Please find below an excerpt from an interesting article by Dr. Alex Cowie in  ‘Diggers and Drillers’ about South Boulder Mines, Eritrea, the Red Sea and the future potential of potash in terms of increasing global demand for fertilizer products needed to improve crop efficiency and agricultural output.

I’ll be up front about this. South Boulder is a speculative investment.

It may not be for the faint of heart. Its potash deposit is still in its infancy. And it’s two or three years until production. It’s also based in one of the riskier parts of Africa, Eritrea: a country that still disputes its border with Ethiopia.

So why have I bypassed my usual insistence on low-sovereign risk countries?

Because this potash deposit is too good to miss.

South Boulder is at early exploration stage of its 100% owned Colluli potash project. Progress has been very fast here. Drilling started on the edge of the Red Sea just six months ago, and the company has already announced its first resource figure of 548 million tonnes of potash. Let me put that in context. It is already almost half the size of Potash Corp’s 1132-million-tonne resource…  currently the largest in the world. Not bad for half a year’s work.

But what is even more remarkable is that this 548-million-tonne figure only factors in THREE of the 17 holes drilled so far. The other 14 are being tested right now. And the results will be factored into a new resource figure that you can expect to see before the end of March.

The company believes the resource figure will grow much higher, as they more than doubled the upper range of the exploration target to 1250 million tonnes. Whether this happens or not remains to be seen. But it would make it the largest deposit in the world. Is it really possible?  Let’s just say I reckon they’re being conservative! If you take into account that three holes has enabled a JORC compliant 548 million tonnes (Mt) inferred resource, you could infer 17 holes gets you to over 3100 Mt.

Of course, nothing is ever that simple in mining. But even if you halve that estimate – to be safe – you’re still looking at 1550 Mt. And that still exceeds Potash Corp’s figure.  And the company is planning a lot more drilling yet.I need to point out that most of this will be in inferred category, which is only the first hierarchy of resource classification. More good drilling results between the current holes will be needed to upgrade it to a ‘measured’ resource that you could be more confident of.

The 17 drill results so far have been very consistent. But this is typical of a deposit created by an ancient sea bed drying out. Millions of years ago this was an inlet of the Red Sea.

The land changed and the inlet was cut off from the sea. So it dried up into a twenty metre thick layer of potash, which then got covered over by a shallow layer of rock.

So it’s not like a gold or copper deposit where the grade can vary from one metre to the next. Potash deposits are more like a coal deposit, where you get a predictable blanket lying across the whole basin. It’s also important to point out that they have only scratched one small corner of their exploration license…..

To read the full article please visit http://www.portphillippublishing.com.au/osi/

Please note that Diggers and Drillers requires you to subscribe  to their paid content to be able to read the full article.

South Boulder Mines has released the Quarterly Operations Report for the quarter ending 31 Dec 2010.

To view the full report please Click here

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GOLD and potash/phosphate followers have a lot to think about.

First gold. So far this month, the yellow metal has lost 5.7 per cent of its value. Now, as regular Pure Speculation readers will know, this column is well and truly in the bull paddock when it comes to gold.

But that does not make us blind to evidence. So, if you are knee-deep in gold or gold stocks, you should know that this 5.7 per cent drop in January is the largest for the first month of the year since 1997, when it fell 6.3 per cent. Then it proved to be harbinger of worse to come: that year gold fell from $US358/oz to close at $US294/oz. This, of course, is not to say that we’ll see a repeat. Most unlikely in fact – but we thought we should point out what happened 14 years ago this month.

But we were cheered to see two penny stocks get a little interest today. Each Monday we’re trying to search through the 10c and under stocks for any signs of life. Well today Liontown Resources managed a 17.6 per cent gain to 10c (at time of writing) after reporting that it has entered a joint venture to look for gold in Tanzania. In our view, East Africa has been unjustly neglected while the other side of the continent has been getting all the gold glory.

Another sleeper stock, Rimfire Pacific Mining, lifted – again on thin trade – by 0.02c to 5.4c on news from its Sorpresa gold and base metal project near Fifield, NSW, and located on the same geological corridor as the Cadia and North Parkes copper-gold mines. (By the way, we read elsewhere today that gold companies are increasingly anxious to grab any gold projects where there is also the promise of copper.)

