December 2016 Quarterly Report

The Board of Salt Lake Potash Limited (the Company or Salt Lake) is pleased to present its quarterly report for the period ending 31 December 2016.

Highlights: 

Surface Aquifer Exploration Program

Ø An 8.5 tonne amphibious excavator completed 127 shallow test pits and 7 trial trenches in the shallow aquifer at the Lake Wells Project. Sustained pump tests were completed on two 4.5m deep trenches in the southern part of the lake. Highlights from modelling completed in January 2017 include:

- Modelled annual flow rates of 1.1 - 1.3 Litres per second (L/s) based on a 1 year simulated model of the results recorded during the 50m trial trench pump test.

- Modelled annual flow rates of 0.23 - 0.28L/s based on a 1 year simulated model of the results recorded during the 25m trial trench pump test.

Deeper Paleochannel Aquifer

Ø The off-lake aircore drilling program, targeting the Lake Wells paleochannel, continued to successfully intersect Basal Paleochannel Sediments along the entire length of the paleochannel unit, which will comprise the main productive aquifer in the deeper part of Lake Wells brine resource.

Ø A second off-lake bore in the deep basal sand aquifer in the northern part of Lake Wells was test pumped at a constant rate of 8L/s for 4 days. The drawdown data exhibited boundary conditions consistent with the paleochannel setting.

Process Development Testwork

Ø The Company conducted a range of process development testwork to significantly enhance the Lake Wells process model. Substantial volumes of brine from Lake Wells were concentrated into harvest salts (Potassium and Sulphate mixed salts) in three separate trials under simulated and actual site conditions.

Ø The conversion and crystallisation of harvest salts at Hazen Research in Colorado then produced the first Sulphate of Potash (SOP) samples from Lake Wells brine.

Ø An extensive Site Evaporation Trial (SET) was established at Lake Wells. The SET has to date processed approximately 125 tonnes of brine and producing harvest salts on a continuous basis. The SET will continue to operate for up to 12 months generating site specific evaporation data and producing sufficient harvest salts for bulk production of SOP samples for distribution to potential partners and customers.

Regional Lakes

Ø Geophysical surveys were performed at Lake Irwin and Lake Ballard to resolve the geometry of the paleovalley, and to define the position and depth of the paleochannel at each Lake.

Ø Initial evaporation testwork on Lake Irwin brine confirmed the suitability of harvest salts for SOP production.

LAKE WELLS EXPLORATION

Surface Aquifer Exploration Program

In November 2016, the Company mobilised an 8.5 tonne amphibious excavator to gather further geological and hydrological data about the shallow brine aquifer hosted by the Quaternary Alluvium stratigraphic sequence in the upper 20 meters of Lake Wells.

The aim of the program is to evaluate the geology of the shallow Lake Bed Sediments, and to undertake pumping trials to provide estimates of the potential brine yield from trenches in the shallow sediment.

The excavator program is also providing important geological and geotechnical information for potential siting and construction of trenches and on-lake brine evaporation ponds.

The program to the end of 2016 included the excavation of 127 test pits in three tranches over the lake playa. The test pits were generally excavated to an area of 1 meter x 1.5 meters and a depth of 4 meters and are representative of the shallow stratigraphy of the lake playa.

The test pits were logged for geology, hydrology and brine chemistry during the excavation process. Particle Size Distribution (PSD) samples and brine samples were taken from each pit.

The test pits were also subject to short duration pumping tests in order to analyse the recovery of the brine levels in the test pits.

Based on the geology and hydrological information from the test pits, a number of sites for excavation of larger test trenches were chosen, reflecting the variability of the geology and hydrogeology encountered in the lake playa sediments.

A total of seven trenches were excavated on the chosen sites, each approximately 4.5 meters deep and between 25 meters to 50 meters long. Benching was used to provide geotechnical stability for the trench sidewalls and the resulting trenches are approximately 5m wide at the surface and 1m wide at the base.

Five of the trenches were located in the southern end of the Lake Wells, in close proximity to the Evaporation Trial Site. To date two trenches have been test pumped.

