TIDMDNK
RNS Number : 4119V
Danakali Limited
03 December 2019
Announcement Tuesday, 3 December 2019
============= =========================
US$50M strategic investment from AFC
-- AFC has agreed to make a US$50M (A$74M) strategic equity
investment in Danakali
-- Subscription price of A$0.60 per Share represents a 5%
discount to Danakali's 30-day VWAP
-- Facilitates commencement of project execution activities
-- On track for production during 2022
Danakali Limited (ASX: DNK, LSE: DNK, Danakali or the Company)
is pleased to announce that it has entered into a Subscription
Agreement with Africa Finance Corporation (AFC) for a placement of
fully paid ordinary shares (Shares) to raise US$50M
(Placement).
The Placement will be part of the overall funding package used
for the development and construction of the Colluli Sulphate of
Potash Project (Colluli or the Project) in the Danakil Depression
region of Eritrea, East Africa. Colluli is fully permitted and
construction ready, with both the EPCM contract and senior debt
documentation well advanced. The Placement facilitates commencement
of project execution activities which places Colluli on track for
production during 2022.
The Placement takes AFC's total participation to US$150M (US$50M
in Danakali equity plus US$100M of credit approved Colluli Mining
Share Company (CMSC) senior debt) demonstrating their major and
long-term commitment to the Project, Danakali and Eritrea.
Key terms of the Placement
The Placement will be undertaken in two tranches to raise a
total of US$50M (A$74M) (subject to satisfaction or waiver of
conditions precedent, set out in Appendix B)
-- The first tranche will consist of approximately 53 million
new Shares issued to AFC at an issue price of A$0.60 per Share to
raise A$31.8 million (US$21.5 million) (Tranche 1); and
-- The second tranche, which is subject to Danakali shareholder
approval and execution of senior debt documentation, will consist
of approximately 70 million new Shares at the same issue price as
Tranche 1 to raise the remaining A$42.0 million (US$28.5 million)
(Tranche 2).
The offer price of A$0.60 per Share represents a:
-- 6% discount to Danakali's latest close price; and
-- 5% discount to Danakali's 30-day VWAP.
AFC has received confirmation of approval from the Australian
Foreign Investment Review Board (FIRB) of its application in
relation to the Placement.
The Placement, upon completion of both tranches (and assuming no
other issues of Shares take place prior to completion of the issue
of Shares under Tranche 1) would result in AFC holding 32% of
Danakali. As part of its equity investment, AFC will be granted the
right to nominate up to two directors to Danakali's Board.
Maintenance of these nominee Board positions will rely on AFC's
Danakali ownership remaining above certain thresholds.
A summary of the key terms of the Placement and Subscription
Agreement, including conditions precedent, is set out in Appendix
B.
Chief Executive Officer of Danakali, Niels Wage, said: "I am
very pleased to have secured AFC as a strategic equity investment
partner. It marks a significant milestone for Danakali and
continues our momentum towards financial close. Danakali has made
good progress over the past 12 months having secured a large
proportion of the development capex for Module I and demonstrated a
sustainable approach to the future development of Colluli. An
investor with the reputation of AFC is a great endorsement of the
project and will provide a strong platform to attract further
investment. We are excited to commence project execution activities
and look forward to providing updates to our shareholders and other
stakeholders."
Chief Executive Officer of AFC, Samaila D. Zubairu, said: "We
assess hundreds of potential investment opportunities across Africa
every year. Colluli stands apart from other opportunities due to
its long life, low cost, low technical risk and proximity to
infrastructure. We look forward to a cooperative alliance with
Danakali in delivering the Colluli Sulphate of Potash Project."
Indicative timetable
The issue of Shares to AFC under Tranche 1 is scheduled to
settle on or about 9 December 2019. Admission of such Shares to the
Official List (Standard Segment) and to trading on the Main Market
of the London Stock Exchange is expected on or about 9 December
2019.
