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Form 51-102F1 – For the Quarter Ended September 30, 2010
Management Discussion and Analysis
IC Potash Corp. (Formerly Trigon Uranium Corp.)
Hereafter called “IC Potash” or the “Corporation”)
(Containing Information up to and including November 22, 2010)
Description of Management Discussion and Analysis
This Management Discussion and Analysis (“MD&A”) should be read in conjunction with the unaudited
financial statements of the Corporation for the quarter ended September 30, 2010 and the audited financial
statements for the year ended December 31, 2009. This MD&A contains forward-looking information and
statements which are based on the conclusions of management. The Corporation cautions that the forwardlooking
information and statements are subject to certain risks and uncertainties that could cause actual
results to differ materially from the information and those statements. The forward-looking information
and statements are only made as of the date of this MD&A.
All financial information is presented in Canadian dollars unless otherwise stated. All references to a year
refer to the year ended on December 31st of that year, and all references to a quarter refer to the quarter
ended on September 30. The Corporation is a reporting issuer in British Columbia, Alberta, and Ontario,
and trades on the TSX Venture Exchange under the symbol “ICP”.
Additional information related to the Corporation is available for view on SEDAR at www.sedar.com.
Company Overview
IC Potash is a junior resource exploration company in the business of acquiring and exploring mineral
properties. The recovery of the amounts comprising mineral properties and deferred exploration costs are
dependent upon the confirmation of economically recoverable reserves, the ability of the Corporation to
obtain necessary financing to successfully complete the exploration and development of those reserves and
upon future profitable production. It is the intention of the Corporation to obtain financing through access
to public equity markets.
The Corporation owns 100 percent of Intercontinental Potash Corp. (“ICP”), a company involved in
exploration for potash and potash-related minerals. On November 30, 2009, the Corporation completed a
reverse-takeover (“RTO”) with ICP. Legally, IC Potash is the parent of ICP, but for financial reporting
purposes, IC Potash is considered to be a continuation of ICP. The comparative numbers in this Circular
prior to the RTO date are those of ICP only. IC Potash is consolidated commencing on December 1, 2009.
Forward Looking Statements
This discussion includes certain statements that may be deemed “forward-looking statements.” All
statements in this discussion, other than statements of historical facts that address future production, reserve
potential, exploration drilling, exploration activities and events or developments that the Corporation
expects, are forward-looking statements. Although the Corporation believes the expectations expressed in
such forward-looking statements are based on reasonable assumptions, such statements are not guarantees
of future performance and actual results or developments may differ materially from those in the forwardlooking
statements. Factors that could cause actual results to differ materially from those in forwardlooking
statements include market prices, exploitation and exploration successes, continued availability of
capital and financing, and general economic, market or business conditions. Investors are cautioned that
any such statements are not guarantees of future performance and those actual results or developments may
differ materially from those projected in the forward-looking statements.
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ICP
The mandate of ICP is potash and potash-related mineral exploration in North America and internationally.
ICP holds interests in federal prospecting permits and permit applications for sub-surface potash rights in
the state of New Mexico as well as New Mexico state mining leases through its wholly-owned subsidiary
Intercontinental Potash Corp. (USA).
ICP seeks to mine Polyhalite from its Ochoa project in Lea County, New Mexico. Polyhalite is an evaporite
mineral containing potassium, magnesium, sulphate, and calcium – all important plant nutrients. The
Ochoa property is 100 percent controlled by ICP.
The Bureau of Land Management (“BLM”) federal sub-surface potassium permits for the Ochoa Project
are in respect of an area of approximately 48,144 acres. The State of New Mexico potash mining leases
cover an area of approximately 25,890 acres.
Potash content of ores is expressed as equivalent percent K2O. Polyhalite (15.6% K2O) is comparable to
langbeinite (22.7% K2O), but also contains magnesium, calcium and sulphate, essential plant nutrients. Its
most attractive attribute is the fact that it dissolves slowly and is, therefore, effective in regions with high
rainfall and in strongly leached soils prevalent in tropical regions. Further, in many areas of the world there
is concern about excessive amounts of chloride in runoff from potash fertilization. Polyhalite contains zero
chlorides. The use of polyhalite as an organic, non-chloride, slow-release and multi-nutrient fertilizer is
based on many historical studies of the mineral as a potassium fertilizer. Agricultural research testing in
greenhouses has demonstrated that polyhalite may be an effective source of potassium, magnesium,
calcium, and sulphur as plant fertilizer nutrients.
ICP’s plans are based on the development of polyhalite to satisfy various needs of the potash fertilizer
markets where non-chloride potassium fertilizers are preferred. The focus will be the use of polyhalite as
feedstock to produce the non chloride potash fertilizer, Sulphate of Potash (“SOP”). ICP’s initial analysis
is that polyhalite can be converted to SOP on a very cost effective basis. ICP estimates that SOP has an
established market size of approximately 4 million tonnes and SOPM has a market size of over 1 million
tonnes. SOP is premium priced potash that generally sells at premiums of 30% to 50% over the price of
sylvite.
ICP has established the following business strategy:
• explore for and develop potassium fertilizer minerals in the Southwest United States with particular
emphasis on polyhalite, including in the near term, completion of phase two of the recommended
program in the 43-101 Report;
• conduct further work studying the most effective manner of converting polyhalite into SOP; and
• establish marketing relationships for SOP.
