South Boulder Sees $500 Million a Year From Eritrea Potash Mine
By William Davison
April 18 (Bloomberg) — South Boulder Mines Ltd., an Australian mining company, expects to produce $500 million worth of potash annually from a deposit in Eritrea when operations start in 2016, Managing Director Lorry Hughes said.
The company, based in Perth, this week raised its estimate on the size of the deposit at the Colluli Potash Project in the Horn of Africa country by 85 percent to 1.08 billion metric tons. Colluli, which is 70 kilometers (44 miles) from the Red Sea, may initially produce 1 million tons of potash a year, the company said in a statement on April 15.
“The expanded resource is expected to substantially improve the already robust economics of an open pit mine at Colluli,” according to the statement.
Eritrea, which has been ruled by President Isaias Afwerki since independence from Ethiopia in 1993, is under United Nations sanctions for its alleged support of al-Qaeda-linked militants seeking to topple the UN-backed government of Somalia.
The government denies the accusations. In December, the UN Security Council requested mining companies to “undertake appropriate measures to promote the exercise of vigilance” in dealings with Eritrea’s mining industry.
The state-owned Eritrean National Mining Corp. plans to buy as much as a 30 percent “paid participating interest” in Colluli, South Boulder said in a statement last month, adding that the company would welcome the move. The increased resource estimate at the mine means its current 17-year lifespan will “definitely be extended,” according to Hughes. Potash is used as an agricultural fertilizer.
In 2009, the Security Council imposed an arms embargo on Eritrea and restricted the travel and froze assets of some of its leaders. The December expansion of sanctions on the country was because of concern at the “potential use of the Eritrean mining sector as a financial source to destabilize the Horn of Africa region,” according to the resolution on the UN’s website.
An initial draft would have banned investment in Eritrea’s mining industry if it had been adopted. Chalice Gold Mines Ltd., an Australian explorer for the metal, has found deposits at Koka in Eritrea, while Sunridge Gold Corp. and Canada’s Nevsun Resources Ltd. also operate in the country.