Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

South Boulder Mines Continues Potash Drilling At Colluli

South Boulder Mines (ASX:STB) is progressing drilling at its Colluli Potash Project in Eritrea that will provide key data for both the Pre-Feasibility and Definitive Feasibility study work.

Colluli is one of only three major deposits containing kainite salt (key salt for SOP production) in solid form globally.

SOP contains both potassium and sulphur, and is used principally for specialty crops such as fruits, vegetables, nuts and beans.

Of the new drilling, six of the 12 mine planning holes have been drilled to date along with the first of four resource 'twinning' holes.

South Boulder and the Eritrean National Mining Company (ENAMCO) are equal shareholders of the Colluli Mining Share Company (CMSC) which will develop the Colluli Potash project.

The company has also earlier in September extended the Pre-Feasibility Study (NYSE:PFS) to include recent developments that have favourable implications on capital and operating costs.

Samples from the 'twinned' hole have been dispatched to K-Utec‟s certified laboratory for chemical analysis while representatives from AMC Consultants have visited site for both resource and geotechnical drilling inspections.

In addition, site inspections have been completed to confirm the location of the recovery ponds for the processing plant; the designated road route between Colluli and Anfile Bay has been field mapped and inspected; and samples taken along the route to determine suitability of material as road aggregate.

"We are pleased with the progress of the drilling program and the amount of field work that we have been able to complete during this campaign," managing director Paul Donaldson said.

"The samples currently being taken will provide key data for both the pre-feasibility and definitive feasibility study work.

"In addition to the drilling work, we also expect some metallurgical testwork to be completed within the next week that will allow the project team to firm up the internal configuration of the processing plant.

"Following our announcement to defer the pre-feasibility study to further explore potential capital and operating cost benefits arising from some of the preliminary metallurgical testwork, we are close to confirming the appropriate plant configuration for the costing of the processing facility for the Colluli Project."

Colluli Potash Project

The Colluli resource is a unique combination of potassium bearing salts suitable for the production of potassium fertilisers with a total resource of 1,080Mt at 18.0% KCl or 11.35% K2O.

This is comprised of 261.81Mt at 17.94% KCl or 11.33% K2O of Measured Resources, 674.48Mt at 17.98% KCl or 11.36% K2O of Indicated Resources and 143.50Mt at 18.00% KCl or 11.37% K2O of Inferred Resources.

Scoping studies completed in February 2014 demonstrated mining cost reductions of over A$50 per tonne of product relative to the staged development model by using all potassium bearing salts in the resource.

Colluli is located in the Danakil Depression region of Eritrea about 65 kilometres from the coast.

It is the world's shallowest potash deposit - starting at 16 metres, facilitating the low capex open pit mining and favourably positioned to supply the world's fastest growing markets.

The project team has been running PFS and DFS workstreams in parallel, and is well placed to complete many of the other workstreams while the processing plant configuration is refined.

South Boulder's decision to extend the PFS means its delivery is now expected in February 2015, however this will not impact delivery of the Definitive Feasibility Study in mid-2015.

It has also completed preliminary design for the production of potassium sulphate (sulphate of potash) from the Colluli Resource.

There is also a substantial price premium in producing potassium sulphate over potassium chloride, and is the best and most value accretive development option for the resource.

Analysis

South Boulder's drilling program is progressing well and will provide a pipeline of potential share price kickers as results are reported.

Other potential share price kickers include:

- Results from metallurgical testwork to firm up the internal configuration of the processing plant; and
- The PFS in February 2015.

The company is well-funded with $9 million in cash at the end of June 2014, and also recently attracted a $1.8 million investment from the Hong Kong based Kam Lung Investment Development Company (KLID).

KLID will look to secure an offtake deal for potassium sulphate on commercial terms acceptable to the CMSC board.

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.