Scoping Study Update Kola Project Republic ... - Land Matrix · TM/PJF/NR/lae Kola_SS Update_340100.070_022_MLM.docx October 20, 2014 Executive Summary On September 17, 2012, Elemental

Scoping Study Update Kola Project Republic of Congo

Report Prepared for

Elemental Minerals Limited

.

Report Prepared by

SRK Consulting (U.S.), Inc. SRK Project Number 340100.070 October 20, 2014

SRK Consulting (U.S.), Inc. Scoping Study Update – Kola Project Page i

TM/PJF/NR/lae Kola_SS Update_340100.070_022_MLM.docx October 20, 2014

Scoping Study Update Kola Project Republic of Congo

Elemental Minerals Limited 14 Emerald Terrace, West Perth Western Australia, Australia, 6005 Phone: +61 8 9324 1377 SRK Consulting (U.S.), Inc. 7175 West Jefferson Avenue, Suite 3000 Lakewood, CO 80235 e-mail: [email protected] website: www.srk.com Tel: +1.303.985.1333 Fax: +1.303.985.9947 SRK Project Number 340100.070 Effective Date: August 1, 2014 Issue Date: October 20, 2014 Endorsed by CP(s): Neal Rigby, CEng MIMMM, PhD (SRK) Paul O’Hara, P.Eng. (AMEC) Reviewed by: Peter Fairfield, BEng (SRK)

SRK Consulting (U.S.), Inc. Scoping Study Update – Kola Project Page ii


Executive Summary On September 17, 2012, Elemental Minerals Ltd (ELM) issued a Technical Report compliant with

Canadian National Instrument 43-101 (NI 43-101) for a Prefeasibility Study (PFS) for the Sintoukola

Potash Project located in the Republic of Congo (ROC). While referred to as the Sintoukola Project

in the PFS report (SRK, 2012), the report was developed for the Kola deposit only and will be

referred to herein as the Kola Project (Project). The PFS report presented a Mineral Resource and

Mineral Reserve estimate, and a classification of resources and reserves in accordance with the

Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and

Reserves: Definitions and Guidelines, November 27, 2010 (CIM). The PFS defined the mine,

process facility and infrastructure requirements, costs and economics for a production target of 2

million tonnes per year (Mt/y) of muriate of potash (MoP).

Subsequent to the PFS report being issued, ELM considered alternatives to reduce the initial capital

requirements that included the following:

Reschedule mine planning to start with a Phase 1 production of 1 Mt/y of MoP for the first

four years where after Phase 2 would be completed to achieve a total nameplate capacity of

2 Mt/y of MoP using conventional underground mining methods;

A revised shaft configuration with one 12 m diameter (dia.) main shaft and a secondary

4.5 m dia. ventilation shaft for Phase 1. A refrigeration plant will be installed in the secondary

ventilation shaft as part of Phase 2;

Overland conveyor for Run of Mine (RoM) material transport, in place of the dedicated mine

haul road and off highway trucks, that will be owned and operated by a third party;

Construction of the plant in two separate 1 Mt/y phases, in place of one 2 Mt/y process

facility, with both considering a stick built approach. The phased plant construction will also

result in phased civil works, brine dilution and discharge infrastructure;

Several ROC mining companies are pursuing the construction of an export facility at Pointe

Indienne. 30 km south of Tchiboula, for the direct loading of bulk commodities such as

potash, phosphate and iron ore. ELM is in discussion with one of these companies to share

joint usage of a common facility at Pointe Indienne. A jetty is currently under construction

with an expected completion in 2016. This Scoping Study assumes that ELM will store and

transport 1 Mt/y of MoP to the commercial jetty in Phase 1 and defer the construction of the

product storage facility, jetty and transshipment system at Tchiboula until Phase 2;

The dedicated natural gas pipeline will be replaced with trucking compressed natural gas

(CNG) to the process facility site; and

Conversion of the construction camp into an operational accommodation camp during the

Phase 1 operations.

On June 24, 2014, ELM commissioned SRK Consulting (U.S.), Inc. (SRK) and AMEC Americas

Limited (AMEC) (collectively the Consultants) to update the scenario presented in the PFS to reflect

the revised implementation approach. As the design and cost estimates for the revised scenario

have not been conducted to a PFS level, the updated project plan is considered by SRK to be at a

Scoping Study level of accuracy. This included an update of the economic model to incorporate:

Capital and operating costs for the above scenarios;

Current potash market prices;

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Current spot shipping rates between ROC and Brazil;

Most current understanding of the tax regime; and

Expressions of interest (EOI) for funding of Project infrastructure, specifically contract

mining, overland conveying of material and transshipment of product.

The PFS capital cost estimates were developed using scope of facilities, civil, electrical and

mechanical equipment lists and quantities, Process Flow Diagrams (PFDs) and/or drawings, and

budget quotations from suppliers, as purchased quotations from other projects and/or in-house data

(SRK, 2012). As part of the Scoping Study, many of the PFS designs and supporting cost

calculations were considered valid, but the capital costs needed to be escalated from 2012 to reflect

2016 US dollars (US$). SRK reviewed South African and North American price indices for the time

periods, including adjustments in currencies, over the last two years and selected an escalation

factor of 3.1%. For the revised implementation approach items, scoping level capital and operating

cost estimates were provided by various vendors and ELM. SRK reviewed these costs for suitability

with current costing expectations. Capital costs were developed for each scope area based in US$

and were escalated by 1.1% to reflect Q1 2016 US$. These estimates allowed for direct costs only

and SRK included an allowance for indirect costs in the economic modelling.

There is no new information which materially affects the resource and reserve estimates that were

reported in the PFS (SRK, 2012), and they have not been upgraded or changed.

For the purpose of the Scoping Study, Total Project Capital is defined as any capital spent to

achieve the ultimate design capacity of 2 Mt/y of MoP. Phase 1 capital is defined as the initial capital

required for construction and ramp-up to the initial 1Mt/y of MoP operation and Phase 2 is defined as

the capital required after Phase 1 completion to expand the Project capacity to the ultimate 2 Mt/y of

MoP. Sustaining capital is defined as the capital required to support ongoing commercial operations

through the Life of Mine (LoM) but does not include Phase 2 capital.

Capital costs for all disciplines are summarised in Table 1.

Table 1: Capital Cost Summary

Description Phase 1

(US$000’s)Phase 2

(US$000’s)Total Project

(US$000’s)Sustaining (US$000’s)

LoM(US$000’s)

Mining 159,390 21,688 181,078 167,730 348,808 Material Handling - - - 42,462 42,462 Processing 262,534 234,270 496,805 115,746 612,550 Marine and Transshipment 14,433 99,673 114,106 47,014 161,120 Solid Residue and Brine Disposal 83,581 72,714 156,295 38,405 194,700 Employee Facilities 21,728 42,219 63,948 12,578 76,526 General Infrastructure 87,913 10,991 98,905 21,731 120,636 Owner’s Costs 35,928 24,117 60,044 - 60,044 Subtotal Capital Costs 665,507 505,673 1,171,180 445,666 1,616,846 Contingency 132,821 95,467 228,288 89,188 317,476 Subtotal Capital + Contingency 798,328 601,140 1,399,468 534,854 1,934,322 EPCM 99,791 75,143 174,933 - 174,933 Insurance 9,580 7,214 16,794 - 16,794 Capital Expenditures 907,699 683,496 1,591,195 534,854 2,126,049

Scoping level operating costs were estimated for mining, material handling, processing, product

export and natural gas supply, while operating costs for marine and transshipment (excluding

product export), residue storage and brine disposal, employee facilities, general infrastructure

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(excluding natural gas supply), environmental and G&A were factored from the PFS (SRK, 2012). All

operating costs have been escalated to Q1, 2016 US$ using the same escalation factors as for the

capital costs. The operating costs presented in Table 2 are extracted from the economic model,

which is based on the mine schedule. LoM operating costs are estimated at US$90.53/t of product

free on board (FOB).

Table 2: Life of Mine Operating Costs by Discipline

Item Total Cost(US$000’s) (Q1, 2016)

Unit Cost(US$/t MoP)

(Q1, 2016) Mining 1,551,124 34.52 Material Handling 464,632 10.34 Processing 1,020,772 22.72 Marine and Transshipment 244,380 5.44 Solid Residue and Brine Disposal 63,333 1.41 Employee Facilities 251,547 5.60 General Infrastructure 174,737 3.89 Owner Costs 297,058 6.61 Total Operating Cost (FOB) 4,067,582 90.53

The post-tax economic analysis indicates the following:

Net present value for the project at a 10% discount rate (NPV10) of US$1,836 million; and

Internal rate of return (IRR) of 24.0%.

