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South Boulder strikes deal over Colluli
The West Australian May 14, 2013, 8:50 am
Shares in South Boulder Mines jumped after the company said it had reached agreement with the Eritrean government on the terms of a 50/50 joint venture over its Colluli potash project in the African nation.
South Boulder described the agreement as a major milestone in the development of the project, saying it provided certainty as to the economic and fiscal basis under which the project could be developed.
"This certainty is expected to assist ongoing discussions with potential strategic investors," the company said in a statement.
The company will fully fund the project's development, at an expected debt/equity ratio of 70/30.
However a clawback clause means it will be able to recoup 50 per cent of the project's costs through free cashflow once the mine is in production.
South Boulder chief executive Paul Donaldson said the signing of a binding term sheet with ENAMCO (Eritrean National Mining Corporation) established clear terms for a partnership with the Eritrean Government and clearly aligned South Boulder's and ENAMCO's interests in moving project forward.
He said the deal would provide certainty for potential financiers and strategic investors.
South Boulder shares fell more than a third in November last year when the company revealed it would be forced into a 50/50 profit share arrangement with the Eritrean government over Colluli and that it would have to fund the entire project's costs of development.
ENAMCO previously had a 30 per cent paid participating interest in the Colluli project, in addition to a free-carried 10 per cent interest.
Colluli hosts a measured, indicated and inferred mineral resource estimate of 1079.00 million tonnes at 17.97 per cent potassium chloride or 11.35 per cent potassium oxide.
South Boulder shares were up four cents, or 14.29 per cent, to 32 cents at 8.50am.