[Video] Eritrea’s World Class Colluli Potash Project

Seven quick facts on the Colluli Potash Project:

1. DFS confirms low capex, high margin, long life project
2. Phase I development capital reduced from PFS by over 30% to US$298m
3. Capital payback period of 3.5 years
4. Project post tax NPV of US$860m and IRR of 29%
5. Colluli in the bottom quartile of the mine gate cost curve
6. 1.1 billion tonnes ore reserve, with expected 200+ year mine life
7. DFS demonstrates Colluli is one of the most attractive potash projects in the world

By Danakali Ltd

Danakali Limited (ASX:DNK) is pleased to announce that it will host a visit to the Colluli potash project site in Eritrea, East Africa from the 20th to the 22nd June. The visit team will comprise the South African Ambassador to Eritrea, Prof. M Iqbal D Jhazbhay and Baillieu Holst analyst, Warren Edney.

The trip will include a visit to the port of Massawa, which is the designated export facility for the first stage of the Colluli potash project development. Baillieu Holst initiated coverage on Danakali earlier in June. Somers and Partners mining analyst, Duncan Hughes visited the Colluli site and port of Massawa in February.

An additional visit to the Colluli site for mining analysts and diplomats is currently being planned for October of this year.

The Colluli project definitive feasibility study (DFS) was completed in November 2015, and is currently awaiting mining license approvals. Funding discussions are underway and the company has signed memorandums of understanding for 800,000 tonnes of sulphate of potash per annum.

The DFS indicates industry leading capital intensity, bottom quartile operating costs and an ore reserve of 1.1 billion tonnes.

The Colluli Project Summary

The Colluli deposit is located in the Danakil region of Eritrea, East Africa. Colluli is approximately 177km south-east of the capital (350km by road), Asmara and 180km from the port of Massawa (230km by road), which is Eritrea’s key import/export facility.

The project is a joint venture between ENAMCO and Danakali with each having 50% ownership of the joint venture company, the Colluli Mining Share Company (CMSC). CMSC is responsible for the development of the Project.

The Danakil region is an emerging potash province and one of the largest unexploited potash basins globally. To date, over 6Bt of potassium bearing salts suitable for the production of potash fertilisers have been identified in the region and the potash potential has attracted a number of major international potash producers, including both Yara International and ICL.

The Colluli resource is located approximately 75km from the Red Sea coast, and mineralisation commences at just 16m below surface, making it one of the most accessible potash deposits globally.

Shallow mineralisation makes the resource amenable to open cut mining: a proven, high productivity mining method. Open cut mining provides higher resource recoveries relative to underground and solution mining methods, is generally safer, and can be more easily expanded.

The Colluli resource comprises three potassium bearing salts in solid form: sylvinite, carnallitite and kainitite. These salts are suitable for high yield, low energy production of SOP, which is a high quality potash fertiliser carrying a price premium over the more common MOP. Potassium sulphate has limited production centres around the world and is suitable for application to fruits, vegetables, coffee plants and other chloride intolerant crops.

The salt composition in the Danakil region also provides the ability to produce a suite of potash products that not only includes potassium sulphate, but also potassium magnesium sulphate and potassium chloride. Such potash product diversification cannot be achieved by any other region in the world.

The JORC-2012 compliant mineral resource estimate for Colluli stands at 1.289Bt @ 11% K2O for 260Mt of contained SOP. The JORC-2012 compliant ore reserve estimate for Colluli stands at 1.113Bt @ 10% K2O for 216Mt of contained SOP. The Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves.

A definitive feasibility study (DFS) for the production of potassium sulphate was completed in November 2015. The DFS utilises a modular development approach which mitigates risk while enhancing fundability and economic return. Phase I is expected to produce approximately 425ktpa of premium SOP product with commissioning currently targeted for Q4 2018. Phase II, commencing production in year 6, will increase total SOP production to 850ktpa.

Phases I and II are designed to create a platform for growth and generate cash flows to fund subsequent expansions, which have not been included in the DFS.

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