South Boulder Mines signs milestone JV for Colluli Potash Project
South Boulder Mines (ASX: STB) has reached a major milestone in the development of its Colluli Potash Project in Eritrea with the signing of a binding term sheet agreement with the Eritrean National Mining Corporation (ENAMCO).
The signing of a binding term sheet agreement with the Eritrean National Mining Corporation provides South Boulder Mines with certainty as to the economic and fiscal basis under which the Colluli Potash Project can be developed, which will assist its talks with potential investors.
Importantly, the agreement provides
significant certainty as to the economic and fiscal basis under which the
project can be developed, assisting the company in its ongoing discussions with
potential strategic investors.
“The signing of a binding term sheet with ENAMCO is a significant milestone for
STB,” South Boulder chief executive officer Paul Donaldson said.
“The agreement establishes clear terms for a partnership with the Eritrean
Government through ENAMCO, clearly aligns STB and ENAMCO’s interests in moving
project forward with project development and provides certainty which will
facilitate interaction with potential financiers and strategic investors.”
Separately, the company has confirmed the Kainite resource at Colluli may be
mined and shipped in its own right, which has the potential to improve the
financial returns from the project.
Term Sheet
Under the agreement, South Boulder and ENAMCO will incorporate a new Eritrean
company, CMSC, that they will each hold a 50% stake in. South Boulder will
contribute three members to its board while ENAMCO will have two members.
CMSC will own 100% of the Colluli Potash Project, takeover the Exploration Agreement
with Eritrea and assume responsibility for the exploration, development and
operation of the project.
Analysis
The binding agreement with ENAMCO provides South
Boulder Mines with the certainty required to progress development of the
Colluli Potash Project.
It also has the potential to improve the company’s returns from the project,
making it more attractive to investors.
South Boulder is trading at 45% cash backing with $16.3 million, or $0.127 per
share, in cash as of 31 March 2013. This compares with its market
capitalisation of $35.83 million and current share price of $0.28.
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