POTASH DRAGON CHILE GEOPHYSICAL SURVEY TRANSIENT ELECTROMAGNETIC (TEM) METHOD. LLAMARA and SOLIDA PROJECTS SALAR DE LLAMARA, IQUIQUE, REGION I, CHILE

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POTASH DRAGON CHILE GEOPHYSICAL SURVEY TRANSIENT ELECTROMAGNETIC (TEM) METHOD LLAMARA and SOLIDA PROJECTS SALAR DE LLAMARA, IQUIQUE, REGION I, CHILE OCTOBER 2012

CONTENT Page I INTRODUCTION 1 II FIELD WORK 2 2.1 Equipment 2 2.2 Field Configuration 2 III TEM METHOD DESCRIPTION 5 IV DATA PROCESSING 6 4.1 1D Inversion 6 4.2 Resistivity Sections 6 V RESULTS 7 5.1 Interpretation Sections 7 5.2 3D Model of Conductive Unit 8 5.3 Volumes Estimation 8 VI CONCLUSIONS 11

FIGURES Fig. 1 Fig. 2 Fig. T-1 Fig. T-2 Fig. T-3 Fig. T-4 Fig. T-5 Fig. T-6 Fig. T-7 Fig. T-8 Fig. T-9 Fig. T-10 Fig. T-11 Fig. T-12 Fig. T-13 Fig. T-14 Fig. T-15 Fig. T-16 Fig. T-17 Fig. T-18 Fig. T-19 Fig. T-20 Fig. T-21 Fig. T-22 Fig. T-23 Fig. T-1s Fig. T-2s Fig. T-3s Fig. T-4s Fig. T-5s Fig. T-6s Fig. T-7s Fig. T-8s Fig. T-9s Fig. T-10s Fig. T-11s Location Map Satellite Image of Projects Sectors Resistivity Section (Layered Model), Llamara Project, Line 7647000 N Resistivity Section (Layered Model), Llamara Project, Line 7648000 N Resistivity Section (Layered Model), Llamara Project, Line 7649000 N Resistivity Section (Layered Model), Llamara Project, Line 7650000 N Resistivity Section (Layered Model), Llamara Project, Line 7651000 N Resistivity Section (Layered Model), Llamara Project, Line 7652000 N Resistivity Section (Layered Model), Llamara Project, Line 7653000 N Resistivity Section (Layered Model), Llamara Project, Line 7654000 N Resistivity Section (Layered Model), Llamara Project, Line 7655000 N Resistivity Section (Layered Model), Llamara Project, Line 7656000 N Resistivity Section (Layered Model), Llamara Project, Line 7657000 N Resistivity Section (Layered Model), Solida Project, Line 7641000 N Resistivity Section (Layered Model), Solida Project, Line 7642000 N Resistivity Section (Layered Model), Solida Project, Line 7643000 N Resistivity Section (Layered Model), Solida Project, Line 7644000 N Resistivity Section (Layered Model), Solida Project, Line 7645000 N Resistivity Section (Layered Model), Solida Project, Line 7646000 N Resistivity Section (Layered Model), Solida Project, Line 7647000 N Resistivity Section (Layered Model), Solida Project, Line 7648000 N Resistivity Section (Layered Model), Solida Project, Line 7649000 N Resistivity Section (Layered Model), Solida Project, Line 7650000 N Resistivity Section (Layered Model), Solida Project, Line 7651000 N Resistivity Section (Layered Model), Solida Project, Line 7652000 N Resistivity Section (Smooth Model), Llamara Project, Line 7647000 N Resistivity Section (Smooth Model), Llamara Project, Line 7648000 N Resistivity Section (Smooth Model), Llamara Project, Line 7649000 N Resistivity Section (Smooth Model), Llamara Project, Line 7650000 N Resistivity Section (Smooth Model), Llamara Project, Line 7651000 N Resistivity Section (Smooth Model), Llamara Project, Line 7652000 N Resistivity Section (Smooth Model), Llamara Project, Line 7653000 N Resistivity Section (Smooth Model), Llamara Project, Line 7654000 N Resistivity Section (Smooth Model), Llamara Project, Line 7655000 N Resistivity Section (Smooth Model), Llamara Project, Line 7656000 N Resistivity Section (Smooth Model), Llamara Project, Line 7657000 N

