Name of the Project
Colluli potash project.

Location
Danakil, Eritrea.

Client
The Colluli Mining Share Company (CMSC) is a joint venture (JV) between the Eritrean National Mining Company (Enamco) and Danakali (previously South Boulder Mines), with each company having an equal stake in the company.

CMSC is responsible for the development of the project.

Project Description
The mine life of Colluli currently exceeds 200 years, facilitated by the 1.11-billion-tonne ore reserve.

The Colluli resource comprises three potassium-bearing salts – sylvinite, carnallitite and kainitite.

These salts are suitable for high-yield, low-energy input and the production of potassium sulphate (SOP) – a high-quality potash fertiliser with a price premium over the more common potassium chloride.

The project will be completed in phases. The first phase will comprise 425 000 t/y of SOP, with the second phase adding 425 000 t/y of SOP.

The operation will use openpit mining methods to take advantage of Colluli’s shallow mineralisation, which starts at 16 m.

The depth of mineralisation makes it the shallowest known evaporite project in the world.

The project will include ore-processing facilities and evaporation ponds at the mine site, an upgraded 50 km product haulage road connecting the mine site to the main road to the Port of Massawa, a 85 km desalinated water pipeline from the coast to the mine site, and an accommodation camp and administration facility.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
The project has an after-tax net present value, at a 10% real discount rate, of $860-million and an internal rate of return of 29%, with the payback period for Phase I estimated at 3.5 years.

Value
Phase I of the project is estimated at $298-million.

The capital cost for Phase II is estimated at $175-million.

Duration
Phase I commissioning is currently targeted for the fourth quarter of 2018.

Phase II will start production in Year 6.

Latest Developments
The Eritrean Energy and Mines Ministry has awarded Danakali a mining licence for its Colluli tenements, following the signing of a mining agreement.

The licence allows for the exploitation of potassium, calcium, sodium and magnesium salts, as well as bromine from the Colluli resource.

The licence spans more than 60 km2 of the 100 km2 agreement area, and represents more than 60 years of the 200-year mine life determined in the Colluli definitive feasibility study.

The additional licences could be applied for within the agreement area, as required, to sustain or grow the operations.

Meanwhile, the mining agreement inked with the Eritrean Ministry of Energy and Mines provides within the agreement area, the exclusive exploitation rights of all mineral resources, the exclusive right to apply for and be granted one or more mining licences, and the exclusive right of land use over the life of the resource for CMSC.

Provided that the conditions of the mining licences are met, the agreement is applicable to the development and operational phases, and the reclamation and closure of the project area.

Further, it allows CMSC the freedom to build all industrial, administrative, residential, medical and other buildings, as well as facilities necessary for a mining operation, and subject to applicable laws, it also allows the company access to transport infrastructure, port facilities, power, fuel, telephone or other communication, and water, as well as services owned or provided by government.

The agreement also has provisions for offshore accounts, remittances of after-tax profits and dividends accruing from the investment, proceeds from asset sales, and principal, interest and amounts due on foreign loans.

The Phase 1 development will include a project-owned and -built road, as well as a 900 000 t/y product export terminal.
 
Key Contracts and Suppliers
Lycopodium (PFS).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Danakali, tel +61 8 6315 1444, fax +61 8 9486 7093 or email info@danakali.com.