Geology of the shallow sediments

Based on the widespread test pits the shallow aquifer geology is reasonably uniform across the Lake. The shallow sediment is generally composed of Cenozoic (Quaternary - Holocene) brown to white to red, unconsolidated, gypsiferous sand, silt and clay with a strong overprint of ferric oxides from 0.5 to around 3 - 8m depth. Dominated by sub-angular, well sorted, very fine to medium quartz sand, the sand commonly grades progressively to a more silt and clay dominated sediment with depth, with occasional interbedded sand lenses. Authigenic prismatic and tabular gypsum is common, growing in discontinuous, vein-like structures throughout the unit, with a large variety of crystal sizes. Minor, medium-grained lithic fragments can be found throughout this gypsum.

Trench P1a (25m)

The geological sequence in P1a consisted of a 0.7m layer of surficial coarse grained evaporate sand overlying silt and clay with evaporate clasts to 3m depth. Plasticine clays were encountered from 3m to the base of the trench. The trench appears to have average brine flows in visual comparison to other trenches and test pits.

Trench P1c (50m)

For P1c the geological sequence includes a 0.4m thick layer of surficial coarse-grained evaporite sand overlying silt with evaporite clasts to 2m depth. The interval from 2m to 2.8m comprised a stiff fractured/fissured clay that yielded significant brine. Sediment from 2.8 to 3.6m was soft clay and the underlying interval to total depth of 4.4m was silt and fine grained evaporate sands that also yielded brine.

Sustained Test Pumping Results

Trenches were test pumped for several days using a pair of centrifugal suction pumps yielding up to 4L/s each. The test pumping process involved pumping out the trench volume with both pumps until the brine level was drawn down to a predetermined level above the trench floor. The pump yields were then restricted to keep the brine in the trench at this predetermined level. The brine from the trench was disposed away from the test trenches to prevent recycling of brine and creating an artificial recharge boundary.

Observation wells were constructed at distances varying from 10, 20, 50, and 76 meters away from the trenches to measure the water table drawdown in the surrounding aquifer during trench pumping. These wells were logged for geological information and constructed with slotted 50mm casing to the bottom of the well at 6 meters below surface.

The brine level elevations were measured with water data loggers in both the trench and the observation wells and verified during the test pumping with manual readings. The cumulative brine yield from the pumps were measured with a calibrated flow meter.

Standing water level of the brine was approximately 0.5m below ground surface at each trench and in the observation wells before test pumping started.

The data from the trench test pumping were analysed and processed based on the measured brine flows, water level readings in the trenches and the observation wells.

Note that the amount of brine pumped daily from the trenches decreased after one day in P1a and two days in P1c. This is due to the removal of the trench storage. After this initial period the inflows were from the surrounding aquifer material.

As expected, the aquifer material surrounding the P1c trench displayed more permeability than the material surrounding the P1a trench and this can be seen in the drawdown measured in the observation wells.

P1a Detail Analysis

The brine level in the trench was drawn down by 1.4m to stabilise at approximately 1.7m below ground surface. Pumping was then continued at a lower rate to maintain a constant brine level in the trench and balance brine inflow to the trench with pumping. By the end of the 8.3 day trial the flow rate from the trench had reduced to 38m3/day (0.6L/s) as the surrounding material close to the 25 meter long trench was dewatered.

P1c Detail Analysis

The brine level in the trench was drawn down by 2m to stabilise at approximately 2.5m below ground surface, pumping was then continued to maintain a stable water table in the trench, while brine inflow from the surrounding sediment balanced pumping from the trench. By the end of the trial the pumping rate required to maintain a stable brine level had decreased to approximately 130m3/day (1.6L/s) as the surrounding material close to the trench was dewatered.

Two rain events occurred during the P1c pumping trial, the first on 3 December 2016 (day 2 of the trial) and the second on 5 December 2016 (day 4 of the trial). The magnitude of each rain event was approximately 20mm, and the effect of rainfall recharge is observed in rising brine levels measured at monitoring bores around the trench.

These observations indicate the importance of recharge on the long-term water balance of the shallow lake bed aquifer.

