south boulder mines steps on the gas

Hi all


An article about STB mine Colluli Potash Deposit in Eritrea.



Wednesday, January 11, 2012 by Angela Kean


South Boulder Mines (ASX: STB) is making strong progress towards the completion of a Definitive Feasibility Study (DFS) for the development of its Colluli Potash Deposit, with all key technical activities to complete the study in 2013 underway or set to begin in the near term pending approvals.

The company recently received some highly favourable economics from discounted cash flow financial modelling for the base case Stage 1 open pit mining and processing of the Colluli Potash Deposit including a net present value of US$1.33 billion and an internal rate of return of 40.6%.

South Boulder Mines is planning a series of investor visits starting this month to assess potential financial, offtake and development partners for the Colluli Project.

Importantly for the resource at Colluli, some of the resource sits in the higher confidence categories, with 133.7 million tonnes at 17.55% KCl in the Measured category, 343.3 million tonnes at 17.38% KCl in the Indicated category, and 87.3 million tonnes at 24.96% KCl in the Inferred category.

The company has provided the market with an update on recent key activities and highlights from Collulli.

- Potash assays from a further six resource extension holes were returned from holes completed in the last drill program. An updated JORC Resource estimate is planned for completion in the March quarter;

- A program of HQ diamond drilling has recommenced, with five holes completed to date, to define further shallow potash. Continuous drilling is planned throughout the next 14 months, beginning with an initial resource extension program of 22 holes for 2,000 metres;

- A close spaced (50-200 metres centres) PQ diamond drilling program is in the final stages of approval. Up to 70 holes will be completed to collect sufficient samples for definitive metallurgical testing and to assess the short range variability and localised geometry of the deposit;

- A total of 13 hydrogeological monitoring bores have been installed at Area A as part of DFS ground water and geotechnical assessment with respect to open cut mining studies;

- South Boulder Mines has begun a global tender process for DFS engineering design and is expecting to award the tender in February 2012;

- The recently completed Engineering Scoping Study produced a pre-tax net present value of US$1.33 billion with start-up capital costs of US$0.74 billion based on production of an initial 1 million tonnes of KCl per annum.

The study only considered 20% utilisation of the current resource and therefore enormous upside is expected.

- South Boulder is well funded to complete the DFS and is in the process of completing a fully underwritten 1 for 5 Entitlement Issue to raise about $10.7 million. This will result in a strong cash position of $21 million in early February.


Approvals Pending

Key activities currently awaiting approvals include:

- A close spaced PQ diamond drilling program (similar to a broadly spaced grade control program) is in the final design and approval stages to assess the short range variability of the deposit with respect to mining methods, assist with ongoing geological interpretation of the deposit and to collect sufficient potash samples for definitive feasibility processing test work.

It is planned that the program will be undertaken over potential mining areas that correspond to the first few years of production from Area A;

- A complete Social Environment Impact Assessment plan has been submitted to the Eritrean Government for consideration. Approval of the plan is anticipated in the March quarter and a number of data collection activities are well underway to support the DFS;

- A Baseline Hydrology Program was initiated in November 2011 and included the installation of 13 hydrogeological monitoring bores at Area A. Initial assessment was made at Colluli and adjacent regional areas to plan the ongoing surface and ground water assessment programs.



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