The Colluli potash deposit lays only 70km from the Red Sea Coast of Eritrea, a small nation within the Horn of Africa. With over one billion tonnes of rich potassium-bearing salts, and yet to be quantified rocksalt, gypsum and magnesium chloride, the deposit offers a wide range of products and uses. South Boulder Mines most recent work suggests Colluli’s true potential lies in the production of potassium sulphate, a potassium fertiliser with limited global production centres, which carries a substantial price premium over the more common potassium chloride.
In 2009, South Boulder Mines Ltd. gained the exploration rights for Colluli. The tenements cover over 400km2. Exploration drilling began in 2010. Initial feasibility studies focussed on the production of potassium chloride, more commonly known as Muriate of Potash from sylvinite, the most common potassium bearing salt used for the production of potash. The appointment of Paul Donaldson to the South Boulder Executive team in late 2013 however, was the start of a major shift in the development strategy for the resource which has already demonstrated substantial economic uplift with scoping studies completed in several months ago indicating operational cost savings of over $50 per tonne of product in the mining area alone.
Donaldson joined South Boulder Mines as Chief Operating Officer in 2012 and was appointed CEO only two months later. He immediately began a full review of the Colluli’s projects development path. He realized much of the resource had been overlooked. Sylvinite represents only 16% of the potassium bearing salts within the resource.
“The Colluli deposit is the shallowest known potash mineralization globally. Mineralisation starts at only sixteen meters below the surface which is ideal for open cut mining,” explains Donaldson.
“Open cut mining economics are heavily impacted by strip ratios and given the volume and grade of the potassium salts below the upper layer of sylvinite ore; it simply makes good economic sense to exploit these minerals given the low marginal cost of mining them.”
If you think about the resource as a multi-layered cake, the original development focussed only on the icing – we are taking all of the cake”
With little rainfall, low humidity and high year end temperatures, Colluli’s geographic location potentially provides an advantage that many operations don’t have – energy from the sin. Solar evaporation is high on the list of processing options that South Boulder is now exploring.
“To date the review is indicating exceptionally positive results. The reduction in mining costs has been due to the substantial reduction in waste to ore ratio which has reduced from around 15.5/1 to 2.5/1,” explains Donaldson. “What excites us even more is the fact that we are now considering the production of potassium sulphate as our product rather than potassium chloride. Potassium sulphate currently carries a price premium of almost $300 per tonne over potassium chloride and represents further upside.”
The company has now redefined its objectives and is aiming “to bring the Colluli project into production using the principles of risk management, resource utilisation and modularity, using the starting module as a growth platform to develop the resource to its full potential.” Reaching this full potential is the main goal of South Boulder Mine’s Chief Executive Officer and Managing Director, Paul Donaldson.
“The change in strategy has some large implications for the start-up scale of the project as well” explains Donaldson. “By reducing operating costs and producing a higher revenue generating product, we potentially have the ability to scale the size of the start-up module back which will obviously reduce the capital requirements and create a growth platform for the future. One of the key advantages of the shallow mineralisation is the low relative capital intensity in contrast to underground operations which in some cases need to spend over $500,000 per meter just to access the resource. When the resource is 1000m below the surface, this adds up fast. We have the advantage of accessing the resource with a much lower capital outlay – a lower barrier to entry with a large, long life resource, favourably positioned relative to the key markets will certainly support the financing of the project.”
In November, 2013, South Boulder Mines entered into a Shareholder’s Agreement with the Eritrean National Mining Corporation. Each holds 50% ownership of the Colluli project. This partnership provides economic and fiscal certainty in regards to the continued development of the Project.
The partnership allows the joint venture company to borrow up to 70% in debt; South Boulder must put in 30% equity. Once the joint venture debt is serviced, South Boulder receives 75% of total cash flow until 50% of its equity contribution has been paid on an annual basis.
In an official statement, Donaldson explained that the agreement would, “secure and clarify the project ownership structure and assist in discussions with strategic investors and potential financiers.”
The True Value of Colluli
The Colluli project’s value is based getting the right balance between the resource, the mine method and product suite. The layered nature of the deposit allows for extraction of several different types of potassium bearing salts, including Sylvinite, Carnallitite, and Kainitite. These salts can be used to make potassium sulphate or a combination of potassium sulphate and potassium chloride. South Boulder has now entered its metallurgical test work phase to determine the best product suite and processing method.
Colluli is also in a geographically ideal location. It is the closest potash deposit in the Danakil depression to the coast being only 70 kilometres from the Red Sea coastline. The location lowers potential trucking costs and promotes easy access. It is also positioned favourably to access the growing Indian fertiliser industry.
South Boulder had chosen a direction that takes full advantage of Colluli’s potential. As put by Donaldson, “Given the raw economic balance between what’s in the ground and what we could make, we’re maximizing the resource to its complete potential.”