Fig. T-12s Fig. T-13s Fig. T-14s Fig. T-15s Fig. T-16s Fig. T-17s Fig. T-18s Fig. T-19s Fig. T-20s Fig. T-21s Fig. T-22s Fig. T-23s Fig. I-T-1 Fig. I-T-2 Fig. I-T-3 Fig. I-T-4 Fig. I-T-5 Fig. I-T-6 Fig. I-T-7 Fig. I-T-8 Fig. I-T-9 Fig. I-T-10 Fig. I-T-11 Fig. I-T-12 Fig. I-T-13 Fig. I-T-14 Fig. I-T-15 Fig. I-T-16 Fig. I-T-17 Fig. I-T-18 Fig. I-T-19 Fig. I-T-20 Fig. I-T-21 Fig. I-T-22 Fig. I-T-23 Resistivity Section (Smooth Model), Solida Project, Line 7641000 N Resistivity Section (Smooth Model), Solida Project, Line 7642000 N Resistivity Section (Smooth Model), Solida Project, Line 7643000 N Resistivity Section (Smooth Model), Solida Project, Line 7644000 N Resistivity Section (Smooth Model), Solida Project, Line 7645000 N Resistivity Section (Smooth Model), Solida Project, Line 7646000 N Resistivity Section (Smooth Model), Solida Project, Line 7647000 N Resistivity Section (Smooth Model), Solida Project, Line 7648000 N Resistivity Section (Smooth Model), Solida Project, Line 7649000 N Resistivity Section (Smooth Model), Solida Project, Line 7650000 N Resistivity Section (Smooth Model), Solida Project, Line 7651000 N Resistivity Section (Smooth Model), Solida Project, Line 7652000 N Interpretation Section, Llamara Project, Line 7647000 N Interpretation Section, Llamara Project, Line 7648000 N Interpretation Section, Llamara Project, Line 7649000 N Interpretation Section, Llamara Project, Line 7650000 N Interpretation Section, Llamara Project, Line 7651000 N Interpretation Section, Llamara Project, Line 7652000 N Interpretation Section, Llamara Project, Line 7653000 N Interpretation Section, Llamara Project, Line 7654000 N Interpretation Section, Llamara Project, Line 7655000 N Interpretation Section, Llamara Project, Line 7656000 N Interpretation Section, Llamara Project, Line 7657000 N Interpretation Section, Solida Project, Line 7641000 N Interpretation Section, Solida Project, Line 7642000 N Interpretation Section, Solida Project, Line 7643000 N Interpretation Section, Solida Project, Line 7644000 N Interpretation Section, Solida Project, Line 7645000 N Interpretation Section, Solida Project, Line 7646000 N Interpretation Section, Solida Project, Line 7647000 N Interpretation Section, Solida Project, Line 7648000 N Interpretation Section, Solida Project, Line 7649000 N Interpretation Section, Solida Project, Line 7650000 N Interpretation Section, Solida Project, Line 7651000 N Interpretation Section, Solida Project, Line 7652000 N

