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Encanto Potash releases positive Preliminary Economic Assessment for Muskowekwan Project

Vancouver, British Columbia - Encanto Potash Corp. ("Encanto" or the "Company") (TSXV: EPO)(OTCQX: ENCTF) is pleased to report results of a positive Preliminary Economic Assessment ("PEA") carried out on the Muskowekwan Project in Saskatchewan, Canada by Wardrop, a Tetra Tech Company ("Wardrop"). This news release has been revised to include required cautionary statements for a Preliminary Economic Assessment and to delete the term "ore" from resources.

Encanto President and CEO Jim Walchuck comments: "We are very pleased with the robust internal rate of return ("IRR") of 24% attributed to a solution mine in the PEA, as compared to 20.9% IRR for a conventional mine. Wardrop’s recommended solution option gives Encanto a concise economic direction as how best to take the Muskowekwan Project into production."

The following table provides a comparison summary of the two mining methods analyzed on the Home Reserve land package forming part of the Muskowekwan Project:

  Solution Mine Conventional Mine
Indicated Resource (% KCL) 79.1 MMt @ 29.4% 45.9 MMt @ 34.8%
Inferred Resource (% KCL) 60.5 MMt @ 29.7% 32.7 MMt @ 36.1%
Initial Mine Life (Indicated) 32 years 23 years
Possible Additional Mine Life (Inferred) 24 years 16 years
Annual Production (Primary & Secondary) t KCL 2,500,000 tpy 2,000,000 tpy
Total Estimated Capital Cost $2,418,100,000 $2,716,200,000
Project Unit Operating Cost/Tonne $68.14/t KCL $55.07/t KCL
Estimated Net Present Value (NPV10) $2,859,000,000 $2,347,000,000
Estimated After Tax & Royalty (IRR) @ $450 t KCL
(Base Case)
24.0% 20.9%
Estimated After Tax & Royalty (IRR) @ $500 t KCL 26.6% 23.4%
Estimated After Tax & Royalty (IRR) @ $400 t KCL 21.3% 18.3%

*Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Based on the above analysis Encanto intends to pursue the development of a solution mine for a number of reasons:

  • Annual potash solution production of 2.5 MM tpy from the caverns on the Home Reserve will result in a 32 year mine life and this can be extended an additional 24 years should the Inferred Resource be converted to an Indicated Resource. This is a much longer mine life compared to a conventional mining scenario.
  • Lower CAPEX and CAPEX/Tonne produced.
  • Lower overall manpower requirements, however, opportunities for employment by First Nation members will likely be greater. Overall, 320 full time employees are planned.
  • Higher internal rate of return.
  • Shorter time to production.
  • Ability to utilize poor quality or even brackish water in the mining process to enhance environmental stewardship and lower costs.
  • Over 1000 workers to be employed in the construction phase.
  • The potential to improve the IRR to 25.7% @ $450/t KCL and 28.4% @ $500/t KCL if a local water aquifer can be accessed.

In addition:

  • As disclosed in prior news releases, Encanto anticipates adding an additional 15,500 acres to the Muskowekwan Project’s land package which nearly doubles the land on the Muskowekwan property through a Treaty Land Entitlement process.
  • Encanto plans to drill the TLE lands and provide an updated resource report which will include this acreage. Additional resources if confirmed on the TLE lands could possibly extend the mine life by decades.

With this positive PEA the Company will focus its immediate attention on the commencement of Environmental Baseline Studies. Once the additional holes are drilled and assays received the Company will commence a Prefeasibility Study.

This Wardrop PEA was prepared by John Cairns, P. Eng., reviewed by Vern Funk, P. Eng., and authorized by Stan Kotowski, P. Eng. Vern Funk, P. Eng. and Stan Kotowski, P. Eng reviewed technical information in this news release and had reviewed the results as reported in tables above. Stan Kotowski reviewed and approved the contents of this news release in respect to PEA. He was also responsible for the supervision of all disciplines involved in PEA preparation and adherence to strict QA/QC protocol. Wardrop, a worldwide engineering firm, offers Encanto a wide range of engineering experience ranging from PEA’s, through to feasibility studies, detailed design, equipment procurement, construction management and commission/start up.

The PEA was completed in conjunction with the NI 43-101 compliant technical report prepared by North Rim Exploration of Saskatoon, Saskatchewan and released by the Company on March 18, 2011. North Rim has extensive experience in the resource characterization and preparation of NI 43-101 technical reports on potash resources having worked on Saskatchewan potash projects for Mosaic, Potash One and Athabasca Potash.

The Preliminary Economic Assessment includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the Preliminary Economic Assessment will be realized.

The technical content of this news release has been reviewed by James Walchuck, P. Eng., President & CEO of Encanto, a qualified person as defined by NI 43-101.

About Encanto:

Encanto Potash Corp. is a TSX Venture Exchange-listed Canadian resource company engaged in the exploration and development of potash properties in the Province of Saskatchewan, Canada, the largest producing region for potash in the world.

For additional information about Encanto Potash Corp., please visit the Company’s website at www.encantopotash.com or review the Company’s documents filed on www.sedar.com.

ON BEHALF OF THE BOARD OF DIRECTORS

James Walchuck
President and CEO