Eritrea: Danakali’s advanced potash project is a cut above the rest

By Proactive Investors

Danakali Ltd (ASX:DNK) is focused on the development of the world-class Colluli Potash Project in the East African country of Eritrea.

Colluli is 100% owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).

Front end engineering design (FEED) confirmed a post-tax project net present value of US$902 million and post-tax internal rate of return (IRR) of 29.9% for Colluli.

There is no other known sulphate of potash (SOP) greenfield development project that has completed FEED.

Most advanced SOP greenfield project globally

Danakali’s chief executive Danny Goeman said: “Colluli is the premier and most advanced SOP greenfield development project globally.

“It has industry-leading capital intensity, forecast first quartile operating costs, and highly attractive economic returns.

“We are focused on working with our joint venture partner to ensure the successful development of modules I and II, and unlocking the significant expansion and multi-commodity potential of the resource.”

FEED completion transitions Colluli from study phase into project execution phase

FEED provides offtakers and funders with a high level of detail, accuracy and confidence, and provides a robust platform for project execution.

The modular development approach underpins a highly scalable, long life project.

Module I is expected to produce 472,000 tonnes per annum (tpa) of premium SOP product. Module II will increase total SOP production to 944,000 tpa.

Colluli is the closest SOP deposit to a coastline, only 75 kilometres from the Red Sea coast.

It is 230 kilometres from the established port of Massawa, which is equipped with bulk and container loading facilities.

The port allows direct access to markets including India, Southeast Asia, the Middle East, Europe and Africa.

Colluli is also 87 kilometres from a potential port export terminal at Anfile Bay, which is an alternative export option subject to further review.

It has potential to unlock significant value for Colluli by enabling the low-cost export of additional volumes from the project.

Fully permitted and top-tier resource

Colluli is fully permitted following the signing of the Mining Agreement in February 2017; and the subsequent awarding of the requisite Mining Licenses.

The deposit comprises a massive Ore Reserve estimate of 1.1 billion tonnes grading 10.5% potassium oxide for 203 million tonnes of contained SOP equivalent.

Colluli is one of the few resources globally comprising Sylvite, Carnallite and Kainite in an ideal ratio for simple processing.

It is the shallowest evaporite deposit in the world, with mineralisation starting at just 16 metres allowing open-cut mining.

First quartile operating costs

Colluli is amenable to simple, low cost, open-cut mining with a progressive working face that provides access to each of the mineralised layers simultaneously.

The processing method to be utilised at Colluli is the most commonly used, low-cost process for the production of SOP.

The ore body consists of three main members being Sylvinite, Carnallitite and Kainitite which are fed as ore feed into the processing plant, and from which the minerals Sylvite, Carnallite and Kainite are extracted and mixed to produce SOP.

If operating in 2016, Danakali would have been the lowest cost SOP producer outside of China.

Moving towards the execution phase

The completion of FEED unlocks Danakali’s ability to focus on financial close and project execution.

FEED provides off-takers with additional confidence on project execution and its ability to receive funding.

It also provides project financiers with a level of certainty which further de-risks the investment proposition.

The project’s execution phase will incorporate engineering design, procurement, construction, management and commissioning of facilities.

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