South Boulder Mines-Potash for produce
Article | 6 November, 2014 - 12:24
There's no arguing with the fundamentals. Growing populations, reduction in
arable land, changing dietary preferences, climate change and the escalating
demands of emerging economies have placed food security at the top of the
political as well as the economic agenda. World population is growing by
some 75 million every year. By 2050 almost 9.3 billion people are expected
to inhabit the earth. Food production will have to increase by almost 50
percent to feed them, and this means a huge global demand for fertilisers,
already forecast to reach 190 million tonnes by 2016.
The market for potassium fertilisers, or potash, is currently around 60
million tonnes. Demand is forecast to grow at approaching five percent per
annum, much faster than nitrogen and phosphorus based fertilisers. It was
this fact that attracted the attention of South Boulder Mines' founder and
Australian entrepreneur Liam Cornelius. The ASX listed company he founded in
2003 had gold and nickel exploration interests, and in 2007 it acquired some
tenements in the Pilbara region of Western Australia to gain an initial
foothold in the potash market. Its focus on potash, however, was sharpened
in 2009 when, following careful research into the characteristics of the
Danakil Depression that straddles Ethiopia and Eritrea, it was granted
exploration tenements for the Colluli concession in southern Eritrea.
Colluli is an extensive, 400 square kilometre resource. Drilling that
started in 2010 has established that it contains more than a billion tonnes
of potassium bearing salts. Subsequent to this, the company set about
disposing of its other assets, spinning out the gold and nickel tenements
into a separate company, Duketon Mining, and putting all its efforts into
developing Colluli. South Boulder's present CEO Paul Donaldson, a vastly
experienced mining professional with more than 20 years' experience at BHP
Billiton, who had joined as Chief Operating Officer, had been attracted by
the market potential for potash and the ideal location of Colluli to supply
the product to key markets in Australasia, India and southern Europe as well
as the sheer size of the resource, "The Colluli resource is the shallowest
known potash deposit in the world: mineralisation starts at 16 metres and it
runs down to about 140 metres so it is perfect for open cut mining which is
much cheaper than developing an underground mine. Open cut mining also gives
very high resource recovery relative to underground and solution mining
methods used for potash mining."
However he felt the original plan did not take full advantage of the way the
deposit is composed. "The strategy had been to build a flotation circuit,
bring the top level sylvinite into production of potassium chloride and then
deal with the ancillary polysulphate, carnallite and kainite resources at a
later point," he explains. "The problem with that approach was that top salt
is only 16 percent of the resource. With a resource covering such a big land
area, you could end up with very high mining costs. So the economics of the
project did not look as attractive when potash prices declined back in early
2013." At this point the company went through a restructuring from which
Donaldson emerged as CEO from his Chief Operating Officer position,
embarking on a new development path that involved full resource utilisation
and at the same time shifting the production focus from potassium chloride
to potassium sulphate.
Though potassium chloride is in widespread demand, it is not suitable for
every kind of crop. Potassium sulphate (referred to as Sulphate of Potash or
SOP) is used in crops that are sensitive to chloride or fertiliser burn,
like coffee, tobacco, pineapple, avocado and many other fruits, or where
sulphur is deficient. "We found that the combination of salts that we had in
the resource is highly favourable for the low cost production of potassium
sulphate rather than potassium chloride," he says. The bottom line is that
potassium sulphate creates a premium potash fertiliser that sees a price
premium in the market - and there are limited production centres globally.
"We use a very simple liberation and flotation process, simply mixing the
kainite with other salts: under ambient conditions you then get a conversion
that takes it to potassium sulphate. We have validated this with our
metallurgical test program." This is something that cannot be done by most
other producers, since it is rare to have the right combination of salts in
a single resource - and where that does happen the salts are usually held in
brine, which contains about a tonne of water that has to be evaporated to
obtain around five kilogrammes of potassium.
