Eagle Star

Centrally located within the state of Piaui and near the cities of Picos and Eliseu Martins, Eagle Star's 100%-owned Ruth Agromineral Project covers approximately 118,000 hectares (nearly 292,000 acres) across 59 mineral claims (42 phosphate, 17 potash) in a favorable geological environment, believed to host a large phosphate deposit. Located within 200km from Eagle Star's Agnico Iron Project, this agrominerals project is also less than 250km away from the Balsas Agricultural Center.

The area houses a large soy growing industry including a 69,218km² area that crosses two states, and is responsible for the production of over 2.3 million tonnes of soya beans. The region is semi-arid with a hot and dry climate, ranging from minimum temperatures of 18^oC to maximum temperatures of 36^oC. The average annual rainfall is around 600mm, and January-February-March is the rainy season.

All three main concession blocks are located within the Parnaiba Basin in areas with extensive phosphate potential in which mineralization characteristics are similar to the Wonarah phosphate mine located in the Georgina Basin, Northern Australia. The Wonarah deposit hosts 485 million tonnes grading 18% phosphates (P₂O₅). In addition to phosphates, potash (K₂O) can sometimes be associated in the same area as phosphates, but in different beds, as seen in deposits of glauconite in East Otago, New Zealand which can be found with phosphate rocks.

Sedimentary rocks, dubbed the Parnaiba Basin, cover the central regions of Piaui. The northern and southern parts of the state are covered by igneous rocks, and to date, most exploration licenses for P₂O₅ in Piaui were focused on these north and south igneous regions, where geological information was readily available through a gamma-spectromeric survey performed by CPRM – a government agency.

Global phosphate mining activity shows that the commodity can be derived from two different kinds of geological settings: sedimentary and igneous. Sedimentary deposits provided most of the world's production (nearly 80-90%) while igneous deposits have been the source for 10-20%. The Parnaiba Basin has all the paleological components necessary to host a large P₂O₅ deposit; namely marine cold waters sediments, low sedimentation rates and concretionary sediments.

Early sampling performed by Eagle Star and an arms-length geological team in the central sedimentary region has confirmed their assertion that the Parnaiba's sedimentary basin has the perfect geological environment to host a large, high-quality phosphate deposit.

Due to the extremely large target area, Eagle Star had to perform a wide sampling program of artificial outcrops near the existing road network. Though the thickness of these rocks in many outcrops is more than 12m, the sampling team could only initially take samples of 3m due to vertical slope. This included 222 samples covering a 200km x 20km area. Results from the sampling defined three different anomalous regions, including the principal anomalous zone of 180km² which returned values of 2-22% phosphorus and a second zone covering 340km² with results of 3-10%.

PAES LANDIM BLOCK

SANTA CRUZ BLOCK

CANABRAVA BLOCK

Further testing is anticipated, in order to determine the manner and projected schedule of P₂O₅ production. Eagle Star plans to commence next stage of exploration effective immediately, including mapping, systematic chip sampling and drilling.

Preliminary field studies show high values of K₂O coming from glauconite, which is a potash silicate mineral also known as potash rock. Glauconite contains between 4-8% potassium along with iron, magnesium and aluminum bound together with silica. It has mildly magnetic properties because of its iron content, which can be used to magnetically upgrade rock material to produce pure glauconite concentrates. The best results for K₂O came from a white-green siltstone (glauconite), unlike the siltstones in the area known to host phosphate rock. All 12 sample results ranging between 4.04% and 6.19% of K₂O were considered anomalous to potash. 6 results were located within the blocks previously claimed by Eagle Star and 6 in the new areas. The best result was detected near the town of São Luiz do Piaui following a rising sequence of K₂O sample results from South to North of 1,07%-2,19%-3,51%-6,19% K₂O. Since the sampling stopped at this last point, this tendency should suggest high values ahead. Following is a results table of samples taken in the newly claimed areas.

The rock samples were analyzed by SGS Geosol Laboratorios Ltda (SGS) located in Vespaciano, Minas Gerais State, Brazil.

SOCORRO BLOCK

SÃO LUIZ BLOCK

The Ruth project's area has excellent infrastructure consisting of roads, water reservoirs, power lines and a future railroad to be completed by the year 2013. In addition, Piaui state has a large agricultural base that includes soy and eucalyptus plantations. With demands coming from nearby consumers, the accessible local markets will most likely consume future agromineral supplies (P₂O₅ and K₂O) and reduce transportation and marketing costs.

With an agricultural sector representing 1/3 of its economy, 42% of exportation and 17.7 million jobs, Brazil is rapidly emerging as an important agricultural producer on the world stage. But concern lingers, as Brazil's food production is outgrowing fertilizer production. Lacking a sufficient local supply, Brazil has become one of the world's largest importers of fertilizers. Its importance as a buyer in the global market stems not only from its required volume of imports, but also because its demand occurs in the second half of the year (other major purchasing countries place most of their orders for the first half of the year as a result of their agricultural calendars). Fertilizer consumption in Brazil is concentrated in four major crops: soy, corn, sugarcane and coffee. In 2009, these crops accounted for approximately 75% of all the fertilizer consumed in the country². Due to weather induced crop failures and demand growth from emerging economies, the fertilizer market has had an impact on food prices.

