In the news release, "Gensource announces results of a PEA for its Vanguard Project", issued 31-May-2016 by Gensource Potash Corp over CNW, "Project capacity" under "SUMMARY OF THE PEA" should read "250,000 t/a final product, standard grade" rather than "50,000 t/a final product, standard grade" as incorrectly transmitted by CNW. The complete, corrected release follows:

Gensource announces results of a PEA for its Vanguard Project

SASKATOON, May 31, 2016 /CNW/ - Gensource Potash Corporation ("Gensource" or the "Company") (TSX.V: GSP) is pleased to announce the completion of a Preliminary Economic Assessment ("PEA") for its Vanguard Potash Project ("Vanguard", or "Project") in Saskatchewan.  The Vanguard area is the subject of an Asset Purchase Agreement ("APA") with Yancoal Canada Resources and the APA is subject to closing conditions as set out in Gensource's news release dated 06Apr2016.   The PEA was completed in compliance with NI 43-101 Standards of Disclosure for Mineral Projects ("43-101", or "Technical Report").

As stated in the recommendations of the initial Vanguard Technical Report, announced 28Apr2016, the key next step for Vanguard was to complete a PEA.   Gensource is pleased to announce today the completion of the PEA and the next stages of project development:  upgrading the resource and completing a preliminary feasibility study.

The PEA was prepared by Innovare Technologies Ltd. (Innovare), in conjunction with ENGCOMP Engineering and Computing Professionals Inc. (ENGCOMP), of Saskatoon.   The geological and resource estimate components of the PEA remain unchanged from the 28Apr2016 Resource Estimate Technical Report, as completed by Terra Modelling Services Inc.

The PEA formalizes the conceptual engineering design for the Vanguard project, and ultimately becomes the prototype for Gensource's small scale production facilities with a target production rate of 250,000 t/a.    Based on the engineering analysis, an AACE (Association for the Advancement of Cost Engineering) Class 5 capital cost estimate was completed and operating costs were calculated.  The basis of the engineering design was the Inferred Mineral Resource as defined in the Resource Estimate announced 28Apr2016.  An economic analysis was performed to understand the potential financial performance of this small scale operation. 

As background, the Company is developing a small scale production model.  The small size is of key importance: 

• It allows for vertical integration of the mine with an identified market partner,
• It has the potential for lower capital expenditures (CAPEX) which may be more readily financed in challenging capital markets for the resource industry, together with very attractive operating costs (OPEX), and
• It has the potential to exhibit a significantly reduced environmental footprint – with no salt tailings on surface, no brine ponds or other brine control structures, and no requirement for fresh surface water consumption.

Gensource's President & CEO, Mike Ferguson, said, "We are very pleased to have completed the PEA for Vanguard – and we are specifically pleased with the results.  The analysis in the Report indicates that there is good potential for an economic potash operation using the small scale techniques we've defined.  The fact that a strong ROI is indicated – even when using very conservative inputs like today's low potash price, and a real and rational sustaining CAPEX program - supports Gensource's business plan as a marketable approach to becoming a new and independent potash producer.  We believe the PEA provides a very solid foundation for Gensource to move forward with the next step work on Vanguard. The recommendations of the PEA include,  1) upgrade the resource from Inferred to Measured and Indicated through a geological confirmation program and, 2) to begin a preliminary feasibility study.   Those are exciting next steps and we are laying the groundwork now."

SUMMARY OF THE PEA
General:
Design parameters for, and general results of the PEA are:

FURTHER DETAIL

Geology:
No further work has been completed regarding the definition of the resource since the previous Technical Report announced on 28Apr2016.  The resources defined within the Vanguard area are:

Mining:
Vanguard will implement a selective mining approach, using horizontal caverns.  A total of 6 caverns, covering nominally 2 sections (1 section = 1 square mile) of mineral resource will be required to attain the planned 250,000 t/a production rate.   Calculated cavern life, using only the PLM1 sub-member of the Patience Lake member of the Prairie Evaporite formation (as defined in the Technical Report) is 11 years.   Cavern replacement costs and pipeline extension costs are allowed for in the sustaining capital estimate.

