Working together for a sustainable future

The Vale Voice

In this issueKronau Project Update

The Solution Mining Process (Part 1)

Saskatchewan Watershed Authority

Q & A

Meet the Team

Project timelines delayedBased on the current weakening in the global economy, Vale has made the decision to adjust the timelines of the Kronau Project in Saskatchewan. Although the Kronau Project will be moving slower than originally anticipated, it will continue pre-feasibility work on key aspects of the project. A new timeline for the project is currently being developed.

Preliminary work continuesAs the preliminary work continues, there are two main areas of development that we are focusing on:

Water source assessment – The water intake and pipeline for the Project is a separate undertaking being led by SaskWater. Earlier this year, the Saskatchewan Watershed Authority confirmed that both Katepwa Lake and Buffalo Pound Lake could deliver sufficient water to support the Kronau Project; however, Buffalo Pound may be a more reliable water source from a water availability perspective. In light of this information, we asked SaskWater to assess Buffalo Pound as an alternative water source.

The assessment is underway and is expected to be complete by late 2012. Once the process is finished, a decision will be made on the preferred water source. SaskWater will then submit a project proposal for the water intake and pipeline project.

Environmental assessment process – We plan to submit our draft Environmental Impact Statement (EIS) to the Province before the end of 2012. The EIS will present all of the baseline environmental and socio-economic data that we have been gathering since early 2010. It will describe the project mitigation measures and assess the potential environmental effects. Community members will be invited to information sessions to learn more about our findings.

Vale remains committed to the Kronau Project. We are here to stay and be a part of the Saskatchewan community. We will continue to communicate with all stakeholders on project developments as they move forward.

Kronau Project Update

About the Cover

A photo from Vale’s Copper Cliff greenhouse. Seedlings are grown every year and used for re-greening efforts on site and across the Greater Sudbury Area.

Mining Potash

KCl = Potassium chloride = Sylvite as a mineral

NaCl = Sodium chloride = Salt = Halite as a mineral

Potash = both KCl + NaCl (and other trace salts) as a product = Sylvinite as a mineral

Brine = water + (NaCl + KCl elements) in solution and other trace elements

Did you know?

There is no such thing as a 100 per cent KCl mineral deposit. Since potash is typically formed during the evaporation of saltwater lakes, NaCl is always present where there is KCl.

Potash is primarily made of potassium chloride (KCl), along with minor amounts of sodium salt (NaCl) and moisture. With the addition of nitrogen and phosphorus, these potassium salts are turned into effective fertilizers that help plants withstand low moisture conditions, temperature extremes and disease. As the world’s population grows, fertilizers play an increasingly crucial role in enabling us to produce more food from existing agricultural land and avoid further deforestation.

Potash production involves extracting potash-bearing ore and then processing it. Potash can be extracted through conventional underground mining or solution mining. Typically, conventional mining is used when the potash deposit is less than 1,000 metres underground. For deposits that are deeper than 1,500 metres, solution mining is typically used. Solution mining techniques will be applied to the Kronau Project.

Where does potash come from?Like many minerals, potassium is a commodity not normally found in high concentrations. The largest concentrations are found in underground salt beds formed during the evaporation of ancient salt lakes.

The potash deposits found in Saskatchewan are the remnants of a large shallow inland sea – part of the Western Canadian Sedimentary Basin that once extended from Manitoba across to British Columbia and covered 1.4 million square kilometres. This basin allowed for large-scale salt deposits that at one time covered more than one-third of the total landmass of Saskatchewan. The three beds of sylvinite (potash and salt) underneath and around the Project site are called the Patience Lake, Belle Plaine and Esterhazy members.

Step 1 – GeologyGeological exploration marks the beginning of the mining process. Historical data, drilling, seismic surveys and other techniques are used to identify potash deposits. These deposits have to be free of cracks, relatively flat and low in impurities to be suitable for solution mining.

Step 2 – ExtractionAfter planning the potash operation and ensuring all economic, social and environment checks have been completed and approvals have been granted, the next step is to extract the potash.

For solution mining, this involves drilling a pair of small wells below the target potash bed to a depth of more than 1,700 metres. Modern directional drilling techniques allow a series of wells to be drilled from a single location or ‘pad’, and the wells themselves are angled out to the desired future location of the caverns. This drilling strategy minimizes surface disturbance. In most cases, activities such as farming can continue on the majority of the land throughout the entire solution mining operation.