The three components typically associated with fertilizer production are Nitrogen (N), Phosphorus (P) and Potassium (K) and in 2008, Brazil was the world's 2^nd largest phosphorus importer and the 3^rd largest potash importer¹. Brazil currently stands as 5^th in worldwide fertilizer consumption and 2^nd in importation. This growing demand, has driven the country's proportion of imported raw fertilizer materials from 36% in 1990 to 80% in 2010¹. According to the National Fertilizers Association (Anda), Brazil produced 8.4 million tonnes of fertilizers in 2009 and imported 11 million tonnes². Rising fertilizer prices will put further pressure on Brazil to grow its own domestic supplies.

In response to growing demand, the federal government has pledged US$5 billion between 2010 and 2014 towards fertilizer development with a goal of self-sufficiency. The government has also enlisted the help of the country's two largest companies Vale (mining) and Petrobras (oil and gas) to invest in research and technology development aimed at medium- and long-term exploration for deposits of several key fertilizer minerals. Vale responded in January 2011, by acquiring US$3.8 billion worth of Bunge's (an agribusiness company) Brazilian fertilizer-nutrient assets⁴. In Minas Gerais State, Petrobras followed suit in March 2011, announcing the construction of a US$1.4 billion fertilizer plant⁵.

Processed fertilizer is not the only method to aid the soils in the Brazilian Savanna, which are already very depleted in agromineral nutrients. Where P₂O₅ and K₂O concentrations are inadequate to the production of processed soluble fertilizers, grounded raw phosphate rock and potash in the form of glauconite can be applied directly to the soil as an effective alternative source of fertilizer. Rocks of sedimentary origin, like those identified in Eagle Star's Ruth Agromineral Project are more adequate to this technique due to their crystalline structure. Still, the viability of this method is dependent upon the type of agricultural crops the raw material is applied to (more applicable to long term crops that benefit from slow release of nutrients) and close proximity to the source (less than 200km) due to the large volume of raw material necessary to transport (around 2 tonnes of grounded rock for every hectare) in this type of application. Eagle Star Minerals' Ruth Agromineral Project is located within 200km of one of the region's largest soya bean plantations, (covering nearly 7 million hectares of land) and in close proximity to large Eucalyptus plantations.

¹International Institute for Sustainable Development; "Food Security: The Brazilian Case" by Weber Antonio Neves do Amaral and Alessandro Peduto

²ICIS.com

⁴NYTimes.com, January 27, 2010

⁵FoxBusiness.com, March 17, 2011

Successfully used as a slow-acting potash fertilizer by direct application, glauconite was historically applied to agricultural fields during the First World War⁷. Due to a shortage of supply in highly-soluble marine potash minerals from Germany, the major source of supply at the time, glauconite, quickly rose in usage to meet the demands of the time.

Today, glauconite has had a comeback, evidenced by the number of glauconite projects worldwide. Direct application of K₂O in the form of glauconite has been tested positively in neighbouring Argentina, with the application of glauconitic sands providing an efficient and economic alternative source of potassium⁸. In India within the states of Uttar Pradesh, Madhya Pradesh, Rajasthan and Gujarat, glauconite has recently been used with positive results . The best part of the deposits used showed 6% K₂O, which matches that of Eagle Star's potential new claims.

Already, in Brazil, Verde Potash PLC a fertilizer exploration and development company listed on the TSX Venture Exchange has released results of growing trials on a product they call ThermoPotash - a slow-release, non-chloride, multi-nutrient, fertilizer product sourced of potash-rich rock at their flagship Cerrado Verde project in the state of Minas Gerais. As per their release dated May 16, 2011:

"ThermoPotash results were up to 17% better than KCl, confirming its efficiency as a potash fertilizer and demonstrating the superiority of a slow release product.".This is great news as it shows that thermo-potash products can compete as direct-spread fertilizers.

The potential for glauconite mining is twofold: On the one hand pure potassium salts can be produced, but on the other hand direct-spread fertilizer products can now be created easily and relatively cheaply in a kiln at around 800^oC."

To the west of the Minas Gerais State in Brazil there are many ongoing K₂O projects on rock formations similar to those found in the proposed Eagle Star K₂O claims. In chosen targets, the grades vary from 4% to 10% of K₂O, of which some of them are in advanced stage with a dense drilling program. While some of these companies solely focus on the Potash salt route, others, like Verde Potash, are following the thermal route as mentioned before.

⁶www.cruzeirodosul.inf.br

⁷Glauconite - OneMine.org

⁸Direct Application of Phosphate Rocks and Glauconite as Alternative Sources of Fertilizer in Argentina by Liliana Castro and Selvia Tourn

⁹Mineral Glauconite may be used as alternative source of potash

At a construction cost of US$3.21 billion, Brazil's Transnordestina railroad project is scheduled for a 2013 completion. The 1,728km long railway across Brazil's northeast is anticipated to aid the transport of more than 30 million tonnes of cargo a year across the country's fastest growing region. The railroad connects the City of Eliseu Martins in Piaui, the Suape Port and the Port of Pecem, with the Metropolitan Region of Recife and Fortaleza Metropolitan Region, across virtually the entire territory of the state of Pernambuco and Ceara.

Eagle Star's Ruth Agromineral claims are aligned in close proximity to the Transnordestina, thus improving access to ports and outside markets.