By Angela Kean,
South Boulder Mines (ASX: STB) will accelerate the completion of the Definitive Feasibility Study (DFS) on the Colluli Open Cut Potash Project in Eritrea with a planned capital raising of A$10.1 million.
The company will exit a trading halt this morning after announcing the non-renounceable entitlement offer of up to 9.2 million shares at $1.10 per share on the basis of one new share for every 10 held.
The company is also offering one attaching unlisted option for every two new shares subscribed for, exercisable at $1.60 each and expiring 12 months after the date of issue.
The record date for the offer is 22 December 2011. The offer opens on 23 December 2011 and closes on 17 January 2012.
A recent Scoping Study on the Colluli Open Cut Potash Project returned highly favourable economics for South Boulder.
Based on around 16% of the JORC Resource of 564.4 million tonnes at 18.6% KCI, for total contained potash of 104.9 million tonnes – a net present value of US$1.33 billion (12% discount rate) was returned, with an internal rate of return of 40.6%.
Capital expenditure including contingency came in at US$0.74 billion, delivering project revenue of over US$6 billion. The production rate is based on 1 million tonnes annually from an open pit, for a study mine life of 17 years.
With only a portion of the resource used in the model, South Boulder said that it considers the mine life upside of the project to be immense and likely to be in excess of 50 years once details of Sulphate of Potash (SOP) and K-Mg sulphate production is included.
Importantly for the resource at Colluli, some of the resource sits in the higher confidence categories, with Measured 133.7 million tonnes at 17.55% KCl, Indicated 343.3 million tonnes at 17.38% KCl, and Inferred 87.3 million tonnes at 24.96% KCl.
Importantly for South Boulder, demand for potash is expected to rise due to increased population and standard of living and worldwide decreased arable land. The biggest growth markets are India, China and Brazil.
The potash market is currently around 50 million tonnes per annum and growing.
The Colluli project is strategically located close to major infrastructure and 70 kilometres from the coast, and is the closest supplier to India and nearby to Asia.
South Boulder is targeting first production in 2016 or sooner.
Funds from the capital raising will add significantly to South Boulder’s cash reserves of around $14 million.