Trenching at Sorpresa has produced two assays above 70 grams/tonne gold. It’s early days but the words of executive chairman John Kaminsky are worth noting. “The fact that the Sorpresa area had not been discovered or mined previously yet has the capacity to contain such elevated gold grades continues to encourage the company that this area is very promising,” he said.

Also worth noting today was that Pacific Nuigini, which is headed by high profile mining figure Peter Cook, declared a new gold-silver-base metal discovery in Papua New Guinea. Sampling has produced a number of high grade assays up to 23.7 grams/tonne gold, 156g/t silver, 7.77 per cent zinc and 12.2 per cent lead. The stock was unchanged at 37.5c.

Meanwhile, South Boulder Mines posted a BBC report today on the looming world hunger crisis. STB pointed out that this could be good news for potash (and we would add phosphate, too) as countries race to increase food production.

The British Government issued a study, to which 400 experts contributed, claiming that the globe is facing a crisis of severe food shortages.

The report classified the DR Congo and Chad as “extremely alarming” in terms of future famines, with the “alarming” category including India, Tanzania and several other African countries. Mongolia was classed as “serious”. Plenty of others were on the next level of priority, including China.

There were also reports today that cabbage prices in South Korea are soaring, making the vegetable – which is used in the staple kimchi dish – unaffordable to many.

Not surprising then that Aguia Resources was up 22 per cent just before the close. The company already has phosphate in Brazil and has added potash deposits there. Brazil now imports the bulk of its fertiliser so there’s a ready local market.

brombyr@theaustralian.com.au

The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice. The writer does not own shares in any company mentioned.

The Ausralian

South Boulder Mines commences trading after a news announcement that it upgrades its exploration target to 500 to 750 million tonnes of potash ores from the initial 300 to 500 million. More detailed reports on the new potash intersection are expected to be released in the coming days. The stock reacted with a daily gain of 9% and was the first time braking clearly the 3 AUD mark (3.39 AUD).

South Boulder Mines (ASX: STB) told investors that Lorry Hughes will be speaking on behalf of South Boulder Mines Ltd at the Mines and Money London 2010 Exhibition taking place from November 30 – December 1 in London. Mines and Money is said to provide one of the best forum for miners and financiers to meet, exchange ideas, learn, debate, make and cement business relationships.

Organizers say that in its eighth year, 2010 promises to deliver another successful event, with a conference programme featuring a broad range of expert speakers covering a wide spectrum of issues concerning the miner and mining financier in today’s business climate.

To view the full up-to- date brochure please click here: Mines and Money London Exhibition 2010

Extract from Annual Report 2010

Chairman’s Address on the South Boulder Mines Limited 2010 Annual Report

South Boulder’s seventh year as a publicly listed company has been one that shows promise of ultimately having an interest in producing mines with nickel suphide at Duketon and potash in Eritrea.

The Colluli Potash Project has progressed rapidly with the establishment of an Asmara Office and the employment of staff. After a long period of preparation drilling finally got underway in June. Drilling evaporite potash is more akin to oil and gas drilling in that you have to have the right composition and density of drilling fluid or no sample is recovered.

Due to the expertise of our potash mining, processing and exploration consultant, ERCOSPLAN, and the readiness to learn on behalf of our Eritrean Drilling contractor, General Exploration Drilling we successfully drilled four holes with excellent core recovery. This was a fantastic effort in the Danakil Depression; 120 m below sea level, with day temperatures in the mid 50’s & lows in the mid 40’s. During an overnight visit to the drilling in July, I was struck by the technical skill in potash drilling in one of the harshest places on earth and the willingness of our Eritrean geological staff to learn and complete the work.

Significant thicknesses of potassium rich salts have been demonstrated by the recently completed drilling both by assay and visually from very shallow depths 30 to 60m. The Colluli Project is now proven to be one of the shallowest deposits of potash in the world and this has the potential to be part of a significant new potash producing province.

Back in W.A., the Duketon Project has delivered on the promise shown last year with significant drill intercepts of, Kambalda Style, nickel rich suphide at the Rosie prospect. This opens up the potential of further discoveries within the Duketon Belt as these nickel deposits rarely occur singly but have numerous occurrences such as at Kambalda and Forrestania. Unfortunately due to the nature of the agreement with Independence Group, South Boulder does not have control over the rate of progress of exploration over the Duketon Nickel project. This fact however is considered minor as it is expected the exploration work will progress at an accelerated rate in the near future.