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Table of Contents Executive Summary .......................................................................................................... ii

1 Introduction .................................................................................................................. 1

1.1 Terms of Reference and Purpose of the Report ................................................................................. 1

1.2 Qualifications of Consultants .............................................................................................................. 3

1.3 Sources of Information ........................................................................................................................ 3

1.4 Site Visits ............................................................................................................................................ 4

1.5 Effective Date ...................................................................................................................................... 4

1.6 Units of Measure ................................................................................................................................. 4

2 Property Description and Ownership ......................................................................... 5

2.1 Ownership ........................................................................................................................................... 5

3 Resources ..................................................................................................................... 6

4 Reserves ....................................................................................................................... 7

5 Updated Material Assumptions .................................................................................. 8

5.1 Mine Schedule .................................................................................................................................... 8

5.2 Material Handling System ................................................................................................................... 8

5.3 Process Facility Design ....................................................................................................................... 8

5.4 Product Export System ....................................................................................................................... 9

5.5 Natural Gas Supply System .............................................................................................................. 10

5.6 Ancillary Infrastructure ...................................................................................................................... 10

5.7 Environmental Preliminary Report .................................................................................................... 11

6 Market Studies ........................................................................................................... 12

6.1 Summary of Information .................................................................................................................... 12

6.2 Nature of Material Terms .................................................................................................................. 12

6.3 Relevant Market Studies ................................................................................................................... 12

6.4 Commodity Price Projections ............................................................................................................ 12

6.4.1 Demand ................................................................................................................................. 12

6.4.2 Supply.................................................................................................................................... 12

6.4.3 Target Market ........................................................................................................................ 13

6.4.4 Recommended Mode of Sale ................................................................................................ 13

6.4.5 Product Quality ...................................................................................................................... 13

6.5 Commodity Price Projections ............................................................................................................ 13

7 Capital and Operating Costs ..................................................................................... 15

7.1 Project Implementation Schedule ..................................................................................................... 15

7.2 Basis of Costing ................................................................................................................................ 15

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7.2.1 Escalation .............................................................................................................................. 15

7.2.2 Revised Implementation Costing .......................................................................................... 16

7.3 Capital Cost Estimates ...................................................................................................................... 16

7.3.1 Mining .................................................................................................................................... 16

7.3.2 Material Handling .................................................................................................................. 17

7.3.3 Processing ............................................................................................................................. 17

7.3.4 Marine and Transshipment.................................................................................................... 18

7.3.5 Solid Residue and Brine Disposal ......................................................................................... 19

7.3.6 Employee Facilities ............................................................................................................... 19

7.3.7 General Infrastructure ........................................................................................................... 19

7.3.8 Owner Costs .......................................................................................................................... 20

7.3.9 Project Indirect Costs ............................................................................................................ 20

7.3.10 Capital Cost Summary .......................................................................................................... 21

7.4 Operating Cost Estimates ................................................................................................................. 21

8 Economic Analysis .................................................................................................... 24

8.1 Taxes, Royalties and Other Interests ................................................................................................ 24

8.2 Economic Model Principal Assumptions ........................................................................................... 24

8.3 Cashflow Forecast and Annual Production Forecast ........................................................................ 25

8.4 Results .............................................................................................................................................. 27

8.5 Sensitivity Analysis ............................................................................................................................ 29

9 Risks and Opportunities ............................................................................................ 31

9.1 Risk Assessment and Mitigation ....................................................................................................... 31

9.1.1 Financing Risks ..................................................................................................................... 31

9.1.2 Construction Risks ................................................................................................................ 31

9.1.3 Operational Risks .................................................................................................................. 31

9.1.4 Permitting Risks .................................................................................................................... 33

9.2 Opportunities ..................................................................................................................................... 34

10 Conclusions and Recommendations ....................................................................... 35

10.1 Conclusions ....................................................................................................................................... 35

10.2 Recommendations ............................................................................................................................ 35

11 References .................................................................................................................. 36

Disclaimer ........................................................................................................................ 37

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List of Tables Table 1: Capital Cost Summary ......................................................................................................................... iii

Table 2: Life of Mine Operating Costs by Discipline .......................................................................................... iv

Table 6.5.1: Average Annual Potash Price Projections and Netback Price Calculation (US$/t) ...................... 14

Table 7.3.1.1: Mine Capital Summary .............................................................................................................. 16

Table 7.3.2.1: Material Handling Capital Summary .......................................................................................... 17

Table 7.3.3.1: Processing Capital Summary .................................................................................................... 18

Table 7.3.4.1: Marine and Transshipment Capital Summary ........................................................................... 18

Table 7.3.5.1: Solid Residue and Brine Capital Summary ............................................................................... 19

Table 7.3.6.1: Employee Facilities Capital Summary ....................................................................................... 19

Table 7.3.7.1: General Infrastructure Capital Summary ................................................................................... 20

Table 7.3.8.1: Owner Cost Capital Summary ................................................................................................... 20

Table 7.3.9.1: LoM Contingency by Major Capital Grouping ............................................................................ 21

Table 7.3.10.1: LoM Capital Cost Summary..................................................................................................... 21

Table 7.4.1: Life of Mine Operating Costs by Cost Centre ............................................................................... 22

Table 7.4.2: Selected Life of Mine Cost Element Unit Rates ........................................................................... 23

Table 8.2.1: Technical-Economic Model Parameters ....................................................................................... 25

Table 8.4.1: Life of Mine Economic Results Summary ..................................................................................... 27

Table 8.4.2: Life of Mine Economic Results ..................................................................................................... 28

List of Figures Figure 8.3.1: Production Profile ........................................................................................................................ 26

Figure 8.3.2: Annual After-Tax Cash Flow Profile ............................................................................................ 26

Figure 8.5.1: After-Tax NPV Sensitivity Graph ................................................................................................. 29

Figure 8.5.2: After-Tax IRR Sensitivity Graph .................................................................................................. 29

Figure 8.5.3: Cumulative After-Tax NPV Curves at Various Potash Price Points (at 10% discount rate) ....... 30

Figure 8.5.4: After-Tax NPV Profile .................................................................................................................. 30

SRK Consulting (U.S.), Inc. Scoping Study Update – Kola Project Page viii


List of Abbreviations

Abbreviation Unit or TermAAE Alan Auld Engineering AMEC AMEC Americas Limited ASX Australian Stock Exchange CEC Centrale Eléctrique du Congo CFR cost and freight CIM Canadian Institute of Mining, Metallurgy and Petroleum Standards CNG compressed natural gas CoG cut-off grade CP competent person CSA CSA Global Pty Ltd Dia. Diameter EBITDA earnings before tax depreciation amortization EGIS EGIS International EIS Environmental Impact Statement ELM Elemental Minerals Limited EOI Expression of Interest FEL front end loader Fertecon Fertecon Limited FOB free on board FS Feasibility study IRR internal rate of return K Potassium K2O Potassium oxide KCl Potassium chloride km Kilometre kV Kilovolt LoM Life-of-Mine m metre masl metres above sea level MGM Les Etablissements Congolais MGM S.A.R.L MoP muriate of potash Mt million tonnes Mt/y million tonnes per year MW mega watt NaCl halite NPV net present value % percent PFD process flow diagram PFS Prefeasibility study QP Qualified person ROC Republic of Congo RoM Run-of-Mine RSF residue storage facility m3 standard cubic metre SEIFSA Steel and Engineering Industries Federation of South Africa SPSA Sintoukola Potash S.A. SRK SRK Consulting (US), Inc. t tonne (metric ton) (2,204.6 pounds) t/hr tonnes per hour US$ United States dollar ZAR South African rand

SRK Consulting (U.S.), Inc. Scoping Study Update – Kola Project Page 1


1 Introduction

1.1 Terms of Reference and Purpose of the Report On May 17, 2011, Elemental Minerals Ltd (ELM) commissioned SRK Consulting (U.S.), Inc. (SRK),

AMEC Americas Limited (AMEC), EGIS International (EGIS) and CSA Global Pty Ltd (CSA) to

prepare a Technical Report compliant with Canadian National Instrument 43-101 (NI 43-101) for a

Prefeasibility Study (PFS) for the Sintoukola Potash Project located in the Republic of Congo (ROC).

While referred to as the Sintoukola Project in the PFS report (SRK, 2012), the report was developed

for the Kola deposit only and will be referred to herein as the Kola Project (Project). The PFS

Technical Report was issued on September 17, 2012 (SRK, 2012), presented Mineral Resource and

Mineral Reserve estimates, and a classification of resources and reserves in accordance with the

Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and

Reserves: Definitions and Guidelines, November 27, 2010 (CIM). The PFS defined the mine,

process facility and infrastructure requirements, costs and economics for a production target of 2

million tonnes per year (Mt/y) of muriate of potash (MoP). The PFS project configuration consisted of

the following elements:

Room and pillar mining to produce 6.8 Mt/y run of mine (RoM) material to surface;

Truck hauling over a distance of 36 kilometres (km) to the process facility located at

Tchiboula;

Ore processing at the process facility to produce 2 Mt/y of MoP and 4.8 Mt/y of halite (NaCl)

waste;

NaCl waste will be diluted and pumped into the sea;

MoP will be stored in a 200,000 tonne (t) covered facility;

MoP will be exported via a 700 metre (m) long Jetty, self-unloading barges and

transshipment 10 km offshore into typically handymax sized ocean going vessels;

Supply of power to the process facility and mine site via a 220 Kilovolt (kV) transmission line

from Mongo-Kamba II substation, 50 km to the south;

Supply of natural gas to the process facility, from the Centrale Eléctrique du Congo (CEC)

power station, 80 km to the south via a committed gas pipeline; and

Accommodation provided in a 1,000 man single status camp.

The initial capital expenditure to achieve nameplate capacity of 2 Mt/y of MoP within six months of

the commissioning of the process facility was estimated to be US$1.85 billion.

Subsequent to the PFS report being issued, ELM considered alternatives to reduce the initial capital

requirements that included the following:

Reschedule mine planning to start with a Phase 1 production of 1 Mt/y of MoP for the first

four years after which Phase 2 would be completed to achieve a total nameplate capacity of

2 Mt/y of MoP;

A revised shaft configuration with one 12 m diameter (dia.) main shaft and a secondary

4.5 m dia. ventilation shaft for Phase 1. A refrigeration plant will be installed in the secondary

ventilation shaft as part of Phase 2;

Overland conveyor for RoM material transport owned and operated by a third party, in place

of the dedicated mine haul road and off highway trucks;



Construction of the plant in two separate 1 Mt/y phases, in place of one 2 Mt/y process

facility, with both considering a stick built approach. The phased plant construction will also

result in phased civil works, brine dilution and discharge infrastructure;

Several ROC mining companies are pursuing the construction of an export facility at Pointe

Indienne, 30 km south of Tchiboula, for the direct loading of bulk commodities such as

potash, phosphate and iron ore. ELM is in discussion with one of these companies to share

joint usage of a common facility at Pointe Indienne. A jetty is currently under construction

with an expected completion in 2016. This Scoping Study assumes that ELM will store and

transport 1 Mt/y of MoP to the commercial jetty in Phase 1 and defer the construction of the

product storage facility, jetty and transshipment system at Tchiboula until Phase 2;

The dedicated natural gas pipeline will be replaced with trucking compressed natural gas

(CNG) to the process facility site; and

Conversion of the construction camp into an operational accommodation camp.

