JOHANNESBURG (miningweekly.com) – The prefeasibility study (PFS) of ASX-listed South Boulder Mines’ (SBM’s) Colluli project, in Eritrea, was an exercise of scale through which the company would determine the correct balance between risk mitigation, fundability and the economic return of the project, South Boulder CEO and MD Paul Donaldson told Mining Weekly Online on Wednesday.

He said the PFS for the production of potassium sulphate at the project was well advanced, adding that this study was expected to be completed by February, after which a definitive feasibility study (DFS) would be undertaken. 

“We are actually running all of our resource drilling in parallel currently so that the difference between the PFS and the DFS is only about five or six months [and, therefore,] we expect the DFS to be completed mid-2015,” he pointed out.

After completing the DFS, South Boulder would apply for a mining licence, as well as engage funders to finance the $400-million project construction.

Donaldson said South Boulder was planning to secure funding within 12 months of completing the DFS, which meant that construction could start by mid-2016, and production by mid-2018.

He added that the Colluli project had significant upside potential as potassium sulphate had a significant price premium over the more well-known potassium chloride.

Further, the resource also had the added potential to produce potassium magnesium sulphate, potassium chloride and magnesium sulphate, which were all key agricultural commodities used in the fertiliser business.

“There is no resource globally that has the capability to have such a diverse range of potassium and magnesium fertilisers, so we see significant upside in the resource going forward, as it has the potential to go past the potassium sulphate markets and diversify the cash flows of the project,” he said.

However, Donaldson explained that South Boulder would, initially, focus only on the production of potassium sulphate at Colluli.

“It is all about simplicity and picking the right development path to take the project forward, and the right development path is potassium sulphate. It has the highest product margin, it consumes all of the salts within the resource and, what that effectively means, is that we get low strip ratios, low operating costs and a high price.

“Once you have established your infrastructure with that particular development, then you can start to diversify, put more infrastructure in and take advantage of removing more of the products,” he explained.

Donaldson added that South Boulder would be focusing on markets in the Middle East, India and South Africa for its products as these regions were the most geographically favourable; however, he noted that, as the project was located in East Africa, Colluli would also have access to the broader Asia, China, Indonesia and the Philippines markets.