South Boulder agrees to submit an alternative 50/50 profit sharing proposal with Eritrean Ministry of Energy and Mines

Stuart McKinnon, 

The West Australian November 5, 2012 UPDATE 12.55pm: 

The sovereign risks for Africa-focused explorers have again been highlighted with South Boulder Mines being forced to present a 50/50 profit-sharing proposal to the Eritrean government over its Colluli potash project. 

South Boulder had wanted the Eritrean Government to acquire a 30 per cent paid interest in the project, in addition to its existing free-carried 10 per cent stake. 

But negotiations between the two parties have resulted in South Boulder having to present a 50/50 profit sharing proposal where the company would pay 100 per cent of the project's costs. 

South Boulder said during negotiations, it had become apparent to both the Eritrean Ministry of Energy and Mines (MOEM) and the company that Colluli was a strategic and significant asset. 

"As a consequence, South Boulder has agreed to submit an alternative proposal for the Eritrean National Mining Corporation to participate in the Colluli potash project by way of a 50/50 profit share, where South Boulder would pay 100 per cent of the development costs," the company said in a statement. 

"The profit share negotiations need to address a range of matters, with a keen focus on potential financing strategies. 

"In this regard, both the MOEM and South Boulder intend to work together in good faith to determine the appropriate structure and commercial arrangements to develop the Colluli asset. 

"In discussions MOEM has made it clear that it fully supports the development of the Colluli potash project by South Boulder and is keen to conclude negotiations to enable licensing and development to proceed in a timely and expeditious manner.

"The Colluli potash project has a current resource of 261.81 million tonnes at 17.94 per cent potassium chloride. 

South Boulder shares sunk 32.5 cents, or 36.52 per cent, to 56.5 cents by 12.55pm after sinking as low as 51 cents in earlier trade. 

South Boulder is the latest company to have its share price hit by fears over sovereign risk in Africa. 

Last week, Tiger Resources was forced to hose down reports the Democratic Republic of Congo government could independently lift its interest in the company's copper projects.