Danakali to sell its stake in Eritrea potash project
Fertiliser exploration company Danakali on Monday announced the potential sale of its 50% interest in the Colluli sulphate of potash (SOP) project, in Eritrea, for $166-million before tax, sending the Australia-listed company’s stock surging 25%.
Danakali, which owns the project in a 50:50 partnership with the Eritrean National Mining Company, has executed a non-binding term sheet with Sichuan Road and Bridge Group.
The term sheet is subject to the Chinese company’s satisfactory completion of a due diligence and the parties entering into definitive agreements.
The deal, net of all government taxes, means Danakali will receive about $121-million. If the conditions are satisfied or waived, Danakali will distribute 90% of the net proceeds to its shareholders and continue as a listed company to identify new projects and growth opportunities.
The deal is expected to be finalised between March and May next year.
The company’s stock closed 25% higher at A$0.32 a share on Monday, having touched a high of A$0.36 a share earlier in the day.
The Colluli projects boasts a 1.1-billion tonne-ore reserve and an almost 200-year mine life.
A front-end engineering design study confirmed an advanced stage and economically attractive project. Module 1 development capital will be $302-million, with an incremental module 2 development capital will be $202-million.
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