Ann: Carnallite Scoping Study Completed & ENAMCO , page-20

re: Ann: Carnallite Scoping Study Completed &... Radioactive,
The decision about where to make large capital investments is an important one for all players and internal rate of return is used to evaluate the attractiveness of a project or investment. Investments with highest IRR is usually preferred. Here are some examples of IRR’s for some of the proposed greenfield potash projects.
- STB = 40.6%
- American West Potash = 39.7%
- Allana Potash = 35%
- Elemental Minerals = 29.3%
- Western potash = 27.3%
- Encanto Potash = 23.6%
- Karnalyte Resources = 21.4%
- Verde = 27%
- Potash One = 22.7%
- IC Potash = 26%

Clearly, STB IRR is a stand out as it offers shortest payback period. Also compared to other projects open cut mining gives the benefit of faster timeline to production, ease of scalability (very important parameter as project economics can improve dramatically) and lower technical risk. Whilst all the above projects IRR’s meet the minimum target IRR of 10%-15% based on long term potash prices of about $400 -$450/t, securing finance for many of these projects will be a significant task due large capital costs and long lead time associated with many of these projects. Therefore projects that require less capital will hold appeal to strategic investors/players.

Regarding technical risks, didn’t ELM state in their latest presentation that one of the substantial risks for their project is potential for water ingress into the mine stopping? Also if the proposed outsourcing of upfront infrastructure investments is not successful then their development costs will actually increase to about $925/t.