Step 3 – Cavern DevelopmentThe next stage involves preparing a cavern for production. Once the wells are drilled, cased, and cemented to protect the upper formations, the water is injected and brine is withdrawn from each well. The water dissolves the salt and creates a cavity below the potash bed for the collection of clays or insolubles. A blanket is maintained on top of the cavity to ensure the dissolution occurs in the desired location. Modern techniques are used to monitor the cavern’s progress both directly and remotely. Next, the two caverns formed around each of the paired wells are expanded until they connect to form a single cavern. At this point, water can be injected via one well, and brine withdrawn via the other. Typically, caverns spend about one year in the development phase, but this varies depending on geology, the operating strategy and many other factors.

The Solution Mining ProcessPart 1

Cavern Connection

Patience Lake Potash Bed

Belle Plaine Potash Bed

Halite

Halite

Halite

Esterhazy Potash Bed

Modern directional drilling techniques allow a series of wells to be drilled from a single location or ‘pad’ as illustrated in this image.

Water creates two cavities, one from each well, that are developed laterally until they connect into a single cavern ready for primary mining.

Step 4 – Cavern ProductionAfter a cavern’s development is complete, it is ready for production. During this phase, the blanket is raised so that the water can be injected to commence the upward solution mining of the potash bed. The dissolution is monitored and controlled so that the maximum amount of potash is extracted while minimizing surface impact. The resulting brine contains both KCl and NaCl – a solution that is pumped through pipelines back to the plant for processing. Once the cavern has become large enough, there is also a possibility to recycle NaCl brines back into the cavern to produce more KCl while minimizing the NaCl production.

Step 5 – Cavern ClosureOnce the cavern has been fully mined (which can take more than a decade), the remediation process begins. The cavern is closed so that it will be safe, and the top section of the well is removed. The surface facilities are removed and land remediated so the surface land can be used exactly as it was prior to mining.

As a result, solution mining can be used to safely and sustainably extract potash from a depth of greater than one kilometre underground in an economic and environmentally friendly way. In the next issue, we’ll take a closer look at the processing plant and how potash is extracted out of the brine.

Primary Mining

Patience Lake Potash Bed

Belle Plaine Potash Bed

Halite

Halite

Halite

Esterhazy Potash Bed

Why is fresh water used in the development process? Can’t you use brine to create the caverns?

Water can hold a certain amount of NaCl and KCl as a dissolved element. The laws of chemistry don’t allow these proportions to be altered greatly, although they vary slightly with temperature and if other elements are present. Saturated brine already holds as much NaCl as it can carry, making it unable to dissolve more salt. Fresh water is the only solution that can dissolve more NaCl and KCl.

In the primary mining phase, water is injected via one well and brine withdrawn via the other.

A conversation with the Saskatchewan Watershed Authority

Continued on next page

Q. How much water is in Saskatchewan?Water supply varies across the province with water supplies generally being more plentiful and reliable in northern watersheds. The Saskatchewan River Basin is the most important watershed in southern Saskatchewan and provides drinking water for more than half of the people in our province. Within this basin is Lake Diefenbaker, the largest body of water in southern Saskatchewan. Lake Diefenbaker is formed by two dams: the Qu’Appelle River and Gardiner Dam.

Overall, water supplies are highly variable with extremes from very low to very high from one year to the next. So on average, we have significant amounts, but it really comes down to those below normal years.

Q. How much of Saskatchewan’s water is fit for human consumption?With proper treatment processing in place, a large portion of the water in Saskatchewan can be used for human consumption. Saskatchewan does have some saltwater lakes, such as the Quill Lakes – which comprise the largest inland body of salt water in Canada – and Manitou and Redberry lakes.

Although groundwater sources are generally more mineralized than surface water sources, with proper treatment processing in place much of Saskatchewan groundwater can be used for human consumption. In general, the deeper the groundwater is sourced, the higher the drilling cost and the higher the salinity, making the economics more challenging.

Q. How is water managed in Saskatchewan?Saskatchewan’s economy continues to grow and we want to ensure all Saskatchewan people benefit from a growing economy through an improved quality of life, and effective water management is integral to that.

We’re currently conducting the second round of consultations for a 25 Year Saskatchewan Water Security Plan which will be released this fall. A new Crown corporation called Integrated Water Saskatchewan will be created to strengthen water management in Saskatchewan.

This new agency will simplify the water-related regulatory processes and reduce confusion about which government agency is responsible for water by establishing a one-window approach for many water functions.

The 25 Year Water Security Plan will guide the government actions on water management, and Integrated Water Saskatchewan will be the strong water agency needed to lead implementation of this plan.

Q. What are your processes for water applications?Anyone wishing to begin construction, alteration, extension or operation of water works, and the right to use water, requires Watershed Authority approval. The Watershed Authority issues approvals for the construction and operation of water works and issues water rights for the sustainable use of ground and surface water for domestic (diverting stream flow), municipal, agricultural, industrial, recreation and wildlife purposes.

