Danakali strikes Colluli sales deal

27th January 2023 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

Danakali strikes Colluli sales deal

Photo by: Bloomberg

ASX-listed Danakali has struck a $166- million binding agreement 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 nonbinding term sheet with Sichuan Road and Bridge Group.

Under the terms of the share sale agreement, Sichuan Road and Bridge Group will 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 this month 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 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.