Completion of AFC's subscription for Tranche 2 is subject to
conditions precedent, including the approval of Danakali
shareholders at a general meeting expected to be held in February
2020 and execution of the final US$200M CMSC senior debt facility
with AFC and Afreximbank (the Facility) documentation. Danakali
will dispatch a Notice of Meeting to shareholders containing
detailed information about the funding package and include an
Independent Expert's Report (IER).
Events Expected date
============================================== ===================================
Tranche 1 settlement
* On or about 9 December 2019
---------------------------------------------- -----------------------------------
Notice of Meeting materials (including IER)
dispatched to shareholders * Mid to late January 2020
---------------------------------------------- -----------------------------------
General Meeting to approve Tranche 2 share * Late February 2020
placement
---------------------------------------------- -----------------------------------
Settlement of New Shares issued under Tranche * Early March 2020
2
============================================== ===================================
The above timetable is indicative only and subject to change
without notice.
Remaining project financing requirements
Danakali has previously announced credit approval for the
US$200M CMSC senior debt Facility from AFC and Afreximbank (refer
ASX announcement dated 5 August 2019). The Facility, together with
the Placement, represents the majority of Colluli's Module I
project funding requirements. Completion of Tranche 2 of AFC's
investment is conditional upon the execution of definitive
documentation for the Facility.
The Company now has a clear pathway towards completing all
funding for the Project and is currently well progressed with
assessment of a range of options for the balance required.
Advisers
Standard Chartered Bank is acting as corporate financial adviser
to Danakali.
Norton Rose Fulbright is acting as legal adviser to
Danakali.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation. Upon the publication of this
announcement via Regulatory Information Service, this inside
information is now considered to be in the public domain.
Announcement authorised for release by board of Danakali
Ltd.
For more information, please contact:
Danakali
Niels Wage William Sandover
Chief Executive Officer Head of Corporate Development &
+61 8 6189 8635 External Affairs
+61 499 776 998
Corporate Broker - Numis Securities UK IR/PR - Instinctif Partners
John Prior / James Black / Paul Mark Garraway / Sarah Hourahane
Gillam / Dinara Shikhametova
+44 (0)20 7260 1000 danakali@instinctif.com
+44 (0)207 457 2020
Visit the Company's website: www.danakali.com
Follow Danakali on LinkedIn:
www.linkedin.com/company/danakali-limited
Subscribe to Danakali on YouTube:
www.youtube.com/channel/UChGKN4-M4lOvPKxs9b-IJvw
Appendix A: About AFC
AFC is a private sector-led investment bank and development
finance institution created to help mobilise and channel required
capital towards driving Africa's economic development. AFC offers a
unique value proposition as an Africa-focused multilateral
financial institution covering 3 complementary service areas:
project development, financial advisory and principal investing. In
addition to these core services AFC has significant experience and
expertise in project management and will ensure that the objectives
of all parties involved are met through careful monitoring of the
project from beginning to end. AFC's core mission is to address
Africa's infrastructure development needs while seeking a
competitive return on capital for its shareholders.
For more information, visit www.africafc.org.
