Danakali Limited (ASX: DNK, LSE: DNK) is focused on the development of the Colluli Potash Project (Colluli or the Project). The Project is located in the Danakil Depression region of Eritrea, East Africa and is 100% owned by the Colluli Mining Share Company (CMSC). CMSC is a 50:50 Joint Venture between Danakali Limited and the Eritrean National Mining Company (ENAMCO).
Since drilling commenced at Colluli in early 2010, over 1 billion tonnes of high grade potassium bearing salts suitable for the production of potash have been identified. The potassium bearing salts of the Danakil Depression have the unique capability of producing a diverse range of potash types including muriate of potash (MOP or potassium chloride), sulphate of potash (SOP or potassium sulphate), and sulphate of potash magnesia (SOP-M or potassium magnesium sulphate).
Sulphate of potash is a highly valued, chloride free, premium potash fertiliser that has limited primary production facilities globally. SOP contains both potassium and sulphur, which are essential crop nutrients.
Following the positive outcomes of a prefeasibility study (PFS) for the production of sulphate of potash (SOP) in February 2015 and a definitive feasibility study (DFS) that was completed in November 2015, a front-end engineering design (FEED) study was completed in January 2018 for a modular SOP development.
- Module I is expected to produce 472ktpa of premium SOP product; and;
- Module II, commencing production in year 6 of the Project, will increase total SOP production to 944ktpa
FEED provides offtakers and funders with a high level of detail, accuracy and confidence, and provides a robust platform for project execution. FEED confirmed a post-tax project NPV of US$902M and post-tax IRR of 29.9% for Colluli. There is no other known SOP greenfield development project that has completed FEED.
Colluli meets the criteria for a Tier 1 project:
- Industry leading capital intensity;
- Forecast first quartile operating costs;
- Proximity to coast and global markets;
- Outstanding grade; and
- Exceptionally long mine life (approximately 200 years).
Colluli is the shallowest evaporite deposit in the world, with mineralisation starting at just 16m, allowing open-cut mining.
Colluli is the only SOP resource that allows extraction of potassium salts in solid form. Primary production of SOP typically comes from potassium rich brines, which require considerable evaporation.
Extracting the salts in solid form provides superior economic outcomes: it enables the salts to be processed immediately, significantly reducing the time between mining and revenue generation; and it reduces the evaporation pond footprint contributing to a lower capital intensity.
The processing method to be utilised at Colluli is the most commonly used, low cost process for production of SOP. Colluli salt composition is ideal for low energy, high yield conversion to SOP at ambient temperatures.
Colluli is the closest SOP deposit to a coastline, only 75km from the Red Sea coast.
Colluli is 230km from the established port of Massawa. The port of Massawa is equipped with bulk and container loading facilities.
A Mining Agreement was entered into with the Eritrean Ministry of Energy and Mines in February 2017; and subsequently seven Mining Licenses were awarded.
Colluli is expected to provide an outstanding economic, social and community dividend. Positive impacts through:
- associated economic development;
- creation of hundreds of permanent jobs for Eritrean nationals; and
- long term training for trades and professionals.”
A binding take-or-pay offtake agreement has been confirmed with EuroChem Trading GmbH (EuroChem) for up to 100% (minimum 87%) of Colluli Module I SOP production.
Development Finance Institutions. Africa Finance Corporation (AFC) and African Export Import Bank (Afreximbank, together the Mandated Lead Arrangers), have obtained formal credit approval to provide CMSC with US$200M in senior debt finance.
Danakali is focussing on finalising CMSC senior debt documentation, completing project financing and project execution.