Seeking Alpha

Proactive Investor's  Instablog

Proactive Investor
Send Message
Proactiveinvestors is a leading multimedia news organization, investor portal and events management business with offices in New York, Sydney, Toronto and London. Proactiveinvestors operates five financial websites in four languages providing breaking news, comment and analysis on hundreds of... More
My company:
My blog:
  • South Boulder Mines Releases Updated Study On Colluli Potash Project 0 comments
    Mar 21, 2013 2:15 AM

    South Boulder Mines (ASX: STB) has provided an update of the economic model for its Colluli Potash Project in Eritrea.

    The company has generated a staged development scenario based on the key elements of the two previous Engineering Scoping Studies (ESS-1 and ESS-2) and the in progress Definitive Feasibility Study (NYSE:DFS).

    The staged development scenario assumes an operation commencing at 1 million tonnes per annum of Sylvinite processing only, expanding to 2 million tonnes per annum of Sylvinite and Carnallite processing after two years.

    The key metrics of the staged development scenario include a net present value (NYSE:NPV) range of US$601 million to US$1.3 billion (based on post-tax, real discount rates of 7-10%) and an internal rate of return (NYSE:IRR) of 15.1%.

    South Boulder estimates that Colluli's capital intensity is in the first quartile of emerging greenfield potash projects globally.

    The base case assumes a US$450 per tonne flat real potash price, however an increase in the price to US$475 per tonne would increase the NPV to US$773 million and IRR to 16.5%.

    Total CAPEX of US$1.29 billion, which is lower than the earlier estimation of US$1.5 billion and excludes working capital, will be externally funded.

    Life of mine average steady state cash operating costs have been estimated at US$184 per tonne.

    Staged development model

    The staged development model draws on ESS-1 and ESS-2 and the conclusions of the DFS process to date.

    It envisages:

    - Construction in years one and two of a 1 million tonne per annum operation processing Sylvinite ore only, with the start of production in year three and ramp up to full production of 1 million tonnes per annum in year four; and

    - Construction in year four and five of 1 million tonne per annum expansion operation processing Carnallite ore, with commencement of expansion project production in year six and ramp up to full production of 2 million tonnes per annum in year seven.

    Mining will be by conventional open pit methods.

    Processing facilities will be built at Colluli, and South Boulder will build, own and operate its own infrastructure, including the construction of a road to link the minesite to a new port with export facilities to be built at Anfile Bay.

    ENAMCO discussions

    South Boulder remains in discussions with the Eritrean National Mining Company (ENAMCO) regarding ENAMCO's equity interest in the Colluli Potash Project.

    Current negotiations envisage a 50% interest share for each of ENAMCO and South Boulder with all capital costs to be funded by South Boulder.

    Definitive Feasibility Study

    The DFS began in April 2012 and is around 50% complete.

    As a consequence of the work completed on the DFS in the current financial year, South Boulder has already met the expenditure requirements attaching to its exploration licence for the 12 months ending July.

    Key items in the work program such as social and environmental monitoring, geological block modelling and the finalisation of hydrogeological modelling are continuing along with resource optimisation, market and product analysis work.

    South Boulder is also in discussions with, and considering approaches from, strategic investors regarding the potential for third party investment in the project.

    The company has around $18.5 million in cash at the end of December 2012.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

Back To Proactive Investor's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.