Appendix B: Summary of AFC Subscription Agreement
Term Description
======================= ===============================================================
Tranche 1
======================= ===============================================================
Amount * A$31.8M / US$21.5M
----------------------- ---------------------------------------------------------------
Subscription price * A$0.60/share
----------------------- ---------------------------------------------------------------
Number of shares * 52,958,908
----------------------- ---------------------------------------------------------------
Conditions precedent Tranche 1 is subject to the following conditions:
* no insolvency event occurring in relation to any of
Danakali or its group companies; and
* no indication being received from ASX that it will
refuse to grant quotation of Shares issued under the
Subscription Agreement or otherwise make quotation
conditional
----------------------- ---------------------------------------------------------------
Settlement * On or about 9 December 2019
======================= ===============================================================
Tranche 2
======================= ===============================================================
Amount * A$42.0M / US$28.5M
----------------------- ---------------------------------------------------------------
Subscription price * A$0.60/share
----------------------- ---------------------------------------------------------------
Number of shares * 70,042,323
----------------------- ---------------------------------------------------------------
Conditions precedent Tranche 2 is subject to the following conditions:
* Danakali shareholder approval (for the purposes of
item 7, section 611 of the Corporations Act);
* the IER concluding that the issue of the Tranche 2
Subscription Shares is either (i) fair and reasonable,
or (ii) not fair but reasonable;
* no indication being received from ASX that it will
refuse to grant quotation of Shares issued under the
Subscription Agreement or otherwise make quotation
conditional;
* the Company having not used the Tranche 1 proceeds
for any purpose other than agreed between Danakali
and AFC;
* execution of senior debt documentation in relation to
the Facility; and
* Tranche 1 completion having occurred
----------------------- ---------------------------------------------------------------
Strategic arrangements
* AFC will have a right to nominate a maximum of two
Directors to the Danakali Board as follows:
_ AFC holding between 10% and 15% of Danakali,
one director; and
_ AFC holding more than 15% of Danakali, one additional
director
* Subject to ASX granting a waiver from Listing Rule
6.18, anti-dilution right to participate in any new
issues of shares in Danakali on the same terms as
other participants provided that AFC's shareholding
remains at 10% or more
======================= ===============================================================
- - -S - - -
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 potash deposit. The resource is amenable to open
pit 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, together the
Mandated Lead Arrangers), have obtained formal credit approval
to provide CMSC with US$200M in senior debt finance.
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.
Competent Persons Statement (Sulphate of Potash and Kieserite
Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and
Inferred Mineral Resource estimate of 1,289Mt @11% K(2) 0 Equiv.
and 7% Kieserite. The Mineral Resource contains 303Mt @ 11% K(2) 0
Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K(2) 0
Equiv. and 7% Kieserite of Indicated Resource and 35Mt @ 10% K(2) 0
Equiv. and 9% Kieserite of Inferred Resource.
The information relating to the Colluli Mineral Resource
estimate is extracted from the report entitled "Colluli Review
Delivers Mineral Resource Estimate of 1.289Bt" disclosed on 25
February 2015 and the report entitled "In excess of 85 million
tonnes of Kieserite defined within Colluli Project Resource adds to
multi agri-commodity potential" disclosed on 15 August 2016, which
are available to view at www.danakali.com.au. The Company confirms
that it is not aware of any new information or data that materially
affects the information included in the original market
announcement and, in the case of estimates of Mineral Resources or
Ore Reserves, that all material assumptions and technical
parameters underpinning the estimates in the relevant market
announcement continue to apply and have not materially changed. The
Company confirms that the form and context in which the Competent
Person's findings are presented have not been materially modified
from the original market announcement.
Competent Persons Statement (Sulphate of Potash Ore Reserve)
Colluli Proved and Probable Ore Reserve is reported according to
the JORC Code and estimated at 1,100Mt @ 10.5% K(2) O Equiv. The
Ore Reserve is classified as 285Mt @ 11.3% K(2) O Equiv. Proved and
815Mt @ 10.3% K(2) O Equiv. Probable. The Colluli SOP Mineral
Resource includes those Mineral Resources modified to produce the
Colluli SOP Ore Reserves.
The information relating to the January 2018 Colluli Ore Reserve
is extracted from the report entitled "Colluli Ore Reserve update"
disclosed on 19 February 2018 and is available to view at
www.danakali.com.au. The Company confirms that it is not aware of
any new information or data that materially affects the information
included in the original market announcement and, in the case of
estimates of Mineral Resources or Ore Reserves, that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. The Company confirms that the form and context
in which the Competent Person's findings are presented have not
been materially modified from the original market announcement.
Competent Persons Statement (Rock Salt Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and
Inferred Mineral Resource estimate of 347Mt @ 96.9% NaCl. The
Mineral Resource estimate contains 28Mt @ 97.2% NaCl of Measured
Resource, 180Mt @ 96.6% NaCl of Indicated Resource and 139Mt @
97.2% NaCl of Inferred Resource.
