PERTH (miningweekly.com) – ASX-listed Danakali has struck a $166-million binding share sale agreement (SSA) with Sichuan Road and Bridge Group to sell its 50% shareholding in the Colluli sulphate of potash (SoP) project, in Eritrea.
A potential sale was flagged in October last year after Danakali inked a non-binding term sheet with Sichuan Road and Bridge Group.
Under the terms of the SSA, Sichuan Road and Bridge Group would acquire all of Danakali’s shares in the Colluli Mining Share Company (CMSC) as well as a shareholder loan owned by CMSC to Dankali, for $135-million and $31-million respectively.
Danakali told shareholders on Thursday that the agreement provided shareholders with an attractive post-tax value outcome in the absence of a full equity funded solution for the Colluli potash project. The transaction will result in Danakali receiving $121-million net of all government taxes.
The transaction will be subject to a number of conditions, including shareholder and Chinese regulatory approvals, as well as approval from the Eritrean government, which holds the remaining 50% interest in the Colluli project.
Following the completion of the transaction, Danakali plans to distribute 90% of the net proceeds to shareholders, and will continue as a listed company to identify new projects and potential new alternative growth opportunities.
The transaction is planned for completion in the second quarter of this year.
Colluli is estimated to have a 1.1-billion-tonne ore reserve and will have a mine life of nearly 200 years.
Front-end engineering design studies estimate that the Phase 1 project will require a capital investment of $302-million to support Module 1, producing 472 000 t/y of SoP, while a further $202-million investment will be required for Module 2 development, increasing SoP production to 944 000 t/y.