On June 24, 2014, ELM commissioned SRK Consulting (U.S.), Inc. (SRK) and AMEC Americas

Limited (AMEC) (collectively the Consultants) to update the scenario presented in the PFS to reflect

the revised implementation approach. As the design and cost estimates for the revised scenario

have not been conducted to PFS level, the updated project plan is considered by SRK to be at a

Scoping Study level of accuracy. This included an update of the economic model to incorporate:

Capital and operating costs for the above scenario;

Current potash market prices;

Current spot shipping rates between ROC and Brazil;

Most current understanding of the tax regime; and

Expression of interest (EOI) for funding of Project infrastructure, specifically contract mining,

overland conveying of material and transshipment of product.

While certain aspects of the Project follow the original PFS approach, the costs were developed in

2012. As part of the Scoping Study, many of the PFS designs and supporting costing calculations

were considered valid, but the capital costs needed to be escalated to reflect 2016 US$. SRK

reviewed South African and North American price indices for the time periods, including adjustments

in currencies, over the last two years and selected an escalation factor of 3.1%. For the revised

implementation approach items, scoping level capital and operating cost estimates were provided by

various vendors and ELM. SRK reviewed these costs for suitability with current costing expectations.

Capital costs were developed for each scope area based in US$ and were escalated by 1.1% to

reflect Q1 2016 US$.

For certain aspects of the revised implementation approach, SRK considers that these capital and

operating costs were prepared to a Scoping Study level of accuracy. Therefore, ELM and the

Consultants considered this update to be prepared at a Scoping Study level as defined by the Joint

Ore Reserves Committee (JORC) Code 2012.

This report does not include a statement or update on the previously reported mineral resource or

ore reserve estimate but relies on the tonnages and grades from the original PFS.



1.2 Qualifications of Consultants None of the Consultants employed in the preparation of this report has any beneficial interest in

ELM. The Consultants are not insiders, associates or affiliates of ELM. The results of this Technical

Report are not dependent upon any prior agreements concerning the conclusions to be reached, nor

are there any undisclosed understandings concerning any future business dealings between ELM

and the Consultants. The Consultants are being paid a fee for their work in accordance with normal

professional consulting practice.

The following individuals, by virtue of their education, experience and professional association, are

considered Competent Persons (CP) as defined in the JORC Code 2012 for this report, and are

members in good standing of appropriate professional institutions. The CP’s are responsible for

specific sections as follows:

Paul O’Hara (Manager, Process, AMEC in the Saskatoon, Saskatchewan, Canada Office) is

the CP responsible for Section 5.3; and

Dr. Neal Rigby (Corporate Consultant, Mining in the SRK, Denver, Colorado, USA office), is

the CP responsible for all other Sections presented in this report.

1.3 Sources of Information SRK relied on others for the following information used to prepare this report:

AMEC: Mr. Paul O’Hara was the Qualified Person (QP) responsible for the metallurgy and

process presented in the PFS report (SRK, 2012) and the phased process facility costing

presented in the Scoping Study;

Alan Auld Engineering (AAE): Phased mine shaft design and costing presented in the

Scoping Study;

CSA: Dr. Simon Dorling (Principal Consultant Geologist with CSA Global Pty Ltd in Perth,

Western Australia) was the QP responsible for property description, history and ownership,

geology and mineralization, drilling and sampling. Dr. Andrew Scogings (Associate Geologist

of CSA Global Pty Ltd in Perth, Western Australia) was the Qualified Person (QP)

responsible for the mineral resource presented in the PFS report (SRK, 2012);

EGIS: Jean Hector, Senior Geologist (EGIS) was the QP responsible for marine, brine

management and general Infrastructure presented in the PFS report (SRK, 2012);

SRK: Dr. Neal Rigby (Corporate Consultant, SRK US) was the QP responsible for the

Reserves and mine planning presented in the PFS report (SRK, 2012). Johan Boshoff

(Principal Geotechnical Engineer, SRK Consulting Ltd, Australasia) was the QP responsible

for the solid residue storage and Jane Joughin (Principal Environmental Scientist, SRK

Consulting (UK) Limited) was the QP responsible for environmental and social impact

assessment (ESIA) presented in the PFS report (SRK, 2012). SRK UK reviewed alternatives

proposed as part of the scoping study and performed a desktop study of potential ESIA

impacts;

ELM: Overland conveyor material handling system, product export and trucking CNG

strategies, potash pricing and inputs to the economic model;

Information in the public domain; and

Documents referenced in Section 11.



The Consultants have reviewed and relied upon the work of other consultants in the project areas in

support of this Technical Report.

Descriptions of the Project tenure were provided to the Consultants by ELM. ELM has warranted to

the Consultants that the information provided for preparation of this report correctly represents all

material information relevant to the Project. ELM has taken reasonable measures to ensure that title

to its properties are in good standing, including obtaining a legal title opinion with respect to validity

of the relevant Project licenses and agreements (PWC, 2011). No attempt to independently verify the

land tenure information was made by SRK.

The Consultants used their experience to determine if the information from previous reports was

suitable for inclusion in this technical report and adjusted information that required amending. This

report includes technical information, which required subsequent calculations to derive subtotals,

totals and weighted averages. Such calculations inherently involve a degree of rounding and

consequently introduce a margin of error. Where these occur, the Consultants do not consider them

to be material.

1.4 Site Visits The following CP’s conducted site visits to the Project on the dates indicated:

Paul O’Hara visited the site in September, 2011 to view the general location of the property

and site conditions; and

Neal Rigby of SRK undertook a site visit in November, 2012 to view the general location of

the property and site conditions.

1.5 Effective Date The effective date of this report is August 1, 2014.

1.6 Units of Measure The metric system has been used throughout this report. Tonnes are metric of 1,000 kilograms (kg),

or 2,204.6 lb. All currency is in U.S. dollars (US$) unless otherwise stated.



2 Property Description and Ownership The Project includes the Kola deposit which is a potash project situated in the Kouilou Province in

the south west corner of the ROC. The Kola deposit is a shallow, high-grade, near-term sylvinite

deposit.

2.1 Ownership The exclusive mineral exploration permit, “Sintoukola”, was awarded to Sintoukola Potash S.A.

(SPSA) through Presidential Decree No 2009-237 dated August 13, 2009 which was published in the

Congolese Official Gazette No 35 on September 27, 2009. The Sintoukola exploration permit for

1,408 km2 was awarded for an initial period of three years and can be renewed twice for two

extension periods of two years. ELM has informed SRK that the permit has been renewed once,

decreasing the surface area to 1,408 km2 and a second permit renewal application was submitted on

May 7, 2014. Receipt of the application was confirmed by the government agency on May 22, 2014.

The exploration permit area will be reduced to 1,067 km2 to extract the Kola mining license area

during the second renewal.

SPSA is a company registered in the ROC and ELM holds 97% of the equity in SPSA. Les

Etablissements Congolais MGM S.A.R.L (MGM) will remain as a 3% shareholder and will retain the

Chairmanship of SPSA until the Government take a 10% free carry stake. Terms have been agreed

with MGM for the balance of Sintoukola.

In addition to the exploration license, SPSA was awarded a mining license for the Kola deposit. The

size of the license area is 204.52 km2 as per presidential decree 2013-412 issued on August 9, 2013

and gazette on August 15, 2013. The focus of the Project presented in this Scoping Study report lies

entirely within this Kola mining license area.



3 Resources The mineral resource estimate is presented in Section 12 of the PFS (SRK, 2012).



4 Reserves The mineral reserve estimate is presented in Section 13 of the PFS (SRK, 2012).



5 Updated Material Assumptions This section discusses areas that have changed from the PFS as outlined in Section 1.1.

5.1 Mine Schedule SRK reviewed the current price and cost assumptions and confirmed that the change to the Cut-off

Grade (CoG) did not have a material impact on the mine design. SRK then used the tonnage and

grades stated in the 2012 PFS mineral reserve (SRK, 2012) to develop an alternate mining case

which reduced initial capital expenditure. With respect to mining, the updated scenario includes the

following changes to the 2012 PFS:

Production schedule: Mine scheduling will support production of 1 Mt/y of MoP for the first

four years, increasing production to 2 Mt/y of MoP during Phase 2;

Ventilation: During the lower production capacity in Phase 1, refrigeration is not required.

Refrigeration will be required as part of full production in Phase 2;

Shaft size and configuration modifications: A revised shaft configuration with one 12 m dia.

main shaft and a secondary 4.5 m dia. ventilation shaft for Phase 1. No additional shafts will

be required as part of Phase 2;

Contractor mining; and

Escalation of costs to 2016 US$.

5.2 Material Handling System The material handling system for the Scoping Study consists of the following:

Mine site material handling equipment, which will include a 40,000 t covered storage

stockpile that is fed by a single high angle conveyor with RoM material. The facility will

include a reclaimer at the bottom of the covered storage feeding the overland conveyor;

A 35 km long overland conveyor system which is fully covered and fully fenced with several

crossing points strategically located for people and animals along the route. The overland

conveyor system includes a service road with drainage and crossing culverts that will allow

for inspection and maintenance. The overland conveyor will consist of two flights, with

intermediary booster drives installed at each of the two flights. The belt system is expected

to have an overall availability of 90%, with a design capacity of 1,000 tonnes per hour (t/h),

resulting in a nominal annual capacity of approx. 7.8 Mt/y; and

Plant site material handling system where the overland conveyor discharges into a 40,000 t

storage dome. At the dome bottom, a second conveyor reclaims the material and feeds it to

the process facility crusher.

