Producing Sulfate of Potash from Polyhalite with Cost Estimates

PREPARED FOR

Dated March 23, 2010

Prepared by Donial Felton B.Sc. Chemical Engineering, Chemfelt Engineering James Waters, MET MBA PE Richard D Moritz B.Sc. Mining Engineering, MBA Member MMSA Terre A Lane B.Sc. Mining Engineering, Member AusIMM Gustavson Associates, LLC

TABLE OF CONTENTS
SUMMARY .................................................................................................................................................................. 1 SULFATE OF POTASH .................................................................................................................................................. 1 PREMIUM PRICING OF SOP ........................................................................................................................................ 2 CURRENT COST OF PRODUCING SOP AND ICP EXPECTED COST TO CONVERT POLYHALITE TO SOP ........................ 2 CURRENT SOP PRODUCTION METHODS ..................................................................................................................... 3 INTRODUCTION ....................................................................................................................................................... 3 PROCESS TECHNOLOGY ............................................................................................................................................. 3 Calcination ........................................................................................................................................................... 3 Leaching ............................................................................................................................................................... 4 Solar Evaporation ................................................................................................................................................. 4 Harvesting............................................................................................................................................................. 4 Upgrading ............................................................................................................................................................. 4 Granulation........................................................................................................................................................... 4 PROCESS DESCRIPTION ........................................................................................................................................ 5 UNITED STATES BUREAU OF MINES EARLY WORK.................................................................................................... 5 BRINE HARVESTERS AND SOLAR EVAPORATION........................................................................................................ 5 THE GREAT SALT LAKE PROCESS .............................................................................................................................. 6 MANNHEIM FURNACE A RELATIVELY HIGH COST METHOD ................................................................................... 8 ICP SOLAR EVAPORATION PROCESS DESCRIPTION .................................................................................................... 9 PRODUCTION COSTS ............................................................................................................................................ 12 ICP SOLAR EVAPORATION OPERATING COSTS ........................................................................................................ 12 BRINE HARVESTER AND SOLAR EVAPORATION ....................................................................................................... 12 MANNHEIM OPERATING COSTS................................................................................................................................ 13 DEVELOPMENT STRATEGY ............................................................................................................................... 14 CONCLUSIONS ........................................................................................................................................................ 15 REFERENCES .......................................................................................................................................................... 15 APPENDIX 1 GREAT SALT LAKE BRINE PHASE DIAGRAM ................................................................... 16 APPENDIX 2 ICP POLYHALITE LEACHATE BRINE PHASE DIAGRAM ............................................... 17 APPENDIX 3 ICP COSTS ..................................................................................................................................... 18 APPENDIX 4 AUTHORS QUALIFICATIONS .................................................................................................. 19

LIST OF FIGURES
FIGURE 1 GSL FLOWSHEET ......................................................................................................................................... 7 FIGURE 2 MANHEIM FURNACE .................................................................................................................................... 9 FIGURE 3 SOLAR EVAPORATION POND PROCESS ....................................................................................................... 11 FIGURE 4 SENSITIVITY OF GSL PRODUCTION COSTS TO MOP .................................................................................. 13 FIGURE 5 MANNHEIM SENSITIVITY TO THE COST OF MOP ....................................................................................... 14

LIST OF TABLES
TABLE 1 BRINE COMPOSITION GRAMS PER LITRE ....................................................................................................... 6 TABLE 2 GSL OPERATING COSTS AND PRODUCTION STATISTICS.............................................................................. 12

