Passport Potash Inc. (TSXV: PPI, OTCQX: PPRTF) PEA shows a 27% After-Tax IRR. Investment Highlights

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1 Siddharth Rajeev, B.Tech, MBA, CFA Analyst Nicole Engbert- BSc. Research Associate - Mining Passport Potash Inc. (TSXV: PPI, OTCQX: PPRTF) PEA shows a 27% After-Tax IRR April 4, 2013 Sector/Industry: Junior Mining/Exploration Market Data (as of April 2, 2013) Current Price C$0.21 Fair Value C$0.63 ( ) Rating* BUY Risk* 5 (Highly Spec) 52 Week Range C$0.16 C$0.29 Shares O/S million Market Cap C$38.55 mm Current Yield N/A P/E (forward) N/A P/B 18.8x YoY Return -25.0% YoY TSXV -30.7% *see back of report for rating and risk definitions Investment Highlights www. passportpotash.com A recent Preliminary Economic Assessment (PEA) for the Holbrook Basin potash project gives an after-tax Net Present Value (@12% discount rate) of US$2.19 billion with an Internal Rate of Return of 27.08%. An updated resource estimate gives in situ Measured + Indicated (M+I) resources totaling 58.3Mt KCl, and in situ Inferred resources of Mt KCl. This is an increase of 41%, and 18%, for the M+I, and Inferred categories, respectively. The majority of the increase came from inclusion of the Hopi Tribe lands in the calculation. Although the initial CAPEX estimate of US$1.9 billion is low relative to other junior potash projects, it is higher than our US$1.75 billion estimate. We have lowered our fair value estimate from $0.81 to $0.63 per share. Near-term catalysts include: results from the ongoing drill program, and completion of a Preliminary Feasibility Study at the end of Key Financial Data (FYE - Feb 28th) (C$) (9M) Cash and Equivalents 8,599, ,481 Working Capital 1,829, ,234 Total Assets 10,266,966 3,044,138 Net Income (7,087,913) (3,583,102) EPS (0.04) (0.02) Passport Potash Inc. is a potash exploration and development company based in Vancouver, British Columbia. The company is focusing on the Holbrook potash project, located in the Holbrook Basin, Arizona. A recently released NI compliant PEA gives an after-tax NPV (@12% discount rate) of US$2.19 billion with an IRR of 27.08%.

2 Page 2 Robust PEA On March 13, 2013, Passport Potash Inc. ( PPI or the company ) announced the results of a Preliminary Economic Assessment ( PEA ) for the Holbrook Basin potash project. The PEA was prepared by the Germany based firm, ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbh ( ERCOSPLAN ), which is an engineering firm specializing in potash and other mineral salts. The study gives an after tax NPV (@12% discount rate) of US$2.19 billion, with an internal rate of return ( IRR ) of 27.08%. According to management, operating costs are expected to be US$114/tonne, this also includes sustaining capital expenditures, and a US$20/tonne freight cost. The PEA report shows life of mine average operating costs of US$193/tone, in line with our $200/tone estimate at the time of our previous report. The PEA is based on underground mining using the room and pillar method. Overall recoveries are expected to be 89.8% KCl using the hot leach extraction method. The company has a production startup goal of 2018, with construction starting in The initial production target is 250,000t/y, with an 8 year ramp up to the goal of 2.5Mt/y. Management has stated that water rights are part of land agreements for the Holbrook project, and that they anticipate adequate water supply for any future mining operation. Management indicated that the potash price of US$430/tonne FOB is estimated based on shipping to Southern California, or Galveston, Texas, on the Gulf Coast, although no specific port is identified in the PEA. The study used a price of US$430/t in 2013, increasing at 2% p.a. Our long-term forecast is US$425/t, unchanged from our previous report. Potash is currently trading at US$400 US$425/t. Although the PEA does not quote a freight/transportation cost, management provided that an estimate of $20/tonne is included in the US$114/tonne operating cost. This is lower than the price quote from the BNSF Railway Company website of US$65.49/ton (US$72.19/tonne) to San Francisco, and US$69.22/ton (US$ 76.3/tonne) to Galveston, Texas. Thus, we anticipate that the actual freight costs will be greater than US$20/tonne, which will pull down the NPV estimate. We would of liked the PEA report to have more details on the operating cost distribution for us to be able to properly evaluate the study results. The table below shows the primary inputs and results for the base case scenario. The table also shows a list of junior potash comparables.

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4 Page 4 As can been seen in the above table, PPI s PEA results are generally in line with other potash projects. The initial CAPEX of US$1.95 billion includes US$1 billion for building the mine, and US$0.95 billion for plant construction. Although the estimate is higher than our $1.75 billion estimate, we find that it is on the lower end of potash projects, which is positive for the company. Updated Resource Estimate The above PEA is based on an updated resource estimate for the Holbrook Basin property. The new estimate is based on 59 recent drill holes and 71 historical drill holes. It also includes Hopi Tribe lands, which were not included in previous resource estimates. The table below shows the updated resource estimate; Category Tonnage (Mt) Grade KCl (%) In Situ KCl (Mt) Tonnage (Mt) Grade KCl (%) In Situ KCl (Mt) Measured Indicated M+I Inferred Source: Company The in situ tonnage for the combined measured and indicated categories has increased by 41%, and the in situ tonnage for the inferred category has increased by 18%. The grades have remained relatively similar for all categories. We attribute the increase in resources to the addition of Hopi lands in the resource estimate. The mineral resources on the Hopi lands account for 20.4% of the M+I resources, and 20.1% of the Inferred resources. We believe that this is a significant portion of the resource area which presents a risk to the project if the Hopi tribe decides to back out of the joint exploration agreement. Future Development Work in 2013 will include drilling geotechnical holes to aid in mine design and preparing permit applications. PPI is continuing with its ongoing drill program, and plans to release a Pre-Feasibility Study by the end of this year. The company is planning to have permit applications submitted by early 2014, and estimates to receive permit approvals using the expedited permitting process in approximately 12 months. We believe that this is an aggressive timing estimate as mine site permitting and approval of an environmental impact statement by the US Forest Service typically takes at least three years to complete.