Observation bores to the northeast of the trench exhibited significantly greater water table drawdown than the observation bores to the southwest indicating that the sediment is more permeable toward the northeast of the trench. Two permeability zones were applied in the model, a high permeability zone to the northeast of the trench and a lower permeability zone to the southwest.

Trench Data Modelling

A MODFLOW numerical flow model was constructed for each trench site using Visual Modflow software system (McDonald and Harbaugh (1988)1, SWS, 20112) based on the geological and hydrogeological data for each site.

The models were calibrated to the pumping flow rate and water table drawdown measured during each test. These calibrated models provide estimates of the hydraulic properties of the Lake Bed Sediments which will be used to inform the Pre-Feasibility Study for the project.

The models assume consistent hydraulic properties of the Lake Bed Sediment within the zone of influence of pumping. To date insufficient data is available to characterise any extended spatial variability in the geology.

[1] McDonald and Harbaugh (1988), A modular three-dimensional finite-difference groundwater flow model. USGS. Techniques of Water Resources Investigations book 6, chapter A1

2, SWS, 2010, Visual Modflow users Guide, Schlumberger Water Services

Modelling results

Table 1: Trench Pumping Trial Overview

The results shown above indicate that the drainable porosity of the aquifers is very similar while the permeability vary much more due to the different geological settings of the trenches.

Longer term brine yield

The calibrated models developed for each trench were run for an extended duration of 1 year to assess the expected longer term brine yield from a test trench.

For each trench the calibrated model was run for a range of rainfall recharge scenarios:

a) no recharge,

b) 10% of annual rainfall (22mm)

c) 15% of annual rainfall (34 mm).

Trench P1a yielded a total of 8,000 to 9,000 m3 (equivalent to 0.23 - 0.28L/s) over the 1 year simulation for the different recharge scenarios while P1c yielded 36,000 to 40,000m3 (equivalent to 1.1 - 1.3L/s) over the 1 year simulation with the same recharge scenarios. The difference in lengths (P1a = 25m, P1c = 50m) did not account for large difference in pumped volume and it is attributed to the fact that trench 1C is excavated into highly permeable material.

P1a Long-term Yield

The long term yield of brine into trench P1a stabilised at ~20m3/day (0.25L/s) for the 25 meter trench.

P1c Long-term Yield

The long term yield of brine into trench P1c stabilised at ~105m3/day (1.2L/s) for the 50 meter trench.

Thirty brine samples were taken from test pits after the excavation process and the average potassium concentration was 3.522kg/m3.

Aircore Drilling Program

The off-lake aircore drilling program continued to test potential paleochannel aquifer targets identified by geophysical surveys in accessible areas in the southern end of Lake Wells.

The results from the drilling provided further understanding of the hydrogeological characteristics of the paleochannel aquifer and yielded the expected stratigraphic sequence consistent with paleovalley fill material.

Four drillholes totalling 441m were drilled on a transect in the southern area of the Lake, intended to define the deepest part of the basement (the "thalweg") in the Southern extent of Lake. All the drillholes intersected the granite basement and this information was used to validate the refined gravimetric geophysical data. The spacing of the drillholes is 200 meters apart from east to west.

Coarse sands were encountered Drillhole LWA051 from 119m down to 128m and it will be the target for a production bore in the current quarter.

This will complete the off-lake drilling program at Lake Wells for the time being, with future drilling to be undertaken on-lake, aimed at the best paleochannel targets defined in the refined geophysical model.

The average potassium concentration of brine samples taken from the aircore drillholes are shown in the table below. The samples were all taken from the Basal Paleochannel Sediment unit in each bore during the drilling and airlifting process. The sampled values range from a minimum of 2.420kg/m3 to a maximum of 3.390kg/m3.

Table 2: Average Brine Chemistry of Samples taken from the Basal Paleochannel Sediment

Test pumping

A mud-rotary production bore LWTB011 was constructed on the LWA039 transect (in the northern part of the Lake) and a test pumping system from Resource Water Group was mobilised to Lake Wells.

The bore was screened from 100m to 124m over an intersection of sand, coarse sands and some fine gravels. The bore yielded 11.5L/s from airlifting while the bore was developed.