5.3 Process Facility Design The Phase 1 process facility consists of the first 1.0 Mt/y of MoP train and includes equipment that is

used for both phases (i.e.: the fine material bin and the insoluble thickener), while Phase 2 would

complete the plant with another 1.0 Mt/y of MoP train. Other phased activities included the following:

The wet process and dry process buildings were split into two trains that correspond with the

two phases. AMEC estimated that 60% of the ultimate process buildings will be installed



during Phase 1, with the remaining 40% installed during Phase 2 (the Phase 2 building will

be attached to the existing Phase 1 structure);

Two compactors will be installed during Phase 1 and three compactors will be installed

during Phase 2, resulting in 71% granular product for Phase 1 and 89% granular product for

Phase 2;

The majority of the equipment in the tailings building (insolubles) is required for Phase 1,

therefore the entire tailings building will need to be installed in Phase 1. However, only the

equipment required for Phase 1 will be installed (i.e., half of the salt centrifuges and the

associated equipment are included in Phase 2);

The entire reagents building and associated equipment will be installed during Phase 1;

The product storage building, reclaim screening building and associated equipment will be

installed in Phase 2; and

The insolubles will be filtered using a belt filter, transported to the Residue Storage Facility

(RSF) and dry stacked.

5.4 Product Export System Several ROC mining companies are pursuing the construction of an export facility at Pointe Indienne

for the direct loading of bulk commodities such as potash, phosphate and iron ore. ELM is in

discussion with one of these companies to share joint usage of a common facility at Pointe Indienne.

One of these jetties is currently under construction, with an expected completion in 2016. This

Scoping Study assumes ELM will make use of a containerised solution used to store and transport 1

Mt/y of MoP to this commercial jetty in Phase 1 and defer the construction of the product storage

facility, jetty and transshipment system until Phase 2.

The Phase 1 product export system at the Tchiboula site will include conveying the product from the

process facility to an 80 m by 80 m loading platform with a simple covered roof structure. A CAT 988

Front End Loader (FEL) will load product from this stockpile into 6.1m long storage containers with a

capacity of approximately 27 t. Three telescoping reach loaders will be used to move, stack and

store the containers on an 80 m by 100 m storage pad. The containers will be loaded onto over-the-

road truck and twin trailer units and hauled from Tchiboula along approximately 50 km of paved

highway RN5 and approximately 10 km of improved gravel access road to the commercial jetty near

Pointe Indienne. Trucks will return empty containers to Tchiboula on the return trip.

At the Pointe Indienne jetty, ELM will construct a 120 m by 100 m container storage pad that will

provide storage for approximately 67,000 t or 2,500 containers. Three telescoping reach loaders will

either unload the containers or transport them directly to the ship loading system. The ship loading

system will include a small covered facility where the containers are moved by the reach stackers to

a tippler and containers are unloaded into a bin feeding a conveyor system that then connects to the

2,000 t/hr ship loading conveyor.

The truck fleet to support the transportation of 1 Mt/y of MoP will consist of approximately 15 truck

and trailer units including spares, making approximately 50 round trips per day. The cost estimate

includes road upgrades for RN5 and turning loops/parking and pad work, and support facilities for

truck maintenance and fuelling at Pointe Indienne in the costing. It was assumed that a contractor

will own and operate the truck fleet and ELM will lease the containers. Phase 2 will utilise the product

storage facility, jetty and transshipment facilities to be constructed at Tchiboula per the PFS.



5.5 Natural Gas Supply System CNG will be trucked from the natural gas offtake point located at the CEC power station, near Pointe

Noire to the process facility at Tchiboula. Phase 1 will require 30,000 standard cubic metres (m3) of

CNG per day and Phase 2 will require 60,000 m3 per day to support 2 Mt/y of MoP production.

The CNG supply system will consist of a natural gas compression and charging system at the CEC

source station. The CEC power station is a 300 megawatt (MW) natural gas fired power station

constructed in 2009 and is owned by a joint venture between the ROC government and ENI, the

international oil and Gas Company headquartered in Italy and operated by the company Dietsmann.

The quantities of natural gas required by the Project are negligible compared with the quantities

consumed by the power station. The compressor facilities at CEC in Phase 1 will have two charging

stations capable of filling in approximately four hours. The Phase 2 charging stations will be installed

at that time to double the capacity.

The trucking system will consist of a small fleet of trucks (three for Phase 1) that will pull a two trailer

system with modular CNG tanks. The trailers will each have several CNG tanks with a capacity of

6,000 m3 per trailer or 12,000 m3 per truck. Each truck will complete approximately three round trips

per day. The trucks will travel on the paved RN5 from the CEC power station through Pointe Noire to

a short segment of improved gravel road near the process facility at Tchiboula. The trailer units will

be left at the process facility for unloading, and empty units will be returned for refill at CNC on the

backhaul. The number of loads will be doubled for Phase 2.

The process facility at Tchiboula will have approximately one day supply of CNG in tanks or extra

trailer units due to the relative short haul from the source facility. A single decompression and

unloader unit can unload 12,000 m3 of CNG in approximately eight hours. In Phase 2, the system will

be doubled in size.

Truck maintenance facilities will be shared with the product export system, which will continue to be

used in Phase 2. Road maintenance considerations have been included in the RN5 upgrades.

5.6 Ancillary Infrastructure While the revised implementation approach introduced several changes to the infrastructure, items

such as the power supply and distribution, waste water treatment, firefighting and communication will

be constructed, and have been costed, per the original PFS scope. Other ancillary facilities from the

PFS were adjusted or factored as follows:

Buildings. Mine and process facility buildings were reviewed to determine their applicability

and scheduling for the phased approach. For example, any road train related buildings were

removed from the Scoping study, and the supporting facilities, such as offices and mess

facilities, were scaled down accordingly to reflect the reduced staffing in Phase 1;

Roads. Road improvement requirements for ET1, ET2, NT and RN5 were reviewed and

updated to reflect the phased construction. For example, the improvement of ET1 is

currently planned by the ROC government and has been removed from the Project scope

while an additional allowance to upgrade ET2 has been made to accommodate the product

export system in Phase 1;



Refuelling Facilities. As the haul truck trains have been replaced by conveyors for material

handling between the mine and the plant facilities, the refuelling stations at the mine site

have been reduced in scale;

RSF. A phased RSF using a dry stack placement method will be used. As the quantity of

insolubles is relatively small (typically less than 1%), the capital costs from the conventional

tailings system developed in the PFS were used in the SS;

River barges. Based on the original PFS schedule, rental of river barges was needed to

transport construction materials across the Koulou River during bridge repair periods. As

ELM expects the bridge work to be completed prior to Project construction, ELM has

removed these costs;

Brine Discharge. The brine modelling work undertaken subsequent to issuing the PFS

suggested that a higher pre-dilution (i.e., larger flow) was needed to achieve the brine

dispersion parameters from the single discharge pipeline. This resulted in an increased brine

discharge capital cost that is reflected in the capital cost estimate. In addition, the single

pipeline was replaced with two intake and discharge pipelines to reflect the phased

approach. This decreases the initial capital but increases the total capital for the brine

discharge system;

Employee Facilities. The construction camp at the process facility will be upgraded and used

as the accommodations camp for Phase 1. Therefore, the ultimate employee facilities will be

constructed as part of Phase 2; and

Freshwater supply. The freshwater supply at both the Mine and process facility has been

factored to reflect the phased implementation approach with the ultimate PFS requirements

being supplied as part of Phase 2. For example, five wells are required to supply freshwater

at the process facility for Phase 2, with three wells being constructed as part of Phase 1.

5.7 Environmental Preliminary Report A comprehensive Environmental and Social Impact Assessment (ESIA) that met national and

international requirements has been completed and the ESIA report was approved by the Congolese

Government in August 2013 as part of the currently defined PFS. A thorough understanding of

baseline conditions was developed through the field studies undertaken as part of the ESIA.

As the Project will be located in a sensitive biophysical and social environment, opportunities to avoid

or minimise negative impacts were identified and integrated with project designs throughout the

ESIA. Most of the potential impacts of the Project can be readily managed through the

implementation of standard environmental management plans.

A Certificat de Conformité No 001466/MTE/CAB/DGE/DPPN was granted on September 11, 2013

and gazetted on October 10, 2013, which approved ELM’s ESIA for development of the Project as

part of the mining license application based on the currently defined PFS. The Certificat de

Conformité is valid for one year from the gazettal date and must thereafter be renewed annually. The

renewal was submitted on September 11, 2014 and is currently being processed by the Ministry of

Environment. The mining licence was granted on August 12, 2013 and gazetted on August 15, 2013.

The mining licence is valid for 25 years.

The revised implementation approach alters some of the impacts identified and evaluated during the

ESIA. As such these permits will need to be updated to reflect the currently defined PFS along with

the revised implementation approach.



6 Market Studies

6.1 Summary of Information Potassium (K) is one of the three fertilizer nutrients essential for agricultural output and demand is

driven by projected global food consumption.

ELM utilised market research from Fertecon Limited (Fertecon) Potash Outlook 2014-01 report

(Fertecon, 2014) to develop its potash marketing strategy. Fertecon is a respected independent

potash commodity research analyst, utilised by potash industry participants. The report covered all

aspects of potash supply, demand, marketing, potash transportation logistics and pricing. Fertecon

foresee a strong growth in both demand and supply in potash in the next decade.

For the purpose of the Scoping study, Brazil is considered to be the target market for product from

the Project with projected growth in the Brazilian potash demand considered to be sufficient to

absorb all the Kola production.

The preferred product in the Brazilian market is granular material, which will form the bulk of the

production from the Project, at a targeted MoP grade of 60.5% potassium oxide (K2O). Fertecon

provided Cost and Freight (CFR) price projections for the Brazil market through 2025. Thereafter, the

2025 price was kept constant.

6.2 Nature of Material Terms No material contracts are in place at this time.

6.3 Relevant Market Studies ELM used Fertecon’s Potash Outlook (Fertecon, 2014) to form the basis of pricing assumptions.

6.4 Commodity Price Projections

6.4.1 Demand

Whilst global potash consumption was 53.8 Mt/y of MoP in 2013, Fertecon forecast this demand to

grow to 83 Mt/y by 2025. This demand growth is driven primarily by emerging markets with large

populations and strong agricultural sectors. Fertecon estimated that China, Brazil, India and

southeast Asia all show significant growth, while the United States and the rest of the world will

remain large and steady consumers, with moderate growth.

