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Consultants Assessment

Red Metal commissioned an independent due diligence assessment of the Colorado Potash Project by Agapito Associates Inc. (Agapito) who are world renowned leading experts in potash solution mining (http://www.agapito.com/).  Agapito have participated in studies on many potash projects throughout the world including the solution mining study on the Potassio Rio Colorado deposit in Argentina which Vale recently purchased from Rio Tinto for US$850 million.    

Agapito Associates Inc. Summary

Agapito’s assessment validated the significant intercepts calculated from oil well log data and confirmed the large tonnage potential for potash on the project with the calculation of a JORC code compliant Exploration Target for the Potash Beds 5,  6,  9 and  19 (see Agapito Target Statement below, Table 1).  Well log data indicate the dominant potash mineral for all the beds is sylvite (potassium chloride) rather than the less favoured carnallite (hydrated potassium-magnesium chloride).  The study concluded that the Potash Bed 5 to be the most favourable solution mining target.  The deeper beds, in particular Bed 9, are considered potentially significant because if they can be solution mined along with Bed 5 they could have the advantage of significantly lowering the drilling cost per tonne of potash produced.

 The Agapito review found no fatal flaws with the project and concept at this early stage and recommended advancing the project by assessing existing seismic data and drilling a single exploration core hole located midway between the two old oil holes mentioned above (Figure 3).  The hole would seek to confirm the positive data gleaned from the old logs and allow a more accurate assessment of the potassium content and the relative proportions of potassium salt types and impurities of the beds.

Extract From Agapito Associates, Inc. Exploration Target Summary Statement

            

“The Colorado Potash Project (CPP) comprises potash (KCl) mineralization in four evaporite beds, Potash 5, Potash 6, Potash 9, and Potash 19, which range in depth from approximately 1,600 to 2,450 meters (m) over the area of interest.  The Exploration Target estimate for the four beds is shown in Table 1. 

 

Table 1.   Exploration Target Estimate for the Colorado Potash Project
    Bed No.
   Depth(m)
   Thickness (m)
            Grade           K2O%            Sylvite%
Grade-Thickness Product (% K2O-m)
  Sylvinite Tonnage  (Mt)
   Potash 5
  1,600 – 1,900
     3.5–5.2
 13–19           20.8-30.4
    57–86
     940–1,410
   Potash 6
  1,650 – 1,950
     2.6–3.9
 8–13             12.8-20.8
    34–50
     710–1,070
   Potash 9
  1,850 – 2,150
     4.2–6.3
14–21            22.4-33.6
    72–108
  1,130–1,690
   Potash 19
  2,200 – 2,450
     8.5–12.8
13–19            20.8-30.4
  133–199
  2,310–3,470

  Mt = million tonnes         Sylvite(KCl) % = 1.6 x K2O% assuming no other potassium mineral types

The Exploration Target covers an area of approximately 130 square kilometres.  The target assumes a grade-thickness cut-off of 20% K2O-m, below which mineralization is excluded from the estimate.  All mineralization estimated exceeds this cut-off.  The Exploration Target excludes mineralization known or projected to exist in heavily faulted or steeply dipping areas.  The Exploration Target is conceptual in nature and there has been insufficient exploration to define a Mineral Resource, and it is uncertain if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2004).  The Exploration Target is not being reported as part of any Mineral Resource or Ore Reserve.

The basis for the Exploration Target range is a contemporary geologic block model developed from historical geophysical data from thirteen oil and gas exploration holes available through the Colorado Oil and Gas Conservation Commission, a division of the Colorado Department of Natural Resources, and the Denver Earth Resources Library.  The Exploration Target relies on the professional interpretation of grade, thickness, and bed correlations from geophysical logs.  Where K2O grades are reported, values were calculated from natural gamma data derived from radiometrically logged drill holes.

The validity and accuracy of the historical geophysical data have not been verified per JORC standards.  The majority of the geophysical logs were completed by recognizable and reputable contractors to a technical standard compatible with modern exploration.  The historical data are expected to be valid and reliable for the purpose of Exploration Target definition.”