Processing:
The production of potash product (nominally 96% purity KCl) is accomplished by the removal of KCl from the recirculating brine stream by temperature reduction.   Temperature reduction is accomplished by a flash cooling crystallizer, followed by a cooling surface crystallizer operation.  The brine stream is continuously recirculated between the solution mining caverns and the process plant, picking up KCl in the caverns and crystallizing it into solid KCl in the process plant.

Plant utilities, including steam, natural gas, water, power, control are distributed from central locations to each process/mining unit operation. 

Off-site utilities include power, natural gas and potentially potable water.  Investigations confirm location and availability of the utilities. 

A rail spur is planned to the plant site to allow all product to be transported by rail, resulting in no heavy-haul truck traffic on the exiting road network.

Transportation and Logistics:
All product will be transported by rail to the west coast of Canada or the United States.  No specific terminal or port has been selected, but investigations revealed several options at various locations on the west coast of North America for shipment.

The Cost of ocean freight, including the cost to move the product from a West Coast port to a Chinese East Coast port has been factored into the operating cost estimate, although a specific port of destination in China has not yet been identified by Gensource's market partner.

Economic Analysis:
The following defines the input parameters and assumptions used in the discounted cash flow model (DCFM) for the Gensource Vanguard project:

Assumptions:

• The economic analysis is based on a 100% equity scenario.
• Potash production is 100% standard grade.
• Cash-flow model constructed in $CAD.
• Pricing for standard product is USD$260/t, CFR China starting in 2017 with an escalation of 1% thereafter.
• Operating costs have been inflated at 2% per annum.
• There will be no expansion beyond 250,000 t/y.
• The economic model runs for 45 years, including 43 years of production.
• Consideration was given to the expected timing of construction expenses.
• OPEX and sustaining CAPEX are included in the models.
• Annual sustaining CAPEX averages $CAD 16.09/t ($US $12.28/t)
• Insurance during construction is included in the models.
• The cash flows include Saskatchewan Resource Surcharge (3% of revenue), Provincial Royalties (4.4% of K₂O), and Saskatchewan Potash Profit Tax.
• Transportation costs to destination are assumed CFR China. $CAD 95 has been included under the OPEX section of the cash flow.
• Revenue generated from future potash sales are converted into $CAD at a long-term historical exchange $CAD:$US of 1:25.
• Working capital requirements of $CAD 2.21/t.
• Head office general and administrative expenses of 1.5% of Revenue.
• Spot $CAD:$US exchange rate as of the date of this report is 1:31.

Over the life of the operation, a base case price of $300/t is assumed.  Financial performance indicators for that base case are:

Conclusions and Recommendations:
The conclusions and recommendations made in the report are that:

• The resource should be upgraded to Measured and Indicated through a drilling and 3D seismic programs.  Cost estimate to complete this work is nominally $C 2.6M.  Completion of this work is subject to Gensource obtaining additional financing.
• Gensource complete a preliminary feasibility study for Vanguard.  Cost to complete a preliminary feasibility study is estimated at $1.0M.  Completion of this work is subject to Gensource obtaining additional financing.

Final Words:
There are no commercial operations at the Vanguard Project at this time.  The determination of the prospects for commercial operations at the Vanguard Project is dependent upon a feasibility study demonstrating economic and technical viability.

The scientific and technical information contained in this news release was prepared by or under the supervision of Max Ramey, PE, of Innovare Technologies; John McEwan, PE, of Innovare Technologies; Sandy Debusschere, of Innovare Technologies; Louis Fourie, P.Geo, Pri. Sci. Nat., of Terra Modeling Services; Geoff Wilkie, P.Eng., of ENGCOMP Engineering and Computing Professionals, and; Sheridan Fjeld, P.Eng., of ENGCOMP Engineering and Computing Professionals – all consultants to Gensource and Independent Qualified Persons under NI 43-101.

