MagIndustries Potash Unit Announces Updated 43-101 Reserve Report to Support Expanded Operations

MagIndustries Potash Unit Announces Updated 43-101 Reserve Report to Support Expanded Operations

Thursday, August 21st 2008

MagIndustries Corp. report that it has received an updated National Instrument 43-101 Technical Report entitled “Updated Reserve and Resource Estimate for MagMinerals Mengo Permit Area, Kouilou Region, Republic of Congo” (the “Technical Report”) in respect of the property owned by its wholly-owned subsidiary MagMinerals Potash Corp. (“MagPotash”). The Technical Report updates the National Instrument 43-101 Technical Report filed on February 28, 2008 (see the Company’s press release dated February 28, 2008).

The Technical Report is based on new rock mechanical modeling and a new solution mining cavern configuration. The Technical Report reports on the potash reserves and resources available to support MagPotash’s planned Kouilou Potash mining and processing plant (the “Project”) located 25km from the port city of Pointe Noire, Republic of Congo. The Project is intended to be built in two phases, Phase 1 and Phase 2, with each module specified at 600,000 tonnes per year (tpy) for a total capacity of 1.2 million tpy of potash.

The new rock mechanical modeling allows a redefinition of the mineable Horizon 4 carnallitite layer resulting in a larger thickness available for mining and a hexagonal cavern configuration, which allows closer cavern spacing. These changes result in an increase of the previously stated reserves and resources. In the original report proven reserves were estimated to be 17.9 million tonnes of KCl with probable reserves estimated to be 3.1 million tonnes of KCl. The revised estimate of proven and probable reserves is 33.5 million tones of KCl which are sufficient to support 28 years of production at a rate of 600,000 tonnes of K60 potassium chloride (KCl) for the first two years of production and 1,200,000 tonnes of K60 KCl per year for the remaining 26 years. At a production rate of 600,000 tonnes of K60 per year the KCl reserves are adequate for a Project lifetime of 54 years. At a production rate of 1,200,000 tonnes of K60 per year the KCl reserves are adequate for a Project lifetime of 27 years. These reserves lie within a 25 square kilometer (sq km) portion of the 136 sq km Mengo Exploitation Permit which was granted in March 2008.

The study area represents approximately 18% of MagPotash’s Mengo Exploitation Permit area of 136 sq km. MagPotash retains exclusive rights to a further 1,472 sq km of potentially developable area through the Makola Exploration Permit as outlined in the map below:

The potash deposits occur in the form of carnallitite rock which underlies most of the Makola Exploration Permit area. Carnallite is a magnesium-potassium-chloride mineral or a double-salt with the chemical formula KMgCl3-6H2O. The carnallitite rock occurs in multiple, horizontal horizons ranging in thickness from 0.5 meters (“m”) to 24 m with an average content of about 70% carnallite. Four horizons, located between 400m and 800m below the surface, have been considered for commercial development.

The Technical Report is based on the results of 13 drill holes, 23 km of seismic surveys, as well as down-hole geophysical surveys completed by the Company. The Technical Report also incorporates economic data from a preliminary feasibility study completed by NOVOPRO Projects Inc. for Phase 2 of the Project, which assumes that Phase 2 will be in operation two years after the onset of Phase 1. The NOVOPRO study estimates a construction cost for Phase 2 of $423 million and that the economies of scale resulting from a doubling of production volume from 600,000 tpy to 1.2 million tpy will reduce operating costs per tonne from $83 per tonne for Phase 1 alone to $73 per tonne for the 1.2 million tpy Project.

Financial modeling based on a conservative potash price forecast published by Fertecon Limited in 2007 which implies an average net realized price to MagPotash of $464 per tonne for the first five years of the Project, and taking into account the financing costs (Phase 1 capital expenditures of US$ 723 million, financing and development cost of US$257 million and Phase 2 capital expenditures of US$423 million, with a debt to equity ratio for Phase 1 of 70:30) show that even for pessimistic cases the Project is capable of servicing its debt and breaking even.

For the base case, the Project’s internal rate of return is estimated at 19% and at a discount rate of 12%, the net present value is estimated at US$1.2 billion. On the total Project costs of US$1.4 billion pay back is achieved in approximately six years, on the cumulative cash flows from operations from 2011 to 2016. Relative to the net cash flows from operations in 2014, assumed for the purposes of the Technical Report to be the first full year of production at 1.2 million tpy, pay back is approximately four years.

Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau mbH (“Ercosplan”) notes that further engineering studies and pre-production drilling will increase the database and therefore may contribute to a further upgrade of the reserve and resource base in support of future potash plant expansions. Ercosplan also note that the reserves and resources mentioned above are open in all directions.

Ercosplan, the company of the authors of the Technical Report, and formerly the engineering department of the East German Potash Enterprise, has over 50 years experience in the potash industry. Ercosplan was responsible for planning and supervising the core sampling program.

MagIndustries Corp. is a Canadian company whose common shares are listed on the TSX-V Exchange and trades in Canadian currency under the symbol “MAA”. The Company has 197,514,016 shares outstanding on an undiluted basis. MagIndustries’ wholly owned resource subsidiaries are operating and developing major industrial projects in the Republic of Congo (ROC) and the Democratic Republic of Congo (DRC).

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