Colluli Potash Project

Colluli Potash Project - Plan View

Colluli Potash Project – Plan View

South Boulder Mines Limited (ASX: STB) has been actively exploring for potash at the Colluli Potash Project in Eritrea since 2009. Engineering Scoping Study results were favourable, proving that an economic 1Mt p.a. potash mine can be built at half the cost of a typical potash development.

Definitive feasibility studies will be complete in 1H 2013 with production scheduled for 2016 or sooner. The Colluli Project will be one of a few “Greenfields” potash mines to come into production in the next 10 years. The location of the project provides much sought after infrastructure as it is approximately 65km from the Red Sea Coast and major shipping routes to Asia.

The JORC/NI43-101 Compliant Mineral Resource Estimate for the flagship Colluli Potash Project now stands at 1.08 billion tonnes @ 18% KCl* for 194Mt of contained potash.

 

Current JORC/43-101 Compliant Measured, Indicated and Inferred Mineral Resource Estimate

Current JORC/43-101 Compliant Measured, Indicated and Inferred Mineral Resource Estimate

*KCl is commonly expressed as K2O according to the formula (KCl * 0.6317 = K2O). The recent KCl contract price is estimated at around US$ 470/t.

The resource comprises sylvite (KCl), carnallite (KMgCl3.6H20) and kainite (MgSO4KCl.3(H20) bearing horizons and has been identified from 16 – 70m depth. Kieserite (MgSO4.H20) is currently not included in the resource, however, is a mineral that is also important to the fertilizer industry for the production of sulphate of potash (SOP).

The Colluli potash deposit is the world’s shallowest, allowing extraction via open pit mining. There are currently no other open pit potash mines in operation and 91% of world production comes from deep underground mines. Activities including metallurgical testing, engineering design, environmental impact studies, social impact assessment and hydro-geological studies are being undertaken by global experts in conjunction with Eritrean employees of South Boulder Mines Ltd.

For the most current news and information on the Colluli Potash Project check our latest corporate presentation

Project Economics- Detailed Scoping Study Results

Discounted Cash Flow (DCF) financial modeling for the initial Stage 1 open pit mining and processing of the Colluli Potash Deposit has returned highly favourable economics.

Pre-production capital (including 15% contingency) USD 0.74 bn
Pre-tax NPV12% (12% Discount rate) USD 1.33 bn
Internal rate of return (IRR) 40.60%
Project revenue USD 6.03 bn
MOP production rate 1Mt p.a.
Mining method Open pit
Study mine life 17 years

The pre-production capital expense of USD 0.74 billion for 1Mt p.a. MOP production presents a highly attractive investment case, and compares very favourably with other proposed or planned potash developments in the industry. The average pre-production capital expense for Greenfield MOP projects is greater than USD 1 billion per 1 million tonnes of production capacity.

A breakdown of the key pre-production capital expenses including a 15% contingency are shown in the following table;

Capital Item USD
Direct Capex
- mine & plant
- transport & port
352M
102M
Indirect Capex
- mine & plant
- transport & port
161M
25M
Contingency (15%) 96M
Total 736M

History of Exploration in the Danikil Depression

The Danakil Depression has ancient history of artisanal salt production with modern exploration and exploitation dating back to the early 1900’s. The most intensive period of exploration and trial underground mining occurred between 1958 – 1970 at the Musley and Crescent deposits, located approximately 15km south west of Colluli at Dallol, Ethiopia. Since 1968 until recently there has been no exploration at the Colluli Potash Project.

Potash Deal Terms

South Boulder originally applied for the license in May 2008 as part of an open tender process and won the right to negotiate terms for an exploration license agreement in June 2009. The minimum expenditure requirements of the license included USD $500,000 in the first year.

The Eritrean Government is a highly supportive partner.