South Boulder Mines (ASX:STB) has completed Pre-Feasibility...

South Boulder Mines (ASX:STB) has completed Pre-Feasibility Study (PFS) drilling at its Colluli Potash Project in Eritrea ahead of schedule with samples currently undergoing analysis at laboratories.

Drilling will continue at Colluli into the Definitive Feasibility Study (DFS) section of the program.

The early completion of the PFS section of the drilling program allows for the finalisation of the mining study and the Resource Report by the Perth-based company and will ensure delivery of the PFS early in 2015.

The company noted that mobilisation and first drilling had commenced on time.

“We are very pleased with the rapid progress of the program and the seamless transition from PFS to DFS drilling,” managing director Paul Donaldson said.

“In one mobilisation, the team have completed the necessary site investigations for the current study and have brought forward the DFS investigation drilling to ensure a timely and effective delivery of the DFS by the end of this financial year.”

The drilling program was initiated to achieve the following objectives:

- Twinning of resource holes under the supervision of AMC Consultants and South Boulder personnel as part of the transfer of the resource model to AMC Consultants;
- Collect samples from within the mining areas to assess trafficability for mine planning purposes;
- Collect samples for geotechnical work associated with final pit wall angles;
- Collect samples for geotechnical work associated with infrastructure.

South Boulder had recently completed preliminary process design for potassium sulphate (Sulphate of Potash) production using simple liberation and conventional flotation.

Additional metallurgical test work has reduced Capex and Opex from the initial design. This, along with improved yields, is expected to have a positive economic impact on the project.

The company has been pursuing a modular and scalable approach towards developing the project, which has a large resource of 1 billion tonnes of potassium bearing salts, all of which are suitable for the production of potash fertilisers, and is close to the coast.

Colluli Potash Project

The Colluli Potash Project is located within the Danakil Potash belt and has a shallow Resource of 1 billion tonnes of potassium bearing salts, all of which are suitable for the production of potash fertilisers.

It is also just one of three projects globally to contain kainite salt – the key salt for Sulphate of Potash (SOP) production – in solid form.

SOP has historically enjoyed a 35% price premium over potassium chloride though this has grown to over 80%, making it likely that Colluli would produce additional revenue of more than US$290 per tonne.

Colluli is also the closest SOP resource to the coast globally and has the most favourable coastal access from the Danakil depression.

It is just 75 kilometres to the designated loading point at Anfile Bay and 180 kilometres from the Port of Massawa – a 4 berth bulk and container terminal.

The project’s location on the east coast of Africa also allows the product to be export to Asia and Europe.

The switch to SOP production has also resulted in a substantial reduction in strip ratio to 2.3:1 from 14:1, which has in turn reduced estimated mine cost to $75 per tonne from $224 per tonne.

Mine life has also soared to 200 years from the previous 17 years.

Analysis

The early completion of PFS drilling ensures that South Boulder Mines is on track towards completing the key PFS study for the Colluli Potash Project in February 2015.

Significantly, the transition from PFS to DFS drilling is also notable. The work has brought forward the DFS investigation drilling to ensure a timely delivery of the DFS by the end of this financial year.

Its use of low cost and well understood flotation to process its salts could place the project in bottom quartile of operating costs for SOP production.

Proactive Investors continues to highlight other drawcards at Colluli such as the large 1 billion tonne, the suitability of the resource for SOP production, its proximity to coast, the modular approach to development and the company’s relationship with the Eritrea Government.

Share price kickers ahead include:

- Finalising the Resource Report in the third quarter of 2014;
- Results from Colluli drilling;
- Delivery of the Pre-Feasibility Study in February 2015;
- Delivery of the Definitive Feasibility Study in mid-2015;
- Completion of the Social Environmental Impact Assessment in the third quarter of 2015; and
- Mining Licence application in fourth quarter of 2015.

The company is well-funded with $10 million in cash which effectively provides an Enterprise Value (EV) of just $16 million.

South Boulder recently attracted a $1.8 million investment from the Hong Kong based Kam Lung Investment Development Company (KLID).

KLID will look to secure an offtake deal for potassium sulphate on commercial terms acceptable to the CMSC board.

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