Monday, 25 July 2011

South Boulder Mines near surface potash hits continue unabated at Colluli

South Boulder Mines (ASX: STB) string of high grade near surface potash discoveries continues at the Colluli Potash Project in Eritrea.

The significance of the latest hits at Area B is the confirmation by the company of the current exploration target of 1.25 to 1.75 billion tonnes at 18-20% KCl.

South Boulder said exploration at the Area B discovery continues to intersect potash from depths as shallow as 16 metres, with assays currently pending from the new discovery area - however, sylvinite has been visually identified in core from 13 of 21 holes drilled to date.

New results that have been received include:

- 8.07 metres of kainitite from 16.51 metres;
- 7.56 metres of kainitite from 48.44 metres;
- 6.54 metres of kainitite from 74.15 metres; and
- 5.58 metres of sylvinite from 65.59 metres.

At the project 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.

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