Fig. A1 Fig. A2 Fig. A3 Fig. A4 Fig. B1 Fig. B2 Fig. B3 Fig. B4 Fig. B5 Fig. B6 Fig. B7 Fig. B8 Fig. B9 Fig. B10 Fig. B11 Fig. C1 Fig. C2 Fig. C3 Fig. C4 Fig. C5 Fig. C6 Fig. C7 Fig. C8 Fig. C9 Fig. C10 Fig. C11 Fig. C12 Fig. C13 Fig. C14 Fig. C15 Fig. C16 Fig. D Conductor Unit Maps, Llamara Project: ASTER Topographic Relief, TEM Lines and Mining Properties Resistivity of Conductor Unit Upper Surface Elevation of Conductor Unit Thickness of Conductor Unit Resistivity Maps, Llamara Project: Resistivity of Conductor Unit, Resistivity 1.0 Ωm Resistivity of Conductor Unit, Resistivity 1.2 Ωm Resistivity of Conductor Unit, Resistivity 1.4 Ωm Resistivity of Conductor Unit, Resistivity 1.6 Ωm Resistivity of Conductor Unit, Resistivity 1.8 Ωm Resistivity of Conductor Unit, Resistivity 2.0 Ωm Resistivity of Conductor Unit, Resistivity 2.2 Ωm Resistivity of Conductor Unit, Resistivity 2.4 Ωm Resistivity of Conductor Unit, Resistivity 2.6 Ωm Resistivity of Conductor Unit, Resistivity 2.8 Ωm Resistivity of Conductor Unit, Resistivity 3.0 Ωm Perspectives, Llamara Project: Topographic Relief, TEM Lines and Mining Properties, view to NE Upper Surface Elevation of Conductor Unit, view to NE Resistivity of Conductor Unit, view to NE Conductor Unit, Resistivity 3.0 Ωm, view to NE Conductor Unit, Resistivity 2.5 Ωm, view to NE Conductor Unit, Resistivity 2.0 Ωm, view to NE Conductor Unit, Resistivity 1.5 Ωm, view to NE Conductor Unit, Resistivity 1.0 Ωm, view to NE Topographic Relief, TEM Lines and Mining Properties, view to SW Upper Surface Elevation of Conductor Unit, view to SW Resistivity of Conductor Unit, view to SW Conductor Unit, Resistivity 3.0 Ωm, view to SW Conductor Unit, Resistivity 2.5 Ωm, view to SW Conductor Unit, Resistivity 2.0 Ωm, view to SW Conductor Unit, Resistivity 1.5 Ωm, view to SW Conductor Unit, Resistivity 1.0 Ωm, view to SW Volume of Conductor Unit as a function of Cut-off Resistivity, Llamara Project

Fig. S-A1 Fig. S-A2 Fig. S-A3 Fig. S-A4 Fig. S-B1 Fig. S-B2 Fig. S-B3 Fig. S-B4 Fig. S-B5 Fig. S-B6 Fig. S-B7 Fig. S-B8 Fig. S-B9 Fig. S-B10 Fig. S-B11 Fig. S-C1 Fig. S-C2 Fig. S-C3 Fig. S-C4 Fig. S-C5 Fig. S-C6 Fig. S-C7 Fig. S-C8 Fig. S-C9 Fig. S-C10 Fig. S-C11 Fig. S-C12 Fig. S-C13 Fig. S-C14 Fig. S-C15 Fig. S-C16 Fig. S-D Conductor Unit Maps, Solida Project: ASTER Topographic Relief, TEM Lines and Mining Properties Resistivity of Conductor Unit Upper Surface Elevation of Conductor Unit Thickness of Conductor Unit Resistivity Maps, Solida Project: Resistivity of Conductor Unit, Resistivity 1.0 Ωm Resistivity of Conductor Unit, Resistivity 1.2 Ωm Resistivity of Conductor Unit, Resistivity 1.4 Ωm Resistivity of Conductor Unit, Resistivity 1.6 Ωm Resistivity of Conductor Unit, Resistivity 1.8 Ωm Resistivity of Conductor Unit, Resistivity 2.0 Ωm Resistivity of Conductor Unit, Resistivity 2.2 Ωm Resistivity of Conductor Unit, Resistivity 2.4 Ωm Resistivity of Conductor Unit, Resistivity 2.6 Ωm Resistivity of Conductor Unit, Resistivity 2.8 Ωm Resistivity of Conductor Unit, Resistivity 3.0 Ωm Perspectives, Solida Project: Topographic Relief, TEM Lines and Mining Properties, view to NW Upper Surface Elevation of Conductor Unit, view to NW Resistivity of Conductor Unit, view to NW Conductor Unit, Resistivity 3.0 Ωm, view to NW Conductor Unit, Resistivity 2.5 Ωm, view to NW Conductor Unit, Resistivity 2.0 Ωm, view to NW Conductor Unit, Resistivity 1.5 Ωm, view to NW Conductor Unit, Resistivity 1.0 Ωm, view to NW Topographic Relief, TEM Lines and Mining Properties, view to SE Upper Surface Elevation of Conductor Unit, view to SE Resistivity of Conductor Unit, view to SE Conductor Unit, Resistivity 3.0 Ωm, view to SE Conductor Unit, Resistivity 2.5 Ωm, view to SE Conductor Unit, Resistivity 2.0 Ωm, view to SE Conductor Unit, Resistivity 1.5 Ωm, view to SE Conductor Unit, Resistivity 1.0 Ωm, view to SE Volume of Conductor Unit as a function of Cut-off Resistivity, Solida Project -*-

