Danakali Ltd (ASX:DNK) LON:DNK) (OTCMKTS:SBMSF) continues to work closely with Africa Finance Corporation (AFC) to find a mutually suitable funding structure to begin construction of the Colluli Sulphate of Potash (SOP) Project in Eritrea, East Africa, as soon as possible.
AFC president and CEO Samaila D Zubairu said: “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.
“AFCis fully committed to seeing Colluli developed as quickly and safely as possible and looks 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.”
Tranche two condition unmet
It is unlikely that all the conditions precedent for tranche two of AFC’s equity funding of US$42.8 million will be satisfied prior to the deadline of November 21, 2020.
While Danakali and AFC have been working in good faith to satisfy the conditions, tranche two 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.
AFC is also Danakali’s largest shareholder and one of the two mandated lead arrangers and lender under the Colluli Project’s US$200 million debt financing.
Colluli SOP Project
The Colluli SOP project is around 75 kilometres from the Red Sea coast and hosts mineralisation at just 16 metres, making it one of the most accessible potash deposits globally as well as the world’s shallowest known potash deposit.
This 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) and has secured binding take-or-pay offtake agreement with EuroChem Trading GmbH (EuroChem) for up to 100% (minimum 87%) of Colluli Module I SOP production.
Pending Danakali and AFC finding a mutually suitable funding structure and the commencement of construction, SOP production anticipated during 2022.