The pump was installed at 95m for the duration of the test pumping and a calibration test was completed for the bore, including pumping the following rates:

· 7 L/s for 5 minutes with drawdown of 34.85m

· 10.5 L/s for 5 minutes with drawdown of 46.68m

· 13L/s for 5 minutes with drawdown of 62.70m

· 15L/s for 10 minutes with drawdown of 80.51m

A step rate test with four steps was undertaken ranging from 7L/s to 13L/s. The duration of each step was 100 minutes and the last step at 13L/s was stopped short at 15 minutes due to the water level at 93.40m in the bore approaching the pump inlet at 95m.

A constant rate test at 8L/s was undertaken for four days with the water level in the bore reaching 69.68m and boundary conditions consistent with a paleochannel setting were encountered during the test. This was inline with the geophysical modelling of the gravimetric survey data.

The constant rate test results were modelled and the results indicated that the measured aquifer transmissivity for the screened interval is 10.1m2/day with a bulk hydraulic conductivity of 0.42m/day.

This bore pumping test provides additional valuable data on the potential productivity of the paleochannel basal aquifer in the Northern part of the Lake. The limited availability of off-lake paleochannel targets mean future bore pumping tests are likely to be undertaken on bores installed in the on-lake paleochannel targets.

Two brine samples were taken from production drillhole LWTB11 during the drilling and development process with average potassium concentration of 3.725kg/m3.

LAKE WELLS PROCESS TESTWORK

The proposed process for production of SOP at Lake Wells is based on brine extracted from the Lake being concentrated in a series of solar ponds to induce the sequential precipitation of salts, firstly eliminating waste halite and eventually producing potassium-containing salts (Harvest Salts) in the harvest ponds. These harvest salts are then processed by a combination of attrition, flotation, conversion and crystallisation into SOP and other end products.

During the quarter, three separate brine evaporation trials under both simulated and actual site conditions were completed or are continuing and substantial volumes of brine from Lake Wells have been concentrated into harvest salts (Potassium and Sulphate mixed salts).

Institutional process development company, Hazen Research Inc. (Hazen), in Colorado, USA, and Bureau Veritas (BV) in Perth conducted laboratory trials under simulated conditions to produce significant quantities of harvest salts and refine the Lake Wells brine evaporation model. An extensive Site Evaporation Trial (SET) was also established at Lake Wells to process large volumes of brine under site conditions.

Initial marketing samples of Sulphate of Potash (SOP) were also produced by Hazen by processing of harvest salts from Lake Wells brine.

Bench Scale Trial - Hazen Research

Hazen is a world class industrial research and development firm located in Golden, Colorado that has developed hundreds of hydrometallurgical, pyrometallurgical, and mineral beneficiation processes for most commercial metals and industrial minerals, and many inorganic and organic chemicals, including potash and other crop nutrients.

Salt Lake engaged Hazen to complete an evaporation, flotation and crystallisation trial on a representative sample of Lake Wells brine. The Hazen evaporation test was monitored using a USBM theoretical model; the actual evaporation pattern followed the modelled theoretical pattern very closely.

Hazen first evaporated an initial 240kg charge of brine under simulated site conditions producing 14kg of harvest salts for further testing.

Sighter rougher reverse flotation tests were then conducted on the harvest salts. Excellent initial halite separations were achieved in reverse flotation with approximately 90% of the halite removed from the harvest salts. Further rougher tests followed by rougher-cleaner and rougher-scavenger tests are planned to refine the process design in the coming months.

Flotation tails (harvest salt concentrate) were then converted to schoenite under controlled temperature and dilution conditions and filtered to recover the schoenite concentrate. XRD and ICP analysis of the converted schoenite showed excellent conversion to approximately 99% schoenite.

The schoenite was added to a saturated K2SO4 brine at 55ºC. At these conditions, SOP was crystallized from solution by selective dissolution and the Company successfully produced its first solid SOP marketing samples.

Site Evaporation Trial

A large scale, continuous Site Evaporation Trial (SET) has been established at Lake Wells to define process design criteria for the halite evaporation ponds and subsequent harvest salt ponds.

