Front End Engineering Design Economic Outcomes
The FEED utilises a modular development approach which mitigates risk while enhancing fundability and economic return. Module I is expected to produce approximately 472ktpa of premium SOP product. Module II, commencing production in year 6, will increase total SOP production to 944ktpa at an additional capital cost of US$175m. Modules I and II are designed to create a platform for growth and generate cash flows to fund subsequent expansions which have not been included in the FEED.
FEED firmly establishes Colluli as the most advanced and attractive SOP greenfield development project.
- Enhanced project economics with considerably higher level of accuracy
- Industry leading capital intensity and forecast first quartile operating costs
- Project level NPV of US$902M with IRR of 29.9% for Modules I and II
- Danakali share of NPV of US$439M with IRR of 31.3%
- Operating and capital cost accuracy level of ±10%
- Critical milestone for offtake and debt processes
- No other known SOP greenfield development project has completed FEED
The economic evaluation of Colluli has been completed using a discounted cash flow model. An external review of the model has been undertaken to ensure logistical and arithmetic integrity and in reference to the applicable fiscal regime.
Capital and operating costs are presented in real US dollars (June 2017) to an accuracy of ±10%. Estimates have been compiled for the economic period of review (first 60 years of production).
Development and working capital estimates are summarised in the table below. Colluli development capital optimisation has resulted in industry leading capital intensity which enhances both the Project’s returns and fundability.
Sustaining capital has been allocated for further pond and tailings construction, minor mobile equipment, infrastructure upgrades and closure provisioning.
The table below shows the relevant sustaining capital over the economic period of review (first 60 years of operation).
OPERATING COST ESTIMATES
Operating costs are presented in real US dollars (June 2017) to an accuracy of ±10%. Estimates have been compiled for the economic period of review (first 60 years of production).
All costs have been prepared on an owner operated basis except for mining production (first 60 years), product logistics (first 60 years) and power (first 5 years).
The Colluli operating cost estimates include all direct costs to allow mining, production and load-out of SOP production, transport to Massawa port, and loading of containers onto ship liners at Massawa port.
The forecast mine gate cash costs would position Colluli in the bottom quartile of the SOP cost curve. Based on the estimated average composite sale price of US$569/t SOP, Colluli is expected to deliver an attractive operating margin.