ii

SUMMARY
Gustavson Associates LLC, Chemfelt Engineering, and Mr. James Waters MET MBA PE, were contracted by IC Potash Corp (ICP) to complete an independent evaluation of the methods of producing Sulfate of Potash (SOP) from polyhalite. SOP is a significant growing market segment within the fertilizer industry. This report also provides a background discussion of the methods currently employed worldwide to produce SOP and cost of production. ICP has proposed that the Company develop and mine the mineral polyhalite, K2Ca2Mg(SO4)42(H2O), from an underground source located east of Carlsbad, New Mexico. The polyhalite will be the feedstock for a new processing facility to be built in the vicinity of the mine that will produce Sulfate of Potash (SOP) using a process they refer to as the solar evaporation option, utilizing solar energy to evaporate water from potassium sulfate rich brine, allowing the SOP to crystallize and precipitate. This processing option employs simple, low cost, and robust proven technology. Based on the work of the United States Bureau of Mines and other potash producers, the conversion of polyhalite to SOP is a relatively straight forward process. The simple brine produced from the polyhalite will be harvested from solar evaporation ponds. Downstream processing of salts harvested from solar evaporation ponds will require a much simpler processing route than the current lake brine harvesting operations. We, the independent authors of this report, conclude that this simple, low cost, robust production method can be employed to produce SOP and that premise is the focus of this report. Sulfate of Potash SOP has an international market of approximately four million tonnes per annum. ICPs business strategy is to become one of the world's lowest cost SOP producers. MOP is a chloride mineral and many crops find chloride somewhat toxic. Crops, which are particularly sensitive to chloride, include most fruits, vegetables, tobacco, and potatoes in various soils, and many horticultural plants. Key benefits of the use of SOP include: improved plant health; more efficient photosynthesis; improved uptake of nutrients; increased resistance to drought, frost, disease, and insects; and increased yields, better quality (e.g. taste, color, texture) and longer durability (e.g. transport, shelf life, processing) of fruits and vegetables. SOP has no chloride and is therefore the preferred form of potash fertilizer for chloride sensitive crops. The general condition of soil degradation affects 15% of the Earths land area, resulting in 30% of the Worlds cropland becoming unproductive. Salt marshes of temperate zones, heavily irrigated lands, and wetland rice soils, for instance, are all salty. Salinity induced symptoms include reduced root growth, decreased flowering, and smaller leaf size. SOP has a low salinity compared to MOP, and therefore is the preferred fertilizer for many saline soils around the world. The salinity index of SOP is only 46 compared to the relatively high salt index of MOP at
1|P a g e

116, based on equal weights of material. Higher salt index value will more likely cause injury to germinating seeds or seedlings. During the First World War, Germany controlled the availability of potash and the price rose dramatically. The US Bureau of Mines and the US Geological Survey discovered that the marine sediments of the Permian Basin, running north from Texas across New Mexico, were a regime where potassium salts might be found. This exploration led to the discovery of potash deposits of sylvite and langbeinite in the now well known Carlsbad district. Prior to the discovery of potash, polyhalite was discovered east of the potash deposits, which is the location of the ICP project. The polyhalite deposits were not mined and have lain untouched until recently when ICP began their work. The USBM carried out research on making SOP from polyhalite, and the processing method they developed was based upon fundamental laboratory investigations with capital costs, operating costs and economic analysis generated for each processing methodology. ICPs interest and work has been primarily focused on specific processes for the extraction and recovery of SOP from calcined polyhalite. Calcination of the polyhalite allows the mineral to be rapidly dissolved in water and subsequently treated to recover SOP. This process forms the basis for SOP recovery with evaporation and precipitation in solar ponds. ICP repeated the calcination bench scale test work completed by the USBM (July 2009), under the test conditions outlined by the USBM and obtained the equivalent results. The calcination of polyhalite involves heating minus ten mesh ore to 450C for three to four minutes to drive off water, breaking the hydration bonds. The polyhalite was not exploited because MOP was readily available and cheap. Premium Pricing of SOP As a result of the agricultural advantages of SOP, and because over half of the worlds producers use MOP, SOP sells at a substantial premium compared to the price of MOP. The high production cost for most of the worlds producers is the result of their need to buy MOP or otherwise consume potassium chloride, as a source of potassium, to produce SOP. Given the strong demand for SOP, and the high marginal cost of production, SOP is sold to farmers at a 30% or more premium to the price of MOP. Current Cost of Producing SOP and ICP Expected Cost to Convert Polyhalite to SOP ICP intends to develop and produce SOP using the mineral polyhalite as feedstock, providing the potassium as well as the sulfate needed to produce SOP. Polyhalite can be mined inexpensively. As a result, ICP should be able to produce SOP at the lowest cost quartile of the global production cost curve, and will benefit from the favorable pricing of the final product.