The information relating to the Colluli Rock Salt Mineral
Resource estimate is extracted from the report entitled "+300M
Tonne Rock Salt Mineral Resource Estimate Completed for Colluli"
disclosed on 23 September 2015 and is available to view at
www.danakali.com.au. The Company confirms that it is not aware of
any new information or data that materially affects the information
included in the original market announcement and, in the case of
estimates of Mineral Resources or Ore Reserves, that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. The Company confirms that the form and context
in which the Competent Person's findings are presented have not
been materially modified from the original market announcement.
AMC Consultants Pty Ltd (AMC) independence
In reporting the Mineral Resources and Ore Reserves referred to
in this public release, AMC acted as an independent party, has no
interest in the outcomes of Colluli and has no business
relationship with Danakali other than undertaking those individual
technical consulting assignments as engaged, and being paid
according to standard per diem rates with reimbursement for
out-of-pocket expenses. Therefore, AMC and the Competent Persons
believe that there is no conflict of interest in undertaking the
assignments which are the subject of the statements.
Quality control and quality assurance
Danakali exploration programs follow standard operating and
quality assurance procedures to ensure that all sampling techniques
and sample results meet international reporting standards. Drill
holes are located using GPS coordinates using WGS84 Datum, all
mineralisation intervals are downhole and are true width
intervals.
The samples are derived from HQ diamond drill core, which in the
case of carnallite ores, are sealed in heat-sealed plastic tubing
immediately as it is drilled to preserve the sample. Significant
sample intervals are dry quarter cut using a diamond saw and then
resealed and double bagged for transport to the laboratory.
Halite blanks and duplicate samples are submitted with each
hole. Chemical analyses were conducted by Kali-Umwelttechnik GmBH,
Sondershausen, Germany, utilising flame emission spectrometry,
atomic absorption spectroscopy and ion chromatography.
Kali-Umwelttechnik (KUTEC) has extensive experience in analysis of
salt rock and brine samples and is certified according by DIN EN
ISO/IEC 17025 by the Deutsche Akkreditierungsstelle GmbH (DAR). The
laboratory follows standard procedures for the analysis of potash
salt rocks chemical analysis (K(+) , Na(+) , Mg(2+) , Ca(2+) ,
Cl(-) , SO(4) (2-) , H(2) O) and X-ray diffraction (XRD) analysis
of the same samples as for chemical analysis to determine a
qualitative mineral composition, which combined with the chemical
analysis gives a quantitative mineral composition.
Forward looking statements and 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.
All statements in this document, other than statements of
historical facts, that address future production, project
development, reserve or resource potential, exploration drilling,
exploitation activities, corporate transactions and events or
developments that the Company expects to occur, are forward looking
statements. Although the Company believes the expectations
expressed in such statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those in
forward-looking statements.
Factors that could cause actual results to differ materially
from those in forward-looking statements include market prices of
potash and, exploitation and exploration successes, capital and
operating costs, changes in project parameters as plans continue to
be evaluated, continued availability of capital and financing and
general economic, market or business conditions, as well as those
factors disclosed in the Company's filed documents.
There can be no assurance that the development of Colluli will
proceed as planned. Accordingly, readers should not place undue
reliance on forward looking information. Mineral Resources and Ore
Reserves have been reported according to the JORC Code, 2012
Edition. 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.
Mineral Resource, Ore Reserve, production target, forecast
financial information and financial assumptions made in this
announcement are consistent with assumptions detailed in the
Company's ASX announcements dated 25 February 2015, 23 September
2015, 15 August 2016, 1 February 2017, 29 January 2018, and 19
February 2018 which continue to apply and have not materially
changed. The Company is not aware of any new information or data
that materially affects assumptions made.
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.
The distribution of this announcement outside the United Kingdom
may be 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
AGRCKBDKCBDDOBK
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