South Boulder Mines' study shows production expansion potential at Eritrea
potash project
. 27/11/12 12:33 am
<
http://www.proactiveinvestors.com.au/companies/overview/1142/South+Boulder+
Mines> South Boulder Mines (
<
http://www.proactiveinvestors.com.au/companies/sponsors_landing/1142/south-
boulder-mines-1142.html> ASX: STB) has completed an Engineering Scoping
Study (ESS-2) for its Colluli Potash Project in Eritrea, demonstrating the
potential to mine and process the underlying carnallite mineralisation.
Importantly, this could mean an expansion above the initial targeted
production level of 1 million tonnes per annum outlined in the Definitive
Feasibility Study (DFS) under the right economic conditions.
Key points from the new study include a longer mine life of 26 years versus
17 years for the mining of sylvinite only, higher recoveries of 90% versus
80% and lower average life of mine C1 operating costs of US$187 per tonne
versus US$263 per tonne.
Lorry Hughes, managing director, told Proactive Investors today with the
second study South Boulder had proved that the operating cost is reduced
substantially.
The previous Engineering Scoping Study (ESS-1), released in November 2011,
focused on the sylvinite mineralisation only, which forms the basis of the
current DFS scheduled for completion in 2013.
The results of the new study have provided South Boulder with significant
encouragement to conduct further assessment into the economic viability of
open pit mining and processing of the carnallite mineralisation to produce
muriate of potash.
Hughes said the results of ESS-2 clearly demonstrate the potential of the
Colluli Project to expand above the initial targeted production level of
1Mtpa outlined in the DFS.
"The study shows that there are suitable technologies to extract potash from
carnallite mineralisation and the project could expand under the right
economic conditions.
"However, given the significant additional capital requirements of
introducing carnallite processing and current market conditions, the company
has decided to pursue a staged approach to development where carnallite
expansion options are only reviewed in more detail following completion of
the current DFS."
Hughes said South Boulder is still focused on a 1 million tonne production
start-up to achieve the lowest capital start-up.
"The approach we've taken is the staged approach, where we want to get
established as a producer in the quickest, cheapest, easiest process route,
and also for marketing the product in the fertiliser business.
"The product we're planning to make is standard MOP potash out of sylvinite.
95% of all the potash that is traded in the world is MOP potash from
sylvinite so we know we've got a good market, and it's also the easiest and
cheapest process."
The scope of the current DFS will remain focused on mining and processing
only the sylvinite at a production rate of 1Mtpa of muriate of potash, as
this will have lower capital intensity and a greater prospect of attracting
finance.
The previous Engineering Scoping Study estimated pre-production capital of
US$740 million, including a 15% contingency, to mine and process sylvinite
compared to US$1.52 billion estimated for the mining and processing of
sylvinite and carnallite.
Hughes said: "Key findings from ESS-2 will be used and applied to the DFS to
design stockpiling of waste and tailings from sylvinite mining and
processing operations so as to retain maximum optionality to pursue future
expansion opportunities."
Further work on these options is planned after completion of the DFS.
"I am comfortable that South Boulder is taking a prudent approach by
focusing on the 1Mtpa project configurations in the DFS," Hughes said.
"This allows a more achievable development size and more aggressive project
timelines. ESS-2 has shown the scalability of the Colluli Potash Project
and, in addition to the current DFS, South Boulder is focused on defining
the scale of the Stage 1 development to find the optimum mix of capital
expenditure versus commercial potash production.
"The Colluli Project is one that could evolve over many decades to include
potential production from different potash minerals.
"However, at this stage South Boulder is firmly focused through its DFS on
the definition of an economically viable mine over the short to medium term
which is capable of being financed on competitive terms."
Positive technical aspects
ESS-2 has identified a number of areas that demonstrate positive technical
aspects that could allow economic mining and processing of carnallite to
produce muriate of potash as part of a potential future expansion of the
Colluli Project.
These include:
- Carnallite can be processed utilising solar decomposition and standard
froth flotation to produce standard muriate of potash;
- KCl recovery rates of up to 90% may be achieved;
- If both carnallite and sylvinite are mined and processed together, the
waste-to-ore strip ratio can be significantly reduced;
- Access to carnallite could allow a significant increase in muriate of
potash production above the planned 1Mtpa; and
- Port and transport infrastructure can be expanded to allow increased
capacity.
Kainitite
At Colluli, there is also substantial Kainitite mineralisation of 597
million tonnes at 19.8% KCl.
The Kainitite resource is subject to an ongoing study to determine the most
effective method of processing and marketing to produce either a K-Mg-SO4
fertilizer or potassium sulphate.
Production of potassium sulphate from Kainitite remains a longer term
prospect, requiring a technical solution to enable processing of the ore
into a saleable product.
Colluli
South Boulder is working towards developing the world's first, modern, open
pit potash mine, with initial production scheduled for 2016 or sooner.
The Colluli Potash Project hosts a total JORC resource of 1.08 billion
tonnes at 17.97% KCl or 11.35% K2O for total contained potash of 194 million
tonnes KCl or 123 million tonnes K2O.
This includes higher grade sylvinite of 114.6 million tonnes at 28.56% KCl
or 18.04% K2O.
The current resource is included in an exploration target of 1.25 to 1.75
billion tonnes at 18% to 20% KCl.
ENAMCO update
South Boulder is continuing negotiations with the Eritrean National Mining
Company (ENAMCO) regarding the company's participation interest in the
Colluli Potash Project.
In March 2012, South Boulder provided ENAMCO with a proposal for ENAMCO to
acquire a 30% paid participating interest in the Colluli Potash Project (in
addition to ENAMCO's right to a free-carried 10% interest).
During the course of the negotiations and the ongoing development of the
Colluli Potash Project, it became apparent to both the Eritrean Ministry of
Energy and Mines (MOEM) and South Boulder that Colluli is a strategic and
significant asset.
As a consequence, South Boulder has agreed to submit an alternative proposal
for ENAMCO to participate in the project by way of a 50/50 profit share,
where South Boulder would pay 100% of the development costs.
The company said ENAMCO has made it clear that it fully supports the
development of the Colluli Potash Project by South Boulder and is keen to
conclude negotiations to enable licensing and development to proceed in a
timely and expeditious manner.
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Findings from a second Engineering Scoping Study indicate South Boulder
Mines could expand its Colluli Potash Project above the planned 1Mtpa
production level by mining and processing carnallite mineralisation.
Although it was found that suitable technologies could extract potash from
Carnallite mineralisation, South Boulder will retain its focus on its
sylvinite project with lower capital needs. Negotiations with the Eritrean
National Mining Company are continuing.Findings from a second Engineering
Scoping Study indicate South Boulder Mines could expand its Colluli Potash
Project above the planned 1Mtpa production level by mining and processing
carnallite mineralisation. Although it was found that suitable technologies
could extract potash from Carnallite mineralisation, South Boulder will
retain its focus on its sylvinite project with lower capital needs.
Negotiations with the Eritrean National Mining Company are continuing.
Received on Tue Nov 27 2012 - 17:33:32 EST