2|P a g e

Current SOP Production Methods The three principal methods of SOP production are; the reaction of potassium chloride (MOP) with sulphuric acid or an alternative source of sulfate; the processing and extraction of minerals or brines containing potassium and sulfate; and reacting potassium chloride and Kieserite. The most common method of SOP production is the Mannheim process making up over 50 percent of the worlds production. This method is very high cost because it requires large amounts of MOP as an input, is energy intensive, and individual operations can only be built on a small scale. Currently the cost of production of SOP is $350 to $700 per tonne for the Mannheim process, with the cost to purchase MOP making up $300 to $600 per tonne of that cost. This production cost is likely in a short term low, with medium to long range expectation that the price of MOP will increase, and in fact it has recently been increasing, resulting in higher SOP production costs. Another principal method of SOP production is through the evaporation of salt lake brines. There are three salt lakes in the world which have brines that are being treated to produce SOP. These are the lowest cost producers of SOP and account for approximately 15% of global SOP production. The three salt lakes are (1) Great Salt Lake of Utah, (2) Salar de Atacama in northern Chile, and (3) Lop Nur of northern China. The latter two producers likely have costs of under $200 per tonne. The salt lake production is constrained because these lakes normally have relatively low levels of contained sulfate. The third method of producing SOP and the second largest production source is from the company K+S Kali. Through ion exchange, MOP is reacted with magnesium sulfate, (kieserite), to produce SOP and byproduct magnesium chloride.

INTRODUCTION
Process Technology Though no company currently utilizes polyhalite as feed stock for their plant, many of the competing companies use all of the individual or unit processes in their production method that are also required to make SOP from polyhalite. The process ICP has selected for the production of SOP is simple, low cost and robust. Increased demand for SOP has over the last 20 years has created a viable growing market. The entire process system that ICP will employ has been tested and proven in pilot scale tests by former potash companies. The process includes mining, crushing, and pulverizing ore; followed by calcination, leaching, solar evaporation, harvesting, upgrading, and granulation. Calcination Calcination is a common practice of heating rock to drive off different compounds. When polyhalite is calcined at moderate temperatures, water molecules are driven off. Polyhalite
3|P a g e

calcination occurs at 450C, freeing the potassium and magnesium sulfate compounds from their hydration bonds, allowing them to quickly dissolve in water. Leaching The hot calcined product is quenched in 95C process water. The calcined potassium and magnesium sulfate compounds are quickly dissolved in the hot water, producing a chemically simple, high potassium, sulfate brine. Waste products like calcium sulfate, calcium carbonate, and magnesium carbonate from the ore are not soluble and remain as solids in solution and are removed by centrifuge and filtration. Solar Evaporation The hot potassium, magnesium, and sulfate rich solution is cooled with heat exchangers, and sent to large, shallow ponds for solar evaporation. Evaporation increases the concentration of the solution to saturation when SOP (K2SO4) and schoenite (K2SO 4MgSO46 H2O) crystallize and precipitate. Each of the current lake brine production operations utilizes solar evaporation to produce SOP. However, each of these lake brine operations has high levels of sodium, chloride, and other elements within their naturally occurring lake brine, complicating the operation of the ponds and the processing of the precipitate. Harvesting Like other solution pond operations, the precipitate is drained and allowed to dry before self loading rubber tire scrapers collect the SOP plus Schoenite precipitate. The scrapers deliver the product to the plant site where it is stacked in a stockpile, allowing further draining. Upgrading The mixed SOP plus schoenite precipitate is fed from the stockpile to a draft tube baffle crystallizer (DTB) where water is added in the proper amount to re-dissolve the schoenite only, leaving SOP as a solid. The potassium sulfate portion from the dissolved schoenite is then precipitated as pure SOP product, leaving the magnesium sulfate in solution. The two SOP solids are filtered, dried and delivered to the granulation circuit. The draft tube baffle reactor vessel technology is used by the Carlsbad, K+S Kali, and lake brine producers to upgrade their products. Granulation Granulation is used to produce the final product, which has both rapid and slow release fertilizer characteristics. Some of the Carlsbad, lake brine, and K+S Kali operations use granulation technology, others use older methods.

