Ann: PARADOX BASIN POTASH PROJECT UPDATE - STATE , page-24

re: Ann: PARADOX BASIN POTASH PROJECT UPDATE ... The presentation released to the ASX on the 27/09/2011 shows a map on page 19 showing the potash grades for Potash Bed 18. Although POK State Hole 3 is not marked on the map - it appears to me that it would be within the pink zone (which was thought to be 38% KCl or greater).

Obviously, that map needs to be updated now that State Hole 3 has revealed lower grades. However there must be a high grade zone present, as HUSKY FED 6-15 and HATCH POINT 1 include potash beds that are thick and grading at 37 - 38.8% KCl, but obviously the high grade zone does not extend as far south as POK State Hole 3.

Having said all that, whilst today's results were not what I was hoping for, they were not that bad either.

Long term, provided the company can get approval to drill on federal land, thick potash beds at high grades should be intersected. I am basing this on the fact that previous gas drilling has already shown that thick, high grade potash beds are present in a number of locations.

The company has plenty of cash to continue with drilling on Federal Land, so IMHO, it could just be a matter of time before they intersect the higher grade regions.

Whilst long term I think that they should intersect thick, high grade potash, short term, if a certain publication advises its readers to sell, the share price could fall a long way.

The company should drill a 4th hole in the state block to the west of POK State Hole 3 (refer to the map in today's announcement). This state block is roughly half way between HUSKY FED 6-15 and GIBSON DOME-GOVT1. Both of these drill holes contained thick beds of Potash Bed 18 at high grades. Therefore, drilling in this state block, IMHO, would have a high chance of intersecting thick beds and high grades whilst awaiting federal drilling permits. I have emailed management to ask about this - and am currently waiting to receive a response.

I am frustrated that they won't drill in the locations that are most likely to intersect thick beds at high grades, it's all fine and well to determine the extent of the potash beds, but investors expect that some of the drilling will occur in the areas that are likely to give the best results.

IMHO, State Holes 1 and 2 were unlikely to ever return great results, but State Hole 3 was, IMHO, reasonably placed. But given that the results were below investors expectations, the company now really needs to drill in a location that is likely to give good results.

I would hope that the company chooses the next drilling location very carefully, and chooses a location that is likely to intersect thick beds at high grades, rather than choosing a location that would simply determine the extent of the potash beds in under-explored areas. First, drill in suitable locations to confirm the results from previous gas drilling that the thick beds of potash at grades of 30-35%+ really do exist - and then later you can drill in other areas that are under-explored to gain an understanding of what might be there.

Once Federal Drilling is permitted, to have a high probability of intersecting thick beds and high grades, the company needs to drill either to the south west, or between HATCH POINT 1 and HUSKY FED 6-15. I would very much hope that none of the future drilling is conducted within the graben. We have already drilled POK State Hole 1 within the graben, we know that the graben reduces bed thickness and grades, so there is no need to drill into the graben again.

I am very worried that over the coming year, the project will give poor results. Not because it's a poor quality project (I still think that it is a very high quality project), but rather I am worried that drilling locations will be poorly chosen.

If the company places future drill holes in poorly chosen locations, I will probably have no choice but to sell - even though I think the fundamentals are still good.

Can someone please confirm for me - is the JORC resource based only on the drilling that the company conducts? Or are the results from gas drilling used as well - with the company drill results just used to confirm that the potash beds are present?

Also, could other investors please share their thoughts and opinions about future drilling? How do others feel about the drilling locations that I have written about above? Would others be happy for future drilling to just show potash extent, at the expense of bed thickness and grade?


PLEASE READ - I have written the above in good faith and whilst I have done my best to ensure that it is accurate, I cannot guarantee that it is free of error. Do your own research and only invest what you can afford to lose.