Brightening future for African potash play

REINVIGORATED by fresh funding, prefeasibility results, a maiden ore reserve and a new moniker, this potash developer is shaping up a project of exceptionally sound economics. By Justin Niessner – RESOURCESTOCKS*
Brightening future for African potash play Brightening future for African potash play Brightening future for African potash play Brightening future for African potash play Brightening future for African potash play

On the ground at Colluli

MiningNews.Net

South Boulder Mines has reaffirmed its faith in the jurisdictional strengths of its Colluli project in Eritrea by rebranding the company Danakali after the emerging east African potash province which hosts the proposed operation.

The name change signals a sharpening of focus on the strategy to leverage Colluli’s outstanding geology against an advantageous geographic proximity to growing potash consumers.

“This is the closest potassium sulphate deposit to a coastline anywhere in the world, and certainly Eritrea is in a great location to service future markets,” Danakali managing director Paul Donaldson told RESOURCESTOCKS.

“If you look at the consumption of fertilisers in the future, it’s all about population growth, and the key population growth areas are India, southeast Asia and Africa. We are central to those locations.”

This confidence in the marketability of Colluli is becoming contagious.

In recent months, Danakali has raised about $A3.3 million from a diversified investor base after impressive prefeasibility results confirmed the project was on target to occupy the bottom quartile of potassium sulphate projects in terms of operating costs. The study also projected Colluli as having the lowest capital intensity of any advanced potassium sulphate project anywhere in the world.

As one of only two potassium sulphate plays in the world with a buy-in price of less than $450 million, Danakali also appears to be one of the most attractive takeover targets in a potash sector poised for growth on the back of seemingly unstoppable population trends.

With a maiden reserve counting 1.1 billion tonnes at 18.5% potassium sulphate equivalent, Colluli is shaping up potential as nothing less than one of the world’s most important potassium sulphate operations.

“Colluli is positively unique because there are a number of things within the project that just can’t be replicated by other projects – and they’re all good things,” Donaldson said.

“The potash resource is very robust, but then you’ve got this huge upside too, with massive volumes of rock salt, magnesium chloride and gypsum. All these things have well established global markets that can be penetrated as well. We have the ability to diversify potash types, so we can make potassium chloride in the long term as well as potassium magnesium sulphate and potassium sulphate.

“We’ll never be constrained by the potassium sulphate market because we can grow into other markets.”

Before Colluli ramps up into a diversified producer supplying various niche potash markets, it will focus on its standout resource class in potassium sulphate. This high-purity fertiliser ingredient, also known as “sulphate of potash” or SOP, represents the top of the potash product quality spectrum and is of strategic importance to chloride-intolerant crops and areas that experience low levels of rainfall.
More than 60% of world supplies of this strain of potash come from secondary sources that require an expensive thermal refining process. Primary sources of ready-to-go SOP, however, are economically extractable in only a handful of locations worldwide.

Advantages in the chemistry at the Colluli site include an uncommon endowment of the critical mineral salt kainite, which in turn allows for a more streamlined SOP production process.

“Kainite exists in solid form and in big veins in only three regions of the world, and at two of these three, mining has basically stopped for a variety of reasons. The Danakil Depression, where we are, is almost the last unexploited kainite-rich deposit with the salt in solid form,” Donaldson explained.

“Because the salts are in solid form, we are bypassing all the upfront capital for solar ponds and evaporation that people normally have to go through. That actually gives us a revenue timing advantage. We mine it and run it straight through the processing plant, and you basically get revenue from day one.”

This flowsheet provides for a smaller surface footprint, reduced infrastructure, faster ramp-up and less water consumption in an arid country. Mining will benefit from a large resource that offers a substantial conversion to reserves thanks to its shallow open-cut nature (mineralisation starts at 16m depth).

Conventional truck and shovel techniques along with continuous miners will develop two pits. Production is targeted to begin only 180km from Eritrea’s key port of Massawa in the third quarter of 2018.

Initial modelling has forecast an output rate of 425,000t of SOP per annum in the first five years before production doubles and the project achieves a value of $US846 million. This plan will allow Colluli to recover all of its 260Mt of SOP as it accelerates over time. By comparison, Reward Minerals’ LD project in Western Australia is planned to maintain a 400,000tpa production rate, exploiting only a fraction of a 24.4Mt SOP resource over 13 years.

Danakali is expecting to complete a definitive feasibility study in the third quarter of 2015.

“When you talk about potassium sulphate and look at all the greenfield projects that are out there at the moment, the Colluli resource has got the most contained potassium sulphate of all of those projects,” Donaldson said.

“We’ve got proximity to the coast, proximity to the key markets of the future, shallow mineralisation and a combination of salts ideal for the production of potassium sulphate, which is geologically scarce. It also allows product diversity that no other potash deposit in the world can offer.

“They’re all things that make the resource positively unique.”

*A version of this report, first published in the July-August 2015 edition of RESOURCESTOCKS magazine, was commissioned by Danakali.

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