A vast potash deposit in Eritrea offers suitability for producing a premium
potash fertilizer, which commands high prices.
Author: Lawrence Williams
Posted: Saturday , 06 Dec 2014
LONDON (Mineweb) -
At an investment conference like this week's Mines & Money in London one can
be besieged by junior miners/explorers all with good stories to tell. The
fallout in the junior sector has already tended to do the sorting of the
wheat from the chaff. But even so some will have seemingly better stories to
tell than others - the problem for the dispassionate observer tends to be to
rate those which might appear to stand out.
As is the nature of things these days there does tend to be a concentration
on gold explorers/developers as gold has an aura which transcends reality.
As my former colleague Chris Hinde at SNL is always keen to point out, in
terms of global value of production coal, iron ore and copper all rank far
higher than gold. But what of other metals and minerals? There are those who
favour nickel, zinc, uranium etc. as the next big thing in terms of price
potential, but the history of mining suggests that perhaps the real profits
in the industry are made in bulk materials where high volumes trump high
values - so what of potash?
Go back a couple of years and it was potash which was rated to be the next
big thing. The world needs food and growing it requires fertilisers where
potash is king. But the projected growth has not really materialised and
prices for potash - or at least for sylvinite (potassium chloride KCl plus
sodium chloride NaCl), the principal mined potash product from major
producers Canada and Russia - have been somewhat in the doldrums.
So how about a potash mine with good reserves, perhaps a billion tonnes,
near the coast but in something of a pariah state as far as the United
Nations is concerned? Doesn't necessarily seem to tick the boxes because of
potash price performance and jurisdiction. But... The pariah state is
Eritrea which at least has a stable government and, for Africa, very low
corruption levels. The potash product, which can be produced, is the much in
demand potassium sulphate (K2SO4) where, according to ASX quoted South
Boulder Mines Managing Director, Paul Donaldson, the current price is not
only more than double that of potassium chloride products, but is rising due
to shortage of supply and little other new production in sight. Over 60% of
the deposit is in the form of Kainite (KCl, MgSO4) which is rarely found in
rock form, mostly produced from brine evaporation elsewhere and the ideal
principal feedstock for conversion to potassium sulphate fertiliser. The
balance is sylvinite 16%, polysulphate (K2SO4, NaCl, MgSO4) and carnallite
(KCl, MgCl2).
South Boulder owns 50% of the Colluli potash project in Eritrea with the
state mining corporation, ENAMCO, owning the other half. Donaldson told
Mineweb that this could be a 200-year mine life project with a resource of
over 1 billion tonnes of potash salts. What's more it is only 75km from the
coast and 180 km from Eritrea's existing principal port of Massawa. However
one of the options being studied is for Colluli's product to be barged in
containers to carriers waiting offshore from a much nearer shipping point to
the mine which would substantially cut transportation costs. The port
location is also ideal for transportation of final product to key markets
such as India, the Middle East, Egypt and beyond.
The other big thing Colluli has in its favour is that the resource lies at a
depth of between around 20m and 140m so is easily extractable via an open
pit compared with much of the word's potash resources which have to be mined
at depth requiring substantial capital just to get down to the potash
horizons. At Colluli the cost of building a mine will thus be a fraction of
that for a deep underground mining operation.
Processing is believed to be straightforward and given that it is not water
quality reliant it should able to use sea water in the plant. The mix of
potash salts in the orebody is said to be absolutely ideal for the
production of the premium potassium sulphate product.
A preliminary feasibility study is under way, due for completion early 2015,
looking at around a 1 million tonne/year output and, assuming this looks
positive a definitive feasibility study would be started to be completed in
the second half of next year. The company is well enough financed to take it
up to the DFS stage but would probably need to raise funds to accommodate
that.