October 22, 2012

Colluli Potash: Sequel Success in Eritrea’s Mining Sector

Colluli Potash: Sequel Success in Eritrea’s Mining Sector

by Kesete Ghebrehiwet | Eritrea’s geology has proven to be quite attractive for investors in the mining sector. What has been achieved in the mining of gold and base metals would soon be followed by potash. This will apparently push the development of Eritrea’s mining sector forward.

Shabait has, during the Asmara Mining Conference held last week in Asmara Palace, conducted an interview with Mr. Zeray Leake, Chief Geologist and Country Manager of South Boulder Mines LTD, as regards the ongoing developments in Colluli Potash deposit, and the excerpt follows:

What are the developments at Colluli potash deposit since that of last year’s Geo Congress?

After the last year’s geo-congress, we recalculated the resource twice. Based on the resources of October 2011, we completed the engineering scoping study one which targets production of sylvinites with annual production capacity of one million tones per year. When we see the engineering scoping study, the resource in Colluli is quite amazing. After all, the initial investment is also quite low; it is about 740 million US dollars and this is very cheap compared with other industries. For instance, to produce one million tone of potash per year, you need to invest may be one billion US dollars. So, when compared with other deposits, the investment in Colluli is it quit cheap. On the top of this, we properly defined deposit of area “B” and we also extended the resources there. Accordingly, we recalculated the resources just in last April and now Colluli stands at 1.08 billion tones with 18% of kcl, which means we have a total content of 194 million tones of potash.

What could be expected in 2013 and afterwards?

Based on the first engineering scoping study, it is very encouraging to proceed with the project. So, we have initiated the definite feasibility study (DFS) and we are expecting to finish this study in July 2013. As the scoping engineering study was very comprehensive, we didn’t do any pre feasibility study; we were quite confident to jump to the DFS which involves a number of engineering works, designing and processing activities. We are working on the infrastructure, all the processing, mining, resources and social and environmental impact assessment. Besides, we are working with the jetty, or the port which we call it product export terminal (PET) that will be located on the Anphile bay. We are just doing a number of things which are going simultaneously and that way we are intending to speed up production period.

Is the construction underway?

We will just finish the DFS. In the mean time, we are negotiating with the Eritrean National Mining Corporation (ENMCO). Sealing the deal with the ENMCO will speed up the mining license permitting. So, we will put an application for mining license and 2014 and 2015 will be construction period and 2016 will be the first production.

Will the South Boulder start mining with area “A” or are you planning to do it simultaneously with area “B”?

The strategy is to start with area “A”. We will start with the sylvinite; when we see the stratigraphy of the deposit, sylvinite is the top most layer. Therefore, we will start production from sylvinite with initial capacity of one million tones per year. After five years, we may just look to expand it into 2 million or 3 million tones per year; in that case we may start to mine the carnallite. However, the first strategy is to completely finish with Area “A” and to expand it to area “B”.

Which market areas are you looking for?

Our target is Asia. Especially, due to the population, the overall developments and change of diet as well as closeness to Eritrea’s coastal area countries like India, Malaysia, Indonesia and China  would be our market targets. There is, of course, a lot of interest from Chinese and Indian companies, there are also investors form the Middles East such as from Qatar and Oman. So, our target will definitely be  Asia. The aforementioned advantage  is a good reason to target Asia.

Does the South Boulder encounter any sort of technical challenge; if so how have you been overcoming it?

Well, we don’t have a major problem to date. All the challenges we have been having are the normal exploration and geological matters. Otherwise, we have been having a very good support form the Eritrean Government; the local communities, all government offices and ministries in Asmara and Massawa have been very supportive and that’s why we are at this stage.

Let’s talk about the social and environmental impact of the project?

When we see the social and environmental impact of the project, the project site is in the Danakil Depression, 100 meters below sea level, where there is no potable water, every thing is quite brackish — no wild life and no vegetation and the closest community is more than 35 km form the area and this makes the project quite interesting. Besides, since we will not generate any acid like the gold and base metal mines, there will be no significant impact on the environment. We are designing every thing in very environmental sound way. We have involved engineers, who have good experience in designing such kind of projects and environmental consulting firms, who have good experience with Eritrea and potash. Any mining activity can have some adverse impact on the environment, but what matters is the design and involvement of communities. We are seriously working in addressing this issue through different base lines on vegetation, wild life, and livelihood including land forms. What is more is that, we have considered archeological items and heritages, marine life and any thing associated with the ecosystem. We will be working hand in hand with the local government and the communities who are a bit far from our mining site. Since it is going to be a big project, we are intending to involve all the coastal communities, for it will not be simple to mobilize work force from Asmara or some where else. So, we are planning to organize some sort of trainings and thus communities around the area could cope with the technology and can be part of the project.

What could we expect from the annual production of potash?

When we say an annual production of one million tones of potash, that is, taking the current potash price, it would be half billion US dollars and if the production is expanded into 2 million tones of potash the annual revenue would definitely be one billion US dollar. With such a development, I can see its impact in improving the overall livelihood of Eritreans.

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