South Boulder Mines' Colluli potash could have lower capital costs: preliminary DFS
Friday, June 29, 2012 by John Phillips
South Boulder Mines' (ASX:STB) Colluli Potash Project's economics may have just got a lot better due to preliminary findings from the Definitive Feasibility Study.
All important CAPEX and operating costs could be reduced the study has revealed, becoming more attractive to financiers and paving the way for more rapid development and the start of production and cash flow.
Findings have also identified the benefits including processing of Carnallite as well as Sylvinite, which will result in reduced mining costs due to stripping ratios being less than those used in the Engineering Scoping Study.
Another major plus to move the project forward is that strong technical support is emerging for an expansion of potash production capacity beyond the planned start-up capacity of 1Mtpa - due to the ability to process Carnallite mineralisation efficiently.
Lorry Hughes, managing director, commented on the very positive findings: “The economics of this already-robust project continue to improve as the technical studies progress.
“The increased resource and the positive findings from additional studies are indicating a mine life significantly longer than indicated it the scoping study. We are confident that the DFS will show Colluli to be a highly attractive investment proposition for financiers, paving the way for rapid development and the start of production and cash flow.”
Colluli currently hosts a Measured, Indicated and Inferred JORC Resource of 1.08 billion tonnes at 18% KCl for 194 million tonnes of potash, and has a near term 1.25-1.75 billion tonne Exploration Target.
A Feasibility Study is underway targeting 1Mtpa production by 2016, and with low forecast CAPEX of US$0.74B - there is enormous potential to improve economics.
The defining factor for Colluli is the strategic position, ideally located to sell potash into the world’s largest growth market – Asia. Negotiations are also underway with Eritrean Government to sell 30% equity stake and complete approvals.
The current Colluli resource currently contains 194 million tonnes of potash, of which around 20% is attributed to Carnallite mineralisation.
Importantly - this represents substantial upside for the project because mining and processing of the Carnallite was not included in the Engineering Scoping Study.
Early investigations conducted by lead consultants Ercosplan indicate that a simple solar decomposition circuit can be added to the processing route to allow potash to be extracted from Carnallite mineralisation in the same processing facility.
South Boulder said that indications are that processing costs for Carnallite will only be marginally higher than the corresponding processing cost for the Sylvinite mineralisation, which is very encouraging.
South Boulder potential not lost on North American investors
The potential of Colluli can not be underestimated, and no doubt this upside is why North American investors are taking the opportunity to increase their exposure to the project.
Colluli has the lowest CAPEX per tonne in the industry, with the potential for a mine life in excess of 50 years, producing both MOP and Sulphate of Potash.
Earlier in the week South Boulder raised A$9.5 million via a share placement at $0.95 cents to North American investors - and to private equity group Meridian Capital International Fund. Each share has a one-for-two free listed option exercisable at A$1.50 within two years of issue.
The funds will be used to complete Definitive Feasibility Studies and to start early access works, while also providing working capital. The placement will be made under South Boulder's 15% placement capacity.
Discussions with potential strategic partners are also underway.
Valuation - cheapest development cost in the Potash Industry
Where the story becomes even more interesting for South Boulder is that the company has among the lowest development costs in the Potash Industry.
South Boulder has economics of $736 US$/tonne of KCl Capacity, and when compared to some of the major names such as BHP Billiton (Blur) $1,030, Verde Potash (Cerrado Verde) $1,090 and BHP again (Jansen) $1,505 - South Boulders economics become even more compelling.
Highlighting the opportunity of South Boulder and the demand for potash, Asian and South American countries are the biggest importers of potash due to limited domestic production, with China importing almost three quarters of their needs, with India and Brazil almost solely relying on imports.
And with Colluli being only one of the few Greenfields potash deposits developed in the next 10 years - investors may not be able to enter for the stock at current low levels for too much longer.
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Received on Fri Jun 29 2012 - 14:14:12 EDT