Potash was discovered near Carlsbad in 1925. Three mines near Carlsbad contribute 70 percent to total
United States potash production. They mine sylvite (KCl) and langbeinite (K2SO42MgSO4) from three of
the eleven mineralized layers in the McNutt zone of the Permian Salado formation.
ICP’s property of interest lays outside and approximately 14.5 kilometres from the eastern boundary of the
area designated by the federal government as the Known Potash Leasing Area (KPLA). This area covers
the area of potash mineral reserves and resources in the upper Permian Salado Formation east of Carlsbad.
The mines in the Carlsbad district are the only potash mines in the state and produce potassium chloride
from the mineral sylvite and potassium-magnesium-sulphate product from langbeinite. The potassium salts
are used primarily by the fertilizer industry as sources of potassium and magnesium.
This part of the Delaware Basin is a mature oil and gas province. There has been major production from
eastern New Mexico and west Texas fields discovered in the 1940s. The majority of United States potash
production takes place from three conventional underground mines operated by the Mosaic Company and
Intrepid Potash, Inc., near Carlsbad in Eddy County which is to the west of, and adjacent to, Lea County.
A potash milling facility operated by Intrepid is located in Lea County.
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Geology
The Carlsbad potash district is located in the northwest corner of the Delaware Basin in southeast New
Mexico. Upper Permian deposits in the Delaware Basin are characterized by a thick accumulation of
evaporite rocks subdivided, from bottom to top, into the Castile, Salado and Rustler formations. All historic
and current potash production has been from the Salado formation as sylvinite (a mixture of sylvite and
halite) and langbeinite. The Rustler formation is youngest of the evaporite-bearing formations. It is
comprised of five members, of which the Tamarisk is the middle member. It consists of interbedded shalesiltstone,
halite, anhydrite, and Polyhalite. Based on numerous geophysics logs the Polyhalite layer appears
to average 6 feet in thickness at a depth of 1,500 feet.
The Delaware and Midland sub-basins of the upper Permian Basin are separated by the Central Basin
Platform and contain extensive evaporite deposits of the Ochoa Series which lie between the Capitan Reef
limestone of the underlying Guadalupe Series and the fine clastic sediments of the Dewey Lake red beds.
The first evaporite cycle of the Ochoa Series, the Castile Formation, consists of anhydrite and halite in the
Delaware Basin. The overlying Salado Formation is structurally and lithologically complex and, in addition
to the cyclic anhydrite, halite, and clay sedimentation, it is also host to the McNutt potash zone. Potassiumbearing
salts accumulated in the northeast Delaware Basin. With later subsidence, the remainder of the
Salado Formation sediments was deposited, followed by anhydrite and dolomite of the Rustler Formation
and the Dewey Lake Formation red beds. Together, the Castile, Salado and Rustler Formations are some
1,300 metres thick. The interest of ICP is in the occurrence of Polyhalite in the Rustler Formation which
overlies the Salado Formation.
Gypsum and anhydrite are the stable phases after seawater has evaporated to 3.5 times its original salinity.
After the solution has been concentrated by evaporation to a tenth of its original bulk, halite starts to
crystallize along with minor amounts of gypsum. In the Tamarisk member of the Rustler formation,
Polyhalite is a very early diagenetic replacement of a porous gypsum bed by brine that may have been from
five to 1,000 meters deep. The inference of Polyhalite is from the geophysical logs of oil and gas wells in
the Tamarisk member of the Rustler Formation at a depth of approximately 460 metres. Polyhalite shows a
high gamma response, high velocity on sonic logs and relative high density.
The sequence of precipitation of evaporite minerals from seawater generally starts with the least soluble
calcium and magnesium carbonates, such as limestones and dolomites, followed by calcium sulphates
(gypsum and anhydrite), halite, the magnesium sulphates, potassium chloride (sylvite) and the magnesium
chlorides. Polyhalite may be formed, in addition to precipitation, as a secondary mineral after anhydrite
through reaction with potassium and magnesium rich solutions. Polyhalite is a hydrated potassium calcium
magnesium sulphate salt. Unlike other potassium salts such as sylvite, langbeinite, or carnallite, Polyhalite
dissolves slowly in water leaving a residue of calcium sulphate which then breaks down further into
calcium and sulphate. Polyhalite is white, colourless or gray, but may also be brick red or pink if iron
oxides are present. It has a hardness of 3.5 on the Moh’s scale and a specific gravity of approximately 2.8.
It occurs in deposits in conjunction with halite, anhydrite, kainite, carnallite and sylvite and has been
recognized in Carlsbad, New Mexico; Western Texas; and also at Hallstatt, Austria; Galicia, Poland; and
Stassfurt, Germany.
Polyhalite mineralization in the Permian Basin is described by Jones, 1972: “The Polyhalite deposits are by
far the largest, most numerous, and widespread of all the Permian basin potash deposits. They occur chiefly
as massive and disseminated deposits in anhydrite and salt beds, but vein deposits and lens deposits in salt,
anhydrite, and claystone beds are not entirely common. As a rule, the massive deposits and all veins and
lenses consist of predominantly Polyhalite, and they are distinctly compact bodies that have sharp clear-cut
outlines. The disseminated deposits are typically rude, shapeless bodies consisting of a host rock, chiefly
halite, and sparse particles and fine veinlets of Polyhalite. They are many times more numerous than the
massive deposits, but the amount of Polyhalite present is extremely small in comparison with that present
in most massive deposits.”