4|P a g e

PROCESS DESCRIPTION
United States Bureau of Mines Early Work Prior to the First World War, Germany had a monopoly on potassium production. With the onset of the war, the United States lost its source of potassium, creating a potassium shortage, and very high prices. The United States government initiated a potassium exploration program through the US Geologic Survey and the United States Bureau of Mines (USBM). Geologists recognized the marine sediments of the Permian Basin, running north from Texas across New Mexico, as a regime where potassium salts might be found. This exploration led to the discovery of potash deposits of sylvite and langbeinite in the now well known Carlsbad district. Prior to the discovery of potash, polyhalite was discovered east of the potash deposits, which is the location of the ICP project. As part of the government potassium salt program, processing methods were developed to treat the polyhalite to produce SOP and other potassium products. ICP is using technology from this early work completed by the USBM to use polyhalite resources for the production of a high value SOP fertilizer. The USBM Bulletin 459 1944, identified a method for the treatment of the polyhalite resource. Development of the processing method was based upon fundamental laboratory investigations with capital costs, operating costs and economic analysis generated for each processing methodology. ICPs interest and work has been primarily focused on specific processes for the extraction and recovery of SOP from calcined polyhalite. Calcination of the polyhalite allows the mineral to be rapidly dissolved in water and subsequently treated to recover SOP. This process forms the basis for SOP recovery with evaporation and precipitation in solar ponds. ICP repeated the calcination bench scale test work completed by the USBM (July 2009), under the test conditions outlined by the USBM and obtained the equivalent results. The calcination of polyhalite involves heating minus ten mesh ore to 450C for three to four minutes to drive off water, breaking the hydration bonds. Brine Harvesters and Solar Evaporation Recovery of SOP from naturally occurring lake brines contributes approximately 15% of world production. These brines are generally high in sodium chloride and contain other elements. Both of these conditions require more complex processing techniques and additional logistics in material handling than the ICP process. The ICP brines generated from polyhalite will be essentially devoid of sodium chloride, which in addition to simplifying the process may result in a higher quality (i.e. ultra-low or no chloride) product. The following table contrasts the Great Salt Lake brine, (GSL) and the expected ICP brine product.

5|P a g e

 TABLE1BRINECOMPOSITIONGRAMSPERLITRE Site GSL ICPexpected AtacamaSQM Sodium 85.7 0.5 97 Potassium 4.6 21 23 Magnesium 8 8 13 Chloride 147 0.7 202 Sulfate 17.4 58 23 Lithium 0 0 1.9

The Great Salt Lake Process This process is described for illustrative purposes, and is the current process in place to produce SOP from brines at the Great Salt Lake (GSL). The GSL process begins with pumping of the naturally occurring lake brine from the Great Salt Lake into the first set of solar ponds where evaporation proceeds along the line shown as EVAP I@GSL (see phase diagram appendix 1). The evaporation of water raises the concentration of each of the ions in solution until the brine becomes saturated and different compounds begin to crystallize and precipitate. At GSL, halite reaches saturation first so halite is precipitated in the first evaporation ponds. Liquors discharged from the first solar ponds are transferred to the potash precipitation ponds where solar evaporation continues as line EVAP II@GSL on the phase diagram and potassium begins to reach saturation after about 75% of the water is removed. Potassium, sodium and schoenite precipitate. After some schoenite precipitation occurs, the liquor continues to evaporate along the EVAP II@GSL line to the point that schoenite, sylvite, and additional halite precipitate. Evaporation continues as shown by line EVAP III@GSL to the point that kainite, sylvite and halite become saturated and precipitate. Thus, the Compass Minerals evaporation scheme for the Great Salt Lake brine is quite complex. For simplicity and clarity, the halite and sylvite saturation lines have been omitted from the phase diagram in Appendix 1. Solids harvested from the potash ponds are treated with anionic flotation to remove remaining halite. To convert kainite into schoenite, it is necessary to mix the upgraded flotation product with a prepared brine. The conversion of schoenite to SOP at GSL requires that additional MOP be added, over the amount produced from the lake brines. This additional MOP is purchased from the open market. The GSL schoenite solids are mixed with potash in a draft tube baffle reactor (DTB) to produce SOP and byproduct magnesium chloride. Final SOP product is dried, screened, sized, and compacted. The following flow sheet graphically demonstrates the GSL process (Figure 1).

