Colluli is where the value begins

Colluli -There is only one

Danakali (ASX: DNK) is the 50% owner of the Colluli Potash Project located in Eritrea. The Company is developing Colluli in partnership with the Eritrean National Mining Corporation (ENAMCO). Colluli boasts a 1.1Bt Ore Reserve and almost 200-year mine life, shallow mineralisation allowing low-cost open-cut mining, simple, proven, low-cost processing, favourable logistics, expansion, diversification and multi-commodity potential. Economic resources for Sulphate of Potash (SOP) production are scarce, and Colluli is favourably positioned to supply the world’s fastest-growing SOP markets. A Front-End Engineering Design (FEED) study confirmed an advanced stage and economically attractive Project. A binding offtake agreement for up to 100% of Module I SOP production, and a US$200M debt financing term sheet have been executed, and all material permits are in place.

Superior Economics

Colluli is the premier greenfield development project globally. It has industry-leading capital intensity, forecast first quartile operating costs, and highly attractive economic returns.

Colluli is without peer on capital intensity and production capacity with the ability to expand rapidly.
Under the current FEED study for Module 1 and 2, Danakali will be one of the lowest cost SOP producers and with the development of the loading facility at Anfile Bay costs will decrease further as transportation costs are reduced.

Unique deposit

The Danakil Depression is located in the Southern region of Eritrea and extends over 300km into Eastern Ethiopia. It hosts the youngest evaporite deposit and the largest unexploited potash basin in the world. Over 6Bt of potassium bearing salts suitable for the production of potash fertilisers have been identified in the region to date.

Substantial deposit

The Colluli deposit comprises a massive JORC-2012 compliant Ore Reserve estimate of 1,100Mt @ 10.5% K2O for 203Mt of contained SOP equivalent, providing a mine life of almost 200 years

Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 1,289Mt @11% K20. The resource contains 303Mt @ 11% K2 0 of Measured Resource, 951Mt @ 11% K2 0 of Indicated Resource and 35Mt @ 10% K20 of Inferred Resource.

A favourable combination of salts

The Colluli resource contains kainitite, sylvinite and carnallitite ores. Sylvinite and carnallitite both produce potassium chloride, which is then combined with decomposed kainitite to form high purity potassium sulphate.

Extraction of the salts in solid form is a crucial positive differentiator of Colluli. All primary production of potassium sulphate from kainitite worldwide commence with low potassium content brines, which require substantial solar evaporation to generate a harvest salt for subsequent processing. In some cases, depending on the ambient conditions, this process can take over two years. One of the essential benefits of having the salts in solid form is that it takes between 2-3 weeks to mine, process and transport our SOP to Massawa Port. The benefits of this means we generate cash flow much earlier and more predictably relative to solution mining or brine operations. These alternative producers require substantial lead times to generate their harvest salts for processing.

Shallowest known evaporite deposit globally

With mineralisation commencing at just 16m, the Colluli resource is the shallowest known evaporite deposit globally and is amenable to open-cut mining. Open-cut mining is a proven mining method for salts, and it’s safer and more cost-effective than underground mining which allows for better overall resource recovery. In addition to these benefits our grade control drilling provides us to approach the open cut mine plan with a high degree of selectivity and certainty. In turn the well-defined geological features support our ability to maximise the potential from this the multi salt deposit. Surface mining allows controlled extraction, predictable production rates and efficient stockpiling of additional economic salts know to us.

High purity product

Test work on the Colluli salts has been concluded and the process flow design frozen which indicates the Colluli process using filtered sea water will produce SOP at volumes we expect and at the high-grade spec the world requires.  The Colluli process is expected to generate a product with a purity of 94.5%. Standard, granular and soluble products can be produced for distribution to the market. Pilot tests from the Colluli salts have generated product samples for marketing purposes which are now being distributed to prospective customers.