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ICP plans to explore for Polyhalite mineralization within the Tamarisk member of the Rustler Formation,
primarily by core drilling. Physical examination of drill core will allow accurate measurement of the
thickness of the Polyhalite unit. Correlation between drill holes, and comparison with the geophysical log
data will permit assessment of the continuity of Polyhalite mineralization. Most of the wells from which we
have geophysical logs were drilled in the 1980s. All historical work on and in the proximity of the property
of interest has been drilling for oil and gas. An isopach map of the Polyhalite unit, as derived from
geophysical well log data, indicates that a thickness of up to 6 feet that may be mineable by conventional
underground mining methods.
Description of Properties
Ochoa Project
On December 1, 2008, ICP was awarded sixteen federal potassium prospecting permit applications by the
Bureau of Land Management (the "Bureau") in respect of the Ochoa Project in southeast New Mexico. An
exploration plan describing the drilling methods, drilling stipulations, and related reclamation plans for the
sixteen exploration holes, one in respect of each permit, was submitted to the Bureau during the spring of
2008. The Bureau has inspected the proposed drill sites, carried out inspections with respect to water and
wildlife issues, and a cultural resource survey was performed at each drill site where no cultural artifacts
were found that may impede exploration. The initial approved permit applications were in respect of an
area of 36,589 acres. All reclamation plans, environmental plans, and archaeological work have been
approved by the Bureau of Land Management. Bonds in respect of the drill program have been accepted
and all cost recovery charges have been paid in accordance with federal regulations. The initial term of the
permits is two years and term may be extended to four years in total if in the opinion of the Bureau of Land
Management exploration has occurred in an expeditious manner. The next annual rent is due on December
1, 2011. The target of the Ochoa project of New Mexico is a potential Polyhalite economic resource. A
National Instrument 43-101 technical report has been completed in respect of the Ochoa project. As part of
the acquisition of the Ochoa permits, the Corporation issued 500,000 common shares during 2009.
The Corporation paid US$50,000 into a Permit Bond that may be refundable if certain prospecting permit
and reclamation requirements are satisfied, thus this amount is recorded as a “deposit” on the balance sheet.
The Ochoa Property is subject to a royalty of US$1.00 per ton of polyhalite mined for the first 1,000,000
tons and US$0.50 per ton thereafter. A 5% gross royalty is expected to be imposed by the federal
government. The Corporation signed a royalty agreement on September 28, 2009 for an additional 3% net
profits royalty (the “Profit Royalty”) for a term of 25 years commencing from the initiation of production.
The Corporation may acquire, at its option, up to one-half of the Profit Royalties at a price of $3,000,000
per 0.5%.
On March 1, 2010, the Corporation was granted an additional 5 federal sub-surface potassium prospecting
permits covering an area of 11,555 acres in Lea County, New Mexico. These permits are part of the Ochoa
Property and are subject to the same royalties as the first 36,589 acres described above.
In 2010, the Corporation also obtained 17 state mining leases with the New Mexico State Land Office
covering 25,890 acres in Lea County, New Mexico. A minimum royalty rate of 2.5% of the gross value of
production without any deductions is expected to be imposed by the state of New Mexico. The 3% profits
royalty described above will also apply to these leases. The Corporation has posted a US$25,000
MegaBond for Performance and Surface or Improvement Damage of Potash Leases.
The Corporation has applied for two sets of federal sub-surface potassium prospecting permits covering
9,124 acres and 29,520 acres for a total of 38,644 acres in New Mexico. These permit applications have
not yet been approved. The Corporation believes this land may be prospective for polyhalite and other
potash minerals and, when obtained, will form part of the Ochoa Project.
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ICP seeks to mine Polyhalite from its Ochoa Property in South East New Mexico and to process it into
SOP. The Ochoa property is 100 percent controlled by ICP. The 21 Bureau of Land Management
(“BLM”) federal sub-surface potassium permits for the Ochoa Project are in respect of an area of 48,144
acres. All reclamation plans, environmental plans, and archeological work have been approved by the
BLM. Bonds in respect of the drill program have been accepted and all cost recovery charges have been
paid in accordance with federal regulations. The initial term of the federal permits is two years and may be
extended to four years in total if in the opinion of the Bureau of Land Management exploration has proceed
in an expeditious manner. The initial sixteen prospecting permits included the approval of a detailed 16
hole drill program.
As of August 19, 2009, Chemrox Technologies and Gustavson Associates, LLC prepared a National
Instrument 43-101 compliant technical report and preliminary economic analysis (the “Ochoa Report”) for
ICP with respect to the Ochoa Property. The Ochoa Report was filed on SEDAR on September 28, 2009.
The report indicated that mineralogical and chemical analyses suggest that an average polyhalite grade in
the Rustler Formation of 85% polyhalite is not an unreasonable expectation for the ICP permits based upon
core data. The total inferred resource for the polyhalite bed within the Tamarisk member of the Rustler
Formation, greater than 6 feet thick and within the boundaries of the ICP permitted land holdings is
approximately 399 million short tons, using a tonnage factor of 11.43 ft3/ton. Theoretically, annual full
production mining capacity from the underground room and pillar mine could be 4.6 million tons per year.
