Danakali receives support from UK-based merchant bank
Colluli is a shallow resource, suitable for open pit mining via a single pit.
Danakali (ASX:DNK) has been a top performer on the ASX, with the company’s share price close to doubling to $0.73 over the past three-months.
Danakali has received support from the UK-based Hannam & Partners, a privately-owned, relationship-led merchant bank.
The following is an extract from the company’s report titled: SOP Potach Game Changer.
WORLD CLASS POTASH PROJECT
Danakali Limited is a mining company developing the Colluli Potash Project in Eritrea, East Africa, which it operates through a 50/50 JV with the Eritrean National Mining Corporation (“ENAMCO”).
Colluli is a fully permitted, high grade Sulphate of Potash (SOP) project with a reserve of over one billion tonnes, sufficient for a mine life of over 200 years.
The Company aims for first production in 2020 producing 425ktpa of premium SOP product from a single open pit, doubling production to 850ktpa in year six of the operation.
UNIQUE OREBODY PROVIDES ADVANTAGES
Colluli is a shallow resource, suitable for open pit mining via a single pit.
The orebody contains the right combination of sylvinite, carnallite and kainite salts for simple and high yield conversion to SOP at ambient temperature conditions using a proven, conventional processing technology.
GOOD INFRASTRUCTURE
Key infrastructure for Colluli is already in place, namely an existing 230km road to the modern port of Massawa on the Red Sea coast.
Colluli stands out from other development SOP projects in this regard, significantly reducing up front capital requirements.
LOW OPERATING AND CAPITAL COSTS
Shallow open pit mining, relatively simple processing and proximity to the coast result in operating costs in the lowest quartile of global SOP producers as well as the lowest capital intensity of SOP projects currently in development.
FAVOURABLE DFS ECONOMICS
Colluli’s many favourable characteristics result in excellent project economics as outlined in the feasibility study.
Using a price forecast of US$575/t, which compares to the current spot price of around US$600/t, the DFS calculates a Phase II project NPV and IRR of US$415m and 29.3% respectively.
ERITREA SUPPORTIVE OF MINING
Eritrea is widely perceived as a high risk investment destination, however its track record in the mining industry is good.
The Eritrean government to date has been strongly supportive of all mining projects in the country.
There have been no issues with permitting or license tenure.
The country has also been ranked as the 6th most attractive mining investment destination in Africa out of 20 in the most recent Fraser Institute Survey.