By John Beveridge,
REALLY big, long life mineral deposits are always worth investigating, even if they are owned by less well known share market minnows.
South Boulder Mines certainly falls into that category, with its billion tonne Colluli potash deposit in Eritrea boasting a mine life of around 200 years.
It will also naturally produce the higher value fertiliser ingredient Potassium Sulphate (SOP), rather than potassium chloride (MOP).
Now led by former BHP Billiton executive Paul Donaldson, the company is making steady progress towards production with a pre-feasibility study due in the first quarter of 2015 and the definitive study around the middle of next year.
The obvious downside of the project is its location in Eritrea, although Paul said the joint venture ENAMCO structure has been working well and so far there has been nothing but excellent co-operation from the government.
Technically, the Colluli deposit has a lot to recommend it, being close to a port and being a large, high grade deposit which is close to surface and relatively simple to mine as an open pit.
Processing is also favourable with a simple and well understood dual flotation and mixing process to produce the premium SOP product.
Seawater can be easily piped to the site and used for processing and so far metallurgical tests have shown a better than 80% recovery of potassium with no need for grinding.
The potash market is fairly opaque given a combination of private offtake agreements, varying products and a lack of a London Metals Exchange-style pricing but SOP prices have been rallying recently to around US$700 a tonne.
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BHP Billiton has shown an interest in getting into the potash market and is still developing its Canadian Jansen deposit in Saskatchewan, with the investment thesis being that a growing world population with a finite amount of arable land will require more fertiliser over time.
It is hard to fault that logic and South Boulder Mines is a speculative buy, with the important understanding that shareholders should expect to be tapped on the shoulder for more capital before the Colluli project hits production.