The mine could operate 350 days per year for a full daily production tonnage of 13,143 tons. The process
plant design selected utilizes ammonia to precipitate magnesium hydroxide and in a second step, potassium
sulphate. Based on the assumptions and results of the Ochoa Report, Gustavson considers that the Ochoa
polyhalite project has potential to be an economically viable operation, annually producing over 900,000
tons of potassium sulphate and 500,000 tons of polyhalite product for the world market at full capacity.
Based on start-up capital expenditures of US$887M, cash costs of approximately US$220 per ton of
potassium sulphate and US$75 per ton of polyhalite, and a 10% discount rate, the 30-year life project gives
a pre-tax internal rate of return of 43% and net present value of US$2.9 billion. Gustavson and Chemrox
recommend that Trigon and ICP execute their Phase I drilling program. If the results are encouraging,
Gustavson and Chemrox further recommend Phase II drilling and subsequent metallurgical and other test
work and engineering.
The Phase I drill program was designed to: (i) validate interpretations of historical oil and gas geophysical
logs; (ii) expand the classification of resources reported in the 43-101 Technical Report; (iii) extend the
polyhalite target bed to the north-west where it appears to ramp-up closer to the surface than further to the
east; (iv) ascertain chemical and thickness variability; (v) study rock mechanics; (vi) initiate baseline
hydrological investigations; and (vii) determine optimal locations for Phase II in-fill drilling and
prefeasibility studies. As part of Phase I, 6 drill holes were completed in 2009.
The results for the Phase I Ochoa drill program were positive. As expected from geophysics logs, excellent
quality polyhalite, averaging 5.6 feet in thickness and 80% in grade, was found between thin anhydrite
layers, all located within the salt bed of the Rustler formation of the Permian Delaware basin in New
Mexico.
Summary of Phase I Core Analysis (grade based on X-ray diffraction):
Hole From (ft) To (ft) Thickness (ft) % Polyhalite
IPC1 1394.7 1400.7 6 85
IPC2 1523.85 1529.1 5.25 81
IPC3 1554.2 1559.2 5 79
IPC4 964.53 969.88 5.35 70
IPC5 992.14 998.42 6.28 86
IPC6 1483.52 1489.2 5.68 76
Phase I program average: 5.59 80
In 2010, the Corporation received an independent engineering report demonstrating solar evaporation is the
optimal method of producing SOP from polyhalite. The first metallurgical module of the Project Pre-
Feasibility Study has now been completed and has the following findings:
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· Production costs are US$188 per long ton of SOP. At such a projected cost, IC Potash would be one
of the lowest cost producers of SOP in the world.
· The recovery will be 92% of the Potassium (K2O) contained in the polyhalite ore. This would be a
higher recovery than available from traditional salt lakes brines.
· 1500 acres of solar ponds would be required to produce 600,000 tons per year of SOP. This small
acreage requirement is very small compared to other SOP producers who use the solar evaporation
process. A low acreage reduces costs and makes environmental permitting easier.
The Phase II drill program will be performed in accordance with the program description in the 43-101
Compliant Report; “Polyhalite Resources and a Preliminary Economic Assessment of the Ochoa project
Lea County, Southeast New Mexico” which was prepared as at August 19, 2009. Phase II has been
designed to: (i) continue to validate interpretations of historical oil and gas geophysical logs as started by
Phase I drilling; (ii) advance the classification of resources reported in the 43-101 Technical Report from
inferred resource to indicated resource; (iii) acquire bulk samples for metallurgical, geophysical and
process optimization testing through sidetrack coring from the exploration hole; (iv) ascertain chemical and
thickness variability; (v) determine optimal locations for Phase III in-fill drilling and optimum mine
location; (vi) initiate baseline hydrological investigations by geophysical logging of the fresh water zone of
core holes; and (vii) protect any potable water in the area during drilling and drill hole abandonment.
Phase II results were announced. Summary results for the seven-hole Phase-2 program and hole locations
are as follows:
1. ICP 7 - Section 13 - Township 23S, 32 E 5.8 feet of 84% polyhalite
2. ICP 8 - Section 23 - Township 23 S, 32 E 5.7 feet of 85% polyhalite
3. ICP 9 - Section 3 - Township 23 S, 32 E 5.5 feet of 77% polyhalite
4. ICP 10 - Section 1 - Township 24 S, 33 E 5.7 feet of 84% polyhalite
5. ICP 11 - Section 3 - Township 24 S, 33 E 4.2 feet of 80% polyhalite
6. ICP 12 - Section 8 - Township 24 S, 33 E 6.7 feet of 89% polyhalite
7. ICP 13 - Section 29 - Township 23 S, 33 E 6.2 feet of 88% polyhalite
Phase II program average: 5.7 feet of 84% polyhalite
The Phase I & II results are as expected and are based on X-ray diffraction (XRD) and X-ray fluorescence
(XRF). All scientific and technical disclosure for Phase I was prepared under the supervision of ICP Chief
Geologist, Marc Melker CPG, and was verified by him. All scientific and technical disclosures for Phase II
was prepared under the supervision of William J Crowl, a consultant to IC Potash who is a Qualified
Person within the meaning of National Instrument 43-101.
