SOUTH Boulder Mines (ASX:STB) continues to progress a modular and scalable approach towards developing its Colluli Potash Project in Eritrea.
The project has many draw-cards including a large resource; proximity to coast; unique mix of salts for higher value sulphate of potash (SOP); and a relationship with the government.
Indeed, the company had earlier this month extended the Pre-Feasibility Study to include recent developments that have favourable implications on capital and operating costs.
Drilling is also underway to provide key data for both the PFS and concurrent Definitive Feasibility Study.
Delivery of the PFS is now expected in February 2015, and it will not impact delivery of the Definitive Feasibility Study in mid-2015.
South Boulder and the Eritrean National Mining Company (ENAMCO) are equal shareholders of the Colluli Mining Share Company (CMSC) which will develop the Colluli Potash project.
COLLULI RESOURCE
The Colluli Project is located within the Danakil Potash belt, which compares favourably in terms of size, resource depth and environmental issues against other potash belts globally with over 4.2 billion tonnes of measured and indicated potassium salts.
Colluli itself has a total Resource of 1 billion tonnes of potassium bearing salts, all of which are suitable for the production of potash fertilisers.
This mineralisation is shallow, supporting development of the resource as an open pit, which reduces costs.
Notably, it is also just one of three projects globally to contain kainite salt – the key salt for SOP production – in solid form.
LOCATION
Colluli is also the closest SOP resource to the coast globally and has the most favourable coastal access from the Danakil depression.
It is just 75 kilometres to the designated loading point at Anfile Bay and 180 kilometres from the Port of Massawa – a 4 berth bulk and container terminal.
The project’s location on the east coast of Africa also allows the product to be export to Asia and Europe.
SULPHATE OF POTASH
Adding to its attraction, the potash salts at Colluli are suitable for low cost production of SOP, which has a substantial price premium over potassium chloride (MOP) and represents the best and most value accretive development option for the resource.
This is due to suitability for high value crops such as fruits, vegetables, nuts, beans and coffee. It is also advantageous in saline and arid soils.
SOP has historically enjoyed a 35% price premium over MOP though this has grown to over 80%, making it likely that Colluli would produce additional revenue of more than US$290 per tonne.
The switch to SOP production has also resulted in a substantial reduction in strip ratio to 2.3:1 from 14:1, which has in turn reduced estimated mine cost to $75 per tonne from $224 per tonne.
Mine life has also soared to 200 years from the previous 17 years.
The production process is also simple and proven.
Colluli’s key salts – kainite and sylvite – can be purified using simple liberation and conventional flotation processes.
The combination of the purified salts results in an ambient temperature, high yield conversion directly to SOP.
While this is a simple, proven process currently used by low cost brine producers, Colluli has the advantage of starting with salts rather than brine.
This reduces footprint size, improves reliability of productivity, and reduces complexities of brine chemistry management..
MODULARITY
South Boulder has also adopted a modular development philosophy offering expandability rather than a single large scale development.
This has the impact of reducing capital risks; optimising processes; better capital management; and ease of Expandability.
Its infrastructure solution is also based on modularity, simplifying logistics and reducing earthworks.
ROAD AHEAD
Milestones ahead include:
– Metallurgical testwork results in the third quarter of 2014;
– Finalising the Resource in the third quarter of 2014;
– Results from Colluli drilling;
– Delivery of the Pre-Feasibility Study in February 2015;
– Delivery of the Definitive Feasibility Study in mid-2015;
– Completion of the Social Environmental Impact Assessment in the third quarter of 2015; and
– Mining Licence application in fourth quarter of 2015.
ANALYSIS
The momentum is growing for South Boulder Mines’ Colluli Potash Project, which offers numerous advantages including a large resource, production of higher quality sulphate of potash, proximity to coast as well as government support.
Drilling to secure samples for chemical analysis is underway while field work has also been completed to confirm the location of the recovery ponds for the processing plant; map and inspect the road route between Colluli and Anfile Bay; and determine suitability of material along the route as road aggregate.
The company is well-funded with $9 million in cash at the end of June 2014, and also recently attracted a $1.8 million investment from the Hong Kong based Kam Lung Investment Development Company (KLID).
KLID will look to secure an offtake deal for potassium sulphate on commercial terms acceptable to the CMSC board.