5 Page 5 PPI plans to have a Feasibility Study completed for the Holbrook project by the end of Update on Property Agreements Hobi Tribe Agreement In November 2013, PPI announced the signing of a definitive joint exploration agreement with the Hopi Tribe. The terms of the agreement were outlined in the Letter of Intent ( LOI ) signed by the two parties earlier in the fall (see our October 2012 update report for full discussion). Ringbolt Property Agreement On October 31, 2012, PPI announced amendments to the Ringbolt property agreement. This section of land was the subject of a civil action lawsuit between PPI and the vendors, North American Potash Developments Inc. ( NAPD Group ) (see our September 2012 update report for details). The action has since been settled and a new agreement has been signed. The terms of the amended agreement are outlined below, as provided in PPI s October 31, 2013 NR: 1. Passport will pay to the NAPD Group a total of $3,850,000 according to the following schedule: a. $150,000 upon execution of the Amendment Agreement; b. $2,450,000 upon TSX Venture Exchange approval; c. $1,250,000 on or before October 31, 2014; 2. Passport will issue 750,000 common shares to the NAPD Group upon TSX Venture Exchange approval; 3. Upon written notice from the TSX Venture Exchange that the Amendment Agreement has been approved, the parties shall simultaneously do the following: (i) the NAPD Group shall assign all of its rights, title, and interest in, and to the Property, and will take all necessary action with the Arizona State Land Department to effect such assignment; and (ii) Passport will place into escrow, on behalf of the NAPD Group, the $2,450,000 cash payment, and the 750,000 common shares of Passport. The cash payment and shares will be released to the NAPD Group upon receipt of confirmation of the assignment of the Property to Passport from the Arizona State Land Department. 4. There will be no royalty attached to the transferred permits. The above payment outline does not include any payments made to the NAPD Group under the previous option agreement. In total, PPI will have paid $5.75 million in cash and property expenses, and issued 3.15 million common shares to earn a 100% interest in the Ringbolt property.

6 Page 6 Fitzgerald Trust Agreement Amendment The closing of the Fitzgerald agreement has been extended from December 18, 2012, to December 18, Based on the amended agreement, Passport has to make payments on December 18, 2012 ($4 million), June 30, 2013 ($5 million), and December 18, 2013 ($5 million), totaling $14 million. The company has not paid the amount due in December Our discussions with management indicated that they are currently in negotiations to push the payment dates. Financials At the end of Q (November 30, 2012), the company had cash, and working capital, of $0.34 million, and negative $0.54 million, respectively. The company had $0.76 million recorded as a derivative liability associated with the outstanding warrant. Working capital, excluding this amount, was positive $0.22 million. The company reported a net loss of $3.58 million (EPS: -$0.02) during the first nine months of FY2012. We estimate the company had a burn rate (cash spent on operating and investing activities) of $0.96 million per month in the first nine months of FY2012. The following table summarizes the company s liquidity position as of November 30, Subsequent Financings: Liquidity Position (C$$) (9M) Cash and Equivalents 8,599, ,481 Working Capital 1,829, ,641 Current Ratio LT Debt - - LT Debt/Assets - - Burn Rate (851,901) (955,805) In November 2012, the company announced its plans to pursue a $12.50 million by issuing million units at a unit price of $0.18. Each unit consists of a common share and one-half share purchase warrant (exercise price - $0.25 per share for five years). PPI has raised $0.6 million to date. In January 2013, PPI announced its plans to pursue a $2.50 million convertible debenture financing (interest 15% p.a. / conversion price US$0.19 per share for one year). The subscriber will also receive 5 warrants (exercise price US$0.19) for each US$1 investment. PPI has raised $5.59 million to date. According to management, the company currently has approximately $2 - $3 million in cash. Stock Options and Warrants We estimate the company currently has million stock options outstanding (weighted average exercise price of $0.32) and million warrants outstanding (weighted average exercise price of $0.24). Approximately 7.60 million stock options are currently in-themoney. The company can raise up to $1.47 million if all these in the money options are exercised.

7 Page 7 Valuation and Rating Our DCF valuation dropped from $1.23 to $0.83 per share primarily because of the higher CAPEX estimate. The revised comparables valuation is $0.39 per share versus our previous estimate of $0.36 per share. The valuation increased as a result of the increase in resources, partially offset by a decrease in the comparables average enterprise value to KCl resource ratio from $1 to $0.82/t. Valuation Summary VPS DCF $0.83 Comparables $0.39 Average $0.61 Working Capital - LT Debt $0.02 Fair Value $0.63 Our revised fair value estimate on PPI, based on the average of our DCF and comparables valuations, is $0.63 per share, down from the previous estimate of $0.81 per share. We maintain our BUY rating and risk rating at 5 (Highly Speculative). Risks The following risks, though not exhaustive, may cause our estimates to differ from actual results: The success of drilling, resource expansion, and development are important long-term success factors for the company. The value of the company depends on commodity prices, particularly potash. Access to capital and share dilution. The company currently has no operating mines. Part of the property is on State and Federal land, which can take longer to permit for development and exploration. Option to earn a 100% interest in the Twin Buttes Ranch expires in August If exercised, the company will have to pay US$20 million. Part of property is on land designated for possible future expansion of the Petrified Forest National Park

8 Page 8 Fundamental Research Corp. Equity Rating Scale: Buy Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold Annual expected rate of return is between 5% and 12% Sell Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. 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