Other projects
In March 2010, the Corporation wrote off all other mineral properties (including Dove Creek, Sinbad, Pine
Ridge and Other) because the Corporation does not intend to advance these properties in the foreseeable
future.
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Summary of Quarterly Results
Selected audited and un-audited quarterly financial information of the Corporation for the quarters ended
September 30, 2010 is as follows:
Table of Results for the Quarters to September 30, 2010
Table of Results for the Quarters to September 30, 2009
Selected audited and un-audited quarterly financial information of the Corporation for the quarters ended
September 30, 2009 is as follows:
Sep 30 Jun 30 Mar 31 Dec 31
2009 2009 2009 2008
Total assets $ 4,144,352 $ 4,612,539 $ 5,037,657 $ 5,466,686
Mineral properties $ 1,745,972 $ 1,507,088 $ 1,334,198 $ 1,169,873
Working capital (deficit) $ 1,834,735 $ 2,690,041 $ 3,507,094 $ 4,081,330
Shareholders’ equity $ 3,881,072 $ 4,343,468 $ 4,907,016 $ 5,312,343
Interest income $ 1,211 $ 1,896 $ 9,908 $ 27,025
Net earnings (loss) $ (458,944) $ (635,295) $ (400,308) $ (589,341)
Basic earnings
(loss per share) $ (0.01) $ (0.04) $ (0.03) $ (0.03)
Fully diluted earnings
(loss per share) $ (0.01) $ (0.04) $ (0.03) $ (0.03)
Results of Operations for the Quarter ended September 30, 2010
The Corporation did not generate operating revenue during the quarter ended September 30, 2010, as all of
the operating activities of the Corporation were directed towards acquisition and exploration. Exploration
activity was carried out on the Ochoa potash project during the quarter.
Ochoa property
During 2008 and 2010, the Corporation acquired certain permits and leases located in Lea County, New
Mexico. As part of the acquisition of the permits, the Corporation issued 500,000 common shares valued at
$30,000 in 2009 as a finder’s fee.
Total costs incurred on the project during the quarter amounted to $1,355,632 of which $73,027 was for
acquisition costs, $1,248,233 was for exploration costs, and $34,372 was for work related to a pre-
Sep 30 Jun 30 Mar 31 Dec 31
2010 2010 2010 2009
Total assets $ 21,398,299 $ 8,501,530 $ 8,760,212 $ 10,846,327
Mineral properties $ 5,493,868 $ 4,138,236 $ 3,297,953 $ 3,175,862
Working capital (deficit) $ 14,940,371 $ 2,837,733 $ 4,713,927 $ 6,143,822
Shareholders’ equity $ 20,590,785 $ 7,518,305 $ 8,220,931 $ 9,522,067
Interest income $ 1,362 $ 211 $ 1,204 $ 3,839
Net earnings (loss) $ (1,548,367) $ (980,307) $ (1,301,136) $ (1,013,893)
Basic earnings
(loss) per share $ (0.02) $ (0.02) $ (0.02) $ (0.03)
Fully diluted earnings
(loss) per share $ (0.01) $ (0.01) $ (0.02) $ (0.03)
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feasibility study. As at September 30, 2010, the Corporation had expended $5,493,868 in respect of the
Ochoa property.
Office and Administration Expenses
Amortization during the quarter amounted to $5,694 (2009 - $591). This relates to amortization and
depreciation in respect of furniture and fixtures, equipment, field equipment, and vehicles. ICP did not
have many capital assets in 2009. During the quarter, the Corporation wrote off certain obsolete and
missing exploration equipment and computers, thus $62,779 was recorded as a loss on asset disposal.
Consulting fees in the quarter was negative $45,000 (2009 - $nil) due to the reversal of a previous accrual.
Most consulting in the quarter was capitalized to the project or treated as a financing cost. Investor
Relations in the quarter was negative $1,585 (2009 - $2,653) due to the reversal of a previous accrual and a
credit note from a vendor that eliminated a prior period accounts payable. Regulatory fees (transfer agent
and filing fees) were $2,977 (2009 - $nil) for the quarter. ICP did not have significant regulatory fees in
2009 because it was not listed on a stock exchange. Business development and market development for
potash related products was $60,099 (2009 - $9,257). Business development activities related to the search
for joint venture partners and product distributors as well as political contributions and public relations.
Administration and related costs amounted to $78,614 (2009 – $26,940) for the quarter. This included
annual general meeting costs, telephone, postage and courier, dues and subscriptions, stationery, repairs
and maintenance, utilities and related costs. This amount increased due to the increased size and operations
of the Corporation. Stock-based compensation for the quarter was $910,975 (2009 - $nil) because stock
options were granted in the quarter, but not in the corresponding quarter of 2009. Travel and related costs
for the quarter amounted to $20,323 (2009 – $52,853) and were composed of such costs not specifically
related to exploration projects. Professional fees of $50,223 (2009 – $51,382) for the quarter were incurred
in respect of tax preparation costs, review engagement costs, and legal costs. ICP did not undergo a
quarterly review in 2009. $18,029 (2009- $29,509) was paid for office rental and off-site storage of
equipment and documents during the quarter. The amount is lower because the Corporation recently closed
a large office in Colorado. Wages and benefits for the quarter amounted to $331,580 (2009 – $257,351).