The objectives of the SET are to:

· Refine the solar evaporation pathway, under actual site conditions, for Lake Wells brine. The analysis of this pathway will refine the salting points of the various salts along the evaporation pathway allowing for the completion of a detailed mass balance for the pond system;

· Refine the quality and quantity of brine and salts produced at the various points along the evaporation path;

· Define the distribution in various salts of potassium, magnesium and sulphate through the evaporation system;

· Provide design information for brine in-flow requirements, pond area, required number of ponds and flow requirements between ponds for a commercial facility; and

· Determine opportunities for recycle of bittern or salt that may improve potassium, magnesium or sulphate recovery to the harvest salts.

· Provide bulk salt samples for further process testwork and production of bulk SOP samples for potential offtake partners and customers.

The outputs of the ongoing SET test work will also provide key inputs into the basis of costings for the halite and harvest evaporation ponds for the Lake Wells SOP project and assist in the development of a more extensive test work program include:

· Halite Evaporation Pond Design: On-lake pond construction trial;

· Flotation Test Work: Collected mixed salts from the harvest ponds will provide the inputs for flotation work;

· Conversion Test Work: Outputs from the flotation trials above will provide inputs for conversion design trials; and

· Crystallisation Trials: Outputs from the flotation trials above will provide inputs for crystallisation test work.

Brine is introduced to the first Halite Pond, H1, via a small, hand dug surface trench. The brine progresses on a continuous basis through a series of six ponds as it concentrates through evaporation: two halite ponds; two transition ponds; and two harvest salt ponds.

To date approximately 125 tonnes of Lake Wells brine has been processed through the SET across trains 1 and 2, establishing an initial continuous load of salts and enriched brine. The SET is expected to produce hundreds of kilograms of harvest salts per week over the summer months for further testing. The harvest salts recovered from the SET contain up to 50% Kainite (KMg(SO4)Cl.3(H2O)), a potassium double salt which can be readily converted into SOP following the basic process trialled at Hazen. The SET will operate over up to 12 months across a variety of weather conditions.

An Automatic Weather Station (AWS) has been established at the SET site, providing comprehensive, continuous data for temperature, solar radiation, pan & theoretical evaporation, relative humidity and wind velocity and direction. The AWS data combined with actual evaporation records from the nearby SET will allow for sizing and detailed production modelling of commercial scale evaporation ponds.

Bench Scale Trials - Bureau Veritas

The Company engaged international laboratory and testing company, Bureau Veritas (BV) in Perth, to conduct a series of tests evaporating brine at simulated average Lake Wells site conditions. The aim of the BV trials is to monitor the chemical composition of the brine and salts produced through the evaporation process to establish:

· Concentration thresholds in the brine chemistry which can be used to maximise the recovery of harvest salts and minimise the quantity of dilutive salts into a process plant;

· The quantity and composition of harvest salts which will for the plant feed in commercial production; and

· The potential for any internal evaporation pond recycle streams that may improve harvest salt recovery.

The first trial in the series consisted of evaporation of 90kg of brine on a load cell to monitor evaporative loss. The temperature of the brine was controlled to a constant 23oC using infra-red lamps and air flow across the brine surface was provided by a fan.

From the initial 90kg charge 3.25kg of harvest salts (dry basis) were collected and analysed for chemical composition and crystal structure.

The evaporation pathway at BV appears to closely match the pathway demonstrated at Hazen Labs. BV has subsequently completed the evaporation of a further 2,500kg of brine to provide harvest salts for further flotation and crystallisation testwork to refine the SOP production model and provide additional customer samples.

LAKE IRWIN

Geophysical Survey

A geophysical survey was completed at the Lake Irwin project. Atlas Geophysics were engaged to run a total of 15 geophysical transects across the Lake Irwin playa lake portion of the project area, orientated perpendicular to the inferred trunk paleochannel in order to map and confirm the paleochannel geometry. Transects were spaced up to 7 km apart with lengths between 4 and 25 km, and a combined length of about 200 km. Gravity data on all transects and passive seismic (Tromino) on six transects was collected at 200 m intervals across the project area. 