I INTRODUCTION At the request of Potash Dragon Chile, a Geophysical Survey using the Transient Electromagnetic (TEM) Method was performed in the Llamara and Solida Projects; both sectors located in the northern part of Salar de Llamara, Region I of Tarapacá, between the cities of Calama and Iquique, Chile (Figure 1). The objective of the study is the delineation in extent and depth of brine layers. According to previous experience, this geophysical technique proves to be the most suitable for the detection and quantification of saline aquifers associated with this type of environment. The Coincident Loop configuration was used for this survey, with loop size of 200x200 m2. Distance between lines was 1 Km and distance between stations along the lines was 0.5 Km. A total of 288 TEM stations were measured between last week of July and first week of September, 2012 (144 stations in Llamara and 139 in Solida). Data were processed with a 1D inversion system, using layered and smooth models, and then integrated into sections of resistivity for each line. Interpretation sections were created from layered resistivity profiles. A 3D modeled body of the brine conductor layer was generated, which is presented in perspectives and plan maps. Volume estimations were obtained from this 3D modeled body. In this printed report, graphics are show in letter size for easy display and consultation. All digital data and real scale graphics are provided in CD. Preliminary and final results have been sent to the client during field, processing and interpretation steps. 1

II FIELD WORK 2.1 Equipment Zonge instrument were used in this survey, consisting of a multipurpose digital receiver model GDP-32 and TEM Transmitters, Models ZT-30 and NT-20 (with batteries as a power source). The receiver is used in electrical and electromagnetic methods as TEM, NanoTEM, IP (time and frequency domains), CSAMT, AMT, etc. It use frequencies from DC to 8 KHz, has software controlled digital filters; the data are recorded in solid state memory, transferred electronically to a PC. 2.2 Field Configuration Data acquisition was conducted from July 25 to August 15, 2012 for Llamara Project (149 stations) and from August 16 to September 7, 2012 for Solida Project (139 stations). The total of 288 stations were located using non-differential GPS equipment, Datum PSAD56 19S. TEM stations were placed in a regular network of east-west lines spaced every 1 km, with points every 0.5 Km along each line. The Coincident Loop configuration was used, where the transmitting and receiving antennas are equal size loops of isolated wire concentrically deployed on the ground. Table 1 show the measuring parameters used in the TEM survey. 2

Table 1 TEM Survey Parameters Loop Configuration Coincident Loop Transmitting and Receiving Antennas Loops of 200x200 m 2 Repetition Frequencies 4, 8, 16 and 32 Hz Measured Variable Vertical Component of Magnetic Field Figures A1 and S-A1 shows the plan maps of TEM stations and lines on the ASTER GDEM (Advanced Spaceborne Thermal Emission and Reflection Radiometer, Global Digital Elevation Model), for Llamara and Solida Projects, respectively. This GDEM has a horizontal resolution of 30 m. Table 2 and Table 3 show the position, length and stations of each line for Llamara and Solida Projects, respectively. Table 2 TEM Lines for Llamara Project (UTM Datum PSAD56 19S) Line Stations Total Stn Northing East min. East max. Length (m) L11 143 149 7 7,657,000 427,000 430,000 3000 L10 135 142 8 7,656,000 427,000 430,500 3500 L9 120 134 15 7,655,000 427,000 434,000 7000 L8 99 119 21 7,654,000 424,000 434,000 10000 L7 78-98 21 7,653,000 424,000 434,000 10000 L6 61-77 17 7,652,000 426,000 434,000 8000 L5 49-60 12 7,651,000 428,500 434,000 5500 L4 37-48 12 7,650,000 428,500 434,000 5500 L3 25-36 12 7,649,000 428,500 434,000 5500 L2 13-24 12 7,648,000 428,500 434,000 5500 L1 1-12 12 7,647,000 428,500 434,000 5500 149 3

