Passport Potash Inc. (TSX VENTURE: PPI) -
Disclosure Clarification
As a result of a review by the British Columbia Securities
Commission (BCSC), we are issuing the following news release to
clarify our disclosure.
Production Comparison
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.
Clarifying Disclosure
Exploration Targets
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)
Project Risk
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.
Timely Disclosure
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.
Drilling Results
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 2011-07-located 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 2011-15-is 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 2011-19-is 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 2011-20-is 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 2011-21-is 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
Forward-Looking Statement
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.
Contacts: Passport Potash Inc. Peter J. Kletas 866-999-6251-Toll
Free peter@passportpotash.com Passport Potash Inc. Clive Mostert
780-920-5044 cmostert@passportpotash.com www.passportpotash.com
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