if i were the md of rio., page-11

the following points are taken from a company email which someone posted last week...(this is the way I see it, I could be wrong.)


1. "obvious the Potash project was potentially very large" (i.e the $250m commitment to capex from ENAMCO is too much for the government up front, note at Bisha they deferred the buy in of $250m to after tax cash flows)

2. "South Boulder Mines Ltd is at an early stage of negotiations in relation to a revised deal structure and is working to achieve a commercially sound, financeable arrangement which reflects the quality and size of the Colluli Project" (i.e they are working out the buy in price for a 50/50 non contributing interest which will be significantly more than 60/40 contributing, mainly because of the increase in the split and the fact that they are not paying capex up front)

3. "the Eritrean government has made it clear that it fully supports the development of the Colluli Potash Project by South Boulder and is keen to conclude negotiations to enable licensing and development to proceed in a timely and expeditious manner"


The ASX announcement of November 5th was released to advise that during the course of discussions with the Eritrean Government and the further development of Colluli it was obvious the Potash project was potentially very large and had a long life and was quite strategic to Eritrea. It was agreed this required a different type of approach. Following that, the Eritrean Government requested South Boulder to put forward its thoughts on a 50/50 profit share arrangement as an alternative to the previously announced 60/40 buy-in structure. In those circumstances the Board determined it appropriate to advise the market of this change.

South Boulder Mines Ltd is at an early stage of negotiations in relation to a revised deal structure and is working to achieve a commercially sound, financeable arrangement which reflects the quality and size of the Colluli Project and provides the best returns from its development. Given the state of negotiations the Company is not in a position to say much more at this time.

We should not lose sight of the fact that Colluli is a large project with a valuable commodity in potash which is vital for food security as the world faces feeding its population.

During the negotiation process, the Board is being advised by Azure Capital and has also strengthened its executive management team with the addition of Mr. Tony Kiernan, an experienced businessman and former commercial lawyer who recently played a key role in Eritrean government negotiations on the acquisition, evaluation, approvals process and ultimately the successful sale of Chalice Gold Mines Ltd’s Zara Gold Project in Eritrea.

As per the recent ASX release, the Eritrean government has made it clear that it fully supports the development of the Colluli Potash Project by South Boulder and is keen to conclude negotiations to enable licensing and development to proceed in a timely and expeditious manner. The Company looks forward to announcing further details of the revised commercial structure as negotiations progress.