q's and response from management

Hi Kerry,
I was very concerned and appalled at the wording of the recent announcement regarding a 50/50 split with the govt. IMO it has left more questions than answers and has created mass panic with shareholders,as can be seen in the 30%+ slide of the SP.
There is no mention of whether the Govt will pay off it's intended 50% of the project with future profits. I can understand not all answers where able to be made, but this announcement was poorly conceived and understood.
Some investors are also concerned about the viability of the project going forward and if STB can still gain finance for the full 700mill on 50% of the
project. There was already concern over the region with severiegn risk, this is why STB was pushed down to a relatively low MC for the past year. Value of the project has been totally eroded now and Lorry needs to take a good hard look at this, faith needs to be restored.
It is my belief that STB need to make another announcement ASAP to clarify these points with shareholders and bestow some more confidence in the
project going forward.

Yours faithfully

RESPONSE:

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 reflect 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.



Regards







Kerry Rudd | Executive Assistant