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EPM Mining Ventures – Sulfate of Potash in Sevier Playa, Utah

EPM Mining Ventures

OVERVIEW

EPM Mining Ventures, Inc. (TSXV:EPK,OTCQX:EPKMF) is an exploration-stage potash development company. The Company’s key property is the Sevier Playa Sulfate of Potash (SOP) Project in Millard County, Utah. A recent Preliminary Feasibility Study (PFS) forecasted average annual SOP production of 300,000 metric tonnes (t) with an estimated Net Present Value (NPV) of $629 million (after tax, inflated, 8% discount rate) and an estimated Internal Rate of Return (“IRR”) of 20% (after tax, inflated).

The project’s flow-sheet proposes using an industry proven, environmentally-friendly and cost-effective solar evaporation process to produce SOP, a premium-priced fertilizer used for specialty crops and arid soils. SOP is a necessary fertilizer for those fruits and vegetables for which Muriate of Potash (MOP) is too harsh. Consequently, SOP sells at a substantial premium (historically between 30% to 50%) to MOP.

INVESTMENT HIGHLIGHTS

  • Rare, naturally occurring brine deposit of premium-priced sulfate of potash — currently only three operators in the world produce SOP from naturally-occurring brines
  • Potential low-cost producer using an industry proven, solar evaporation process
  • Located approximately 130 miles south of Great Salt Lake in mining-friendly Utah; close to other major potash producers and all required infrastructure
  • Strategic equity partner in Tata Chemicals

KEY PROJECT

Sevier Playa – Millard County, Utah, United States

Located approximately 130 miles south of Salt Lake City and near major potash producers, the Sevier Playa Project is a terminal lakebed brine deposit in Millard County, Utah and covers approximately 124,000 acres.

Sharing the geology of prehistoric Lake Bonneville with the Great Salt Lake, Sevier Playa brine contains major elemental concentrations of sodium (Na), magnesium (Mg), potassium (K), chlorine (Cl) and sulfate (SO4). Although the Company’s primary focus is SOP (K2SO4), other potential mineral production includes magnesium sulphate, magnesium chloride, sodium sulphate, and possibly lithium.

The first known systematic study of the area to determine the economic viability of the minerals was conducted in the 1970’s by geologist Murray Godbe and his team. They found indications of a vast pool of brine containing potassium and other important minerals in the Sevier Playa sediments. The team subsequently drilled hundreds of wells taking brine samples from across the vast lake surface and from many depths. However, the development and production of the project was shelved after the death of both its financier, W.D. Hayden, and Godbe.

In 2008, Emerald Peak Minerals LLC formed to resurrect the project. After securing leases from the State of Utah, Emerald Peak Minerals partnered with EPM Mining Ventures Inc. of Canada to secure the financing necessary to obtain the US federal leases from the Bureau of Land Management. EPM Mining raised about CAD$30 million dollars and won the federal acreage needed to define the project. Later, EPM increased its land package through subsequent agreements.

Currently, the Company directly controls about 96,000 acres through its wholly-owned US subsidiary Peak Minerals Inc. and has agreements to operate more than 28,000 additional contiguous acres.

In April 2012, EPM completed an exploration drilling program that paved the way for an updated National Instrument 43-101 Resource Technical Report by the Norwest Corporation that was released in May 2012. The Technical Report delineates a mineral brine resource to an average depth of 20 meters and shows that the in-situ brines at Sevier Playa contain approximately 29.5 million tonnes of Measured and Indicated Potash Resources with an additional 9 million tonnes in the Inferred Category.

EPM plans to use a Solar Evaporation process as a means of extracting SOP and other minerals from the brines at Sevier Playa. Solar Evaporation is an industry-proven, environmentally friendly, and cost-effective process.

A Preliminary Feasibility Study (PFS) was announced in October, 2013. The PFS forecasted average annual SOP production of 300,000 metric tonnes (t) with an estimated Net Present Value (NPV) of of $629 million (after tax, inflated, 8% discount rate) and an estimated Internal Rate of Return (“IRR”) of 20% (after tax, inflated). The PFS includes an updated Mineral Resource Estimate, which estimate includes 31.486 million tonnes of SOP in the Measured and Indicated categories, a 7% increase from previously published estimates, due primarily to results of recent drilling.

Economic Indicators

NPV (pretax, 8%) $ 957 M
NPV (after tax, 8%) $ 629 M
IRR (pretax) 24%
IRR (after tax) 20%
Average Annual SOP Production 300,000 t
Mine Life 30 years
Initial Direct Capital Costs $ 292 M
Initial Indirect Capital Costs $ 50 M
Initial Capital Contingency $ 36 M
Operating Cost $ 180.91/t
Production Royalties (% of gross revenues) 5.61%
Year 3 EBITDA (nameplate production) $ 143 M
Payback Period (from commencement of production) 5.5 years
Measured & Indicated SOP Resource 31.486 Mt

 

The economic analysis in the PFS is based upon the following assumptions:

  • 100% Equity
  • Production Ramp-Up over two years, reaching full production in Year 3
    • 50,000 tonnes in Year 1
    • 100,000 tonnes in Year 2
    • 300,000 tonnes in Year 3
  • Construction on playa in Preproduction Year 3 (“PP-3”)
  • Effective tax rate of approximately 29%

The economic analysis was based upon Measured and Indicated Mineral Resources only. No Inferred Resources were included in the analysis. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Although a PFS has been completed, Mineral Reserves will not be established until further verification of the hydrologic models via longer-term pilot testing planned during the Feasibility Study in 2014.