Clean, safe water is not only essential for a healthy environment and economic growth – it’s essential to life itself. The Saskatchewan Watershed Authority plays a multi-faceted role in leading the stewardship of our province’s water resources. We spoke with Patrick Boyle at the Watershed Authority to gain a clearer understanding of how our province manages its H2O.

Q. How much water will the Kronau Project require?Vale requested a water allocation of 60,000 cubic metres per day for the Project. The Saskatchewan Watershed Authority oversees the application process.

This is the maximum amount of water we anticipate requiring – it includes potential future expansions and doesn’t account for operation shutdowns. This amount of water supports a mining rate of 2.9 million tonnes of potash per year.

We currently aim to recycle as much water as possible, and we are continuing to explore all opportunities to reduce water usage.

Q. Why is Vale exploring another potential water source other than Katepwa Lake?The Watershed Authority has confirmed that both Katepwa Lake and Buffalo Pound Lake can deliver sufficient water to support the Project; however, from a water availability perspective, Buffalo Pound may be a more reliable source. After we were advised of this additional information, we asked SaskWater to further investigate and evaluate the viability of Buffalo Pound as a water source. As SaskWater is the utility provider of water, they are managing the water intake and pipeline project to support the Project. Once this evaluation is complete, Vale and SaskWater will be in a better position to determine the best water source.

Q. How does Vale select the best water source?Vale has been working with SaskWater and the Watershed Authority since 2010 to analyze and determine the best water source options to support the Project. In our initial examination process, we considered groundwater, effluent water, and several lake water sources. As we narrowed our choices down, we selected sources with the least amount of potential environmental impact. As we finish our assessment and comparison between Katepwa Lake and Buffalo Pound, we will base our decision on the reliability of water, the feasibility of the engineering projections, potential environmental impacts and the financial impact of each option.

Answering your questions

For more information, please visit www.swa.ca

The Saskatchewan Watershed Authority works to ensure its water supplies – which are essential for economic, social and ecological health and in supporting our province’s continuing growth – are sustainable. This includes watershed planning, operating and rehabilitating water management infrastructure and allocating surface and groundwater.

The five main areas of work undertaken by the Watershed Authority are:

a) Managing the water supply for social and environmental needs;

b) Protecting surface and groundwater quality;

c) Developing, owning and managing Saskatchewan’s water management infrastructure;

d) Collecting and analyzing data and providing information to support sound water management and use;

e) Reducing damage from flooding.

Meet the Team

Jason AshEnvironmental Lead

Since joining the Kronau Project team last June, Jason’s responsibilities have included work on a variety of health, safety, environment and community aspects of the Project. Hailing from Ontario, he holds a bachelor’s degree in mining engineering from Queen’s University and a master’s degree in management from Durham University Business School in the UK. His previous work experience has allowed him to travel the world – from working in oil and gas in Egypt to handling regulatory affairs for a diamond mine in Yellowknife, N.W.T. A true bon vivant, Jason loves good food, wine and travelling. He and his partner Becka, an emergency room nurse, share their home with their two dogs.

Latasha McMullenSolution Mining Specialist

Latasha joined Vale’s Kronau Project as a solution mining engineer in November 2011. A graduate from the University of Regina’s Industrial Systems Engineering program, she has a background in operational-based solution mining and is enjoying the transition to project work. Latasha feels lucky to have the opportunity to advance her career and skills with Vale and remain in her home province; she has lived in Saskatchewan her whole life!

Since she’s so accustomed to Saskatchewan’s expansiveness showcasing flat fields and endless skies, she loves to travel to see the other landscapes of the world. She also enjoys spending time with family and friends, practicing yoga and golfing, as well as supporting local companies and initiatives to make Regina a better place.

Contact UsFor all general inquiries contact:

Corporate Office1874 Scarth Street, Suite 1900 Regina, SK S4P 4B3 +1 (306) 791-4510 Email: kronau.project@vale.com

Exploration Office20 South Plains Road Emerald Park, SK S4L 1B7 +1 (306) 791-6551

Get to Know ValeVale is a global mining company that discovers and transforms minerals into the essential ingredients for everyday life. Vale Potash Canada Limited is a wholly owned indirect subsidiary of Vale S. A. (South America). For more information about Vale, please visit www.vale.com.

The Vale Voice is a Vale Potash Canada Limited newsletter that will provide updates on our company and the Kronau Project. To sign up and receive The Vale Voice as a mail-out or PDF file, please email kronau.project@vale.com.