South Boulder Reviewed Colluli Potash Development Strategy

Development News
After a review of the development strategy, South Boulder came up with three processing options that allow for the production of Potassium Sulphate, a Chloride-Free potassium fertilizer.
After a review of the development strategy, South Boulder came up with three processing options that allow for the production of Potassium Sulphate, a Chloride-Free potassium fertilizer.

By Briefing Interview,

The following is an “Inside Briefing” interview with South Boulder Mines Chief executive Paul Donaldson. In this interview, Paul Donaldson provides an update on South Boulder Mines (ASX: STB, market capitalization: ~$27.5m) and its Colluli potash project in Eritrea.

Highlights of this interview include an explanation of the significant changes in South Boulder’s approach to developing Colluli, why Mr Donaldson believes the project has a good future and an outline of the next key steps. 

INSIDE BRIEFING:   South Boulder has been relatively quiet about its progress at the Colluli potash project since you were appointed CEO just a year ago. The most recent ASX announcement clearly shows there has been a lot of work going on behind the scenes. Can you take us through what you have done over the past year?

PAUL DONALDSON:  We have had a very productive 12 months. We have concluded an agreement with the Eritrean Government and we are very close to finalizing the establishment of the joint venture company with the Eritrean National Mining Company (ENAMCO). We are now planning our first joint venture meeting, which we expect will take place in March.

We have also done a considerable amount of work on the development strategy for Colluli. We have recently completed a review of this strategy and we now have a short-list of three development options. The review also included a study of the logistics and energy options in Eritrea.

INSIDE BRIEFING:  Could you elaborate on why you decided to undertake the development review?

PAUL DONALDSON:  As the review has shown, the original development path was not for the Colluli resource. The most commonly used potash globally is potassium chloride, which is produced predominantly from a potassium-bearing salt called sylvinite. The original scoping work that underpinned the definitive study focused solely on the sylvinite in the resource and did not give the appropriate consideration to balancing the economics of mining and processing costs.

The +1 billion-tonne Colluli resource contains three potassium bearing salts which sit in layers within the ore body. Sylvinite accounts for only 16 per cent of these salts. The other two salts in the resource are Carnallitite and Kainitite. Like Syivinite, both of these salts are used to make potassium fertilizers, otherwise known as potash.

The salts sit on top of each other in the resource and therefore the more salt types are used in the production process, the lower the mining stripping ratios – i.e., the ration of waste to ore. Given the mining costs represented the largest portion f the operating costs in the original development concept, utilizing all salts represented a significant opportunity to improve the project’s economics.

The review indicates the waste to ore ratio can be reduced from 13.4:1 in the sylvinite – only scenario to approximately 2.5:1 by using all salts. This represents an overall cost reduction of approximately $115 per tonne of product from the original study (ESS1) and $50 per tonne of product from our published staged development plan (see ASX announcement dated 21st March 2013).

In addition, using all the slats opens up a lot of the resource, extending the mine life significantly and increases the ultimate scale of the project. The paradigm shift has been to stop thinking of the resource as a traditional deposit and question whether traditional processing its the most effective option.

More than 60 per cent of the resource is Kainitite, a potassium-bearing salt which is less common throughout the world and processed mainly from brines. We have an abundance of Kainitite in salt form and we have shifted a lot of our attention to ensuring we derive value from it.

INSIDE BRIEFING: How does the review of the processing options alter the product suite?

PAUL DONALDSON:  The processing options under consideration each have different product suites. All options allow for the production of potassium sulphate, a chloride-free potassium fertilizer commonly known as sulphate of potash. Sulphate of potash attracts a price premium compared with the more common potassium chloride. The market is considerably smaller and the main production centers are in Central America, Chile and China. Potassium sulphate is produced either from brines or by the addition of sulphuric acid to potassium chloride.

Potassium chloride could also be produced under two of the three scenarios and kieserite, a magnesium sulphate which is also used as a fertilizer, could be a product under one of the scenarios. The objective now is to determine which option is best suited to the resource. This is the aim of the next round of test work.

INSIDE BRIEFING:  The original development path was based on a production module of 1Mtpa of potassium chloride. How do you view that scenario in light of your latest studies?

PAUL DONALDSON:  Our first objective is to get the product suite correctly aligned with the resource. The resource has the potential to produce potassium sulphate as well as potassium chloride, both of which are used in the fertilizer industry. Once we have finalized the product suite and processing route, our intent is to focus on a module size that offers attractive economic returns, builds a good platform for growth and mitigates safety, resource, commercial and capital risks.

INSIDE BRIEFING: There has been some discussions concerning South Boulder’s relationship with the Eritrean Government since South Boulder announced a 50-50 joint venture agreement with the Eritrean National Mining Company (ENAMCO). Would you comment on this?

PAUL DONALDSON:   Our relationship with ENAMCO is going from strength to strength. We have been providing regular project updates and sharing our insights on resource development strategies with them. These discussions have been engaging and productive.

As I indicated earlier, we are planing our first joint venture meeting and we are all aligned in wanting to develop the resource both as quickly and effectively as possible. On my last visit to the Colluli site, I observed the ongoing construction of a mobile communications tower which is being installed to support the project, so the government is facilitating some of the infrastructure development in anticipation of the project advancing.

INSIDE BRIEFING:  What are the next key steps in the development of the Colluli resource?

PAUL DONALDSON:  The next step is to determine which of the three processing options that have been shortlisted is the most viable. The studies completed to date are desktop studies that have derived mass balances from both the average grades of the resource and from similar processing facilities in production.

The important step now is to test that these calculations are correct and then determine how robust the process is with variations in the ore body. For example, although the chemistry that we have modeled is the average grade of the resource, we know that the mine plan will not deliver at the average grade. We need to determine how that grade variability impacts on the process and what buffers are needed to smooth out the variations to deliver predictable outputs in order to correctly design the infrastructure. We are in discussion with potential consultancies to conduct this work with samples from the resource and the Red Sea.

These results will then play a key role in finalizing the Definitive Feasibility Study.

Colluli Project Plan View
Colluli Project Plan View

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