We’re at the Shallow End of the Shallowest Deposit Known in the World: South Boulder

Development News

South Boulder Mines Announced that its Africa Potash deposit is located at the shallow end of the shallowest deposit known in the world

Eritrean Geologist labeling drill smaples at Colluli potash deposit
Eritrean Geologist labeling drill smaples at Colluli potash deposit

By South Boulder Mines,

Emerging Potash developer South Boulder Mines Limited (ASX:STB) has undergone a number of changes since the last time we spoke to the company. At the beginning of February, South Boulder promoted chief operating officer Paul Donaldson to the position of chief executive officer, from which he aims to lead the company in a “good, solid, strategic direction”. Towards the end of March, South Boulder de-merged all its non-potash assets, including the gold and nickel projects discussed in previous articles, listed investments and $1 million in cash, to spin-off company Duketon Mining Limited in exchange for the issue of 31,683,206 Duketon shares

Meanwhile, South Boulder’s central Colluli Potash Project in the State of Eritrea, on the northeast coast of Africa, has continued to progress with the company now in negotiations with the Eritrean government regarding its participation in the project. Discussions with strategic investors are also underway. South Boulder began developing the greenfield potash mine in 2009 and it is now awaiting the results of a Definitive Feasibility Study (DFS), with production scheduled for late 2016.

The JORC/NI43-101 Compliant Mineral Resource Estimate for Colluli now stands at 1.08 billion tonnes at 18% KCI for 194Mt of contained potash. Of this total, approximately 46.96Mt KCI is measured, 121.29Mt indicated and 25.78Mt inferred. Approximately 31Mt KCI is contained in sylvinite, 7Mt in polysulphate, 38Mt in carnallite and 118Mt in kainite. The Exploration Target is 1.25-1.75 billion tonnes at 18-20% KCI.

We’re at the shallow end of the shallowest deposit known in the world. Most of the potash deposits being mined globally are 1,200-1,500m deep, so they use underground mining techniques, but the shallowest point in our deposit is just 17m deep, which lends itself to open-cut mining” – Paul Donaldson, chief executive



The most interesting thing about Colluli is the unusual shallowness of the deposit, which determined its fate to become the world’s first open-cut potash mine. “No-one’s done it before because the potash deposits have traditionally been too deep,” Donaldson explains. “We’re at the shallow end of the shallowest deposit known in the world. Most of the potash deposits being mined globally are 450-1,500m deep, so they use underground mining techniques, but the shallowest point in our deposit is just 17m deep, which lends itself to open-cut mining.

Open-cut mines require lower pre-production capital expenditure (capex) than underground mines and shorten the time to market. However, this doesn’t necessarily mean that open-cut mining is cheaper or easier, Donaldson explains. “Drilling an underground shaft is expensive and takes a long time; however, once you’ve sunk your shaft, you’re just mining potash,” he says.

In an open-cut mine, you have to move all the waste on top of the deposit before you can get to the mineral; that gives you a different cost structure, with low capex but slightly higher operating costs. Nevertheless, the low capex and speed to market of the Colluli project will give us a good start; and product extraction from the lower layers of mineralisation has the potential to further reduce the operating costs to levels similar to those of underground mining operations.



An initial scoping study looked at mining only sylvinite and came back with a low capex of US0.74 billion for 1Mtpa production over a mine life of 17 years, with an 80% recovery rate. The life of mine (LOM) strip ratio of waste:ore would be 13.7:1, requiring an operating cost of US$263 per tonne using a flotation processing method.

A more recent scoping study, completed in November 2012, looked at mining sylvinite and carnallite. This proposed a 2Mtpa production rate over a 26-year mine life, with a 90% recovery rate. The pre-production capex would be higher at US$1.52 billion, but the lower average LOM strip ratio of 6.4:1 would reduce the operating cost to $187 per tonne, using flotation and solar decomposition processing.