6|P a g e

FIGURE1GSLFLOWSHEET 7|P a g e

Mannheim Furnace A Relatively High Cost Method The Mannheim process is used to produce over 50% of the worlds SOP. Sulfuric acid is reacted with potassium chloride within the Mannheim furnace. The furnace is a large multiple graterabble arm cast iron kiln where the potassium chloride and sulfuric acid are first fed onto a stationary reaction plate where an initial reaction takes place. The stationary plate is up to 6 m in diameter. Rotating rabble arms constantly turn over the mixture and move the intermediate product to a lower plate. The kiln portion of the furnace is constructed with bricks that have high resistance to direct flame, temperature, and acid. The other parts of the furnace are heat and acid resistant. Hot flue gas passes up over the plates carrying out liberated chloride gas. The intermediate product reacts with more potassium chloride in the lower, hotter section of the kiln producing SOP. The SOP exits the furnace and passes through cooling drums before being milled, screened and sent to product storage facilities. The process involves two chemical reactions. In the first step potassium chloride and sulfuric acid are combined to produce potassium bisulfate and hydrochloric acid, an exothermic reaction that can occur at room temperature. The second step of the process involves an endothermic reaction, requiring energy input. A temperature of 600 to 700C is required and maintained within the furnace to convert additional potassium chloride and the intermediate product to produce SOP and more chlorine gas. Based on public information about Mannheim Furnace SOP production, about 80% of the production cost results from purchasing MOP and 10% of the cost is for fuel (energy) and sulfuric acid. The chloride gas from the furnace is condensed by cooling, and then absorbed into water to convert most of the gas to a 30% hydrochloric acid solution. The remaining chlorine gas is then absorbed in secondary towers creating a dilute hydrochloric acid which is subsequently distilled to produce an 18% solution. Mannheim kilns are usually limited in capacity to 9,000 to 15,000 tonnes per year. The products obtained are said to be of high purity due to the efficiency of mixing, however some reports of incomplete reaction have indicated that, at times, products containing some hydrochloric acid or MOP are produced.

8|P a g e

FIGURE2MANHEIMFURNACE

ICP Solar Evaporation Process Description ICP proposes to mine polyhalite underground and utilize known processing methods and unit operations to produce SOP. The polyhalite beds controlled by ICP will be mined by conventional room and pillar mining with continuous mining equipment, very similar to the current practice of the potash mines in the area. Mined material will be transported to the surface where it will be crushed and ground to approximately 10 mesh. The ore will be calcined at 450C to remove the water of crystallization and render the material soluble in a hot water leach, as first demonstrated by the USBM. Once the calcined polyhalite is dissolved in the hot water leach, calcium sulfate solids and other minor waste compounds will be removed by centrifuging and a Larox pressure filter. This will leave a simple clean brine composed of potassium and magnesium sulfate. This simple brine will make the downstream processing steps less complicated than that of the lake brine producers. The polyhalite conversion process, brine solar evaporation sequence, is best described by the K2SO4MgSO4H2O system phase diagram from DANS as shown in Appendix 2. The K2SO4 /MgSO4 point is plotted as the starting point on the DANS phase diagram. Evaporation is depicted as line EVAP I@ICP until the start of K2SO4 crystallization. K2SO4 crystallization proceeds horizontally until the K2SO4 saturation line is intersected. Then evaporation continues and proceeds as shown on line EVAP II@ICP until schoenite crystallization is triggered at the apex of the line intersection. Schoenite crystallization starts and proceeds down with a slope determined by the ratio of the products to reactants. This schoenite crystallization continues until
9|P a g e

