REG - Danakali Limited - AFC investment update

DanakaliAnnouncement

26/10/2020 07:00

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RNS Number : 1302D  Danakali Limited  26 October 2020

 Announcement  Monday, 26 October 2020

AFC investment update

Danakali Limited (ASX: DNK, LSE: DNK, "Danakali" or the "Company"), provides
today an update on Tranche 2 of Africa Finance Corporation's ("AFC") equity
funding ("Tranche 2"), which was first announced on 3 December 2019.

 

Danakali and AFC have been working in good faith to satisfy the conditions
precedent for AFC's Tranche 2 of US$28.5m. The Board of Danakali now considers
it unlikely that all such conditions precedent will be satisfied prior to the
deadline of 21 November 2020 (refer announcement 1 June 2020). Therefore,
Tranche 2 will not complete in accordance with the terms of the subscription
agreement.

 

As an international financial institution with a mandate to support
infrastructure and industrial development in Africa, AFC's support of the
development of the Colluli Project remains firm. As Danakali's largest
shareholder and one of the two mandated lead arrangers and lender under the
Colluli Project's US$200m Debt Financing, AFC is in discussion with Danakali
with a view to finding a funding structure suitable to both parties that will
ensure the commencement of construction of the project as soon as possible.

 

Samaila D Zubairu, President and CEO of AFC, commented: "AFC's mandate is to
develop Africa and ensure that more of the value of the continent's resources
benefit the continent's people through the creation of jobs and opportunities
along with improving living standards. AFC are fully committed to seeing
Colluli developed as quickly and safely as possible and look forward to
working with the key stakeholders, ENAMCO, Afreximbank and Danakali on this
important objective and ensure the project is fully funded as soon as possible
so production commences in 2022."

 

 

Announcement authorised for release by the Board of Danakali.

 

For more information, please contact:

 

 Danakali
 Niels Wage                                  Mark Riseley

 Chief Executive Officer / +61 8 6189 8635   Corporate Development Manager / +61 8 6189 8635
 Corporate Broker - Canaccord                UK IR/PR - Instinctif Partners
 James Asensio/Angelos Vlatakis              Mark Garraway / Dinara Shikhametova / Sarah Hourahane

 +44 (0)20 7523 4680                         danakali@instinctif.com / +44 (0)207 457 2020

Visit the Company's website: www.danakali.com (http://www.danakali.com)

Follow Danakali on LinkedIn: www.linkedin.com/company/danakali-limited
(https://www.linkedin.com/company/danakali-limited/)

Subscribe to Danakali on YouTube:
www.youtube.com/channel/UChGKN4-M4lOvPKxs9b-IJvw
(http://www.youtube.com/channel/UChGKN4-M4lOvPKxs9b-IJvw)

 

 

 

 

 

About Danakali

 

Danakali Limited (ASX: DNK, LSE: DNK) (Danakali, or the Company) is an ASX-
and LSE-listed potash company focused on the development of the Colluli
Sulphate of Potash Project (Colluli or the Project). The Project is 100% owned
by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between
Danakali and the Eritrean National Mining Corporation (ENAMCO).

 

The Project is located in the Danakil Depression region of Eritrea, East
Africa, and is ~75km from the Red Sea coast, making it one of the most
accessible potash deposits globally. Mineralisation within the Colluli
resource commences at just 16m, making it the world's shallowest known potash
deposit. The resource is amenable to open cut mining, which allows higher
overall resource recovery to be achieved, is generally safer than underground
mining, and is highly advantageous for modular growth.

 

The Company has completed a Front End Engineering Design (FEED) for the
production of potassium sulphate, otherwise known as Sulphate of Potash or
SOP. SOP is a chloride free, specialty fertiliser which carries a substantial
price premium relative to the more common potash type; potassium chloride (or
MOP). Economic resources for production of SOP are geologically scarce. The
unique composition of the Colluli resource favours low energy input, high
potassium yield conversion to SOP using commercially proven technology. One of
the key advantages of the resource is that the salts are present in solid form
(in contrast with production of SOP from brines) which reduces infrastructure
costs and substantially reduces the time required to achieve full production
capacity.

 

The resource is favourably positioned to supply the world's fastest growing
markets. A binding take-or-pay offtake agreement has been confirmed with
EuroChem Trading GmbH (EuroChem) for up to 100% (minimum 87%) of Colluli
Module I SOP production.

 

Development Finance Institutions, Africa Finance Corporation (AFC) and African
Export-Import Bank (Afreximbank), have obtained formal credit approval to
provide CMSC with US$200M in senior debt finance. The credit documentation was
executed in December 2019, allowing drawdown of CMSC senior debt on
satisfaction of customary conditions precedent. This represents the majority
of funding required for the development and construction of the Colluli. AFC
has invested US$21.5M (A$31.8M) in equity which allowed commencement of the
development.

 

Project execution has commenced and SOP production is expected during 2022.
The Company's vision is to bring Colluli into production using the principles
of risk management, resource utilisation and modularity, using the starting
module (Module I) as a growth platform to develop the resource to its full
potential.

 

 

Disclaimer

 

The information in this document is published to inform you about Danakali and
its activities. Danakali has endeavoured to ensure that the information
enclosed is accurate at the time of release, and that it accurately reflects
the Company's intentions. To the extent permitted by law, the Company accepts
no responsibility or liability for any losses or damages of any kind arising
out of the use of any information contained in this document. Recipients
should make their own enquiries in relation to any investment decisions.

 

 

No representation or warranty, express or implied, is or will be made by or on
behalf of the Company, and no responsibility or liability is or will be
accepted by the Company or its affiliates, as to the accuracy, completeness or
verification of the information set out in this announcement, and nothing
contained in this announcement is, or shall be relied upon as, a promise or
representation in this respect, whether as to the past or the future. The
Company and each of its affiliates accordingly disclaims, to the fullest
extent permitted by law, all and any liability whether arising in tort,
contract or otherwise which it might otherwise have in respect of this
announcement or any such statement.

 

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restricted by law and therefore any persons outside the United Kingdom into
whose possession this announcement comes should inform themselves about and
observe any such restrictions in connection with the distribution of this
announcement. Any failure to comply with such restrictions may constitute a
violation of the securities laws of any jurisdiction outside the United
Kingdom.

 

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