South Boulder is now considering a Staged Development Model (SDM), where a sylvinite-only operation is constructed over a two-year period with production of stage 1 ramping up to full capacity over the subsequent two years. During the ramp up of stage 1, the operation would be expanded to also process carnallite ore, taking the operation to 2Mtpa production two years after stage 1 reaches its full production capacity.

Furthermore, studies are now underway to process the Kainite material, which represents the bulk of the deposit in the lower layers and could potentially reduce mining costs by more than $35 per tonne, allow higher production rates and increase the longevity of the resource to more than 40 years of mine life.Donaldson says South Boulder was pleased to discover that as a stratified deposit, Colluli has even more potential than originally thought.

It means that as we develop methods to process different forms of potash-bearing mineralisations, we will drop our operating costs substantially – so we’re very happy,” he comments.



South Boulder began looking for potash when its price was at a high of US$600 per tonne, before the global financial crisis hit. Donaldson speculates that demand for potash initially received a boost due to growing interest in biofuels, particularly in the US, and it will remain strong for at least as long as the Colluli mine operates. “If you look at the fundamentals of population growth, dietary requirements and how dietary preferences change in accordance with income – and then you overlay development in China, India and even Africa – then certainly the demand for potash is going to continue to grow for the next 20 to 30 years,” he says.

South Boulder identified potash as a good commodity on which to focus and, in 2009, its geologists identified the Danakil Depression – a desert basin in south Eritrea and northeast Ethiopia – as a good place to look for it. Many companies were exploring Ethiopia at that time, including BHP Billiton, but South Boulder was one of very few to try their luck in Eritrea, which contains only one operating mine. Because the mining industry in Eritrea is young, infrastructure is limited and South Boulder will need to build its own port facility and road infrastructure, in addition to the mine, processing facility and accommodation for the fly-in, fly-out workforce.

Nevertheless, Donaldson says the Colluli mine’s desolate location is its greatest advantage.

We’re positioned on the east coast of Africa, which is perfect for accessing the key growth markets of China and India; neither of which is self-sufficient in potash,” he explains.

“So we’ve got a freight advantage compared to the key traditional potash producers: the Canadians and the Russians. Our deposit is close to the coast; it’s about 70km from where the port will be. In contrast, some of the other potash basins need 1,000km of rail to get product to export facilities.”



South Boulder completed the capital raising for its DFS last year, raising $10 million from Meridian Capital who is now a substantial shareholder in the company. The DFS, being coordinated by German potash processing specialist Ercosplan, is around 50% complete and should be finished by the end of the year. South Boulder hopes to use the DFS as the basis for driving more investment in Colluli, so that it can begin construction in 2014.

The construction elements of the DFS are being managed by infrastructure consultant Senet, which Donaldson says is “a good partner in terms of understanding labour, cost, manufacturing and construction issues in Africa”. Meanwhile, British marine consultant Ashmead Maritime is collecting data for the design of the port facility. One of South Boulder’s primary goals for 2013 is to finalise the mining licence with the Eritrean government.

The focus for at least the next five years is on getting the Colluli project established, and then fully realising what the resource can deliver,” says Donaldson. “Thus far, we’ve identified minerals that can produce potash in conventional processing methods, but there are other minerals in the deposit from which we believe we can extract value as well. We see substantial upside in the long-term economics of the project.”

He adds that it is too early, at this stage, to define the company’s ultimate goal; a time will come when it decides whether to be a potash company, a fertiliser company and/or a mining company. “After five years maybe we’ll want to diversify, but that could be into other fertilisers,” suggests Donaldson. “We haven’t thought that far ahead. For the next five years it’s all about the Colluli project – establishing ourselves in the market, identifying, planning and extracting the resource’s full potential.

As seen in the May 2013 Issue of the International Resources Journal - Colluli Drilling Activity
As seen in the May 2013 Issue of the International Resources Journal – Colluli Drilling Activity