SUMMARY

EPM Mining Ventures, Inc. is an exploration-stage potash development company whose key property is the Sevier Playa SOP Project in Millard County, Utah. A recent NI 43-101 Resource Estimate on the project shows that the in-situ brines at Sevier Playa contain approximately 29.5 million tonnes of Measured and Indicated Potash Resources with an additional 9 million tonnes in the Inferred Category. The PEA was completed in November, 2012. The PFS is underway and is expected in Q2 of 2013, followed by a FS expected by the end of 2013. The Company plans to use an industry proven Solar Evaporation process as a means for extracting SOP and other minerals from the brines at Sevier Playa.

MANAGEMENT

Lance D’Ambrosio – Chief Executive Officer
Mr. D’Ambrosio has more than 25 years of experience in sales, marketing, finance and management. He began his career working for companies such as Xerox, Savin, and Paine Webber. At Savin, Mr. D’Ambrosio became a franchise operator, later selling his interests and continuing his entrepreneurial efforts by founding two start-up telecommunications companies; Transworld Telecommunications, Inc. (TTI), a wireless cable operator; and Convergence Communications, Inc. (CCI), a facilities-based communications company, where he raised over $500 million of debt and equity. At TTI and CCI, Lance completed over $200 million of acquisitions, acted as Chairman and CEO, running TTI as a public company. Sprint (NYSE:S) acquired TTI in 1999 for $210 million and Comsat International, Inc., a subsidiary of Lockheed Martin Corporation (NYSE: LMT), acquired CCI in 2003.

In 2000, Mr. D’Ambrosio was named an Ernst & Young “Entrepreneur of the Year” for his success in developing and building CCI. In 2002, he became the Chairman and CEO of DAG, a group of new car franchises that generated over $40 million per year in revenues. In 2007 he sold the new car franchises to join Jeff Gentry to pursue opportunities in the energy and mining industries.

Mr. D’Ambrosio earned a Bachelor of Business Administration from the University of Utah with degrees in both Marketing and Business Management.

Spencer Thunell – Chief Financial Officer
Throughout his professional career, Mr. Thunell has been involved in public accounting, business and financial consulting, and a number of other entrepreneurial ventures. During his tenure with Ernst & Young in Palo Alto, California, Mr. Thunell worked in the Assurance and Advisory Business Services group of its life sciences practice and his clients included both public and private biotech and specialty pharmaceutical companies.

Mr. Thunell also worked as Project Manager, and subsequently as Chief Financial Officer, of Land Equity Partners, LP and Land Equity Partners Fund II, LP – real estate private equity funds focused on land development in the Intermountain West region. Mr. Thunell’s consulting roles have included business planning and financial analysis, business valuations, private placement preparation and contract-CFO services.

Mr. Thunell holds Bachelor’s and Master’s degrees in accounting from the David Eccles School of Business at the University of Utah and is a licensed Certified Public Accountant in the State of California.

Richard Dye, P.E. – Vice President of Project Development
Mr. Dye brings more than 30 years of experience in surface and underground mine and project management, mine design and construction, project engineering, international and corporate level management and environmental management. From 2003 through 2008, he was Senior Vice President for Katanga Mining Limited and responsible for the engineering and the rehabilitation of the company mine and processing assets located in the Democratic Republic of Congo. From 1994 to 2003, Mr. Dye held various positions for Kinross Gold including General Manager at the company’s DeLamar and Fort Knox Mines and served as Vice President of Technical Services responsible for providing operating and engineering support for the company properties in Russia, South America and Africa, as well as managing numerous due diligence and feasibility studies on proposed acquisition properties. Prior to 2003, Mr. Dye worked as General Manager, Mine Superintendent and in various project engineering roles in the operation and construction of multiple gold and uranium properties.

Mr. Dye earned a Bachelor of Science in Mining Engineering from the University of Utah and a Master of Business Administration from Westminster College. He is a Registered Professional Engineer.

Woods Silleroy – Vice President of Operations
Mr. Silleroy has more than 25 years of resource experience as an investor in the oil & gas and mining industries as well as almost two decades of experience in operations. Over the years, he has worked with companies such as Pace International, Disney and The Los Angeles Philharmonic. From 1998 to 2008, Mr. Silleroy was Vice President & Chief Operating Officer of Justice Design Group, a manufacturing and importing firm. There, he managed all day-to-day operations including production, human resources, customer service, marketing, product development as well as IT, network and web site design and administration. Mr. Silleroy also developed, launched and managed the company’s Asian outsourcing and importing programs leading him to travel extensively throughout Asia.

Mr. Silleroy has a Bachelor of Science degree from the University of Utah (Magna Cum Laude, Phi Beta Kappa) and a Master’s degree from the University of Southern California.

Art Ditto – Chairman of the Board
Mr. Ditto has more than 40 years of experience in the mining business and was a founding member of Kinross Gold and Katanga Mining.

Dan Basse – Director
Mr. Basse has more than 40 years of experience in the commodities-based industries and is current president of AgResource Company.

De Lyle Bloomquist – Director
Mr. Bloomquist is president of Global Chemicals Business at Tata Chemicals Limited and president and CEO of General Chemical Industrial Products.

Jeff Gentry –Director
Mr. Gentry has more than 25 years of experience in mergers & acquisitions and operations in the energy and minerals industries. He has executed successful transactions with Amoco, Shell and Texaco.

Ramakrishnan Mukundan –Director
Mr. Mukundan is the managing director of Tata Chemicals Limited and the former executive vice president of the Global Chemicals Business and Consumer Products for Tata Group.

Tedd Botts –Director
Mr. Botts is the current president of Kensington Gate Capital and director of a NASDAQ-listed company as well as a former executive at UBS Group and Goldman Sachs.

Tom Pladsen –Director
Mr. Pladsen is a Chartered Accountant with more than 35 years of experience in financial positions with public and private companies including Andina, Merc & Katanga. He is also the director of a number of TS and TSX-V listed companies.