Eritrea and its Billion Tonnes of Premium Potash

Over 60% of the Colluli deposit is in the form of Kainite which is rarely found in rock form
Over 60% of the Colluli deposit is in the form of Kainite which is rarely found in rock form. The potash product expected to be produced is called potassium sulphate, a premium type of potash that is high in demand with a current price more than double to the type of potash Allana Resources planned to produce in neighboring Ethiopia.

By Lawrence Williams,

AT an investment conference like this week’s Mines & Money in London one can be besieged by junior miners/explorers all with good stories to tell. The fallout in the junior sector has already tended to do the sorting of the wheat from the chaff. But even so some will have seemingly better stories to tell than others – the problem for the dispassionate observer tends to be to rate those which might appear to stand out.

As is the nature of things these days there does tend to be a concentration on gold explorers/developers as gold has an aura which transcends reality. As my former colleague Chris Hinde at SNL is always keen to point out, in terms of global value of production coal, iron ore and copper all rank far higher than gold. But what of other metals and minerals? There are those who favour nickel, zinc, uranium etc. as the next big thing in terms of price potential, but the history of mining suggests that perhaps the real profits in the industry are made in bulk materials where high volumes trump high values – so what of potash?

Go back a couple of years and it was potash which was rated to be the next big thing. The world needs food and growing it requires fertilisers where potash is king. But the projected growth has not really materialised and prices for potash – or at least for sylvinite (potassium chloride KCl plus sodium chloride NaCl), the principal mined potash product from major producers Canada and Russia – have been somewhat in the doldrums.

So how about a potash mine with good reserves, perhaps a billion tonnes, near the coast but in something of a pariah state as far as the United Nations is concerned? Doesn’t necessarily seem to tick the boxes because of potash price performance and jurisdiction. But… The pariah state is Eritrea which at least has a stable government and, for Africa, very low corruption levels.

– – – – – – –
ALSO READ : Eritrea and Ethiopia: New Emerging Potash Producers
– – – – – – –

The potash product, which can be produced, is the much in demand potassium sulphate (K2SO4) where, according to ASX quoted South Boulder Mines Managing Director, Paul Donaldson, the current price is not only more than double that of potassium chloride products, but is rising due to shortage of supply and little other new production in sight. Over 60% of the deposit is in the form of Kainite (KCl, MgSO4) which is rarely found in rock form, mostly produced from brine evaporation elsewhere and the ideal principal feedstock for conversion to potassium sulphate fertiliser. The balance is sylvinite 16%, polysulphate (K2SO4, NaCl, MgSO4) and carnallite (KCl, MgCl2).

“Obviously it would make commercial sense to transport the material from Ethiopia across the border to Eritrea. It would be ideal if this could overcome any political tensions between the two countries, but should that be difficult, then Djibouti would be the alternative export route, with the potash trucked there.” - Farhad Abasov, President and CEO of Allana Resources
“Obviously it would make commercial sense to transport the material from Ethiopia across the border to Eritrea. It would be ideal if this could overcome any political tensions between the two countries, but should that be difficult, then Djibouti would be the alternative export route, with the potash trucked there.” – Farhad Abasov, President and CEO of Allana Resources

South Boulder owns 50% of the Colluli potash project in Eritrea with the state mining corporation, ENAMCO, owning the other half. Donaldson told Mineweb that this could be a 200-year mine life project with a resource of over 1 billion tonnes of potash salts. What’s more it is only 75km from the coast and 180 km from Eritrea’s existing principal port of Massawa.

However one of the options being studied is for Colluli’s product to be barged in containers to carriers waiting offshore from a much nearer shipping point to the mine which would substantially cut transportation costs. The port location is also ideal for transportation of final product to key markets such as India, the Middle East, Egypt and beyond.

The other big thing Colluli has in its favour is that the resource lies at a depth of between around 20m and 140m so is easily extractable via an open pit compared with much of the word’s potash resources which have to be mined at depth requiring substantial capital just to get down to the potash horizons. At Colluli the cost of building a mine will thus be a fraction of that for a deep underground mining operation.

“The Colluli resource is the shallowest known potash deposit in the world: mineralisation starts at 16 metres and it runs down to about 140 metres so it is perfect for open cut mining which is much cheaper than developing an underground mine. Open cut mining also gives very high resource recovery relative to underground and solution mining methods used for potash mining.”

Processing is believed to be straightforward and given that it is not water quality reliant it should able to use sea water in the plant. The mix of potash salts in the ore body is said to be absolutely ideal for the production of the premium potassium sulphate product.

A preliminary feasibility study is under way, due for completion early 2015, looking at around a 1 million tonne/year output and, assuming this looks positive a definitive feasibility study would be started to be completed in the second half of next year. The company is well enough financed to take it up to the DFS stage but would probably need to raise funds to accommodate that.