the schoenite saturation line is reached. Only two solid crystalline forms are precipitated from this brine, K2SO4 and schoenite. The ICP brine is much simpler than the four solid crystalline forms precipitated from the Great Salt Lake brine - NaCl, KCl, schoenite, and kainite, (Appendix 1). The SOP and schoenite will be harvested from the solar ponds using rubber tire self loader scrapers for subsequent processing steps. Crystals from the solar ponds will be mixed with fresh water within a DTB (draft tube baffle) reactor to dissolve the schoenite and selectively precipitate additional SOP while leaving the magnesium sulfate in solution. The SOP product from the DTB reactor will be filtered on a belt filter to remove remaining liquid magnesium sulfate solution from the SOP. The overflow liquid from the DTB reactor and the belt filter filtrate will be recycled to the front end of the solar evaporation ponds to return sulfate to the system, or discarded in the tailings facility. METSIM, a metallurgical process simulation program, was used for the initial design of ICPs solar evaporation process. Detailed flow sheet, heat and mass balance calculations are available by request from ICP. METSIM has become an internationally recognized software tool used for material and heat balance calculations and is in use by more than 500 mineral processing companies around the world. METSIM is being used for potash process design by the largest potash producer in the world. All major mineral processing engineering groups use and rely upon METSIM for design of new mineral processes, new plant design, as well as optimization of existing facilities. The ICP solar evaporation process, from solar ponds to the production of SOP, is similar to lake brine operations like the GSL operation. The simple clean low chloride ICP brine however will not have halite, sylvite or kainite precipitating in the evaporation sequence and will not require the ionic flotation process step to remove the halite. Neither is the kainite conversion step to schoenite at GSL required. The ICP SOP process potentially could produce a higher quality product. The final SOP solids will be sent to a granulation circuit where they will be dried, screened and sized. See Figure 3 for the ICP flow sheet.

10|P a g e

FIGURE3SOLAREVAPORATIONPONDPROCESS

11|P a g e

PRODUCTION COSTS
The cost of production for each of the SOP production technologies was estimated from published data and available company financial reports. ICP Solar Evaporation Operating Costs As part of the ongoing evaluation of the Ochoa project, we have updated the operating cost estimate for the solar evaporation processing option from the previously generated NI 43-101 Technical Report. We expect the total production cost to be $162 per ton SOP or $ 180 per metric tonne, (not including royalties of $38.50 per ton). The ICP production cost will be very competitive in the US and world markets for several reasons. First, is the high potassium grade of the polyhalite. Second, is the production of the simple clean brine that is produced by calcining the polyhalite, and dissolving the potassium sulfate in water. And finally, the use of known proven unit operations and process methods that create a robust low cost operation. Figure 3 shows the flow diagram for the ICP solar evaporation process. Brine Harvester and Solar Evaporation Of the three principal lake brine operations, production costs for two of these producers were available within the public domain. The GSL operation had the most complete data so we will present that data here. In order to produce SOP from lake brines, the sulfate level must be high enough to provide sulfate to the potassium molecules. Table 2 below shows the operating cost for GSL for the last four years. The production costs for the GSL operation are higher than we estimate for ICP due to the dilute nature of their brine, input costs for MOP, and complex processing circuit.
TABLE2GSLOPERATINGCOSTSANDPRODUCTIONSTATISTICS

CompassMinerals(GSL)source2008annual report,andyearend2009pressrelease

millions

Sales operatingearnings costofsales tonsSOP costperton(st) costpertonne

2009 126.8 76.0 50.8 153,000 $332 $366

2008 232.9 117.7 115.2 391,000 $295 $325

2007 136.1 35.6 100.5 423,000 $238 $262

2006 110.3 30.5 79.8 377,000 $212 $233

Note:requires the purchase ofpotassiumchloride,potassiumdeficientbrine

12|P a g e

Our analysis of the GSL data revealed that the GSL operation has an annual fixed production cost of about $20 million, with a variable cost of approximately $200 per ton of SOP. Using published flow sheets, a basic cost model was constructed that included labor, equipment operating costs and inputs, (i.e. reagents and power). From this analysis it is evident that the largest production cost component at GSL is the cost to purchase MOP. Using a base case of 300,000 tonnes production of SOP per year, production cost sensitivity to the price of MOP was calculated and is represented by the graph in Figure 4.

