Name of the Project
Colluli sulphate of potash (SoP) project.

Location
The project is located in the Danakali Depression region of 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 SoP greenfield development project worldwide. Colluli is also the closest known SoP deposit to a coastline anywhere in the world, only 75 km from the Red Sea.
 

At FEED production rates, the project has an expected mine life of 200 years. It is fully permitted, with the mining agreement and all requisite mining licences in place.

Colluli is the only known SoP resource that allows for the extraction of potassium salts in solid form that, in turn, allows for immediate processing, significantly less time between mining and revenue generation, and a reduction of the evaporation pond’s footprint, which contributes to a lower overall capital intensity.

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.

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

The mine will comprise an openpit, 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 that will be fed as ore feed into the processing plant and from which sylvite, carnallite and kainite will be extracted and mixed to produce SoP.

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.

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.

Potential Job Creation
The project is expected to create more than 500 permanent jobs for locals and Eritrean nationals in Module 1, and more than 650 (cumulative) jobs once Module 2 is online, and benefits from strong local support.

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 $200 million senior debt facility offered by Africa Finance Corporation (AFC) and African Export Important Bank (Afreximbank), as well as the equity investment from AFC, have provided the majority of the funding required for construction and project execution.

The incremental Module 2 development is expected to require an initial capital investment of $202-million.

Planned Start /End Date
Development started at the beginning of 2020, and production is expected to start in 2022, with ramp-up to full production in 12 months.

Latest Developments
Danakali’s subsidiary CMSC has made progress with the engineering, procurement, construction and management (EPCM) programme for the Colluli project.

The company has successfully executed Phase 1 of the EPCM programme, and has progressed to Phase 2.

Danakali has said that the delivery of Phase 1 is on schedule, on budget and in line with the front-end engineering design (FEED) of the project, taking Colluli closer to planned production in 2022.

Phases 1 and 2 of the EPCM programme involve mobilising the owner’s project team, finalising geotechnical work, buying critical equipment, such as a reverse osmosis plant, and investigating optimisation opportunities.

Phases 3 to 6 of the EPCM programme will entail finalisation of engineering design and development, finalisation of vendor packages, procurement, finalisation and award of site contracts, construction, commissioning and ramp-up.

The company expects delivery of the reverse osmosis plant by the third quarter of 2020. The plant will be used to provide potable water and water for construction purposes before the commissioning of the main Anfile Bay water intake area, which is being developed by consultancy DRA Global.

Danakali plans to host a site visit to Colluli for analysts and investors during the second quarter of 2020, upon finalisation of Phase 2 of the EPCM programme.

“The FEED pricing reconfirmation is under way, and we are pleased to have identified several optimisation and cost-saving opportunities, which we are incorporating in further planning. We have now started Phase 2 of the project development allowing us to further derisk the development by greater definition of cost, schedule and design,” project director Tony Harrington has said.

Key Contracts and Suppliers
The company and project have a strong network of partnerships, including EuroChem (ten-year binding offtake agreement with Danakali for up to 100% of Module I production), Africa Finance Corporation and Africa Export-Import Bank (provision of $200-million in senior debt finance to CMSC, with the AFC having also agreed to a $50-million strategic equity investment in Danakali); DRA Global (EPCM contractor), Inglett & Stubbs (preferred power contractor); EMW (preferred mining contractor); and Turner & Townsend (contract development)

Contact Details for Project Information
Danakali CEO Niels Wage, tel +61 8 6189 8635 or email info@danakali.com.