6.4.2 Supply

By the end of 2013, the world potash industry had capacity for 81 Mt/y, based on more than 45

operations in thirteen countries. In the eight years since 2005, this installed production capacity has

increased by 20 Mt/y, mostly through the expansion of existing production sites in Canada, China

and Russia. Two thirds of the current capacity total is located in just three countries – Canada,

Russia and Belarus. Worldwide, ten companies control 90% of the total capacity, with the three

largest accounting for one half of the total. Approximately one third of global capacity is controlled by

Uralkali and Belaruskali in the Former Soviet Union and another third of global production comes



from the Saskatchewan deposits through Agrium, Mosaic and PotashCorp. All three companies sell

their product as members of Canpotex. ELM has the opportunity to supply potash from a new

production district, unencumbered by existing marketing and export associations.

6.4.3 Target Market

As part of the PFS, CRU prepared a detailed report for ELM, considering ideal target markets for the

Project. The CRU report discussed five target markets in detail, namely: Brazil, China, India,

Southeast Asia and South Africa. This compared well with the updated report issued by Fertecon.

The research indicated that ELM should focus exports on Brazil and South Africa, mainly due to

highly competitive freight rates and expected ease of entry into these markets.

6.4.4 Recommended Mode of Sale

SPSA has the options of selling its product on a Free on Board (FOB) Pointe Noire basis,

establishing its own in-market presence with offices and employees and/or agents, or a combination

of both. SPSA is currently assessing each of these options.

6.4.5 Product Quality

In Brazil, some 85% to 95% of the total Potassium Chloride (KCl) demand is in the form of granular

grade material, mostly for bulk blending. Consequently, SPSA will produce a predominantly granular

product once operations are in steady state. The smaller amount of standard product that will be

produced by SPSA can be sold into any of the potash markets, but preferably South Africa.

The Brazilian market accepts MoP product with a grade of at least 60% K2O, while lower grades will

lead to price penalties and a poor reputation. Some allowance for product grade variations is

therefore made in the process facility design, with a targeted K2O grade of 60.5% in MoP.

6.5 Commodity Price Projections Fertecon’s potash price forecast to 2025 is shown in Table 6.5.1. The CFR price reflects the price

that buyers will pay for standard product at the port in Brazil. Granular potash product is sold at a

premium of US$15/t to US$20/t to standard product. For this reason, a US$15/t premium was

applied to the Fertecon price projections.

The economic model uses a netback ROC price, which is determined from the Brazilian CFR price,

the granular product premium and shipping rates from the ROC to Brazil. Prices beyond 2025 are

held fixed at the 2025 level. These netback prices are also shown in Table 6.5.1.



Table 6.5.1: Average Annual Potash Price Projections and Netback Price Calculation (US$/t)

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026+ Fertecon July 2014 Brazil cfr standard (US$/t) 335 355 370 385 385 400 410 430 420 400 410 440 440 Granular product premium (US$/t) 15 15 15 15 15 15 15 15 15 15 15 15 15 Brazil cfr granular (US$/t) 350 370 385 400 400 415 425 445 435 415 425 455 455 Shipping rate to Brazil (US$/t) 13 13 13 13 13 13 13 13 13 13 13 13 13 Netback Price in ROC (US$/t) 337 357 372 387 387 402 412 432 422 402 412 442 442



7 Capital and Operating Costs

7.1 Project Implementation Schedule Key milestones for engineering and construction of the mine, process facility and infrastructure are

summarised as follows:

Start FS: Q1 2015;

Complete FS: Q1 2016;

Phase 1 construction commences: Q2 2016;

Phase 1 Shaft sinking commences: Q2 2016;

Phase 1 Mining commences: Q3 2018;

First material through the Phase 1 process facility: Q3 2018;

First product shipped: Q3 2018;

Achieve Phase 1 nameplate capacity: Q1 2019;

Phase 2 start construction: Q1 2021; and

Achieve Phase 2 nameplate capacity: Q1 2023.

7.2 Basis of Costing

7.2.1 Escalation

PFS capital cost estimates were developed using scope of facilities, civil, electrical and mechanical

equipment lists and quantities, PFD’s and/or drawings, and budget quotations from suppliers, as

purchased quotations from other projects and/or in-house data (SRK, 2012). As part of the Scoping

Study, many of the PFS designs and supporting costing calculations were considered valid, but the

capital costs were escalated to reflect 2016 US$.

ELMs procurement strategy will be to purchase approximately 50% of the capital items from South

African sources and 50% from other international sources. SRK reviewed published price indices,

including the following mining indices:

The South African indices utilised were the Steel and Engineering Industries Federation of

South Africa (SEIFSA) Price and Index Pages (PIPS) dated June 30, 2014. The Contract

Price Adjustment Provision Indices were chosen and an average of the indices with a basis

of April, 2014 was used. These indices have their currency basis in South African Rand

(ZAR); and

The international market was considered by using North American Indices selected from

CostMine Mine Cost Estimating (MCS) Cost Indices dated April, 2014 for underground

mines and mills. The indices have their basis in US$.

Adjustments to the indices were made to account for differing time frames available versus the actual

Project escalation time frame. An additional currency correction for conversion of the ZAR to US$

was completed as the currency in this report is based in US$. Based on these indices, a Project

escalation factor of 2.0% was calculated for the period from June, 2012 to September, 2014. This

corresponds to an annual escalation of 0.9%, which was used to further escalate costs to a March

2016 basis by 1.1%, for a total escalation of 3.1%.



The same escalation factors were used for both capital and operating costs.

7.2.2 Revised Implementation Costing

For the revised implementation approach scoping level capital and operating cost estimates were

provided by various vendors and ELM. SRK reviewed these costs for suitability with current costing

expectations.

7.3 Capital Cost Estimates Capital cost estimates are all based in Q1 2016 US$. For the purpose of this report, Total Project

Capital is defined as any capital spent to build the ultimate design capacity of 2 Mt/y of MoP. Phase

1 capital is defined as the initial capital required for construction and ramp up to the initial 1 Mt/y of

MoP operation. Phase 2 is defined as the capital required after Phase 1 completion to expand the

Project capacity to the ultimate 2 Mt/y of MoP. Sustaining capital is defined as the capital to support

ongoing commercial operations through the Life of Mine (LoM) but does not include Phase 2 capital.

7.3.1 Mining

A capital cost estimate based on the mine production schedule was prepared by SRK and is

presented in Table 7.3.1.1. Total mine and mine site capital costs include shaft sinking, vertical

conveyance, ventilation, mine services, surface equipment and buildings.

Table 7.3.1.1: Mine Capital Summary

Description Phase 1

(US$000’s) Phase 2

(US$000’s) Total Project

(US$000’s) Sustaining (US$000’s)

LoM (US$000’s)

Shaft Sinking 115,992 - 115,992 - 115,992 Vertical Conveying 16,854 914 17,768 5,481 23,249 Mine Equipment - - - 133,673 133,673 Underground Conveying - - - 26,830 26,830 Mine Ventilation 2,180 303 2,484 51 2,534 Refrigeration - 3,761 3,761 - 3,761 Mine Services 4,975 - 4,975 - 4,975 Capitalised Pre Production Operating Costs - - - - -

Subtotal Mine Underground 140,001 4,978 144,979 166,035 311,014 Surface Material Handling (Stockpile/Load out) - - - - - Mine Buildings and Utilities 19,388 16,710 36,099 1,696 37,795

Mining and Mine Site Surface 19,388 16,710 36,099 1,696 37,795 Contingency 31,497 4,091 35,587 33,521 69,108

Total Mining 190,886 25,779 216,665 201,251 417,917

As part of ELM’s strategy to decrease Phase 1 capital, an EOI was provided by an underground

mining contractor to perform contract underground mining services. The indicative terms of this

agreement are that capital will be recovered over a period of five years at an interest rate of 10%,

with an additional 12% margin for contractor profit. This contractor is willing to purchase and operate

the underground mining equipment and conveyors and recover these costs as an operating expense

during the LoM. This results in a capital saving of US$62.6 million for Phase 1 and further savings of

US$104.8 million for Phase 2. Thus the capital costs for these items are not included in the Phase 1

or Phase 2 capital cost estimates presented in Table 7.3.1.1.



While replacement and maintenance of the mining equipment will be the responsibility of the mining

contractor, the Sustaining Capital calculations were modelled with ELM purchasing all of the mine

equipment required during commercial operations and would subsequently free issue the equipment

to the contractor. ELM, however, would realize the depreciation benefit against the project’s taxable

income.

7.3.2 Material Handling

A capital cost estimates were prepared by ELM and reviewed by SRK is presented in Table 7.3.2.1.

Table 7.3.2.1: Material Handling Capital Summary

Description Phase 1




LoM (US$000’s)

Overland Conveyor Belt - - - 42,462 42,462 Subtotal - - - 42,462 42,462 Contingency - - - 8,492 8,492

Total Material Handling - - - 50,954 50,954

As part of ELM’s strategy to decrease Phase 1 capital, an EOI was provided by a construction

company to provide contract conveying services. The indicative terms of this agreement are that

capital will be recovered over a period of 10 years at an interest rate of 20%, with an additional 15%

margin for contractor profit. This contractor is willing to purchase and operate the loading, overland

conveyance, offloading and material storage facilities at both the Mine and Plant sites, and recover

these costs as an operating expense during the LoM. This results in a capital saving of US$193.9

million for Phase 1, thus this cost is not included in the Phase 1 capital cost estimate.

While replacement and maintenance of the material handling equipment will be the responsibility of

the construction contractor, the Sustaining Capital calculations modelled with ELM purchasing all of

the replacement equipment required during commercial operations and would subsequently free

issue the equipment to the contractor. ELM, however, would realize the depreciation benefit against

the project’s taxable income.