Table 3 TEM Lines for Solida Project (UTM Datum PSAD56 19S) Line Stations Total Stn Northing East min. East max. Length (m) L23 281-288 8 7,652,000 439,500 443,000 3500 L22 273-280 8 7,651,000 439,500 443,000 3500 L21 259-272 14 7,650,000 439,500 446,000 6500 L20 250-258 9 7,649,000 442,000 446,000 4000 L19 243-249 7 7,648,000 443,000 446,000 3000 L18 230-242 13 7,647,000 443,000 449,000 6000 L17 217-229 13 7,646,000 443,000 449,000 6000 L16 206-216 11 7,645,000 444,000 449,000 5000 L15 195-205 11 7,644,000 444,000 449,000 5000 L14 180-194 15 7,643,000 442,000 449,000 7000 L13 165-179 15 7,642,000 442,000 449,000 7000 L12 150-164 15 7,641,000 442,000 449,000 7000 139 4

III TEM METHOD DESCRIPTION The TEM technique is an inductive electromagnetic method that works in the time domain. Using wire coils placed on the ground, inductive currents are generated in the subsurface and the transient magnetic field produced by the decay of these currents to stop transmission is measured. This process is repeated using waves current of type "positive-zero-negative-zero" frequencies ('repetition') usually varying between 0.5 and 32 Hz, with binary step. The induced current is distributed by diffusion and its behavior depends on the resistivity, size and shape of geoelectric structures. In low resistivity materials, dissipation is slow and the initial amplitude is small, and vice versa. Numerical analysis of the transient magnetic field curve permits to infer quantitative information about subsurface geoelectric parameters. The subsoil is investigated at different depths depending on the duration of transient time. A longer duration of the transient (i.e., lower frequency of the transmitter current) the greater the depth of penetration (and the lower the resolution), and vice versa. As inductive technique, the TEM avoids the problem of galvanic methods to try to inject current directly into the ground in areas of very high contact resistance, such as dry salt soils highly resistive (as caliche ), characteristic of certain places in northern Chile. 5

IV DATA PROCESSING 4.1 1D Inversion Assuming a layered model for the subsurface beneath each station, 1D inversion process allows obtaining its intrinsic resistivities and thicknesses. The data inversion was performed with the Interpex IX1D system, which has two inversion methods. The 'layered model' algorithm enables to interactively vary a user model, with a sufficient number of layers to a proper fit the theoretical curve to the observed data. The 'smooth model' algorithm performs a semi-automatic inversion, providing a large number of thin layers, with a relatively continuous variation of resistivity. In general, the layered model better reflects stratified environments, especially the interfaces depth. The smooth model can give more details of the variation of resistivity with depth. 4.2 Resistivity Sections TEM measurement stations along a line enable the detection of lateral changes of the geoelectric parameters, represented in a resistivity section. Figures T-1 to T-23 shows resistivity profiles for layered models and Figures T-1s to T-23s shows resistivity profiles for smooth models, including Llamara and Solida projects. In resistivity sections, reds indicate a low resistivity (high conductivity), which correlate with fine and/or clayed sediments saturated with saline and/or brine solutions, and blues indicate high resistivity, which correlate with dry surface sediments and bedrock, while the orange, yellow and green realize the diverse characteristics of sedimentary layers. 6

V RESULTS 5.1 Interpretation Sections The objective of this geophysical work is the quantitative determination of the electrical properties of the subsoil in the area of interest, consisting of sedimentary formations and occasionally basement rocks. These geoelectric properties depend on the mineralogy (lithology) and microstructure (porosity, grain size, fracturing) of the rocks, which vary significantly with depth. Also, the fluid type (salinity, saturation, etc.) greatly affects the resistivity. Structures and alteration phenomena also produce changes in resistivity that can be detected with a geoelectromagnetic survey. From the layered resistivity sections, interpretation figures were created giving geological sense to the geoelectrical layer according to some knowledge of similar environments in the northern Chile. Figures I-T-1 to I-T-11 shows the interpretative sections for Llamara Project and Figures I-T-12 to I-T-23 shows the interpretative sections for Solida Project. The interpretative correlation is exposed in Table 4. Table 4 Interpretation of Geoelectrical Layer Average resistivity intervals [Ohm-m] 10 130 Dry surface sediments 2 6 Saline aquifer 1 2 Brine < 1 Highly conductive cores 3 10 Compact basal sediments > 30 High resistivity rocks Lithologic description 7