This amount included the salaries, bonuses, and employment related costs of the President and Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer, Controller, Senior Vice President, and
management and administrative staff in Canada and in USA in IC Potash and ICP and their subsidiaries.
$114,330 of wages from the Chief Operating Officer, Senior Vice President, and Chief Geologist were
capitalized to the Ochoa property. The wages and benefits amount has increased from 2009 due to salary
increases for several employees as well as bonuses paid to 2 employees. Interest income for the quarter
was $1,362 (2009 – $1,211) earned on surety/bond maintained in a US bank and from short term
investments in Guaranteed Investment Certificates, Banker Acceptance or US Term Deposits.
Financings
On September 16, 2010, the Corporation announced that it closed a private placement (the "Private
Placement") pursuant to which it issued an aggregate of 37,500,000 units (the "Units") at $0.40 per Unit to
raise aggregate gross proceeds of $15,000,000. Each Unit was comprised of one common share of the
Corporation (a "Common Share") and one-half of one common share purchase warrant, with each whole
common share purchase warrant (each, a "Warrant") exercisable to acquire one additional Common Share
at an exercise price of $0.65 per share until September 15, 2013.
Pursuant to the Private Placement, Resource Capital Fund V L.P. ("RCF V") purchased 25,000,000 Units as
a result of which RCF V became the largest shareholder of ICP and holds: (i) approximately 25.8% of the
issued and outstanding Common Shares on a non-diluted basis; and (ii) approximately 28.6% of the
Common Shares on a fully diluted basis.
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In connection with the Private Placement, the Corporation paid fees in the aggregate amount of $227,800 to
finders assisting in the Private Placement, including Clarus Securities Inc., Cormark Securities Inc., Mackie
Research Capital Corporation, National Bank Financial Inc. and Wellington West Capital Markets Inc.
Liquidity and Capital Resources at September 30, 2010
At September 30, 2010, the Corporation’s working capital was $14,940,371 (2009 - $1,834,735). The
sources of cash in the quarter included cash from Private Placement in September and interest earned on
Banker Acceptance Notes and USD Term Deposits.
At the date of this MD&A, the management of the Corporation believes that it has sufficient funds to
complete its planned exploration programs as well as carry out its day to day obligations. As at September
30, 2010, the Corporation had a cash balance of $15,670,549 (2009 - $2,045,341) to settle current liabilities
of $807,514 (2009 - $263,280). The Corporation’s ability to remain liquid over the long term depends on
its ability to obtain additional financing. At this time, the Corporation has enough cash to pay all of its
current liabilities. There can be no assurance that the Corporation will be able to obtain sufficient capital in
the case of operating cash deficits. The Corporation has no long term debt and will incur rental expense of
US$11,118 and CAD$2,970 in 2010 and US$47,602 from January 2011 to April 2013.
Transactions with Related Parties
During the nine months ended September 30, 2010, the Corporation entered into the following transactions
with related parties:
• Paid or accrued directors’ fees to directors, included in administrative costs, of $86,000 (2009 -
$9,750).
• Paid or accrued consulting fees of $nil (2009 - $9,000) to directors of the Corporation.
Included in accounts payable as at September 30, 2010 is $8,666 (2009 – $26,623) due to directors and
corporations controlled by directors.
These transactions were in the normal course of operations and were measured at the exchange value which
represented the amount of consideration established and agreed to by the related parties.
Financial Instruments
The Corporation has designated its cash and deposits as held-for-trading, measured at fair value.
Receivables are classified as loans and receivables, which are measured at amortized cost. Payables and
accrued liabilities are classified as other financial liabilities, which are measured at amortized cost.
The carrying value of cash, deposits, receivables, accounts payable and accrued liabilities reflected in the
consolidated balance sheet approximate fair value because of the limited term of these instruments.
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Other
Outstanding Share data as at November 22, 2010:
(a) Authorized and issued share capital:
Class Par Value Authorized Issued Number
Common No Par Value Unlimited 96,897,490
Number of shares held in escrow as at September 30, 2010 is 4,185,622 (2009 – nil).
(b) Summary of Options outstanding:
Number Exercise Expiry
of Options Price Date
125,000 $ 1.34 November 6, 2011
43,750 4.20 January 9, 2012
100,000 0.40 August 4, 2013
150,000 1.16 August 28, 2013
3,750,000 0.40 June 14, 2014
650,000 0.45 April 22, 2015
1,102,245 0.40 August 4, 2015
272,255 0.40 September 19, 2015
950,000 0.50 September 19, 2015
700,000 0.58 November 8, 2015
200,000 0.80 November 22, 2015
8,043,250
(c) Summary of Warrants outstanding:
Number of Warrants
Exercise Price
Expiry Date
8,852,200
68,750
$ 0.65
$ 0.65
December 2, 2011
December 3, 2011
18,750,000 $ 0.65 September 15, 2013
27,670,950
(d) Summary of Agents’ Unit Options outstanding:
Number
of Unit Options
Exercise
Price
Expiry Date
398,300 $ 0.40 December 2, 2010
398,300
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Recent accounting pronouncements and future accounting changes
(i) International Financial Reporting Standards (“IFRS”)
The Canadian Accounting Standards Board (“AcSB”) announced that 2011 is the changeover date for
publicly-listed companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual
financial statements relating to fiscal years beginning on or after January 1, 2011. The transition date of
January 1, 2011 will require the restatement for comparative purposes of amounts reported by the
Corporation for the year ended December 31, 2010. More disclosures will be required under IFRS.
