South Boulder Mines Ltd (ASX: STB) (“South Boulder” or “The Company”) is pleased to announce the completion of a positive Engineering Scoping Study (“ESS-2”) on the technical aspects of the potential to mine and process the underlying ‘Carnallite mineralisation’ at its Colluli Potash Project in Eritrea.
The previous Engineering Scoping Study (“ESS-1”), released in November 2011, focused on the ‘Sylvinite mineralisation’ only, which forms the basis of the current Definitive Feasibility Study (DFS) scheduled for completion in 2013.
The results of ESS-2 have provided the Company with significant encouragement to conduct further assessment into the economic viability of open pit mining and processing of the Carnallite mineralisation (which is located below the Sylvinite mineralisation) to produce Muriate of Potash (“MOP”).
While the results of ESS-2 are encouraging and highlight potential future expansion options for the Project, the scope of the current DFS will remain focused on mining and processing only the Sylvinite at a production rate of 1Mtpa of MOP. This will have lower capital intensity and a greater prospect of attracting finance.
ESS-2 has identified a number of areas that demonstrate positive technical aspects that could allow economic mining and processing of Carnallite to produce MOP as part of a potential future expansion of the Colluli Project. These include:
- Carnallite can be processed utilising solar decomposition and standard froth flotation to produce standard MOP;
- KCl recovery rates of up to 90 per cent may be achieved;
- If both Carnallite and Sylvinite are mined and processed together, the waste-to-ore strip ratio can be significantly reduced;
- Access to Carnallite could allow a significant increase in MOP production above the planned 1Mtpa; and
- Port and transport infrastructure can be expanded to allow increased capacity
ESS-2 has been completed to a scoping level of detail in order to assess future development and potential expansion scenarios above the initial targeted production capacity of 1Mtpa of MOP from the overlying Sylvinite mineralisation. Further work on these options is planned after completion of the DFS.
In addition to the Sylvinite and Carnallite mineralisation, there is substantial Kainitite mineralisation of 597Mt at 19.8% KCl . The Kainitite resource is subject to ongoing study to determine the most effective method of processing and marketing to produce either a K-Mg-SO4 fertilizer or Potassium Sulphate (“SOP”). Production of SOP from Kainitite remains a longer term prospect, requiring a technical solution to enable processing of the ore into a saleable product.
Independent potash consultants ERCOSPLAN assisted in completing ESS-2 and are lead consultants for the current DFS. ESS-2 has been completed to a +/- 40% level of accuracy. The November 2011 ESS-1 results have been provided as a comparison to ESS-2 and it should be noted that ongoing DFS activities continue to refine and update all ESS-1 estimates. Opportunities have been identified to improve operating cost estimates in relation to mining selectivity and processing recoveries.
South Boulder’s Managing Director Lorry Hughes said the results of ESS-2 clearly demonstrate the potential of the Colluli Project to expand above the initial targeted production level of 1Mtpa outlined in the DFS.
“The study shows that there are suitable technologies to extract potash from Carnallite mineralisation and the Project could expand under the right economic conditions. However, given the significant additional capital requirements of introducing Carnallite processing and current market conditions, the Company has decided to pursue a staged approach to development where Carnallite expansion options are only reviewed in more detail following completion of the current DFS,” Mr Hughes said.
“Key findings from ESS-2 will be used and applied to the DFS to design stockpiling of waste and tailings from Sylvinite mining and processing operations so as to retain maximum optionality to pursue future expansion opportunities.
“The processing of Carnallite, which has a magnesium chloride content as well as potassium chloride, requires a slightly different treatment method to that of Sylvinite. Firstly, the ore is dissolved and the resulting brine is transferred to a series of solar evaporation ponds. Upon evaporation of water in the first pond KCl and NaCl crystallise until the brine reaches Carnallite Saturation. At this point the brine is transferred to the next pond and the KCl/NaCl crystal crop from the first pond is harvested and washed and then enriched to 95 % KCl in a similar flotation circuit as the Sylvinite ore.
“ESS-2 has demonstrated that this approach may work, but the Company will need to conduct the relevant test work to confirm its technical and economic viability.
“I am comfortable that South Boulder is taking a prudent approach by focussing on the 1Mtpa project configurations in the DFS. This allows a more achievable development size and more aggressive project timelines. ESS-2 has shown the scalability of the Colluli Potash Project and, in addition to the current DFS, South Boulder is focused on defining the scale of the Stage 1 development to find the optimum mix of capital expenditure versus commercial potash production.
“The Colluli Project is one that could evolve over many decades to include potential production from different potash minerals. However, at this stage South Boulder is firmly focussed through its DFS on the definition of an economically viable mine over the short to medium term which is capable of being financed on competitive terms.”
Further to its ASX Announcement of 5 November 2012, South Boulder advises that negotiations with the Eritrean National Mining Company (“ENAMCO”) are continuing regarding the Company’s participation interest in the Colluli Potash Project.
In discussions ENAMCO has made it clear that it fully supports the development of the Colluli Potash Project by South Boulder and is keen to conclude negotiations to enable licensing and development to proceed in a timely and expeditious manner.
South Boulder is looking forward to negotiating a commercial deal structure for the mutual benefit of the Eritrean people and South Boulder shareholders.