FIGURE4SENSITIVITYOFGSLPRODUCTIONCOSTSTOMOP

Mannheim Operating Costs As previously stated, the Mannheim furnace operations produce the majority of the SOP on the world market. We believe Migao Corporation of Canada produces SOP in China are likely the lowest Mannheim costs in the world. The graph below, Figure 5, shows the high cost structure associated with the Mannheim process, making these operations the highest cost SOP producers in the world. Migao Corporation as well as other SOP producers using the Mannheim process have production costs that are directly tied to the price of MOP. At a current price of $400 per tonne MOP, we estimate the cost to produce SOP at $401 per tonne; including credit for byproduct hydrochloric acid production.

13|P a g e

FIGURE5MANNHEIMSENSITIVITYTOTHECOSTOFMOP

DEVELOPMENT STRATEGY
ICP plans to rapidly develop the Ochoa project, incorporating the solar evaporation process, to quickly demonstrate project viability, leading to a bankable Feasibility Study and production decision. ICP will begin a pre-feasibility study this spring to better define resources and reserves, mine design, process methodology, capital and operating costs, permitting requirements, and economic potential. Additional exploration drilling is planned to expand the resource and define a mineable reserve. As part of the drilling program, additional polyhalite core samples will be obtained for further metallurgical test work and geotechnical testing in support of the underground mine design. Metallurgical work will be to aid in process circuit detailed design for the solar evaporation process. Included will be hot leach optimization, potential impact, and resolution, of any reasonably possible upset conditions for a wide range of potential polyhalite feed stock contaminates. Simple potassium magnesium sulfate brine will be evaporated to produce K2SO4 and schoenite crystals using simulated pan evaporation. This information will direct the sizing of the solar evaporation ponds. Evaporation crystals will also be for sizing of the DTB reactors for production of the final K2SO4 product. There will also be multiple tests for the sizing of simple equipment such as thickeners and filters. The selected processing route is simple and well defined. Additional metallurgical tests will be for detailed design of the processing circuit and not for determination of the process viability.
14|P a g e

Additional land is being secured with appropriate state and federal leases. Various sources of water are being evaluated for use in processing. Collection of baseline environmental data will commence in support of the overall Ochoa project development program.

CONCLUSIONS
Upon evaluation of the three principal methods of producing SOP from polyhalite as described in this report, we have concluded that employing a solar evaporation process to convert polyhalite to SOP is a viable and robust method of production. This report demonstrates the following: Polyhalite contains all the ingredient chemicals to make SOP; Polyhalite can be mined underground; Polyhalite can be used to make a potassium and sulfate rich brine that can be evaporated in solar evaporation ponds; The solar pond salt precipitate can be harvested and treated with simple, proven technology to produce SOP; and The conversion of polyhalite, through the solar evaporation method will have SOP production costs in the lowest quartile of global SOP production cost.

Based on our analysis, we conclude that the solar evaporation method is a proven process and provides a robust production method that can be employed by ICP to produce SOP at a low cost.

