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South Boulder up on Colluli study

South Boulder Mines' Colluli potash project in Eritrea.

Shares in South Boulder Mines jumped after a pre-feasibility study showed its Colluli potash project in Eritrea could become one of the world's lowest cost potassium sulphate operations in the world.

The pre-feasibility study put a price tag of $US442 million on development of Colluli based on a two-module development over a 30-year minelife.

The phase one development capital included a project owned and built road and a 900 kiloton per annum product export terminal on the coast 75 km from the mine.

However the South Boulder said the project's 1.3 billion tonne resource could sustain a 100-year life.

It said the shallow nature of the deposit meant it could operate as an open pit using truck and shovel and no blasting.

The study envisages production of 425 kilotons of potassium sulphate a year, increasing to 850 kilotons a year from year five.

Total cash costs were estimated at $US189 a tonne of potassium sulphate and assumed average price of $US588 a tonne. The company noted that potassium sulphate was a speciality potassium fertiliser with a price premium over the more common potassium chloride.

The study predicted average undiscounted after tax cashflow of $US186 million a year over the initial 30-year mine life and undiscounted after tax cumulative cashflow of $US5.1 billion over the 30 years.

It noted the project would be highly leveraged to rising fertiliser prices and there was substantial scope to improve the project's economics.

South Boulder expects to complete its formal definitive feasibility study in the third quarter of calendar 2015 with first production planned for 2018.

Managing director Paul Donaldson said the company had already commenced optimisation testwork for the process plant and would further advance conversations with strategic partners to help with development of the project.

South Boulder is in a 50/50 joint venture with the Eritrean Government over the project.

Shares in South Boulder were up 1.5 cents, or 5.66 per cent, to 28 cents at 8.55am after emerging from a trading halt and touching an earlier high of 32 cents.