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P O T A S H S E C T O R R E P O R T
21/07/2011 Level 21, 25 Bligh Street, Sydney NSW 2000 |T: +612 9221 8711 | www.fostock.com.au 8
South Boulder Mines Ltd (STB.ASX) - $2.23
OVERVIEW
�X South Boulder Mines (STB) is a mineral exploration company with world class
high grade Colluli Potash project located in the Danakil Depression region of
Eritrea (Africa), 70km from the Eritrean coast and a short shipping distance
to the largest potash markets, being India and China.
�X STB is also in a JV with Independence Group (IGO.ASX) on the Duketon nickel
exploration project located 120kms north of Laverton in Western Australia,
with IGO earning 70% through drilling and studies.
COLLULI POTASH PROJECT, ERITREA (100%)
�X World��s shallowest Potash deposit. Tenement area of 906sqkm consists of
buried evaporite deposits with two shallow potash bearing horizons and
mineralisation at depths of 22.2-64.8m. South Boulder own 100% of the
project with a scoping study well advanced for publication Q3 2011. We note
post completion of a DFS, the Eritrean government will assume 10% free
carry with an option to purchase another 30% at market value.
�X Well located 70km from the coast The Colluli project is well situated within
70km south of the shallow water port of Mersa Fatma and less than 200km
south east of the deep water port of Massawa, providing many options for
export pathways to foreign markets. Infrastructure considerations include
refurbishment of an abandoned rail line that runs through the Colluli
tenement and development of road and port facilities. Utilisation of a slurry
pipeline to port may also be a consideration, dependent upon processing
method.
�X Maiden Resource 548Mt @ 19% KCI. STB have announced a maiden JORC
compliant resource estimate for the Colluli Potash project, reporting a
Measured, Indicated and Inferred resource of 548Mt @ 19%, including 119Mt
@ 23% KCI. Mineralisation remains open and consists of sylvinite, carnallite
and kainite ore. The exploration target for Colluli is 1.5Bt @ 18-20% KCI with
management anticipating the target will contain 20-30% sylvinite.
�X Unique deposit suitable for open pit mining. The mineralisation at Colluli
project occurs at depths <100m, making it the shallowest known potash
deposit in the world. Scoping study is underway to determine the feasibility
of an open pit mining operation at a production rate between 2-10Mtpa
resulting in substantially lower capex and opex costs in comparison to other
greenfield potash projects proposing underground or solution mining. It will
also be the first open pit potash mine. Expected Capex of $0.5-0.75bn
�X Revised resource and scoping study to be completed 3QCY11. Drilling is
currently underway and we anticipate a resource upgrade and maiden
reserve to be defined. Due to the shallow depth of the mineralization, we
expect a much lower cut off grade compared to other potash resources at
significant depths resulting in a large portion of the resource to be converted
to reserves. Scoping study will provide the vital information of met test
results and the economics of a developing an open pit mining operation.
FSB VIEW
�h After a phenomenal share price run late 2010 through early 2011, the market
valuation of STB has come back to attractive levels given the size of resource.
We expect the share price will respond favourable to the release of a major
resource upgrade and highly attractive economics from the scoping study.
�X Given the low capital cost relative to other potash mines and the potential to
utilise an open pit operation we anticipate that STB will be on the radar for
potential corporate activity. The company remains well funded with $12m
cash.
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