7.3.3 Processing

A capital cost estimate for the process facility was prepared by AMEC and ancillary infrastructure

and was factored as described in Section 5 by ELM. Costs were escalated by SRK and are

presented in Table 7.3.3.1.



Table 7.3.3.1: Processing Capital Summary

Description Phase 1




LoM (US$000’s)

Process Facility Capital Cost 214,535 193,113 407,647 99,409 507,056 Non Process Specific Buildings found at the Process/Marine Site

16,858 12,181 29,039 15,615 44,654

Waste Treatment Plant 2,062 - 2,062 722 2,784 Power Distribution 103 - 103 - 103 Process Site Utility Network - - - - - Process Site Platform 28,977 28,977 57,954 - 57,954 Subtotal Process Site: Site Prep and Ancillary

47,999 41,158 89,157 16,337 105,494

Subtotal Process facility & Site 262,534 234,270 496,805 115,746 612,550

Contingency 62,283 55,901 118,184 27,303 145,487

Total Processing 324,818 290,171 614,989 143,049 758,037

7.3.4 Marine and Transshipment

Capital cost estimates for the marine facilities were developed by EGIS during the PFS (SRK, 2012),

reviewed and escalated by SRK, and deferred to Phase 2, per Section 5. Phase 1 capital accounts

for the product export system developed by ELM that is presented in Section 5, reviewed and

escalated by SRK. Phase 2 will utilise the product storage facility, jetty and transshipment at

Tchiboula per the PFS. The resulting capital cost estimate is presented in Table 7.3.4.1.

Table 7.3.4.1: Marine and Transshipment Capital Summary

Description Phase 1




LoM (US$000’s)

General - 4,536 4,536 516 5,052 Trestle & Loading platform - 34,951 34,951 8,660 43,611 Export Solutions 14,433 14,719 29,152 - 29,152 Breakwater - 34,435 34,435 6,908 41,343 Barges & Workboat - - - 30,930 30,930 Material Handling Equipment - 11,032 11,032 - 11,032

Subtotal Marine and Transshipment 14,433 99,673 114,106 47,014 161,120

Contingency 4,330 12,926 17,256 6,082 23,339

Total Marine and Transshipment 18,763 112,599 131,362 53,096 184,458

As part of ELM’s strategy to decrease capital, ELM received an EOI from a shipping company to

provide transshipment services between the jetty located at Tchiboula and the ships to be loaded

offshore. The indicative terms of this agreement are that capital will be recovered over a period of 8

years at an interest rate of 15%, with an additional 20% margin for contractor profit. This contractor is

willing to purchase and operate the barges and recover these costs as an operating expense during

the LoM. This results in a capital saving of US$57.0 million for Phase 2, thus this cost is not included

in the Phase 2 capital cost estimate.

While replacement and maintenance of the transshipment equipment will be the responsibility of the

transshipment contractor, the Sustaining Capital calculations modelled with ELM purchasing all of

the transshipment equipment required during commercial operations and would subsequently free

issue the equipment to the contractor. ELM, however, would realise the depreciation benefit against

the project’s taxable income.



7.3.5 Solid Residue and Brine Disposal

Solution residue and brine discharge capital cost estimates were prepared by ELM as presented in

Section 5, and reviewed and escalated by SRK. The capital cost estimated for the Waste and Brine

Disposal is summarised in Table 7.3.5.1.

Table 7.3.5.1: Solid Residue and Brine Capital Summary

Description Phase 1




LoM (US$000’s)

Seawater Abstraction and Brine Dispersion 72,714 72,714 145,428 28,868 174,296 RSF 10,867 - 10,867 9,537 20,403

Subtotal Waste and Brine 83,581 72,714 156,295 38,405 194,700

Contingency 17,259 14,543 31,802 8,158 39,960

Total Solid Residue and Brine Disposal 100,840 87,257 188,097 46,563 234,660

7.3.6 Employee Facilities

Employee facility capital cost estimates were prepared by ELM as presented in Section 5, and

reviewed and escalated by SRK. The capital cost estimated for the Employee Facilities is

summarised in Table 7.3.6.1.

Table 7.3.6.1: Employee Facilities Capital Summary

Description Phase 1




LoM (US$000’s)

Buildings 17,424 33,611 51,035 12,578 63,613 Utilities - - - - - Platform and Access 4,304 8,609 12,913 - 12,913 Subtotal Employee Facilities 21,728 42,219 63,948 12,578 76,526

Contingency 3,130 6,075 9,205 1,887 11,091

Total Employee Facilities 24,858 48,294 73,153 14,465 87,617

7.3.7 General Infrastructure

General infrastructure capital cost estimates were prepared by ELM as presented in Section 5, and

reviewed and escalated by SRK. The capital cost estimated for infrastructure is summarised in Table

7.3.7.1.



Table 7.3.7.1: General Infrastructure Capital Summary

Description Phase 1




LoM (US$000’s)

Communications Network 1,186 - 1,186 - 1,186 Power Supply 43,199 - 43,199 - 43,199 Natural Gas Trucking - drying only 6,774 2,831 9,605 4,853 14,457

Subtotal Power and Natural Gas 51,158 2,831 53,989 4,853 58,842

ET1 (existing track to mine site) 5,258 - 5,258 - 5,258 ET2 (existing track to Tchiboula) - - - 5,464 5,464 NT (new service track Tchiboula to ET1) 5,877 - 5,877 3,093 8,970 N5 (upgrade & repair) 5,000 - 5,000 - 5,000

Subtotal Roads 16,135 - 16,135 8,557 24,692

Water supply 17,156 7,279 24,435 7,011 31,446 Other (Fire Fighting, refuelling) 3,464 882 4,346 1,310 5,656

Subtotal General Infrastructure 87,913 10,991 98,905 21,731 120,636

Contingency 14,321 1,932 16,253 3,745 19,998

Total General Infrastructure 102,234 12,923 115,158 25,476 140,634

7.3.8 Owner Costs

Owner capital cost estimates were prepared by ELM as presented in Section 5, and reviewed and

escalated by SRK. A summary of the Owner’s Capital Cost estimate is presented in Table 7.3.8.1.

Table 7.3.8.1: Owner Cost Capital Summary

Description Phase 1




LoM (US$000’s)

Home Office Management 2,775 1,800 4,575 - 4,575 Site Management 3,807 2,470 6,277 - 6,277 Commissioning and Start-up 1,196 1,196 2,392 - 2,392 Consultants 742 742 1,485 - 1,485 Travel Costs 2,321 2,321 4,642 - 4,642 Accommodation 1,242 1,242 2,484 - 2,484 Provisional & General Costs 23,843 14,345 38,189 - 38,189

Barge Rentals During Construction - - - - -

Subtotal Owners Costs 35,928 24,117 60,044 - 60,044

Contingency - - - - -

Total Owners Costs 35,928 24,117 60,044 - 60,044

7.3.9 Project Indirect Costs

Project indirect costs include the following:

Contingency was applied as a factor to the total direct costs based on the level of accuracy

for the individual disciplines, to reflect the variability between the PFS costs and the Scoping

level costs. The contingency is summarised in Table 7.3.9.1;

An allowance for Engineering, Procurement, and Construction Management (EPCM) of

12.5% of Direct Capital and Contingency has been made, consistent with the PFS (SRK,

2012); and

An allowance for Insurance of 1.2% of Direct Capital and Contingency has been made.



Table 7.3.9.1: LoM Contingency by Major Capital Grouping

Description Value (%)Mining 19.8Material Handling 20.0Processing 23.8Marine and Transshipment 14.5Solid Residue and Brine Disposal 20.5Employee Facilities 14.5General Infrastructure 16.6Owners Costs -Weighted Average Contingency 19.6%

7.3.10 Capital Cost Summary

The Phase 1 capital cost estimate is US$908 million and the Phase 2 capital cost estimate is

US$683 million, for a Total Project capital cost estimate of US$1,591 million. The LoM capital cost

estimate is US$2,126 million for all disciplines and is summarised in Table 7.3.10.1.

Table 7.3.10.1: LoM Capital Cost Summary

Description Phase 1




LoM (US$000’s)

Mining 159,390 21,688 181,078 167,730 348,808 Material Handling - - - 42,462 42,462 Processing 262,534 234,270 496,805 115,746 612,550 Marine and Transshipment 14,433 99,673 114,106 47,014 161,120 Solid Residue and Brien Management 83,581 72,714 156,295 38,405 194,700 Employee Facilities 21,728 42,219 63,948 12,578 76,526 General Infrastructure 87,913 10,991 98,905 21,731 120,636 Owner's Costs 35,928 24,117 60,044 - 60,044 Subtotal Capital Costs 665,507 505,673 1,171,180 445,666 1,616,846 Contingency 132,821 95,467 228,288 89,188 317,476 Subtotal Capital + Contingency 798,328 601,140 1,399,468 534,854 1,934,322 EPCM 99,791 75,143 174,933 - 174,933 Insurance 9,580 7,214 16,794 - 16,794 Capital Expenditures 907,699 683,496 1,591,195 534,854 2,126,049

7.4 Operating Cost Estimates Operating costs consist of mine, material handling, processing, product export, RSF and brine

disposal, employee facilities, general infrastructure, environmental and general and administrative

(G&A). Scoping level operating costs were estimated for mining, material handling, processing,

product export and natural gas supply, while operating costs for marine and transshipment

(excluding product export), RSF and brine disposal, employee facilities, general infrastructure

(excluding natural gas supply), environmental and G&A were factored from the PFS (SRK, 2012). All

costs have been escalated to Q1, 2016 US$. LoM operating costs by cost centre are shown in Table

7.4.1 and have been estimated at US$90.53/t MoP FOB.

The Phase 1 operating cost is US$159.95/t MoP which includes US$43.12 of capital recovery costs

and an actual operating cost of US$116.83/t MoP. The Phase 2 operating cost is estimated at

US$102.36/t MoP which includes US$30.70 of capital recovery costs and an actual operating cost of

US$71.67/t MoP. The remaining long term operating cost after Year 10, which is the final year of

capital repayment, is estimated at US$75.03/t MoP.



