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Eritrea's Potash Mine Life Estimate Exceeds 200 Years

Drilling Tests for Potash (Credit: South Boulder Mines)

Eritrea's Potash Mine Life Estimate Exceeds 200 Years   

By Proactive Investors,

South Boulder Mines (ASX:STB) is making steady progress at its Colluli Potash Project in Eritrea, where it is conducting economic assessments and project planning that could confirm its potential to process all salts present.

This includes potassium sulphate, a premium potassium fertiliser which currently carries a price premium of approximately $300 per tonne, is ongoing.

This could deliver a significant boost to Colluli’s economics, including a considerably lower strip ratio and therefore reduced costs.

Mining work completed last year demonstrated that mining all salts resulted in mining cost reductions of over $50 per tonne of product relative to the staged development model and over $100 per tonne of product relative to their DFS case.

The production of potassium sulphate represents further economic enhancement of the project.

Colluli Potash Project

Colluli hosts a large combined Resource of 1.08 billion tonnes at 18% KCl for 194 million tonnes of contained potash that promises a long mine life of more than 200 years.

This includes a Measured Resource of 261 million tonnes at 17.94% KCI.

The project is located in the Danakil Depression region of Eritrea, and is just 65 kilometres from the coast comprising around 400 square kilometres. It is one of the closest potash resources to the coast globally.

It is positioned favourably relative to the key growth markets for potassium fertiliser – primarily India and China.

That South Boulder’s Eritrean joint venture partner ENAMCO endorses the company’s approach to process all salts further demonstrates the value of project.

Under this strategy, processing the sylvinite, carnallitite and kainitite will result in a strip ratio of approximately 2.5:1.

This compares with the previous strip ratio of 14:1 under the original Feasibility Case covering just sylvinite, which makes up just 16% of the resource, and the staged development strip ratio of 7:1 for sylvinite and carnallitite.

Mining cost is estimated at US$75 per tonne versus the previous US$195/t and US$122/t while the expected mine life is estimated at more than 200 years, well above 17 years under the original plan and more than 50 years under the staged development option.

Another draw card of processing all the salts at Colluli is that it allows for the production of K2SO4, which currently draws a price of US$600/t FOB. This compares to KCI, which is currently priced at US$310/t.

South Boulder’s current forecast for K2SO4 is US$562/t (currently $US600/tonne) while KCI could draw a price of US$450/t (currently $US300/tonne).

This is further supported by mineralisation at Colluli favouring the production of SOP (Potassium Sulphate) compared to Muriate of Potash (MOP).

That the project also has the potential to produce MOP and SOPM (sulfate of potash magnesia) is also encouraging.

Colluli is well supported by its proximity to key infrastructure as well as the presence of in country mining support.

Road Ahead

Once the path forward is established, South Boulder and ENAMCO will seek to borrow up to 70% of development costs from a third party bank or lender with the required equity funds being contributed by South Boulder.

Of this equity funding, 50% shall be preferentially paid back from 50% of the available funds after annual payment obligations to third parties have been satisfied. The remaining 50% will be available for profit distribution to shareholder.

After first production, funds where required shall be financed by the Colluli Mining share company either through its own internal cash or from debt funding decided by the board.

Key Catalysts

The following are key catalysts for Colluli:

-    Metallurgical Testwork completion in the third quarter of 2014;
-    Finalising the Resource in the same time period;
-    Preliminary Feasibility Study by the end of 2014;
-    Feasibility Study by the end of the first quarter 2015;
-    Social Environmental Impact Assessment in the second quarter of 2015;
-    Mining Licence Application from third quarter 2015 to the end of 2015;
-    Funding in the second quarter of 2016;
-    Detailed Engineering from the second quarter of 2016; and
-    Start of Phase 1 construction in the fourth quarter of 2016.


There are strong share price catalysts ahead for South Boulder Mines and execution of each would provide fertile ground for re-rating of its shares.   
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Eritrea's Potash Mine Life Estimate Exceeds 200 Years Reviewed by Admin on 2:25 PM Rating: 5


  1. 200 years? Damn!!!

    How much profit will Eritrea receive annually from this?

  2. For sure we'll need an expert who could estimate that, but one thing is true, that will be a kind of reservoir of wealth for Eritrea, waoh..

  3. Nebay, I'm definitely not an expert, but this is my guess from the information above. There are 3 things being processed (sylvinite, carnallitite and kainitite). KCL is priced at ($300-$450/tonne), & K2SO4 is priced at ($562-$600/tonne). I'm not sure how many tonnes each has but lets say half & half of the total of around 1 billion tonnes. So the average price would be around $477/tonne produced minus $75/tonne for mining costs. So lets say it will be priced at about $400/tonne, I think ENAMCO has 50% share, so our take would be around $200/tonne. Since there is around 1billion tonnes and the mine life is for 200 years, we should be processing around 5 million tonnes per year. $200/tonnes × 5,000,000 tonnes/year = $1 billion dollars per year. South Boulder and ENAMCO will seek to borrow up to 70% of development costs. I'm not sure how much that will be but they must pay a third party lender from the yearly profits. Conclusion: this is just my guess. When I look at my numbers, it looks like too much to receive a year, but who knows. In any event this is a very good revenue source for us, for the next 200 years. GOD bless our beautiful country ERITREA.

  4. Does this create job opportunity? If not we can open new profitable organizations above all education, health facilities and the infrastructure will be enlarged and many tourists will be entertained. Let The Almighty put his hand on our country and our people! 'degeme yeakele tsebeba' dehnet mestefe fikrewene yemese eyu.

  5. Eritreans and Eritrea deserve it well, nay bahaki..bezuh gizie zetefetene Hezbi, iyu..yeakel..

  6. Stick to what you know.

    Please research further on the concept of Revenue-Expenses= Profit.

    Note the company currently has a valuation of $22M.

    The main questions are:

    - What is the expected capital expenditure of the project?
    - What is the discounted cash flow?
    - What is the payback period?

    All of which are not answered in the investor presentation.

    Based on their timelines a feasibility study will be completed for 2015Q1 at which point they should release more information.

    Until then you are just speculating.

    For information Nevsun has provide the following through their press releases:

    -A total of 40.52 million was provided to Eritrean Government affiliated companies in 2012. Approximately 30 million was paid to the Eritrea Petroleum Corporation for our bulk diesel needs and 3.4 million was paid to the National Insurance Company of Eritrea. The balance went towards construction, telecommunications, transportation, security and various mining related products and supplies.

    - During 2012 we spent 54.1 million on purchases of fuel, heavy mobile equipment, construction materials and other goods and services from Eritrean vendors. Of which, approximately 13.6 million dollars was provided to Eritrean private enterprise. The ability to source all goods locally is constrained by the lack of availability of certain goods; in some cases the lack of sufficient quality and in some cases the high price of certain types of local goods.
    - During 2013 we spent $205 million on purchases of fuel, heavy mobile equipment, construction materials and other goods and services from local and international vendors. Of which, approximately $57 million was provided to local vendors.

  7. Hasadat Agame aysmaE belu, we deserve it

  8. Nekid terah Zeragi arekey, mesana iya Haki..

  9. I read somewhere it's a billion dollars a year for 200 years. So that's a considerable amount of money for a nation with just 6 million people.


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