Issue 6, February 02, 2010

Encanto Potash (EPO, TSXV) - Phase I Exploration Drilling Hits Big

Today Encanto Potash released their first drill results from Muskowekwan. The KCL grades discovered have greatly enhanced our view that EPO could build a significant 43-101 resource over the next 8 months which will enable them to participate in the global potash M&A sweepstakes.

The drill hole was put into the center of the 36,000 acre Muskowekwan property. Both the Patience Lake potash bed and the Belle Plaine potash bed returned KCL grades of 40% - which are excellent. The Esterhazy potash bed had a lower return of 19.6% KCL and is not considered economic.

The total thickness of the two economic potash beds is 6 meters with a grade of 25% K(2)O. As a comparison the Burr Project of Athabasca Potash averaged 5.14 m of 21.04% K(2)O and 4.79 m of 23.39% K(2)O on their upper Patience Lake and Lower Patience Lake potash beds respectively.

Last week BHP Billington announced they have entered an agreement to buy Athabasca Potash for C$8.35 per share in an all cash deal. This represents a total equity value of about $341 million on a fully-diluted basis for API shareholders.

Over the coming months EPO plans to have their first compliant 43-101 resource calculation. To complete this they will need the results of their extensive 3 D seismic survey which should be announced in about six weeks. With the 3D survey in hand they can then plan out their drill program. Phase II drilling is planned for this spring and will be wrapped up in July. If all goes as planned, a compliant resource calculation will be announced by September.

In just 8 months EPO could be sporting a much higher market cap.

The 3D survey which is now being analyzed was a huge undertaking. About 31,000 acres of Muskowekwan property has been shot. To give you an idea how big that really is, the number one M&A contender right now in is Potash One. Their 3D seismic and drill holes covered an area of 14,974 acres, albeit with much wider potash bed thicknesses.

Completion of a compliant resource estimate will put Encanto's Muskowekwan on a very short list of potential potash properties that are available for mergers and acquisitions.

This list just got shorter last week when BHP Billington announced the agreement to buy Athabasca Potash.  But BHP is not the only blue chip corporation wanting a piece of the potash market.

Also last week, Brazilian group Vale agreed to buy the South American fertilizer assets of Bunge, a US commodity supply chain company, for $3.8 billion. They also announced the purchase of a 16% stake in Fertilizantes Fosfatados of Brazil.

The moves by BHP and Vale are very strategic and make good business sense. China particularly is concerned about their agricultural security. In 2007 they produced 3.4 million tonnes of potash whereas their requirement was 11.5 mt., The International Plant Nutrition Institute forecasts that China could consume as much as 26m tonnes of the fertilizer each year within the next 15 years. Potash Corp. forecasts China will consume 8m to 9m tonnes in 2010. Watch for China to make an M&A deal in Saskatchewan over the coming months.

It's not just China that's driving the market though. Worldwide demand is set to take a big jump this year. In the first three weeks of January, Potash Corp. sold more potash in North America than it did in the first eight months of 2009.

By all accounts, the industry has seen the bottom. Morgan Stanley predicts a 50% bounce in 2010 and states there is a long-term bull case for the agricultural sector.

Junior companies who can prove up minable reserves this year stand a good chance for mergers and acquisitions from the BHP's of the world not to mention the governments of China and India.

Encanto is off to a good start. The next major catalyst for Encanto will be the interpretation of the 3D seismic next month.

Full Article

For more information, please contact:

Vanguard Shareholder Solutions
Tel: 604.608.0824
Toll free: 1.866.918.0824

www.encantopotash.com
ir@vanguardsolutions.ca