The geophysical data was processed and merged with available regional data by Core Geophysics, the final merged residual gravity data being used as the basis for interpretation. The trunk paleochannel aquifer has been confirmed to the east of the current lake surface and is up to 1000m wide, while there is thinner tributary beneath the northern lobe of the lake.

Lake Irwin Brine Evaporation Trial

After the successful process development testwork performed on Lake Wells brine, the Company engaged Bureau Veritas in Perth, to conduct a test evaporating brine at simulated average Lake Irwin site conditions. The aim of the BV trial was to monitor the chemical composition of the brine and salts produced through the evaporation process to establish:

· Types of product salts that may be produced through the natural solar evaporation path;

· Concentration thresholds in the brine chemistry which can be used to maximise the recovery of harvest salts and minimise the quantity of dilutive salts into a process plant; and

· The quantity and composition of SOP product salts for the plant feed in potential commercial production.

The preliminary test consisted of evaporation of 180L of brine (specifications in Table 3 below) at simulated Lake Irwin average weather conditions using infra-red lamps for temperature control and air flow across the brine surface provided by a fan.

* Note, this sample is potentially diluted by rainfall. The average K content of all previous Lake Irwin brine samples is approximately 3,310mg/L.

Table 3: Evaporation Trial Feed Brine Chemistry

The preliminary test consisted of evaporation of 180L of brine at simulated Lake Irwin average weather conditions using infra-red lamps for temperature control and air flow across the brine surface provided by a fan.

The trials consisted of two charges evaporated under identical conditions:

· Charge 1 - was 84kg of brine from which 1.9kg of potassium salts were harvested at an average SOP equivalent grade of 11.3% w/w.

· Charge 2 was 83kg of brine from which 2.2kg of potassium salts were harvested at an average SOP equivalent grade of 10.6% w/w.

Analytical and XRD analysis from the trial indicate that harvest salts collected from the trial are suitable for conversion into SOP. Simulation of evaporation pond sizing has begun and further investigations into processing requirements for production of SOP and other by-products are planned.

LAKE BALLARD 

A geophysical survey of Lake Ballard commenced during the quarter with the primary objectives of resolving the geometry of the paleovalley, and to define the position, depth and thickness of the paleochannel. Atlas Geophysics were engaged to run a total of 18 geophysical transects across the Lake Ballard playa lake portion of the project area, orientated perpendicular to the inferred trunk paleochannel in order to map and confirm the paleochannel geometry. Transect lengths are between 6 and 20km with a combined length of about 200km. Gravity data is being collected at 200m intervals on all transects as the deep paleochannel aquifer is inferred to be approximately 500m wide in the western portion of the lake. At the end of the quarter, 13 of the planned 18 transects were completed.

Competent Persons Statement

The information in this report that relates to Exploration Results, or Mineral Resources for Lake Wells is based on information compiled by Mr Ben Jeuken, who is a member Australian Institute of Mining and Metallurgy. Mr Jeuken is employed by Groundwater Science Pty Ltd, an independent consulting company. Mr Jeuken has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity, which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Jeuken consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this report that relates to Process Testwork Results is based on, and fairly represents, information compiled by Mr Bryn Jones, BAppSc (Chem), MEng (Mining) who is a Fellow of the AusIMM, a 'Recognised Professional Organisation' (RPO) included in a list promulgated by the ASX from time to time. Mr Jones is a consultant of Inception Consulting Engineers Pty Ltd. ("Inception"). Inception is engaged as a consultant by Salt Potash Limited. Mr Jones has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Jones consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Table 4 - Summary of Exploration and Mining Tenements

As at 31 December 2016, the Company holds interests in the following tenements:

Australian Projects:

Other Projects:

APPENDIX 1 - LAKE WELLS DRILLHOLE AND TEST PIT LOCATION DATA

APPENDIX 2 - BRINE CHEMISTRY ANALYSIS

APPENDIX 3 - JORC TABLE ONE

Section 1: Sampling Techniques and Data

Section 2: Reporting of Exploration Results

For further information please visit www.saltlakepotash.com.au or contact:

The information contained within this announcement is considered to be inside information, for the purposes of Article 7 of EU Regulation 596/2014, prior to its release.