Name of the Project
Colluli potash project.

Location
Eritrea.

Project Owner/s
The project is 100%-owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).

Project Description
In a front-end engineering design (FEED) study completed in January 2018, the Colluli project was established as the most advanced, economically attractive and fundable sulphate of potash (SoP) greenfield development project globally.

The project has a Joint Ore Reserves Committee- (Jorc-) compliant mineral resource estimated at 1.29-billion tonnes grading at 11% potassium oxide (K₂O) for 260-million tonnes of contained SoP equivalent.

The Jorc-compliant ore reserve is estimated at 1.1-billion tonnes grading at 10.5% K₂O for 203-million tonnes of contained SoP equivalent.

A modular development approach for the Colluli project has shown a highly scalable, long-life project. The shallow mineralisation of the project makes the resources amenable to opencut mining.

The mine will comprise one open pit developing progressively from north-east to south-west. The pit will have a progressive working face that will provide access to each of the mineralised layers simultaneously. The orebody comprises sylvinite, carnallitite and kainitite, which will be fed as orefeed into the processing plant and from which sylvite, carnallite and kainite will be extracted and mixed to produce SoP.

The project proposes two modules.

Module 1 is expected to produce 472 000 t/y of premium SoP.

Module 2, starting production in Year 6 of the project, will increase total SoP production to 944 000 t/y.

Mining will be conducted by mining contractors using conventional mechanised equipment, with no drill-and-blast required. Mined ore will be transported by truck to a run-of-mine pad adjacent to the processing plant.

The massive Colluli ore reserve has significant capacity to underpin further expansions and support decades of growth beyond modules 1 and 2.

Colluli has significant diversification potential beyond SoP, including the option to produce additional potash and salt products such as muriate of potash, SoP-magnesia, kieserite, gypsum, magnesium chloride, and rock salt.

At FEED production rates, the project has an expected mine life of 200 years.

Potential Job Creation
The project could create more than 500 permanent jobs for locals and Eritrean nationals in Module 1, and more than 650 (cumulative) once Module 2 is online, and benefits from strong local support. Particularly during construction and the early stages of production there will also be numerous jobs for expats.

Net Present Value/Internal Rate of Return
The project has an after-tax net present value, at a 10% discount rate, of $902-million for modules 1 and 2, and an internal rate of return of 29.9%. Module 1 has a payback of 3.25 years.

Capital Expenditure
Module 1 will require an initial capital investment of $302-million. The incremental Module 2 development is expected to require an initial capital investment of $202-million.

Planned Start /End Date
Not stated.

Latest Developments
Danakali reported in its quarterly report for the period ended December 31, 2018, released in January this year, that Colluli is execution ready.

Danakali and CMSC are focused on logistics and other technical collaboration aspects with offtake partner EuroChem, operational contracts, operations readiness, funding and corporate social responsibility initiatives.

In December 2018, CMSC executed a mandate to provide fully underwritten debt finance facilities of $200-million to fund the construction and development of Colluli.

African Export-Import Bank (Afreximbank) and Africa Finance Corporation (AFC) are acting as mandated lead arrangers, which is a critical project financing and execution milestone for CMSC and Danakali.

Danakali and its debt adviser, Endeavour Financial, are working with the mandated lead arrangers to advance their due diligence, which is necessary to obtain credit approval.

The mandated lead arrangers and their advisers are also reviewing the provisions of the draft commercial contracts – engineering, procurement and construction management; power and mining – as they become available.

A site visit to Colluli by the mandated lead arrangers and their advisers is expected to take place in the March 2019 quarter.

Key Contracts and Suppliers
Fluor (FEED engineering lead, metallurgy, process and nonprocess infrastructure, and capital and operating cost estimates); AMC Consultants (mine – geotechnical, mine design, mine contract tendering support, compilation of mining costs and competent persons report, and ore reserve update); Knights Piésold (evaporation ponds and tailings, infrastructure geotechnical investigations and hydrogeological investigation and modelling); Global Potash Solutions and Elemental Engineering (metallurgy and processing technical support); Ausenco (water abstraction and pipelines); Braemar ACM (port capacity, capability and handling fees, and engagement of shipping lines); and MBS Environmental (social and environment).

The company and project also have a strong network of partnerships including EuroChem (offtake), DRA Global (EPCM contractor), Inglett & Stubbs (power contractor), Africa Finance Corporation or AFC (debt financier) and the Africa Export-Import Bank or Afreximbank (debt financier).

On Budget and on Time?
Not relevant at this stage.

Contact Details for Project Information
Danakali, tel +61 8 6315 1444, fax +61 8 9467 9119 or email info@danakali.com.