horn of africa

Eritrean Government to Invest in South Boulder’s Colluli Project in the Danakil Basin
Africa is becoming one of the world’s main producers of potash; one of the richest areas for this mineral is the Horn of Africa and there are important projects in the region that will soon reach the production ready stage. Australia’s South Boulder Mines (South Boulder, ASX: STB) has been developing a large deposit in Colluli, Eritrea. South Boulder has noted some very favorable revenue projections for the initial Stage 1 open pit mining indicating a current value of USD$1.33 billion and an internal return rate of 40.6%. South Boulder has been very optimistic about the project and last January started to seek offtake and development partners. The Eritrean government, through its Eritrean National Mining Corporation (ENAMCO) has expressed interest in forming a joint venture with South Boulder, offering to acquire a 30% paid participation in Colluli. ENAMCO already has a 10% stake in the project. Under the proposed partnership, South Boulder remains the sole proprietor of the mine in the exploration phase after which the Eritrean government has the option to take 30% participation.

The Eritrean government’s interest in the project and willingness to invest is a strong vote of confidence for the ultimate success of Colluli. The mine has a very ambitious production target of anywhere from 2 to 10 million metric tons of potash a year starting in 2017, which represents from 4 to 18% of the world’s current total potash production of 55 million tons. Initial production is set to begin in 2016 at a projected and conservatively estimated rate of 1 million tons/year. South Boulder is now ready to complete the final Feasibility Study, which it expects to complete net year. South Boulder’s management says it is pleased with ENAMCO’s interest and that it will help complete the various procedures to reach the full exploitation stage in a more reliable and timely manner. South Boulder also hopes to attract more investors and project financing as a result of the certainty that the government’s participation affords.

The Colluli deposit is part of the Danakil Depression in Ethiopia and Eritrea (which were one country until 1992), identified as one of the most prolific and accessible potash producing areas in the world. The area remained unexplored throughout the 1990’s because of persisting military disputes between Eritrea and Ethiopia. Canadian Allana Potash Corporation (TSX: AAA) is leading a large Potash project on the Ethiopian side of the Danakil Depression and there are potential deposits in Djibouti and Somalia as well. Colluli presents a distinct advantage over the Allana project because it is close to Eritrean ports on the Red Sea, facilitating export. Ethiopia is landlocked and will have to ship potash through Djibouti and possibly Somalia, which has started to recover some stability. The political and military tensions that have discouraged interest in developing potash production in the Danakil region persist; however, all out war ended over a decade ago and there us yet some hope left for Somalia as the central authority has started to win back territory from the rebels thanks to support from an inter-African military coalition.

With the potential for more political stability and the sheer size and accessibility of the Colluli deposits, South Boulder could make Eritrea one of the most important potash producers in the world in the next few years.