The coming year promises to be a transitional one for the company and I thank my fellow directors and all our staff for their hard work and effort over the past year.

TERRY GRAMMER

Chairman

South Boulder Mines Eritrea

By Tim Boreham, The Australian

We suggest that 99 per cent of the room wouldn’t raise their arms, and those who do are fibbers or fertiliser tragics. Given the Big Australian’s ballsy ploy, we’ll be hearing much more about the potassium-rich substance that is as crucial to growing food as phosphate.

For the uninitiated — that is, the 99 per cent — potash is the catch-all name for various potassium salts. Most fertilisers consist of three core elements — nitrogen, phosphate and potassium — with the consistency varying according to the type of crop.

Potash global consumption stands at 50 million tonnes a year and unlike most raw materials Australia doesn’t produce an ounce of it. Production is dominated by Russia’s Silvinit and Uralkali, rumoured merger partners that account for more than half of global production. Traditionally, Germany has been the leading producer.

South Boulder Mines (STB) chief Morry Hughes says there are barriers to developing potash deposits, including their depth: the last new mine started in Germany in the late 1980s. But on the plus side they’re usually uniform in quality and also extensive. Potash Corp, the biggest single producer, acts as oil’s equivalent of an OPEC swing producer, curtailing or increasing production according to demand trends.

The global potash price has been favourable, hovering at about $US340 a tonne. This compares with the average $US620 a tonne at the 2008 peak, but is well up on the $US175 a tonne level of 2006.

As with phosphate, potash pricing was meant to be immune from the global financial crisis, despite the perception that fertiliser is immune from the cycles because everyone has to eat.

In truth it is more complicated: corn and palm oil growers created a spike in demand when oil prices soared because their product was being used for biodiesel.

Locally, there are three or four resource juniors playing in potash, although not necessarily exclusively in that commodity.

South Boulder Mines has been better known for its Duketon nickel venture in Western Australia with Independence Gold, but it’s also appraising its “world class” Colluli potash project in Eritrea.

South Boulder had a tenement at Lake Disappointment, next to fellow potash hopeful Reward Minerals (RWD), but native title difficulties sent the company scouring the world.

It settled on the emerging mining province of Eritrea, where potash has been used for centuries.

“We have been involved in potash for some time, which not many people have given us credit for,” Hughes says.

But with BHP getting into potash in a humungous way there are more investors coming on board. He estimates between 20 per cent and 25 per cent of South Boulder’s share base has been attracted by potash.

In a 50-50 venture with Rum Jungle Uranium, Reward is working two exploration leases over a 150km expanse in central Australia, from Lake Amadeus to Karinga Creek.

“An analogous model would be the Great Salt Lake in Utah, the largest potassium sulphate producer in the US, [or] the Dead Sea.”

Speaking of Utah, Transit Holdings (TRH) has earned a 75 per cent interest in a tenement spanning 390sqkm, in the state’s sparsely populated southeast. The parties are aiming for an “exploration target” of 2.3 billion tonnes.

Completing our potash troika, Elemental Minerals (ELM) recently started drilling on its Sintoukola project in the Republic of Congo, part of a four-year effort to take it to bankable feasibility stage.

Executive Summary

SOUTH BOULDER MINES:

• ASX Listed October 2003 (ASX: STB), (SO3-Ber), (SO3-Fra); and
• Three outstanding projects: potash, gold and nickel.

PROJECTS:

Colluli Potash Project

• Potentially “world class” buried evaporite potash project in Eritrea; and
• Acquisition of an Exploration license granted in July 2009.

Duketon Greenstone Belt Projects, Western Australia.

• Gold discovery at surface “Terminator Prospect”; and
• Other excellent targets proximal to Moolart Well (ASX: RRL)
• Nickel JV with Independence Group (ASX: IGO):
  • IGO earning 70% of nickel upon completion of BFS; and
  • Targeting massive and matrix nickel sulphide deposit, currently drilling, sulphides intersected, announ. 8th Feb.

STRATEGY:

• Conduct resource confirmation and definition drilling ahead of JORC resources and feasibility studies at Colluli. Drilling scheduled for March, first since 1968; and
• Follow up RC drilling planned for Terminator at end February and work towards defining an initial JORC gold resource at Terminator POW approved; and
• JV partner conducting nickel drilling to define JORC resource.