Table 7.4.1: Life of Mine Operating Costs by Cost Centre

Item Phase 1 (Pre Prod to Yr 4) Phase 2 (Yr 5-10) Long Term (>Yr 10) Total Life of Mine

Phase 1(US$000’s)

Cost(US$/t MoP)

Phase 2(US$000’s)

Cost (US/t MoP)

Long Term(US$000’s)

Cost(US$/t MoP)

LoM(US$000’s)

Cost(US$/t MoP)

Contractor Mining 212,960 49.91 471,498 38.57 866,666 30.47 1,551,124 34.52 Operating 164,567 38.56 358,030 29.29 866,666 30.47 1,389,262 30.92 Capital Recovery 48,393 11.34 113,468 9.28 - - 161,861 3.60 Material Handling 159,771 37.44 232,411 19.01 72,450 2.55 464,632 10.34 Operating 24,150 5.66 28,980 2.37 72,450 2.55 125,580 2.79 Capital Recovery 135,621 31.78 203,431 16.64 - - 339,052 7.55 Process 114,302 26.79 272,479 22.29 633,992 22.29 1,020,772 22.72 Marine and Transshipment 79,073 18.53 83,329 6.82 81,978 2.88 244,380 5.44 Operating 79,073 18.53 25,016 2.05 62,540 2.20 166,629 3.71 Capital Recovery - - 58,313 4.77 19,438 0.68 77,750 1.73 Solid Residue and Brine Disposal 8,598 2.01 15,639 1.28 39,097 1.37 63,333 1.41 Employee Facilities 34,150 8.00 62,114 5.08 155,284 5.46 251,547 5.60 General Infrastructure 30,734 7.20 41,144 3.37 102,859 3.62 174,737 3.89 Environmental Operating Costs 3,034 0.71 3,641 0.30 9,102 0.32 15,776 0.35 G&A 39,924 9.36 68,959 5.64 172,398 6.06 281,281 6.26 Total Direct Operating Cost 761,617 159.95 1,334,541 102.36 2,215,803 75.03 4,067,582 90.53



Major operating cost element unit rates are provided in Table 7.4.2.

Table 7.4.2: Selected Life of Mine Cost Element Unit Rates

Description Units US$/UnitPower kWh 0.070CNG cubic metre 0.054Diesel Litres 1.060



8 Economic Analysis The economic results summarised in this section are based upon work performed by SRK. All

economic inputs were estimated in Q1, 2016 US$. The economic model reflects after-tax conditions

and is unlevered.

8.1 Taxes, Royalties and Other Interests The ROC Government has agreed to negotiate the final mining convention with SPSA and ELM

during project financial close. Therefore, ELM has reviewed the following mining conventions that

have been signed with the ROC government in the last two years and are available in the public

domain:

MagIndustries have renegotiated the mining convention for their Mengo Potash Project, prior

to commencement of the construction work. An eleven year tax holiday has been negotiated,

whereafter a corporate tax rate of 30% is applied;

Sundance Resources have signed the convention for their Nabeba Iron Ore Project in July

2014. A five year tax holiday is applied, followed by 7.5% corporate tax for the next five

years and a flat corporate tax rate of 15% thereafter; and

Zanaga Iron Ore have signed the convention for their Zanaga Project in August 2014. A five

year tax holiday is applied, where after a corporate tax rate of 15% is payable.

Whilst, the terms of these conventions are vastly different, they represent an improvement as

compared to those used in the PFS (SRK, 2012). Since the MagIndustries Project is a potash project

that is currently under construction, the terms of the MagIndustries mining convention were applied

to the Kola Scoping Study. The major fiscal terms for the project are laid out below:

Royalty of 3% levied on Earnings before tax, depreciation and amortization (EBITDA);

A tax holiday of eleven years, followed by a corporate tax rate of 30%; and

A 10% non-dilutive free carried interest for the ROC government.

8.2 Economic Model Principal Assumptions The input parameters used in the Economic Model are shown in Table 8.2.1, with the following key

assumptions summarised below:

All costs incurred by the Project through December 31, 2015 are considered sunk costs and

total approximately US$35 million;

A two year post-production period is assumed during which time infrastructure operations

will be turned over to local operators, operating costs will cease and asset retirement

obligations, or closure costs, will be incurred, which were estimated at US$22.5 million from

the PFS;

No difference between financial and tax depreciation is assumed. Depreciation is applied to

all non-mining assets on a straight line basis over 20 years with final write-off of remaining

depreciation in the final year of production;

Working capital changes assume 30 days outstanding on average for accounts receivable

and payable;



ELM will be responsible for the cost of maintaining 60 days of consumable inventories (fuel,

reagents, grinding media, etc.) on warehouse shelves, even with a contract mining

arrangement; and

A corporate tax rate of 30% applies with a maximum loss carry forward period of three years

(following an eleven-year corporate tax exclusion period from production startup).

Table 8.2.1: Technical-Economic Model Parameters

Model Parameters Technical Input Project Start Date 1-Jan-2016 Pre-Production Period 3 years Start of Commercial Production Jan 1, 2019 Phase 1 (1Mt/y of MoP) Period 2019-2022 Phase 2 (2Mt/y of MoP) Period 2023-2043 EOM Mine Life 25 years Post Production Period 2 years Average LoM Granular Potash Price - CFR Basis (US$/t) 450.00 Average LoM Standard Price - CFR Basis (US$/t) 432.00 Granular Product Premium – US$/t 15.00 Freight to Market - Average Life of Project – US$/t 13.00 Royalty 3% of EBITDA Government Free Carried Interest 10% Corporate Tax Rate 30% Depreciation Period (years) 20 Discount Rate (End of Period Discounting) 10.0% Tax Holiday 11 years

8.3 Cashflow Forecast and Annual Production Forecast The production profile is shown in Figure 8.3.1 and the annual after-tax cash flow profile is presented

in Figure 8.3.2, which shows the initial Phase 1 production rate of 1 Mt/y of MoP (3.5 Mt/y mineable

material) from 2019 through 2022 and increasing to 2 Mt/y of MoP (7 Mt/y mineable material) from

2023 onwards.



Figure 8.3.1: Production Profile

Figure 8.3.2: Annual After-Tax Cash Flow Profile



8.4 Results The economic analysis results, shown in Tables 8.4.1 and 8.4.2, indicate an after-tax Net Present

Value (NPV) for the project at a 10% discount rate of US$1,836 million with an after-tax internal rate

of return (IRR) of 24.0%. In addition to a US$90.53/t MoP cost FOB, LoM Direct Cash Cost (which

includes shipping and indirects) of US$103.53/t MoP and Total Cash Cost (which includes sustaining

capital costs) of US$125.75/t MoP are determined.

Table 8.4.1: Life of Mine Economic Results Summary

Model Parameters Units Values

Underground Mine Resource Extracted kt 151,738 Ore Mined kt 151,738 Mined K2O kt 30,371 Processing Material Delivered kt 151,738 K2O Delivered kt 30,371 Process Recovery % 89.5% K2O in Product kt 27,183 Product Grade % 60.50% MoP Product Sold kt 44,931 Sales Volumes, Prices and Delivery Costs Granular MoP Price $/t MoP 450 Standard MoP Price $/t MoP 432 Granular Product Sales kt 39,229 Standard Product Sales kt 5,702 Gross Revenue $000s 20,102,350 Freight to Market $000s (584,108) GSR Royalty $000s (463,520) Gross Income $000s 19,054,722 Operating Costs Mining Cost $000s (1,551,124) Material Transport $000s (464,632) Process Cost $000s (1,020,772) Marine Loadout $000s (244,380) Solid Residue and Brine Disposal $000s (63,333) Base Camp $000s (251,547) Infrastructure $000s (174,737) Environmental $000s (15,776) G&A $000s (281,281) Total Operating Costs $000s (4,067,582) Operating Margin $000s 14,987,140 Project Capital (Initial + Expansion) $000s (1,591,195) LoM Capital $000s (2,148,518) Income Tax $000s (2,408,368) Government Deduction $000s (1,147,738) Free Cash Flow $000s 9,282,516 Metrics NPV $000s 1,835,903 IRR $000s 24.0%



Table 8.4.2: Life of Mine Economic Results



8.5 Sensitivity Analysis A sensitivity analysis for key operating and economic parameters is shown in Figures 8.5.1 and

8.5.2. This shows the Project NPV is most sensitive to changes in potash price, whereas changes in

capital and operating costs have lower effects. Project IRR is most sensitive to potash price, followed

by capital costs and is least sensitive to operating costs.

Figure 8.5.1: After-Tax NPV Sensitivity Graph

Figure 8.5.2: After-Tax IRR Sensitivity Graph



Additional sensitivity analysis was performed for various potash prices and discount rates as shown

in Figures 8.5.3 and 8.5.4, respectively. These graphs show that the project economics are

sufficiently robust to withstand a range of potential changes in market conditions.

Figure 8.5.3: Cumulative After-Tax NPV Curves at Various Potash Price Points (at 10% discount rate)

Figure 8.5.4: After-Tax NPV Profile



9 Risks and Opportunities

9.1 Risk Assessment and Mitigation A project wide risk assessment was performed and presented for the Project in the PFS report (SRK,

2012). A summary of key risks, which have been updated to include the current Scoping Study, are

presented below.

9.1.1 Financing Risks

Project capital requirements presented in this study assume the following:

A commercial jetty facility located near Pointe Indienne. Whilst ELM is in the process of

negotiating access to such a facility, no EOI has yet been signed. Should mutually agreeable

terms not be achieved during the FS, the jetty facility at Tchiboula will need to be

constructed as part of Phase 1. This will result in US$150 million of capital from the product

storage facility, jetty and transshipment facilities moving from Phase 2 to Phase 1, decrease

the Phase 1 operating costs by US$10/t MoP and result in a neutral impact on NPV; and

Some facilities can be outsourced to third parties, such as contract mining and the conveyor

system. SRK has reviewed the expressions of interest that have been issued to date.