5.2 3D Model of Conductive Unit A 3D resistivity model of conductive geoelectric unit correlated with brine aquifer was generated (with Voxel module, Oasis Montaj software, Geosoft) from the resistivity profiles (for layered model case), allowing to better visualize the geometry and location of aquifers of interest as well to estimate the associated volumes. Resistivity, upper surface elevation and thickness plan maps of the conductor unit are shown in Figures A2, A3 and A4 for Llamara Project and Figures S-A2, S-A3 and S-A4 for Solida Project. Also, the resistivity of conductor unit for upper cut-off resistivity of 1.0 to 3.0 Ωm, every 0.2 Ωm are presented in Figures B1 to B11 for Llamara Project and Figures S-B1 to S-B11 for Solida Project. Figures C1 to C16 shows the 3D conductor unit for Llamara Project and Figures S-C1 to S-C16 shows the 3D conductor unit for Solida Project. These figures are perspectives considering different resistivity cut-off values and points of view. It should be noted that this modeled body is not properly a 3D model (ie, was not generated by a 3D inversion), but corresponds to a volume created from interpretative sections, which in turn comes from a set of real 1D models. However, in stratified cases like this sector, this type of body is a proper first approximation to the actual structure. 5.3 Volumes Estimation The 3D integration of TEM models allows an initial calculation of volumes of saturated brine aquifers. The following Tables 5 and 6 and Figures D and S-D present the results of this volume calculation as a function of upper cut-off resistivity. 8

Table 5 Volume of Conductor Unit as a function of cut-off resistivity, Llamara Cutoff Resistivity [Ohm-m] Volume [Millions of m3] Cutoff Resistivity [Ohm-m] Volume [Millions of m3] 0.5 0.075 1.8 1185.013 0.6 0.579 1.9 1342.661 0.7 5.340 2.0 1517.051 0.8 27.927 2.1 1695.172 0.9 80.857 2.2 1888.961 1.0 186.191 2.3 2088.579 1.1 302.791 2.4 2217.488 1.2 394.685 2.5 2338.175 1.3 543.867 2.6 2461.765 1.4 653.878 2.7 2581.206 1.5 768.210 2.8 2703.824 1.6 897.627 2.9 2825.582 1.7 1038.415 3.0 2964.454 Fig. D Volume of Conductor Unit as a function of cut-off resistivity, Llamara 9

Table 6 Volume of Conductor Unit as a function of cut-off resistivity, Solida Upper Cutoff Resistivity [Ohm-m] Volume [Millions of m3] Upper Cutoff Resistivity [Ohm-m] Volume [Millions of m3] 0.4 0.726 1.8 3263.998 0.5 28.254 1.9 3423.346 0.6 65.390 2.0 3539.307 0.7 109.086 2.1 3645.529 0.8 163.771 2.2 3728.619 0.9 267.392 2.3 3794.514 1.0 378.944 2.4 3816.322 1.1 487.596 2.5 3831.840 1.2 620.281 2.6 3841.328 1.3 841.203 2.7 3849.650 1.4 1247.447 2.8 3856.167 1.5 1859.751 2.9 3861.843 1.6 2434.720 3.0 3866.985 1.7 2989.547 Fig. S-D Volume of Conductor Unit as a function of cut-off resistivity, Solida 10

VI CONCLUSIONS The Transient Electromagnetic geophysical technique has proved suitable for the investigation of highly conductive aquifers existing in Llamara Salar sector in northern Chile. According to previous experiences in similar environments, it is expected the presence of brine aquifers containing high quantities of potassium end lithium, among others elements, then becoming geological targets of economic interest. The geophysical results are presented in the form of resistivity profiles, interpretation sections and a 3D model of the conductor unit interpreted as brine aquifer. The volume of this modeled body was calculated using different cutoff values of the resistivity. These values must be considered as a first approximation, since interpolation, gridding and masking process are involved, as well as interpretive judgment in interfaces delineation in some sectors. It is considered, however, that it constitutes a starting point for calibrating the dimensions of these targets. The aquifers of interest identified in this study can be verified by some exploration drilling. Geophysical well logging is suggested to perform in the holes with Natural Gamma, Density Gamma and Neutron Compensated Porosity probes. -*- Geodatos. Santiago of Chile, October 2012.- 11