About Innovare

Innovare Technologies Ltd. is a consulting firm, specialized in drilling, solution mining and processing technologies for potash mining projects.  The three principals of the company have a combined 100+ years' experience, much of that in the potash industry, and have successfully developed potash projects in Saskatchewan.  Based on solution mining and processing concepts developed in other commodities dating back to 1992, the principals realized the potential applications of these concepts and began to adapt them to the extraction of potash.  

About ENGCOMP

ENGCOMP is a multi-discipline engineering consulting firm located in Saskatoon, SK.  With more than 10 years of establishment in the heart of Saskatchewan's potash industry, ENGCOMP is a leader in the delivery of engineering for potash processing facilities.  For more information see www.engcomp.ca.

About Terra Modelling Services

Terra Modelling Services Inc. is a geological consulting company based in Dalmeny, Saskatchewan, with specific expertise in potash and related minerals, as well as diamonds and kimberlites.

For further information about Terra Modelling Services, contact:
Terra Modelling Services Inc.
Louis Fourie, Owner and Principal
Telephone: (306) 292 9154
Email: louis.fourie@terramodellingservices.ca;

About Gensource

Gensource is based in Saskatoon, Saskatchewan and is focused on developing the next potash production facility in that province. Gensource's President and CEO, Mike Ferguson P.Eng., has assembled a management and technical team with direct and specific expertise and experience in potash development in Saskatchewan, and organized that team with a business plan focusing on small scale, economical production and vertical integration.  Gensource plans to use up-to-date techniques and technologies to implement a potash facility like no other in the province – one that has a very small environmental footprint and community impact.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Caution Regarding Forward-Looking Statements

This news release may contain forward looking information and Gensource cautions readers that forward looking information is based on certain assumptions and risk factors that could cause actual results to differ materially from the expectations of Gensource included in this news release. This news release includes certain "forward-looking statements", which often, but not always, can be identified by the use of words such as "believes", "anticipates", "expects", "estimates", "may", "could", "would", "will", or "plan". These statements are based on information currently available to Gensource and Gensource provides no assurance that actual results will meet management's expectations. Forward-looking statements include estimates and statements with respect to Gensource's future plans, objectives or goals, to the effect that Gensource or management expects a stated condition or result to occur, including completion of the YCR transaction, the expected timing for release of a reserve estimate and a preliminary feasibility study, as well as a feasibility study, and the establishment of vertical integration partnerships and the sourcing of end use potash purchasers. Since forward-looking statements are based on assumptions and address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results relating to, among other things, completion of the YCR transaction, a refund of lease conversion costs in the event that the YCR transaction does not proceed, results of exploration, the economics of processing methods, project development, reclamation and capital costs of Gensource's mineral properties, Gensource's financial condition and prospects, the ability to establish viable vertical integration partnerships and the sourcing of end use potash purchasers, could differ materially from those currently anticipated in such statements for many reasons such as: an inability to complete the YCR transaction on the terms as announced or at all, including the conditions for regulatory approval and financing; denial by ministerial authorities of a refund of lease conversion costs in the event that the YCR transaction does not proceed; an inability to finance and/or complete an update of the resource estimate to a reserve estimate, a preliminary feasibility study and a feasibility study, changes in general economic conditions and conditions in the financial markets; the ability to find distributors and source off-take agreements; changes in demand and prices for potash; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with Gensource's activities; and other matters discussed in this news release and in filings made with securities regulators. This list is not exhaustive of the factors that may affect any of Gensource's forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on Gensource's forward-looking statements. Gensource does not undertake to update any forward-looking statement that may be made from time to time by Gensource or on its behalf, except in accordance with applicable securities laws.

SOURCE Gensource Potash Corp