SOUTH Boulder Mines (ASX:STB) shares are set to trade higher after the company attracted investment from the Hong Kong based Kam Lung Investment Development Company (KLID).
The company will issue to KLID 10 million shares at $0.185 to raise A$1.8 million, which is a 13% premium to STB’s 30 day VWAP.
The importance of the placement also delivers South Boulder a strategic investor who is on the lookout for a binding offtake agreement.
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.
The placement injects more funds into the company and adds to the $9 million cash balance at the end of June 2014, and will support the completion of the Pre-Feasibility Study.
Funds will also be allocated to pilot laboratory tests on the process design for potassium sulphate production from all salts in the Colluli resource.
Paul Donaldson, managing director for South Boulder commented: “We are pleased to have Kam Lung Investment Development Company as part of our register as a significant shareholder.
“They have expressed a strong desire to support the success of the project and as part of that commitment are now helping the Colluli Mining Share Company (CMSC) secure offtake arrangements for potassium sulphate produced from the resource.
“Our joint venture partner, the Eritrean National Mining Company (ENAMCO) has been supportive of this arrangement and we continue to work together to ensure the success of the project.”
Pre-Feasibility Work Advancing
South Boulder said that the Pre-Feasibility study work has been progressing well since the variations made to the development strategy to consider the process of all potassium bearing salts in the resource.
The company considers that the unique composition of the resource, its close proximity to the coast, and shallow mineralisation (which commences at only 16 metres) are key strategic advantages for the economics of the project.
Options for KLID
The deal also gives KLID the option to buy an additional 8 million shares, exercisable at $0.35 cents upon securing a binding offtake deal for potassium sulphate on commercial terms acceptable to the CMSC board.
This agreement is in effect for a period of 6 months from the date that the current Pre-Feasibility results are released to the market.
Colluli’s World-class Resource
The Colluli resource is a unique combination of potassium bearing salts suitable for the production of potassium fertilisers.
It hosts 1 billion tonnes of potassium salts and has a current JORC Compliant Measured, Indicated and Inferred Resource.
This is comprised of 261.81Mt at 17.94% KCl or 11.33% K2O of Measured Resources, 674.48Mt at 17.98% KCl or 11.36% K2O of Indicated Resources and 143.50Mt at 18.00% KCl or 11.37% K2O of Inferred Resources.
The total is 1,080 Mt at 18.0% KCl or 11.35% K2O (total contained potash of 194.09Mt KCl or 122.61Mt K2O).
Progression
Since announcing positive results from scoping work completed in late 2013 which considered processing all potassium bearing salts, South Boulder has reinvigorated its project with a ramp up of activity, including:
– The transport corridor and Anfile bay export area have been approved – demonstrating the partnership between South Boulder and the Eritrean National Mining Company (ENAMCO) is working well;
– A new study manager has been appointed, along with key personnel for mine planning, geotechnical work, environmental and processing;
– Metallurgical testing including evaporation and brine tests appear to be well underway;
– Process flow diagrams have been completed; and
– South Boulder has reaffirmed that it is pursuing Potassium Sulphate as the process product in contrast with the original development which focussed on potassium chloride.
Analysis
It appears by securing KLID as an investor in the Colluli Project, the CMSC board and South Boulder now have a Chinese partner to secure an offtake agreement.
This allows the project team to focus on the delivery of the Pre-Feasibility and Feasibility Studies.
While the studies appear to have made significant progress, it appears that STB are ensuring that work can continue seamlessly through to DFS completion in 2015 and are not waiting too long to bolster their cash position.