Further negotiations will need to be undertaken during the FS to confirm that mutually

agreeable terms can be achieved. Failure to obtain these agreements will result in increased

capital requirements.

9.1.2 Construction Risks

The Project has the following construction risks and controls:

Logistics: delays in delivering materials to site will delay project construction. The control for

this risk is the implementation of expediting systems. This control reduces the likelihood of

this risk from likely to moderate, as road and sea freight will be outsourced and therefore

many challenges that may arise will remain beyond the project’s control;

Import delays: delays in clearing materials and equipment through customs will result in

construction delays and failure to reach production targets. The control is to send equipment

specifications, waybills, etc. to customs officials in advance and to ensure that the Owner’s

Team is sufficiently staffed to expedite import procedures. Similar to the logistics risk, this

control reduces the likelihood of this risk from likely to moderate, as customs processes and

procedures are beyond the project’s control; and

Influx management: an uncontrolled influx of work seekers would result in social ills and

environmental degradation. A lack of adequate government control would drive this risk,

which may be realized during both the construction and operational phases. Government

engagement and adequate project design and stakeholder communication may mitigate the

impact of this risk, while the likelihood of it occurring remains high.

9.1.3 Operational Risks

The following operational risks and mitigation measures have been developed:



Light vehicle accidents on the way to the mine and Pointe Noire: accidents would result in

injuries and possibly fatalities. Control measures include driver training, vehicle maintenance

and public awareness campaigns, as well as strict enforcement of rules and procedures.

These control measures are considered to reduce the likelihood from likely to moderate as

light vehicle accidents are often the result of a human error in judgment and this is beyond

the project’s control;

Fiscal stability of the ROC: changes in royalties or taxes could result in fiscal instability.

Political and economic developments in the ROC could drive this risk during both the

construction and operational phases. The control is to engage with the government,

however, this control is relatively ineffective, as the ROC’s political and economic climate is

beyond the project’s control;

Reliability of grid power supply: As Kola’s power is drawn from the grid, lack of maintenance

at the power plant, action by the power supplier to cut supply or damage to the power line

could all lead to power interruptions. This leads to a loss of production and has a safety risk.

The provision of backup generators reduces the consequence and an ongoing liaison with

the power company reduces the likelihood of this risk, while the consequences of an

interruption remain high;

Salt back thickness: mine design parameters have been developed to ensure the integrity of

the salt back based on modelled salt back thickness. Uncertainty in the actual thickness may

cause these parameters to be exceeded. The saltback could break if geotechnical stability

criteria are exceeded. The control is an increase in the level of detail in the geological model

through underground drilling and the adoption of conservative geotechnical design criteria.

Provision of emergency pumping infrastructure also facilitates inrush management. Although

these controls are effective, the potential consequence of this risk is catastrophic. The

residual risk therefore remains high;

Uncertainty of hydrogeological connectivity, water inrush and disturbance zones: any of

these risks may cause a catastrophic inrush of water. Control measures for this risk include

the use of tomography, ground penetrating radar (GPR) and long hole-drilling to ensure

accurate geological and hydrogeological data and models. Provision of emergency pumping

infrastructure also facilitates inrush management. This control reduces the likelihood of the

event occurring. Risk occurrence, however, may result in the loss of the mine and therefore

the residual risk remains high;

No hauling contractor is found: The costs presented for transportation and handling of the

product to the commercial jetty location assumes contract hauling. If no contractor is

available, the project will require Owner purchase and operation of the fleet increasing

CAPEX, but reducing OPEX;

No lease container risk: The costs in the study assume leased containers, if this is not

possible the containers will need to be purchased increasing capital and reducing operating

cost;

Increased traffic: The traffic build-up on RN5 could result in a need for increased

infrastructure cost in excess of the allowance included in the study and impact cost;

CNG safety concerns: Use of CNG with relatively unskilled local operators could cause

issues. The technology is used extensively worldwide and the use of a contractor with a

trained workforce and systems to operate safely will be the preferred alternative; and



Risk of a CM mining into historic oil exploration drillholes: if a CM intersects an historic oil

exploration drillhole, this could result in a catastrophic water inrush. The control is accurate

location and avoidance of the oil exploration drillholes. This control reduces the likelihood of

the event occurring. Risk realization, however, may result in the loss of the mine and

therefore the risk remains high.

9.1.4 Permitting Risks

There are some environmental and social issues that present risks to the Project that need

management attention in order to avoid project delays and/or reputational damage, outlined as

follows:

Permitting: new approvals (or amendments to existing approvals) may need to be obtained

to reflect changes brought about by the revised implementation approach;

Stakeholder engagement: Management of stakeholder expectations is likely to be an on-

going challenge to maintaining the project’s social license to operate. Issues of particular

concern to the community are equitable employment opportunities between local people and

delays to the expected project development schedule;

Impacts on high value biodiversity: failure to adequately manage biodiversity impacts may

result in delays due to delayed approval of the amended ESIA report or resistance from

conservation NGOs and other stakeholders;

Government-led land acquisition and compensation process: the Project involves economic

displacement only; there is no physical displacement. Land acquisition and compensation in

accordance with Congolese legislation is expected to be complete before Q1, 2015. The

government-led process is not aligned with international standards that require provision for

livelihood restoration. Lack of provision for livelihood restoration may undermine the social

license to operate. ELM will review compensation provided through the DUP process and, if

necessary, will prepare a plan for compensation and restoration of lost livelihoods that

complements the government action undertaken to date;

Disposal of process waste streams: there are two principal process waste streams; insoluble

residue disposed of in an RSF, and waste brine, which will be diluted and discharged to the

sea. Geochemical characterization and modelling has been undertaken on these waste

streams. The measures identified (and committed to as part of the ESIA report) to minimise

the risks associated with these waste streams must be carried through to the detailed design

phase; and

Third party damage to infrastructure: operational disruptions may occur as a result of

intentional third party damage to infrastructure, particularly the overland conveyor, which will

be difficult to secure.

ELM is aware of these significant risks and is developing a range of approaches to address them and

manage the potential impacts on the project. With the implementation of appropriate mitigation

measures and proactive management by ELM, these risks should not represent fatal flaws for the

project. Effective stakeholder engagement must remain a core element of ELM’s mitigation and

management plans throughout the FS and the subsequent project lifecycle (from construction to

closure).



9.2 Opportunities The following opportunities have been identified for the Project

Increase the mine life from additional exploration and potential inclusion of other mining

seams;

Fine tune pillar dimensions as a result of more rigorous three dimensional creep modelling

which may result in improved panel extraction ratios;

Reduce the height of the process facility building resulting in lower capital costs;

Optimise the design of the process facility foundations to reduce the capital cost; and

Evaluate modular construction of the process facility, either to reduce the capital costs or

construction schedule, and to simplify construction logistics.



10 Conclusions and Recommendations

10.1 Conclusions The economic analysis results indicate a net present value (NPV) for the project at a 10% discount

rate of US$1,836 million with an internal rate of return (IRR) of 24.0% (after tax).

10.2 Recommendations SRK recommends that the project proceed to Feasibility Study (FS).

During the FS program SRK recommends that ELM consider the following work programs:

Commence a detailed environmental and social review to develop a strategy to obtain an

amendment to the environmental approval from regulatory authorities in a timely manner;

Improve the processing of the seismic data to enhance the imaging of the reflectors and

areas of discontinuity (potential geological disturbance areas), to allow refinement of the

geological interpretation generally. Specifically, this requires generation of improved velocity

models to develop more reliable and integrated depth-migrated models;

Perform additional characterization of the geotechnical characteristics of the seams and

interburden units by sampling and testing core, if available, or by correlating existing test

results with the new materials, and perform additional two and three dimensional finite

element sensitivity modelling of multiple seams to optimise pillar dimensions;

Advance the PFS design for the mine, material handling, process facility and infrastructure

facilities to a FS level, and the Scoping design for the conveyor, dry stack RSF and brine

discharge to a FS level;

Undertake a geotechnical and hydrogeological field and lab testing program for the shaft

design;

Perform a more detailed insoluble characterization, including a test program to investigate

the feasibility of filtering the insolubles;

Review the employee facility location and number of people to be accommodated on site

versus providing bussing from local villages;

Develop a detailed product marketing strategy to evaluate the optimal method to penetrate

the various product markets;

Confirm and document agreement to utilise the commercial jetty and establish a firm basis

for the costs;

Optimise trucking solution to the commercial jetty including bids for trucking and container

leases;

Perform a transportation study including the trucking of product to the commercial jetty and

the CNG transportation; and

Pursue outsourcing of the CNG option to a contractor to reduce risk, reduce capital expense,

and likely with little incremental impact on operating costs.



11 References Fertecon (2014). Fertecon Potash Outlook 2014-01 report.

PricewaterhouseCoopers (2011). Legal Opinion in respect of Sintoukola Potash exclusive mineral

exploration license awarded by Decree nº 2009-237 dated August 13, 2009.

SRK Consulting (U.S.), Inc. (2012). NI 43-101 Technical Report, Sintoukola Potash Project, Republic

of Congo, Report Date: September 17, 2012, Effective Date: September 17, 2012, prepared

for Elemental Minerals Limited.



Disclaimer The opinions expressed in this Report have been based on the information supplied to SRK

Consulting (U.S.), Inc. (SRK) by Elemental Minerals Limited (ELM). These opinions are provided in

response to a specific request from ELM to do so, and are subject to the contractual terms between

SRK and ELM. SRK has exercised all due care in reviewing the supplied information. Whilst SRK

has compared key supplied data with expected values, the accuracy of the results and conclusions

from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK

does not accept responsibility for any errors or omissions in the supplied information and does not

accept any consequential liability arising from commercial decisions or actions resulting from them.

Opinions presented in this report apply to the site conditions and features as they existed at the time

of SRK’s investigations, and those reasonably foreseeable. These opinions do not necessarily apply

to conditions and features that may arise after the date of this Report.