raising at 55 cents, page-105

I was disappointed as to how the cap raise has been managed and the lack of an OPEX estimate as well. However, the potash project does have a very large potential, so I'm holding and the management should be complimented in relation to purchasing the land tenement and defining the resource.

In addition, the whole potash jr. sector is getting hammered. Ethiopian Potash Corp. TSX:FED which has a very large land tenement which is walking distance from STB's A and B zones is down to $4 million in funds and they will most likely have to do a cap raise in 3 to 6 months. Let's see how their cap raise goes and this would be a good comparison to STB's cap raise.

There are very few potash companies that can consider open pit mining. Allana considered open pit mining but indicated that this would be too expensive due to the cost in removing the 100 m plus of overburden. South Boulder's cost for removing the overburden would be substantially less due to the extremely shallow potash.

Verde Potash has indicated that they will be going with open pit mining and below is summary of their prelimnary economic assessment with an estimate of OPEX, which is very low. Fraser and Dundee analysts have an estimate of STB's OPEX in the $105 to $110 range.


News Release Details
Preliminary Economic Assessment for Cerrado Verde Provides Encouraging Results
10/28/2010
Download this Press Release ()
NPV10% for the Project is estimated at US$455.4 million with a 1.1Mt annual production rate and total operating costs of US$41.80 per tonne of product

Amazon Mining Holding Plc (TSX-V symbol: “AMZ”) (“Amazon” or the “Company”), is pleased to announce the receipt of a positive Preliminary Economic Assessment (“PEA” or the “Scoping Study”) from SRK Consulting (“SRK”) and ECM S/A Projetos Industriais (“ECM”) on Amazon’s wholly-owned Cerrado Verde project (“Cerrado Verde” or the “Project”) located in Minas Gerais, Brazil. The PEA evaluated the technical and the financial aspects of the mine operation and beneficiation facility. The Scoping Study assumed open pit mining and pyrometallurgy process for the production of ThermoPotash product.

The Study supports Amazon’s positive outlook on Cerrado Verde’s value and represents a significant milestone toward full development of the Project. Amazon took a conservative base case approach to the Scoping Study, limiting the production rate to 1.1 Mt per year of ThermoPotash at 8.34% K2O. ECM estimates that with a production rate of 1.1 Mt per year and the inferred resource base of 105 million tonnes at 10.3% K2O determined by Coffey Mining, the Project has a projected life of around 100 years, 40 years was assumed for the analysis. Amazon also evaluated a second scenario with a production rate of 2.2 Mt per year.

The results of the study for the 1.1Mt production rate scenario include:

•Estimated Project Capital Cost of US$155.3 million, plus $23.3 million in contingency and $18.2 million of pre-construction costs
•Estimated Operating Cost (including production, work force, and variable costs) of US$37.01 per tonne plus estimated marketing and administrative costs of US$4.79 per tonne for a total cost of US$41.80 per tonne of ThermoPotash
•Net Present Value of US$455.4 million at a 10% discount rate
•Net Present Value of US$339.1 million at a 12% discount rate
•Estimated after-tax and royalty Internal Rate of Return (IRR) of 32.9%
•Payback of the initial Capital Expenditure: 2.38 years
The results of the study for the 2.2Mt production rate scenario include:

•Estimated Project Capital Cost of US$218.4 million, plus $32.8 million in contingency and $18.2 million of pre-construction costs
•Estimated Operating Costs (including production, work force, and variable costs) of US$32.12 per tonne plus estimated marketing and administrative cost of US$4.24 per tonne for a total cost of US$36.36 per tonne of ThermoPotash
•Net Present Value of US$858.1 million at a 10% discount rate
•Net Present Value of US$652.6 million at a 12% discount rate
•Estimated after-tax and royalty Internal Rate of Return (IRR) of 40.2%
•Payback of the initial Capital Expenditure: 1.87 years
The Scoping Study assumed a constant US Dollar-Brazilian Real exchange rate of $1USD=$1.8BRL and constant petroleum coke and limestone pricing of R$310 per ton and R$15 per ton, respectively. Also, the cash flow projections exclude the cost of financing. Mine life was assumed at 40 years. Income tax calculations did not include any loss carry forwards.

The Scoping Study utilized the weighted average delivery-adjusted sales prices of US$151.82/t and $133.23/t for the 1.1 and 2.2Mt, respectively, based on the independent market study conducted by Agroconsult Consultoria & Marketing. (Please refer to the news release on October 26, 2010.) The Marketing Study assumed an FOB Vancouver potash (KCl) price of $400/t long term.

With the encouraging results of the Scoping Study, the Company will continue to study the feasibility of the Project led by Mr. Pedro Ladeira, Vice President of Engineering and Mr. Mauricio Sampaio, Vice President of Operations. President & CEO, Cristiano Veloso, said “We are very pleased with the results of the study. Based on cement production cost estimates, we had previously estimated the operating costs before marketing and administrative costs to be approximately $53 per tonne. This study lowers the estimates by 30% to $37 per tonne. Also, the total capital expenditure associated with the development of the Project is well within the range of our expectations and is significantly lower than other potash projects under development.” Mr. Sampaio added, “Our strategy to incorporate ThermoPotash in NPK removes much of the adoption risk, as 90% of all fertilizer in Brazil is sold as an NPK formulation. The Study’s projected low operating costs combined with the strong ThermoPotash prices estimated by Agroconsult should secure future profitability with first production slated for early 2013.”

The Company will file a NI 43-101 PEA report of the Study on the Cerrado Verde project with Canadian securities regulators within 45 days of this release. The PEA will be available on SEDAR at www.sedar.com, and also on the Company's website.



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