Because the resource is so shallow, it can all be dug out and is immediately
ready to enter the flotation circuit. This is another advantage Colluli has
over kainite resources that occur deep underground. In those cases the only
way to obtain it is solution mining, however kainite is difficult to
dissolve and in these conditions requires either heat or a long period of
saturation. Kainite represents approximately 60 percent of the Colluli
resource with the remaining salts consisting of sylvinite and carnallitite
which are commonly used for the production of potassium chloride.
On this basis Colluli embarked on a completely new development path. The
potassium chloride path was abandoned in favour of the premium product,
though it always has the option to make the former in the future. Since one
of the key differences of the Colluli resource relative to operations
producing potassium sulphate from brines, is that the salts exist in solid
form and therefore do not require evaporation to produce the feed for the
processing plant, this substantially reduces the overall footprint required,
reduces land disturbance and environmental impact, reduces the amount of
double handling of raw materials, and most importantly gives reliability of
product delivery, as production rates are not significantly impacted by
ambient conditions.
Salts from the Colluli resource will simply be mined, stockpiled to the
allocated areas and fed directly to the processing plant. The change in
approach has allowed the company to scale back its development plan
radically, from $800 million to the anticipated region of $350 million. The
operational costs and procurement strategy is being further refined, he
says, to bring capital and operating costs down to a fundable level that
mitigates the risks of safety in an emerging mining jurisdiction and
balances capital outlay against resource risks, he adds.
The resource is 180 kilometres from the well-established port of Massawa, a
town of around 30,000 inhabitants which has four working berths handling
bulk and container traffic. Massawa is connected to the country's second
port via a 500 kilometre coastal highway that runs south from Massawa to
Assab the second port. The Red Sea is one of the world's busiest shipping
routes. Colluli's planned ship loading facility at Anfile Bay provides
deepwater access suitable for loading up to Panamax size vessels. Massawa
port itself is Eritrea's primary import-export facility and will form a key
part of the consumables supply chain for the Colluli operation. The port
currently exports over 250,000 tonnes of copper concentrate from existing
mining operations. Massawa also represents the local recruitment pool for
Colluli. Employees will be bussed to the site.
The resource itself is extremely flat and free of vegetation. Roads will be
improved as the project progresses, says Donaldson. Generators are being
used for the exploration work, however on-site power generation will have to
be built for the plant construction and operational phases. Though it is an
arid region, water should not be a problem, he believes. "The resource is
120 metres below sea level, and most of the process water is in fact
seawater that we will pipe from the coast under gravity." Fresh water for
drinking and other purposes will probably require the installation of a
solar desalination plant at the site, he adds.
Apart from the potassium chloride potential already mentioned the resource
contains 200 million tonnes of magnesium chloride and there are other
by-products of the mine that could be sold. Chief among these is a large
quantity of high quality rock salt and plenty of gypsum. "We think these are
marketable products because of our proximity to the coast and the low
logistics cost of bringing them to market."
The partnership with a government ministry does a lot to take the risk out
of the project, as it ensures full cooperation with permitting, access to
the port and highway authorities and the many other official agencies that
are involved. That is a factor in getting Colluli products to world markets
with as little delay as possible. A pre-feasibility study (PFS) was
initiated in May 2014 for the production of potassium sulphate from the
various potassium bearing salts in the resource, and this is expected to be
completed in early 2015, with the final definitive feasibility study (DFS)
completed in the second half of 2015. Environmental studies supporting the
project are well advanced. Eight baseline assessments were submitted to the
Eritrean Ministry of Energy and Mines in August of this year as part of a
three stage submission process to ensure sufficient time is allowed to
address any concerns - though none are anticipated. "As soon as the PFS is
finished we will start the process of obtaining funding and getting our
mining licence established so we can get into production as fast as
possible," concludes Paul Donaldson. "As far as we are concerned, keeping up
momentum on the upfront work is critical and as soon as the definitive study
is finished we will commence the design engineering of the processing plant
- probably towards the third quarter of 2015 - so that when we secure
funding we can go into construction as fast as possible."
Received on Thu Nov 06 2014 - 09:03:08 EST