Junior Gold and Natural Resource Sector Report Encanto Significantly Increases Land Position
February 2, 2012
Encanto Potash Corp. (EPO-TSXV) - In a surprise move ahead of the upcoming land designation vote on February 25, Encanto's First Nations Joint Venture partner has offered the JV an additional 42,800 acres, to bring the total land package subject to the JV Agreement to roughly 58,300 acres. This is a ~3.5 fold increase from the original Home Reserve land holdings, which were the subject of a Preliminary Economic Assessment ("PEA") released last August.
This move underlines the First Nation's support and commitment to see the development of the world's first potash mine on their soil, and help achieve their goal of a viable and profitable business and investment that creates employment and wealth for their people. Given the 80% positive support from the Muskowekwan Band membership in the first vote held on November 26, 2011, a positive simple majority vote on Feb 25 seems a foregone conclusion, and should spark a quick revaluation of Encanto as uncertainty is removed and investors start to extrapolate the existing economic resource and in-ground PEA valuation to reflect the significantly larger land package.
If the upcoming vote receives the requisite majority approval as expected, these additional pre-reserve lands will be designated for surrender of mineral rights to the Crown, a well-established procedure, which is required before a mineral lease can be applied for and granted.
Last August's positive PEA for the Muskowekwan Project validated our own "back of the envelope" assessment of its value. The PEA disclosed a robust internal rate of return ("IRR") of 24% (at $450/t KCL) attributed to a solution mine, the preferred option to take the project into production. With a calculated NPV of $2.35 billion and a 32 to 56 year mine life before adding in the additional acreage, the existing land position already provided lots of potential upside for shareholders. In May 2011 we took pains to point out that Encanto's initial resource value is based on only a 16,831 acre land position, but adding an additional then-contemplated 15,500 acres their land position effectively doubles the resource exposure of the project. With today's announcement, this potential is increased again, to about 58,300 acres, a 3.5-fold potential valuation bump from the PEA's NPV.
Full Article
------------------------------------------------------------------- For further information, please contact: Vanguard Shareholder Solutions Tel: 604.608.0824 Toll Free: 1.866.918.0824 ir@vanguardsolutions.ca www.encantopotash.com |