The Corporation is currently considering the impact a conversion to IFRS will have on its accounting
systems and financial statements. The conversion project planning includes an analysis of current
accounting policies, key GAAP differences, information systems, internal controls over financial reporting,
resources, and training. The Corporation’s project team has been assembled and will support the
conversion effort through leadership, training, issue identification, technical research, policy
recommendations, and implementation. IFRS conversion software has been purchased to assist with the
conversion.
Several IFRS standards are in the process of being amended by the IASB. Amendments to existing
standards are expected to continue until the transition date of January 1, 2011. The Corporation is
monitoring the proposed amendments. The final impact of IFRS on the Corporation’s consolidated
financial statements can only be measured once all the IFRS applicable at the conversion date are known.
To prepare for the conversion to IFRS within the allotted timeline, the following plan was developed:
a) Phase 1: Scope and Plan
The Corporation has ongoing training for appropriate personnel on IFRS standards and an initial
assessment on the impact of the IFRS conversion on the Corporation’s opening financial position has been
started. This assessment has thus far identified several differences between the Corporation’s current
accounting policies under GAAP and those the Corporation is required to apply under IFRS as they
currently exist. IFRS standards may change prior to the Corporation’s adoption of IFRS and this may
impact the initial assessment. The Corporation does not anticipate any significant changes to its information
technology, internal controls over financial reporting, business activities, nor disclosure controls and
procedures from the conversion to IFRS. The Corporation will review and update the IFRS conversion plan
as required. Phase 1 has been completed and the results have been reported to the audit committee and
board of directors.
b) Phase 2: Design and Build
Based on a detailed review of IFRS standards, the Corporation will choose accounting policies and
procedures, quantify the impact on key line items and disclosures, and prepare draft financial statements
under IFRS. The Corporation has chosen accounting policies and is currently quantifying the impact on
key accounts.
c) Phase 3: Implement and Review
The Corporation will implement new accounting policies under IFRS and prepare and report consolidated
financial statements under IFRS.
The Corporation has achieved its key milestones to date under its IFRS conversion plan. The Corporation
will continue to monitor and report on its conversion to IFRS according to its conversion plan.
(ii) Business Combinations
In January 2009, the CICA issued Handbook Sections 1582 – Business Combinations, 1601 – Consolidated
Financial Statements, and 1602 – Non-Controlling Interests, which replace Sections 1581 “Business
Combinations” and 1600 “Consolidated Financial Statements” effective January 1, 2011 with earlier
adoption permitted. Section 1582 establishes standards for the accounting for business combinations that is
equivalent to the business combination accounting standard under IFRS. Section 1582 requires net assets,
non-controlling interests and goodwill acquired in a business combination to be recorded at fair value and
12
non-controlling interests to be reported as a component of equity. Acquisition costs are not part of the
consideration and are to be expensed when incurred. Section 1601 together with Section 1602 establishes
standards for the preparation of consolidated financial statements. These Sections are applicable for the
Corporation’s interim and annual consolidated financial statements for the fiscal year beginning on or after
January 1, 2011. Early adoption of these Sections is permitted and all three Sections must be adopted
concurrently. The Corporation is evaluating the future impact on its financial statements.
Risks and Uncertainties
Credit risk
The Corporation's credit risk is primarily attributable to cash and receivables. The Corporation has no
significant concentration of credit risk arising from operations. Cash consist of chequing and savings
accounts and guaranteed investment certificates at reputable financial institutions, from which management
believes the risk of loss to be remote. Federal deposit insurance covers balances up to $100,000 in Canada
and up to $100,000 in the United States. Financial instruments included in receivables consist of amounts
due from government agencies, and receivables from related and unrelated companies. The Corporation
limits its exposure to credit loss for cash by placing its cash with high quality financial institutions and for
receivables by standard credit checks. The Corporation’s credit risk has not changed significantly from the
prior period.
Liquidity risk
The Corporation’s ability to remain liquid over the long term depends on its ability to obtain additional
financing. The Corporation has in place planning and budgeting processes to help determine the funds
required to support normal operating requirements on an ongoing basis as well as its planned development
and capital expenditures. The Corporation's approach to managing liquidity risk is to ensure that it will
have sufficient liquidity to meet liabilities when due. As at September 30, 2010, the Corporation had cash
balance of $15,670,549 to settle current liabilities of $807,514.
Interest rate risk
The Corporation has cash balances subject to fluctuations in the prime rate. The Corporation's current
policy is to invest excess cash in investment-grade deposit certificates issued by its banking institutions.
The Corporation periodically monitors the investments it makes and is satisfied with the credit ratings of its
banks. Management believes that interest rate risk is remote as investments have maturities of three
months or less and the Corporation currently does not carry interest bearing debt at floating rates.
