South Boulder Mines (ASX: STB) is rapidly advancing towards the completion of a Definitive Feasibility Study at its Colluli Potash Project in Eritrea with the start of a new program of metallurgical drilling.
Importantly, this comprehensive drilling program allows the company to further de-risk the project.
A high degree of confidence can be established in Colluli as a result of its shallow nature, which presents favourable economics.
Lorry Hughes, managing director, said:
"Due to the extremely shallow nature of the Colluli deposit, we are able to establish an exceptionally high degree of confidence in the resource through relatively cost effective drilling.
"All other potash developments are significantly deeper than Colluli and therefore cost prohibitive to complete this type of work."
This next round of drilling involves up to 34 shallow, large-diameter PQ-diamond holes from areas adjacent to and within the existing Resource.
This will provide sufficient potash samples to complete the processing testwork component of the Definitive Feasibility Study.
Further upside to the new drilling program is it will allow South Boulder to upgrade all of the resource, which will underpin the first 10 years of mining, to the higher confidence Measured and Indicated categories.
Metallurgical drilling will also give the company a better understanding of the geometry of the high grade sylvinite zones to allow optimisation of the Stage 1 mine plan, as well as confirm the potential for additional resources.
The Feasibility Study is due for completion next year, placing South Boulder on track for production at Colluli no later than 2016.
Colluli - Tier 1 asset
South Boulder recently expanded the resource at Colluli by 85% to 1.08 billion tonnes at 18% KCl for 194 million tonnes of potash.
Highlighting the shallow nature of the project, mineralisation starts from just 16 metres below the surface.
The upgrade further confirms Colluli as a Tier 1 asset, and will allow the extension of the 17 year mine life indicated in the Scoping Study.
An engineering Scoping Study completed in November 2011 demonstrated a pre-tax net present value of US$1.33 billion with start-up capital costs of US$0.74 billion.
This study was based on Stage 1 production of 1 million tonnes of KCl annually from the potash mineral cylvite, a zone which represents only a small part of the overall deposit. The study investigated a 17-year open pit operation and forecast an internal rate of return of 40.6%.
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