REFERENCES
1. NI 43-101 Technical Report on the Polyhalite Resources and a Preliminary Economic Assessment of the Ochoa Project Lea County, Southeast New Mexico, prepared for Intercontinental Potash Corporation, August 19, 2009 2. Potash Deposits, Processing, Properties and Uses; Don Garret PhD; Chapman & Hall 1996 3. Annual reports and press releases for Compass Minerals and Migao Corporation 4. Budgetary water treatment pricing from HW Process Technologies, Lakewood Colorado 5. Budgetary solar pond costs from Vector Engineering, Denver Colorado 6. DAns, 1., 1933 Die losungsgleichgewichte der systeme der salze ozeanischer salzablagerungen; Kali-Forschungsanstalt, Berlin, Ver1. Ges F. Ackerbau

15|P a g e

60

MgSO4 Concentration (g/l)

40

20
GSLBrine

0 50 100 150 200 250 300 350

APPENDIX 1 GREAT SALT LAKE BRINE PHASE DIAGRAM

-20 MgCl2 Concentration (g/l)

KAINITE XYLZER

160

GREAT SALT LAKE BRINE TO K2SO4 PRODUCTION PHASE DIAGRAM

140

120

100

SCHOENITE

80

16|P a g e

APPENDIX 2 ICP POLYHALITE LEACHATE BRINE PHASE DIAGRAM

17|P a g e

APPENDIX 3 ICP COSTS

EstimatedICPSOPProductionCostsSolarEvaporation
Cost/ raw units/ton unitraw material units K2SO4 material Cost/tonK2SO4 Annual Cost (000's)

#units ProcessingCosts RawMaterials Water Natural Gas(80%) Electricity(80%) Laboratory OperatingSupplies EquipmentMaintenance Labor SubtotalProcessCost MiningCosts Mine EquipmentandMaterials Labor SubtotalMiningCosts Administration

6000 gallons 6.66 1000CF 128 kwh allowance allowance allowance

$3.00 000'sgal $3.50 1000CF $0.06 kwh

$18.00 $23.31 $7.68 $1.00 $6.00 $15.00 $19.75 $90.74

$10,800 $13,986 $4,608 $600 $3,600 $9,000 $11,848 $54,442

$31.42 $34.97 $66.39 $4.94

$18,852 $20,981 $39,833 $2,964

TotalProductionCostSolarPondEvaporation Costper/tonK2SO4basedupon600,000tonsSOPperyear

$162.06

$97,239

18|P a g e

APPENDIX 4 AUTHORS QUALIFICATIONS

Each of the authors, whose backgrounds are described below, is independent of ICP and are recognized experts in their chosen fields. Donial M. Felton, Consulting Process Engineer. Mr. Felton is a Chemical Engineer with forty-three years of experience; thirty-six of those years were in the potash industry in Carlsbad, New Mexico. Mr. Felton has extensive experience in process design, operation, optimization, and problem resolution in the production of K2SO4, KCl, and langbeinite. Skills include METSIM modeling of complex potash processing plants. Mr. Felton has designed potash circuits for some of the largest potash producers in North America. James Waters, Metallurgical Engineer, MBA. Thirty years experience managing complex minerals processing, chemical manufacturing and mining facilities. The majority of this time was in the potash industry in Carlsbad, New Mexico involved with the operation of flotation, hot leach chemical plant and granulation circuits. Mr. Waters has managed the engineering and construction of multiple major processing plant expansions. He is a registered professional engineer in the state of New Mexico. Terre A. Lane, Principal Mining Engineer. Over twenty five years management experience with twenty years experience in surface and underground mining including; operations, engineering, resource estimation, mine design, scheduling, budgeting, cost control, project analysis, and financial analysis. Ms. Lane has extensive experience in geology, mineral processing, metallurgy, hydrology, rock mechanics and ventilation, as well as, computers, networks, database construction and management, programming, project design, engineering and construction. She is a member of the AusIMM and is a Qualified Person as defined by Canadian National Instrument 43-101. Richard D. Moritz, Associate Principle Mine Engineer, MBA. Mr. Moritz is a Mining Engineer with 28 years of experience and a strong minerals processing background. Work history includes due diligence, technical audits, conceptual, pre-feasibility and feasibility studies. Mining experience includes open pit mining as well as most underground methods. Most notable processing experience was commissioning and managing the gold recovery plant at Muruntau, Uzbekistan and directing the commissioning of the Beaconsfield bacterial oxidation gold plant in Tasmania, Australia. He is a member of the MMSA and is a Qualified Person as defined by Canadian National Instrument 43-101.

19|P a g e