Salt Lake Potash : Low Cost, On-Lake Evaporation Pond Model Confirmed

ASX ANNOUNCEMENT

16 October 2017 LOW COST, ON-LAKE EVAPORATION POND MODEL CONFIRMED

Salt Lake Potash Limited (the Company or SLP) is pleased to advise the successful completion of field trials testing an on-lake, unlined evaporation pond model, which will result in significant capital expenditure savings for the Goldfields Salt Lakes Project (GSLP).

Highlights

• Comprehensive geotechnical and geological investigation confirms the widespread availability of ideal in-situ clay materials for use in evaporation pond construction.

• Modelling based on geotechnical properties of the clays confirms the potential to build unlined on-lake ponds with negligible seepage inefficiency.

• An on-lake construction and pond testing program conducted at Lake Wells over the last six months has validated the unlined pond model, with brine seepage inefficiency well within modelled parameters.

• Amec Foster Wheeler estimate that comparative costs for 400ha of on-lake ponds are $1.6m (unlined) and $42.2m (HDPE lined), highlighting major potential cost savings.

Figure 1: Evaporation Ponds at Lake Wells

The field trial involved construction and testing of four test ponds on the Lake Wells Playa, built solely from in-situ clay materials, using a standard 30t excavator, which operated efficiently and effectively on the lake playa. The trial achieved levels of brine seepage from the evaporation ponds well below the threshold for successful operation of halite evaporation ponds, and potentially also for the smaller potassium salt harvest ponds.

The capex savings from this construction method are substantial, compared to the alternative of plastic lined ponds. SLP's engineering consultant, Amec Foster Wheeler, estimates the cost of lined ponds to be approximately $10.50 per m2, up to 25 times higher than construction costs for unlined ponds.

The 25m x 25m test ponds were designed by SLP's geotechnical consultant, MHA Geotechnical (MHA), to test the constructability and operating performance of a number of pond wall designs and to provide reliable seepage data under site conditions. The observed brine loss in the test ponds was well within the parameters of the hydrodynamic model, indicating losses for a 400ha pond will be below 0.125mm/day.

The Company has identified several opportunities to improve the construction of commercial scale ponds using excavators, along with ancillary equipment to optimize drying and compaction of the clays utilized in pond wall construction. This should result in further improvements in the already very low seepage observed in the trial sized ponds.

SLP plans to now construct an 18ha Pilot scale pond system to further improve the pond design and construction model.

Commenting on the test outcomes, SLP's CEO, Matt Syme, said:

"We are very pleased to have successfully demonstrated and quantified the potential for on-lake, unlined evaporation ponds at the GSLP. The importance of this outcome cannot be understated for two reasons:

• firstly, the potential capex savings are very substantial and

• secondly, this outcome is the final fundamental technical building block which we have tested and validated under field conditions and to a very high standard.

  Along with all of the Company's other high quality testwork on brine extraction and evaporation and the conversion of on-site harvest salts to high quality SOP, as recently validated and optimised by Saskatchewan Research Council, we believe we have rigorously tested all the technical elements of SOP production from salt lake brines to a standard not seen in Australia to date."

  Enquiries: Matthew Syme (Perth)

  Telephone: [phone]

  Jo Battershill (London)

  Telephone: [phone]

  The GSLP SOP Production Process

  The proposed process for production of Sulphate of Potash (SOP) at the GSLP requires brine extracted from Lake Wells to be concentrated in a series of solar ponds to induce the sequential precipitation of salts, firstly eliminating waste halite and then producing potassium-containing Harvest Salts, mostly kainite and carnallite, in the harvest ponds.

  Figure 2: Simplified Lake Wells (GSLP) salt precipitation ponds

  The Harvest Salts are then treated in a processing plant to convert these salts into SOP, while minimising deportment of sodium chloride (a contaminant) to the product. See the announcement dated 14 September 2017 for further details of the Company's successful salt processing testwork.

  The ability to cost effectively and efficiently produce Harvest Salts is in part dependent upon the evaporation ponds retaining brine adequately to maximise brine evaporation and therefore, salt precipitation. Some seepage inefficiency early in the evaporation process, in the Halite ponds, is acceptable as the brines are still relatively low in value.

  Several potential options exist for construction of Halite ponds depending on the local geological conditions. In some geological settings, there is no alternative to plastic lining of evaporation ponds. For example, the sub surface of the Salar de Atacama in Chile is comprised principally of rock salt, which is both soluble and highly permeable. In this case there are no in-situ clays available for lining ponds so, plastic liners are employed to hold the brine. These liners require constant maintenance to ensure holes are repaired to avoid significant brine loss.

  If, as has been shown to be the case in Lake Wells, suitably impermeable clays are available, they can be used to construct ponds walls or dykes to retain brines within the ponds, to allow evaporation of brines and to crystallise the required salts. As a rule of thumb, reducing seepage below 0.25mm of pond level per day is acceptable for a commercial scale system.

  It is important to note that seepage does not mean brine (and potassium) is lost altogether, but rather that the system is less efficient, as any seepage to the playa sediments is recovered eventually by the brine harvest trenches and returned to the ponds.

  Lake Wells Geotechnical and Geological Database

  A total of 105 drill holes and 250 test pits have provided a very comprehensive database of the stratigraphy and geology of the upper levels of the Lake Wells playa. This understanding has supported an ongoing assessment of brine extraction potential via trenching, as well as the suitability of the clay lithologies for pond construction.

  The interpretation of the lithological logs from the drill holes, test pits and trenches has enabled the development of a standardised stratigraphy, which comprises four units from shallowest to deepest, being:

  • a thin layer of evaporate sands;

  • a red-brown silt with high clay content;

  • a grey-olive-yellow mottled clay that is plasticine in nature and stiff to very stiff; and

  • a red-brown clay with varying silt content that is more massive and indurated with depth. The average stratigraphy is represented by the section set out in Figure 3 below,

Figure 3: Cross Section of the Average Lake Wells Stratigraphy Additional Geotechnical Work for Pond Trial

To provide input data for both the pond construction trial and the hydrodynamic model a detailed investigation of the sub-surface stratigraphy was carried out by MHA. The investigation aimed at assessing the ground conditions and evaluating the suitability of in-situ borrow materials for pond construction.

A comprehensive data set was created from the investigation which included:

• Test pits excavated using a 30t excavator to provide bulk samples for laboratory testwork and visual inspection of the in-situ stratigraphic arrangement;

• Hand auger boreholes;

• Electric friction cone penetrometer testing (EFCPT);

• Piezocone/CPTu testing;

• Field permeability testing (Rising/Falling Head);

• Field moisture content testing;

• Dynamic Cone Penetrometer testing; and

• Laboratory testing of disturbed soil samples.