Encanto announces positive Pre-Feasibility Study for Muskowekwan property

TRADING SYMBOL:  TSXV: EPO

VANCOUVER, Feb. 4, 2013 /CNW/ - Encanto Potash Corp. ("Encanto" or the "Company") (TSXV: EPO and OTCQX: ENCTF) is pleased to announce the completion of an independent positive Pre-Feasibility Study (the "PFS") prepared by Novopro Projects Inc. ("Novopro") for the Muskowekwan property (the "Project") in southern Saskatchewan.

The PFS confirms that the Project has significant positive economics and that the resource is of sufficient size as well as grade to support primary and secondary mining for over 50 years with Muriate of Potash production rate of 2.8 million tons per annum.

The PFS' Economic Model for the Project generated an Internal Rate of Return of 19.1% (20.4% before taxes) and a Net Present Value of $3.63 billion ($4.47 billion before taxes) yielding a Project payback period of 5.0 years.  A list of assumptions used in the model are shown in Table 1:

Table 1:  Summary of Financial Model

Realized Potash Price (FOB Vancouver)	$460/t standard $485/t granular
Discount Rate	10%
Inflation Rate	2%
OPEX at full capacity (includes utilities, labour, maintenance, reagents, fuel, insurances and municipal taxes) Sustaining capital cost (includes brine field and Tailing Management Area extensions)	$54.32/t $32.21/t
Logistics Costs (rail and port)	$50.50/t
Taxes and Royalties (includes Potash Production Tax, Crown Royalty and Saskatchewan Resource Surcharge, average over the life of the project)	$64.76/t
Initial CAPEX (includes contingency and escalation)	$2.86 billion
Deferred CAPEX	$130 million
All CAPEX and OPEX costs are in $CAD, revenues are in $US US to CAD exchange assumed as 1.
Annual Production rate	2.8 Mt of K62 grade potash (98% KCl)
Construction Start Date	Q2 2014
Mine Start up	Q1 2017
Lifespan of Project	50 years +

Jim Walchuck, Encanto's President and CEO commented: "This pre-feasibility study confirms the economic robustness of the Muskowekwan Project and highlights our flagship property as an attractive potash project.  This is a major milestone in the Company's intention to develop the Muskowekwan Project into a significant producing potash mine.  I would like to express the Company's sincere appreciation to the Company's employees and consultants who worked on the study and made it possible to move the Project towards the next stage of its development."

Capital and Operating cost estimates were generated with a target accuracy of ±20%, typical for this level of study.  The initial CAPEX estimate for the plant is $2.86 billion and includes estimates for water supply, gas pipeline and a Cogeneration plant and includes a contingency and escalation of $460 million.

The Operating costs were estimated at $54.32/t at full production capacity. This number includes utilities, labour, maintenance, reagents (including fuel), insurances and municipal taxes.  It does not include Royalties, Potash Production Taxes or Federal/Provincial Income taxes which are estimated at $64.76/t.  The logistical costs estimates of $50.50/t were provided by existing carriers and port facilities with capacity to serve this Project.  Sustaining Capital costs were estimated at $32.21/t at full production and include well field extension, and Tailing Management Area (TMA).

Novopro is a Canadian based project development and implementation company servicing the mining and metallurgical industries, specialising in the potash sector with industry leading expertise in solution mining related projects.

Mineral Reserve Estimate and Mineral Resource Update

Table 2 presents Proven and Probable KCl Reserves of 161.96 MMT.  The mineral reserves shall be discussed in more detail in a NI 43-101 report that supports this news release as required by the Canadian securities regulation.

Table 2:   Proven and Probable Reserves

Member	In-Place KCl (MMT)^1	KCl Reserves (MMT)^2
Patience Lake
Proven	20.77	18.65
Probable	82.17	70.67
Belle Plaine
Proven	17.35	15.58
Probable	66.36	57.07
Total Proven Reserves	38.13	34.23
Total Probable Reserves	148.54	127.74
Proven and Probable Reserves	186.66	161.96
^1 MMT = million tonnes; based on cavern tonnages minus 15% cavern recovery loss
^2 Reserves account for unknown anomalies (5% for proven and 9% for probable) and plant recovery of 94.5% (including downstream losses).   These reserves are based on 100% KCl and do not account for the K2O or KCl grade of the product actually sold.

Notes:

1. Proven Radius of Influence of  800 meters
2. Probable Radius of Influence of 2000 meters

The Mineral Reserve estimate was prepared by Agapito Associates Inc. ("AAI") of Grand Junction, under the direction of Qualified Person Dr. Michael P. Hardy P.E., P. Eng.

The Mineral Reserves discussed above were obtained from a mine plan covering the areas of Measured and Indicated Resources surrounding seven of the eight wells advanced for this project.  Mineral Resources outside the areas containing reserves are presented in Table 3:

Table 3:  Resource Summary

Solution Mining Resource Summary (Indicated)
Member		Weighted Average KCl Grade (%)		In-Place Sylvinite Resource (MMT)		Net KCl Resource (MMT)
Patience Lake		26.74		217.92		19.40
Belle Plaine		30.71		116.55		11.91
Total Excluding Interbed				334.47		31.31
Weighted Avg. Excluding Interbed		28.12
Solution Mining Resource Summary (Inferred)
Member		Weighted Average KCl Grade (%)		In-Place Sylvinite Resource (MMT)		Net KCl Resource (MMT)
Patience Lake		29.57		838.08		82.48
Belle Plaine		29.48		776.68		76.21
Total Excluding Interbed				1,614.76		158.69
Weighted Avg. Excluding Interbed		29.53

Notes:

1. MMT = Million Metric Tonnes
2. Density of Sylvinite = 2.08 T/m³
3. In-Place Sylvinite is calculated based on Area x Thickness x Density (2080kg/m³)
4. Net Resource based on 41.6% extraction ratio and 20% plant and cavern loss
5. Weighted average thickness and KCl are weighted to In-Place Tonnage
6. 8-14 interbed salt was thin so it was included in the PLM resource interval.
7. Indicated Resource Radius of Influence of 2000 meters
8. Inferred Resource Radius of Influence of 5000 meters

The resource estimate was provided by Saskatchewan-based North Rim Exploration Limited, qualified person Tabetha Stirrett, P.Geo.

