South Boulder Mines high grade potash hits to boost pending resource upgrade at Colluli

South Boulder Mines (ASX: STB) string of high grade potash intersections is continuing unabated at the Colluli Potash Project in Eritrea.

The latest highlights are from two diamond holes within the current JORC Resource, with the impact a further increase in the robust nature of the deposit.

The first hole highlight included an intersection of 22.03 metres of potash with a combined grade of 21.97% KCl, which had the following higher grade sections:

- 7.60 metres of sylvinite at 30.01% KCl;
- 4.93 metres of sylvinite at 37.20% KCl; and
- 7.32 metres of kainitite at 22.10% KCl.

The second hole intersected 17.53 metres of potash with a combined grade of 17.31% KCl, including:

- 2.12 metres of sylvinite at 19.31% KCl;
- 9.10 metres of kainitite at 21.39% KCl; and
- 6.22 metres of kainitite at 23.37% KCl.

South Boulder can now incorporate these latest results in an upgraded resource estimate for the Area A deposit, which will be used as the basis for the current engineering Scoping Study due to be completed in the September quarter of 2011.

The company is also eyeing an increase to the 1.25 to 1.75 billion tonnes at 18 to 20% KCl exploration target, which has the potential to grow substantially.

The current JORC Resource is 548 million tonnes at 18.6% KCl, for total contained potash of 102 million tonnes.

South Boulder has an initial strategy to consider producing 2 to 10 million tonnes of potash annually from an open pit operation in 2016/2017, which is a substantial target considering the current global production is 55 million tonnes.

The company also has the potential to be the lowest cap-ex and op-ex operation in the world, with industry production costs around USD$100 to USD$250 per tonne, compared to the potash price of around USD$500 a tonne.

South Boulder has forecast operating costs to be in lower 25% of the industry

Eritrea - an east African country

Eritrea is a stable jurisdiction that is fully supportive of South Boulder activities, with the project awarded to the company by an open tender process.

The deal structure is as follows:

- Exploration Phase, South Boulder 100% ownership;
- After Mining Lease and BFS, the Government receives 10% of the project for free and can purchase up to another 30% of the project at fair value;
- The 40% is a full equity participation interest, Government to pay 40% of operating and capital costs;
- 3.5% royalty on potash and corporate tax rate of 38%; and
- The deal structure paves the way for a secure and reliable partnership.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/18011/south-boulder-mines-high-grade-potash-hits-to-boost-pending-resource-upgrade-at-colluli-18011.html