Approximately 4 tonnes of Colluli drill core material have been processed at the Saskatchewan Research Council (SRC) in Canada by way of specific bench testing which has been extremely successful. Over 100kg of Colluli product was tested at Ludman Industries in the USA for product compaction behaviour. Materials handling trials have also been completed to determine the anti-caking requirements for the final SOP product.

Strategic location

Colluli is located in the Danakil Depression region of Eritrea and is approximately 230km by road southeast of the port of Massawa, which is Eritrea’s key import/export facility. Eritrea’s north-eastern and eastern parts have an extensive coastline along the Red Sea, strategically located along the Maritime Silk Road. Colluli is located about 75 kilometres from the Red Sea coast, making it among the most accessible premium potash deposits globally. The proximity to the coast and the established port infrastructure in the Port of Massawa gives Colluli unrivalled access to global export markets, and it also decreases logistics costs from the mine gate onto the ship – estimated at US$73/t. Installation of an export terminal at Anfile Bay would decrease the length of the land transport route from 230 to only 87 km, thus further lowering the logistics costs required to satisfy the multi-commodity trade in and out of Eritrea.

Colluli is located in the Danakil Depression region of Eritrea and is approximately 230km by road southeast of the port of Massawa, which is Eritrea’s key import/export facility. Eritrea’s north-eastern and eastern parts have an extensive coastline along the Red Sea, strategically located along the Maritime Silk Road. Colluli is located about 75 kilometres from the Red Sea coast, making it among the most accessible premium potash deposits globally. The proximity to the coast and the established port infrastructure in the Port of Massawa gives Colluli unrivalled access to global export markets, and it also decreases logistics costs from the mine gate onto the ship. Installation of an export terminal at Anfile Bay would decrease the length of the land transport route from 230 to only 87 km, thus further lowering the logistics costs required to satisfy the multi-commodity trade in and out of Eritrea. Colluli is positioned very close to vital potash markets. 

This geographical advantaged is unique. Demand for fertiliser is driven by population and economic growth which directly translates to food demand. Whilst SOP demand is population growth story it is more of an economic growth story and the African continent is seen to be where the majority of the world’s economic growth will occur in the coming decades. Over the next three decades, almost 95% of the population growth will occur in Africa, India, and South-East Asia. The relative location of the Colluli resource to these critical markets gives it a significant logistics advantage and unrivalled access to the potash markets of the future.

Significant upside

Colluli has significant multi-commodity potential presenting major additional value upside. The potassium salt composition in the resource provides the option to diversify the potash product suite as the Project grows. The Project has unrivalled potash product versatility. Potash products including SOP, MOP, and SOP-M all have the potential to be produced at Colluli. The production of other agricultural and salt products, including Rock Salt, Kieserite, Gypsum and Magnesium Chloride, is also possible from the Colluli resource. A port development at Anfile Bay could assist in unlocking this potential.

The FEED Study

Front End Engineering Design (FEED) strongly confirms Colluli as one of the world’s most economically attractive, and fundable SOP greenfield development project. The FEED results and the recent completion of test work and additional verification provide a higher level of financial certainty to project financiers, further de-risking the investment proposition. It also provides off-takers with additional confidence on Project certainty and fundability, supporting the finalisation of binding bankable offtake agreements.

Offtake agreement

In June 2018, Danakali reached a binding take-or-pay offtake agreement with EuroChem Trading GmbH (EuroChem). Under the terms of the agreement, EuroChem will take, pay, market, and distribute up to 100% of the Colluli site’s SOP fertiliser production over a 10-year term, from the Project’s date of commissioning. The agreement can be further extended by three years if mutually agreed upon.

Following the agreement, Colluli’s position as an economically attractive SOP greenfield development project has been reinforced. EuroChem is an outstanding partner with global reach and extensive fertiliser capabilities. The agreement encourages the maximisation of netback pricing of SOP produced in the Colluli, which will become the first Africa-based fertiliser provider in the supply chain of EuroChem.

Additional details about the agreement are available in the following announcement >>