Eritrea's Colluli Mine To Cost US$298 million

By ProactiveInvestors

Definitive Feasibility Study (DFS) results for Danakali’s (ASX:DNK) Colluli potash project in Eritrea have improved the proposed mine’s already attractive investment profile with a 30% reduction in initial development capital requirements to US$298 million.

Phase 2 development capital was also decreased by 38% to US$175 million, with the majority expected to be funded by operating cashflows.

This more economic footing allowed for a market-leading capital intensity of US$702 per tonne of sulphate of potash (SOP) and supported other outstanding study results including establishment of a US$860 million net present value, a 29% internal rate of return and a payback period of only 3.5 years.

SOP is a high-quality potash fertiliser which represents Colluli’s primary output stream and carries a price premium due to its practicality in low-rainfall regions.

The DFS has projected annualised SOP production at Colluli to total 425,000 tonnes during phase 1 and 850,000 tonnes thereafter.

Other key study outcomes included average mine gate costs of US$141 per tonne of SOP and average total cash costs US$227 per tonne of SOP during phases 1 and 2 of the operation.

These figures establish Colluli as being in the bottom quartile of the mine gate costs curve.

Annual average free cashflows were calculated to grow from an initial US$81 million to US$166 million in phases 1 and 2 as undiscounted after-tax cashflows would warmed up to US$9.6 billion.

This low-capex, high-margin project was projected to be capable of supporting a mine life of more than 200 years with 1.1 billion tonnes of ore reserves

The DFS sets up an even firmer marketing platform for Danakali as the company continues preliminary funding discussions continue with offtakers, strategic partners and financiers.

A mining licence application process is planned to be underway in Q1 2016 and commissioning is targeted for Q4 2018.

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