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The Colluli Resource and Reserve

The Colluli Resource

The Danakil Depression is located in the Southern region of Eritrea and extends over 300km into Eastern Ethiopia. It hosts the youngest evaporite deposit and the largest unexploited potash basin in the world. Over 6Bt of potassium bearing salts suitable for production of potash fertilisers have been identified in the region to date.

The deposit differentiates itself by its depth and composition. With mineralisation commencing at just 16m, Colluli is the shallowest known potash deposit in the world, making it amenable to open-cut mining. In contrast, most potash evaporite deposits typically sit at depths of up to 1km beneath the earth’s surface. Deep, underground potash deposits have high development costs, and exposure to cost and time overruns.

The Colluli resource comprises three potassium bearing salts in solid form: sylvinite, carnallitite and kainitite. These salts are suitable for high yield, low energy production of SOP.

The salt composition in the Danakil Depression provides the ability to produce a suite of potash products including SOP, Sulphate of Potash-Magnesia (SOP-M) and MOP. Such potash product diversification cannot be achieved by any other known potash deposit region in the world.

The JORC-2012 compliant Mineral Resource for Colluli is estimated at 1.289Bt @ 11% K2 O for 260Mt of contained SOP equivalent. The JORC-2012 compliant Ore Reserve estimate for Colluli is estimated at 1,100Mt @ 10.5% K2 O for 203Mt of contained SOP equivalent. The Mineral Resource estimate prepared and reported under the guidelines of the 2012 JORC Code is represented below (the Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves):

colluli measured indicated

Colluli has significant diversification potential beyond potash, including the option to produce additional salt products such as Kieserite (MgSO4 .H2 O), Gypsum (CaSO4 .2H2 O), Magnesium Chloride (MgCl2 ) and Rock Salt (NaCl). Colluli contains a JORC-2012 compliant rock salt Mineral Resource of 347Mt @ 96.9% NaCl.

The Colluli JORC-2012 compliant resource and reserve tables are shown below.

Colluli SOP Mineral Resource

Colluli SOP Ore Reserve

Colluli Rock Salt Mineral Resource

Competent Persons Statement

Sulphate of Potash Mineral Resource

Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 1,289Mt @11% K20. The resource contains 303Mt @ 11% K2 0 of Measured Resource, 951Mt @ 11% K2 0 of Indicated Resource and 35Mt @ 10% K20 of Inferred Resource. The information relating to the 2015 Colluli Mineral Resource estimate is extracted from the report entitled “Colluli Review Delivers Mineral Resource Estimate of 1.289Bt” disclosed on 25 February 2015 and is available to view at www.danakali.com.au. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

Sulphate of Potash Ore Reserve

The January 2018 Colluli Ore Reserve is reported according to the JORC Code and estimated at 1,100Mt @ 10.5% K2 O Equiv. The Ore Reserve is classed as 285Mt @ 11.3% K2 O Equiv. Proved and 815Mt @ 10.3% K2 O Equiv. Probable. The Competent Person for the estimate is Mr Mark Chesher, a mining engineer with more than 30 years’ experience in the mining industry. Mr Chesher is a Fellow of the Australasian Institute of Mining and Metallurgy, a Chartered Professional, a full-time employee of AMC Consultants Pty Ltd (AMC), and has sufficient open pit mining activity experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the JORC Code. Mr Chesher consents to the inclusion of information relating to the Ore Reserve in the form and context in which it appears. In reporting the Mineral Resources and Ore Reserves referred to in this public release, AMC acted as an independent party, has no interest in the outcomes of Colluli and has no business relationship with Danakali other than undertaking those individual technical consulting assignments as engaged, and being paid according to standard per diem rates with reimbursement for out-of-pocket expenses. Therefore, AMC and the Competent Persons believe that there is no conflict of interest in undertaking the assignments which are the subject of the statements.