Eritrea

FORMATION

• The country gained its independence in 1991;
• UN supervised referendum made it official in 1993;
• Population ~ 4 million people; 80% dependent on subsistence agriculture;

CURRENTLY

• Stable Government:
  • Previous minister for mines was in place for 12 years.
• Supportive government for foreign investment in mining and exploration.

MINING REGIME

• Mining code based on Northern Territory, Australia, with royalties of:
  • 5% on precious metals; and
  • 3.5% on base metals and salts.
• Corporate tax rate ~ 38%;

GOVERNMENT INTEREST

• Government 10% free carry; and
• After BFS Government has option to purchase an additional 30% equity participation interest at an independently determined price.

Click here for PRESENTATION

Follow-up drilling during the quarter by South Boulder Mines (ASX: STB) at the newly discovered Terminator Gold Prospect defined further shallow mineralisation that is considered open in all directions with some compelling targets defined.

Significant results included;

- TBAC014 – 31m @ 1.07g/t Au from 1m including; 8m @ 2.68g/t from 1m;
- TBAC024 – 60m @ 1.30g/t Au from 2m including; 10m @ 4.25g/t from 3m;
- TBAC025 – 14m @ 5.13g/t from 70m including; 8m @ 8.38g/t from 72m.

STB said the Duketon Nickel JV continues to deliver excellent results from the Rosie Ni-Cu-PGE Prospect. Most recent highlights include:

- Hole TBRC070 – 7.00m @ 2.61% Ni, 0.42% Cu, 3.75g/t Pt+Pd from 190m;
- Hole TBDD080 – 3.59m @ 2.27% Ni, 0.24% Cu, 3.10g/t Pt+Pd from 205m including; 0.76m @ 4.98% Ni, 0.25% Cu, 6.98g/t Pt+Pd from 207.84m.

Subsequent to the end of the period, a 15-20 combination RC and diamond drilling program has commenced at the Rosie Prospect with results expected in February.

A drilling contract has beenfinalised and logistics for first confirmation drilling at the Colluli Potash Project, Eritrea, have been confirmed. Drill testing of the buried potash horizons are scheduled for February/March.

The company completed a non-renounceable 1 for 10 non renounceable rights issue and shortfall placement to raise ~ $1.1m from the issue of 5,570,794 new shares at 20cents.

STB held cash at end of period $2.6m + cash in trust ($0.68m) for a total of $3.28m; cash + listed equities ~ $1.6m.

South Boulder Mines

South Boulder Mines Ltd. (ASX: STB) announced today that it has been granted officially the Colluli Potash Project exploration licence by the Eritrean Ministry of Energy and Mines.

The Colluli Potash Mine is located in the Danakil Depression region of Eritrea approximately 200 km south east of the capital of Asmara and covers an area of 906 km².

According to South Boulder the project is said to be located in an area, which used to be used by the former Ethiopian Potash Company (EPC) for diamond drilling in 1968.

“The Project consists of buried evaporite deposits in which two shallow potash bearing horizons were identified from historic diamond drilling conducted in 1968 by the former Ethiopian Potash Company (EPC). The first horizon intersected an average thickness of 1.7m sylvinite with average grades of 12.5% K2O at depths to the top of the horizon ranging from 23m – 180m. The second horizon intersected an average thickness of 17m carnallite with average grades of 50 – 70wt% *(~17% K2O) at depths to the top of the horizon at 390m.”

The Danakil Depression has ancient history of artisanal salt production with modern exploration and exploitation dating back to the early 1900’s. The most intensive period of exploration and trial underground mining occurred between 1958 – 1970 at the Musley and Crescent deposits, located approximately 15km south west of Colluli at Dallol. Since 1968 there has been no exploration at the Colluli Potash Project.

The project is located less than 100kms south of the shallow water port of Mersa Fatma and less than 200kms south east of the deep water port of Massawa.

South Boulder stated that the potential of using solar evaporation and solution mining techniques make the project in Eritrea very attractive. These factors coupled with the relatively shallow nature of the mineralisation could lead to relatively cheap capital and operating costs if a deposit is defined.

South Boulder intends to complete detailed data compilation and to undertake diamond drilling, to confirm the reported potash intercepts and to collect samples for preliminary metallurgical test work.

The drilling is planned to commence in the field season early October. South Boulder believes the project has the potential to host a world class potash deposit and is committed to assessing this potential. South Boulder is in the process of setting up a local branch office in Asmara including the recruitment of local administration and geological staff in order to support exploration.