in a timely fashion, the first quarter deadline was missed. The current expected timing of receipt of the NI 43-101 initial resource estimate is approximately four weeks.
- The Company announced on June 9, 2011 that it had completed 19 drill holes. To date, only the results for two of the holes have been released. As noted above, the Company has experienced delays in getting assay results on core drilling. The Company is releasing below the results from five holes, which are all the assay results the Company has received to date.
The Company is pleased to announce that it has intersected potash mineralization in five new holes completed in its recent core-drilling program. Each hole intersected potash at depths ranging from 1123.5 to 1590 feet deep. The best interval averaged 24.0% KCl over 4.5 feet in which is included a 0.5 foot section containing 41.1% KCl.
- Hole PPI 2011-07located near the western edge of the TBR, intersected 9.4% KCL over 6.5 feet beginning at 1320.5 feet. Within this interval is included 1.5 feet containing 17.0% KCl beginning at 1324.5 feet.
- Hole PPI 2011-15is located on ground optioned from Southwest Exploration south of the park. It intersected two potash beds beginning at 1123.5 feet that are separated by a 2.0 foot section of material grading 4.4% KCl. The top bed is 4.5 feet thick and averages 24.0% KCl in which is included a 0.5 foot section containing 41.1% KCI; the lower bed begins at 1130 feet, is 3.0 feet thick and contains 18.0% KCl.
- Hole PPI 2011-19is located in the southeast corner of the TBR. It intersected 14.5 feet of potash averaging 10.5% KCl beginning at 1427 feet. Contained within this interval is a higher grade zone averaging 24.7% KCl across 2.0 feet beginning at a depth of 1433 feet.
- Hole PPI 2011-20is located on the eastern boundary of the TBR north of hole PPI 2011-19. It intersected 10.5 feet of potash averaging 8.1% KCl beginning at a depth of 1590 feet.
- Hole PPI 2011-21is located near the northeast corner of the TBR. Potash, averaging 11.0% KCl, was intersected over an interval of 9.5 feet beginning at a depth of 1338.5 feet.
The potash beds are generally horizontal and therefore the intervals quoted are believed to represent true thicknesses.
All of the Company’s available assayed holes and their respective locations may be viewed on the map available at the following link: http://www.passportpotash.com/nrdr2.html
Core samples for drill holes PPI 2011-07, 19, 20 and 21 were sent to Skyline Assayers and Laboratories in Tucson, Arizona. These samples were analyzed for 32 elements utilizing an Aqua Regia Digestion and ICP-OES Analytical Techniques. Chloride samples for drill hole PPI 2011-15 were sent to Apex Environmental Laboratory in Tempe, Arizona. All samples were pulverized. For the metals analysis, each sample was digested with nitric acid, hydrogen peroxide and hydrochloric acid and then analyzed for trace elements by ICP-MS. Chloride content was determined by a silver nitrate titration method. Samples analyzed in both laboratories met each laboratory’s quality control objectives.
Passport Potash, Inc.’s President and CEO Joshua Bleak commented: “We are very impressed with the drill results we have received. The substantial thickness and grade displayed in these drill holes demonstrates the potential of the potash deposit in the Holbrook Basin. These results will be included in the NI 43-101 resource estimate.”
About Passport Potash, Inc.
Passport Potash Inc. is a publicly traded corporation engaged in the exploration and development of advanced potash properties with its major focus on a previously explored potash property in Arizona. Passport has acquired a strategic position in the Holbrook Basin with land holdings encompassing over 81,315 acres. For more information regarding the Holbrook Basin, please visit http://www.azgs.az.gov/arizona_geology/Summer%2008.pdf
Stephen B. Butrenchuk, P.Geol., Director of Passport, is the Qualified Person as defined in National Instrument 43-101, who has reviewed and approved the technical content of this news release.
On behalf of the Board of Directors of Passport Potash Inc.
Joshua Bleak, President
This news release includes certain statements that may be deemed “forward-looking statements”. Forward-looking information includes, but is not limited to: statements with respect to the effect and estimated timeline of the drilling and assay results on the Company; the estimation of mineral reserves and mineral resources; the timing and amount of estimated future exploration; costs of exploration; capital expenditures; success of exploration activities; permitting time lines and permitting; government regulation of mining operations; potential future expansion of the PFNP; environmental risks; unanticipated reclamation expenses; and title disputes or claims. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “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”. All statements in this release, other than statements of historical facts, including the likelihood of commercial mining and possible future financings are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include : unsuccessful exploration results; changes in metals prices; changes in the availability of funding for mineral exploration; unanticipated changes in key management personnel and general economic conditions. Mining is an inherently risky business. Accordingly the actual events may differ materially from those projected in the forward-looking statements. For more information on the Company and the risks and challenges of its business, investors should review the Company’s annual filings that are available at www.sedar.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.