The Study includes all facilities, infrastructure and utilities to produce potash via the solution mining method.  This includes a two train hybrid evaporation plant, a crystallization plant, drying, storage and load out facility.  The Project also includes a cogeneration plant to produce both the electricity and steam which improves efficiency, and allows for a lower overall carbon footprint. The design details are sufficient to allow the capital cost estimate to adhere to the requirement of AACE (Association for the Advancement of Cost Engineers) "Class 4" standard.

The PFS provides a high-degree of project definition, building on the Preliminary Economic Assessment completed in 2011. Study experts were retained by Encanto and Novopro to refine the Project including Agapito Associates Inc. (Mining Design and Reserve Estimate), North Rim Exploration Limited (Resource Estimate), Stantec Consulting Inc., (Environmental Impact Assessment), MDH Engineered Solutions Corp., a Member of SNC-Lavalin Group (Tailing Management Area Design), NG Consulting (Dissolution Test-Work), Institut fur Gebirgsmechanik GmbH (IfG), and RESPEC Consulting Services (Geo-mechanical Test-Work).  Using these specialised companies resulted in a PFS that is both detailed and thorough.

An Environmental Impact Study (EIS) has been initiated to capture all environmental, heritage and historic aspects required by the regulators to obtain construction permitting.  The EIS is scheduled for completion in Q3 2013. The PFS is based on environmental constraints mapping of the available Muskowekwan First Nation ("MFN") lands to site the plant which was complemented by the following trade-off studies: 1) Site selection alternatives, 2) Solution mining cavern temperature, 3) Evaporation crystallization process, 4) Cogeneration, and 5) Logistics and Port.

No significant limitations were identified and the strong economic outcome results in a recommendation to fast track towards a Feasibility Study as soon as possible.

The technical content of this news release has been reviewed by Jim Walchuck, P. Eng., a qualified person as defined by NI 43-101.

About Encanto:
Encanto Potash Corp. is a TSX Venture Exchange listed and OTCQX traded Canadian resource company engaged in the development of potash properties in the Province of Saskatchewan, Canada, the largest producing potash region in the world. Through the joint venture agreement with Muskowekwan Resources Ltd. on our flagship property, Encanto has been successful in adding a 3.5 fold increase to the project land package, which now totals approximately 58,300 acres. A Preliminary Economic Assessment (PEA), based solely on the Home Reserve Lands (15,500 acres), was released in August of 2011 and an updated NI 43-101 report describing the increase to the compliant resource estimate was filed on May 10, 2012.

The Company has a 100% interest in two additional potash properties in Saskatchewan: the 55,000 acre Ochapowace/Chacachas property and the 91,550 acre Spar property.

For additional information about Encanto Potash Corp., please visit the Company's website at www.encantopotash.com or review the Company's documents filed on www.sedar.com.

ON BEHALF OF THE BOARD OF DIRECTORS

        "James Walchuck"
Per: _________________
James Walchuck
President and CEO

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.

THE FOREGOING INFORMATION MAY CONTAIN FORWARD-LOOKING INFORMATION RELATING TO THE FUTURE PERFORMANCE OF THE COMPANY. FORWARD LOOKING INFORMATION IS SUBJECT TO A NUMBER OF KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR FORWARD LOOKING STATEMENTS. SUCH RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THE ACTUAL RESULTS OF EXPLORATION ACTIVITIES, CHANGES IN WORLD COMMODITY MARKETS OR EQUITY MARKETS, THE RISKS OF THE MINING INDUSTRY INCLUDING, WITHOUT LIMITATION, THOSE ASSOCIATED WITH THE ENVIRONMENT, DELAYS IN OBTAINING GOVERNMENTAL APPROVALS, PERMITS OR FINANCING OR IN THE COMPLETION OF DEVELOPMENT OR CONSTRUCTION ACTIVITIES, TITLE DISPUTES, CHANGE IN GOVERNMENT AND CHANGES TO REGULATIONS AFFECTING THE MINING INDUSTRY, AND OTHER RISKS AND UNCERTAINTIES DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE CANADIAN SECURITIES ADMINISTRATORS (AVAILABLE AT WWW.SEDAR.COM). FORWARD-LOOKING STATEMENTS ARE MADE BASED ON VARIOUS ASSUMPTIONS AND ON MANAGEMENT'S BELIEFS, ESTIMATES AND OPINIONS ON THE DATE THE STATEMENTS ARE MADE. SHOULD ONE OR MORE OF THESE RISKS AND UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING INFORMATION CONTAINED HEREIN. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS IF THESE ASSUMPTIONS, BELIEFS, ESTIMATES AND OPINIONS OR OTHER CIRCUMSTANCES SHOULD CHANGE, EXCEPT AS REQUIRED BY APPLICABLE LAW.

 

SOURCE: Encanto Potash Corp.

James Walchuck
President and CEO
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Martin Gagel  CFA, MBA
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