Rock Salt Mineral Resource

Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 347Mt @ 96.9% NaCl. The Mineral Resource estimate contains 28Mt @ 97.2% NaCl of Measured Resource, 180Mt @ 96.6% NaCl of Indicated Resource and 139Mt @ 97.2% NaCl of Inferred Resource. The information relating to the Colluli Rock Salt Mineral Resource estimate is extracted from the report entitled “+300M Tonne Rock Salt Mineral Resource Estimate Completed for Colluli” disclosed on 23 September 2015 and is available to view at www.danakali.com.au. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

Quality Control and Quality Assurance

Danakali exploration programs follow standard operating and quality assurance procedures to ensure that all sampling techniques and sample results meet international reporting standards. Drill holes are located using GPS coordinates using WGS84 Datum, all mineralisation intervals are downhole and are true width intervals. The samples are derived from HQ diamond drill core, which in the case of carnallite ores, are sealed in heat-sealed plastic tubing immediately as it is drilled to preserve the sample. Significant sample intervals are dry quarter cut using a diamond saw and then resealed and double bagged for transport to the laboratory. Halite blanks and duplicate samples are submitted with each hole. Chemical analyses were conducted by Kali-Umwelttechnik GmBH, Sondershausen, Germany, utilising flame emission spectrometry, atomic absorption spectroscopy and ion chromatography. Kali-Umwelttechnik (KUTEC) has extensive experience in analysis of salt rock and brine samples and is certified according by DIN EN ISO/IEC 17025 by the Deutsche Akkreditierungsstelle GmbH (DAR). The laboratory follows standard procedures for the analysis of potash salt rocks chemical analysis (K+, Na+, Mg2 +, Ca2+, Cl-, SO42-, H2O) and X-ray diffraction (XRD) analysis of the same samples as for chemical analysis to determine a qualitative mineral composition, which combined with the chemical analysis gives a quantitative mineral composition.

Potassium Bearing Salts 

Sylvinite

Sylvinite is the most commonly used mineral for the production of potassium chloride. Potassium chloride, also known as Muriate of potash or MOP, is primarily produced from evaporite deposits in Canada, Russia and Belarus. These deposits are quite deep, with depths of over 1000m in Canada and to 300 to 500m in Eastern Europe. These deposits are typically mined using conventional underground mining methods, however, conventional mining is not suitable at depths deeper than 1,200m. Solution mining involves injecting heated solution into the resource, dissolving the valuable salts and pumping them to surface for subsequent processing. Sylvinite is a combination of two salts; sylvite (KCl) and halite (NaCl). Processing sylvinite is relatively simple. The mined material is crushed to a size where sufficient liberation of potassium chloride and halite particles occur. The liberated materials are then selectively separated in flotation units. Halite is typically transported to a tailings storage facility and sylvite is dried and sold as potassium chloride (Muriate of Potash) fertiliser.

Carnallitite

Carnallitite is the combination of carnallite and halite. Carnallite rich brines are currently recovered from the Dead Sea to produce potassium chloride (MOP). Carnallite is a hydrated potassium magnesium chloride with formula KMg.Cl3.6(H2O). Carnallite occurs within a sequence of potassium and magnesium evaporite minerals; sylvite, kainite, polyhalite and kieserite. Carnallite is an uncommon double chloride mineral that only forms under specific environmental conditions in an evaporating sea or sedimentary basin. It is mined for both potassium and magnesium and occurs in the evaporite deposits of Carlsbad, New Mexico, Utah, United States, and the Williston Basin in Saskatchewan, Canada. Israel and Jordon produce potash from the Dead Sea by using evaporation ponds to concentrate the brine until carnallite precipitates. The carnallite is dredged from the ponds and processed to remove the magnesium chloride from the potassium chloride.

Kainitite

Kainitite is the combination of kainite and halite. Kainite consists of potassium chloride and magnesium sulphate. Kainite exists in salt form in appreciable amounts in only three regions of the world; the Danakil Basin, Ukraine and Italy. Kainite was essentially depleted from the German Strassfurt mines with the salt being primarily used as a direct application fertiliser. With cessation of kainite mining in both the Ukraine and Italy, the Danakil Basin remains the last unexploited major deposit with kainite in solid form. Kainite is the key salt used for low temperature, high potassium yield production of potassium sulphate. It decomposes to an intermediate salt known as loenite, and then reacts with potassium chloride under ambient conditions to produce potassium sulphate. In key potassium sulphate producing operations, kainite is formed by evaporation of kainite rich brines. This increases footprint size and renders production rates subject to ambient conditions. Kainite can produce potassium sulphate or potassium chloride depending on the production process chosen. Kainite makes up over 60% of the Colluli resource and is seen as the key differentiating mineral species. The shallow mineralisation makes it easily extractable. Kainite is difficult to solution mine due to its solubility.

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