Foreign currency risk
The Corporation's functional currency is the Canadian dollar, however most major transactions are in US
dollars. The Corporation is exposed to financial risk arising from fluctuations in foreign exchange rates
and the degree of volatility in these rates. The Corporation does not use derivative instruments to reduce its
exposure to foreign currency risk. A 1% change in the foreign exchange rate would have had a $128,212
impact on foreign exchange gain or loss.
Price risk
The Corporation is exposed to price risk with respect to commodity prices, specifically potash and other
fertilizer products. The Corporation closely monitors commodity prices to determine the appropriate course
of action to be taken by the Corporation. The Corporation’s future mining operations will be significantly
affected by changes in the market prices for potash. Commodity prices fluctuate on a daily basis and are
affected by numerous factors beyond the Corporation’s control. The supply and demand for commodities,
the level of interest rates, the rate of inflation, investment decisions by large holders of commodities, and
stability of exchange rates can all cause significant fluctuations in commodity prices.
Other risks
Although the Corporation has taken steps to verify title to the properties on which it is conducting
exploration and in which it has an interest, in accordance with industry standards for the current stage of
13
exploration of such properties, these procedures do not guarantee the Corporation's title. Property title may
be subject to unregistered prior agreements and non-compliance with regulatory requirements.
The exploration and development of mineral deposits involves significant risks which even a combination
of careful evaluation, experience and knowledge may not be successful in overcoming. Few mineral
properties which are explored ultimately develop into producing mines. There has been no commercial
production of minerals on properties held by the Corporation to date and there is a high degree of risk that
commercial production of minerals will not be achieved. There is no certainty that the expenditures made
by either IC Potash or ICP towards the search and evaluation of mineral resources will result in discoveries
of commercial quantities of any minerals. The Corporation has a limited history of operations and no
material earnings to date and there can be no assurance that the business of the ICP Group will be
successful or profitable. No dividends on any of the Corporation’s Shares have been paid to date.
Locating mineral deposits depends on a number of factors, not the least of which is the technical skill of the
exploration personnel involved. The mining industry is intensely competitive. The commercial viability of
a mineral deposit depends on a number of factors including the particular attributes of the deposits
(principally size and grade), proximity to infrastructure, the impact of mine development on the
environment, environmental regulations imposed by various levels of government and the competitive
nature of the industry which causes mineral prices to fluctuate substantially over short periods of time.
There can be no assurance that the minerals can be marketed profitably or in such a manner as to provide
an adequate return on invested capital.
The operations of the Corporation are subject to all of the risks normally associated with the operation and
development of mineral properties and the development of a mine, including encountering unexpected
formations or pressures, caving, flooding, fires and other hazards, all of which could result in personal
injuries, loss of life and damage to property of the Corporation and others. In accordance with customary
industry practice, the Corporation is not fully insured against all of these risks, nor are all such risks
insurable. Interference in the maintenance or provision of adequate infrastructure could adversely affect
the Corporation’s operations, financial condition and results of operations.
The operations of the Corporation’s properties will be subject to various laws and regulations relating to the
environment, prospecting, development, production, waste disposal and other matters. Amendments to
current laws and regulations governing activities related to the Corporation’s mineral properties may have
material adverse impact on operations. The Corporation has paid all site reclamation costs or posted site
reclamation bonds with the appropriate government agencies. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the operations of the Corporation. There can be
no assurance that the Corporation will not incur substantial financial obligations in connection with
environmental compliance. Failure to comply with applicable environmental and other laws, regulations
and permitting requirements may result in enforcement actions.
The Corporation will need additional funding to complete its short and long term objectives. The ability of
the Corporation to raise such financing in the future will depend on the prevailing market conditions, as
well as the business performance of the Corporation. Current global financial conditions have been subject
to increased volatility as a result of which access to public financing has been negatively impacted. There
can be no assurances that the Corporation will be successful in its efforts to raise additional financing on
terms satisfactory to the Corporation. The market price of the Corporation’s shares at any given point in
time may not accurately reflect the long-term value. If adequate funds are not available or not available on
acceptable terms, the Corporation may not be able to take advantage of opportunities, to develop new
projects or to otherwise respond to competitive pressures.
To the extent of the holdings of IC Potash through its subsidiaries (including ICP), the Corporation will be
dependent on the cash flows of these subsidiaries to meet its obligations, which cash flows may be
constrained by applicable taxation and other restrictions.
The Corporation is dependent upon the services of key executives, including the Chief Executive Officer of
ICP and the Corporation.
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Certain of the directors and officers of the Corporation also serve as directors and/or officers of other
companies involved in mineral exploration and development and, consequently, there exists the possibility
for such directors and officers to be in a position of conflict.
Changes in Internal Controls Over Financial Reporting
There were no changes in internal controls over financial reporting during the period.
Critical Accounting Estimates
The preparation of financial statements in accordance with Canadian generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reported period. Actual results could differ
from those estimates.
Subsequent Events
The following events occurred subsequent to September 30, 2010:
a) The Company granted 700,000 stock options with an exercise price of $0.58 and an expiry date
of November 8, 2015 to one officer and two consultants. The options fully vest immediately.
b) The Company granted 200,000 stock options with an exercise price of $0.80 and an expiry date
of November 22, 2015 to two consultants. The options fully vest immediately.
Other Information
The Corporation’s web site address is www.icpotash.com. Other information relating to the Corporation
may be found on SEDAR at www.sedar.com.
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