TIDMDNK
RNS Number : 6369D
Danakali Limited
30 October 2020
Announcement Friday, 30 October 2020
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QUARTERLY REPORT
For the period ending 30 September 2020
Danakali Limited (ASX: DNK, LSE: DNK, Danakali, or the Company)
is pleased to provide this quarterly update on the activities and
financial position of the Company and its Colluli Potash Project
(Colluli or the Project), located in Eritrea, East Africa. 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). CMSC is progressing to become a
leading producer and exporter of Sulphate of Potash (SOP), the
premium potash type.
Highlights
Approval of Mine Development
- Application of Mine Development accepted by the Eritrean
Ministry of Energy and Mines ( MoEM ), 21 July 2020
- MoEM consent includes granting of security for the Colluli
senior debt financing, with all the preconditions under the CMSC
Mining Agreement being satisfied, and extension to the date for
commencing Commercial Production to 15 Decemb er 2022
EPCM Progress
- DRA Global ( DRA ) deliverables provide greater certainty of
definition regarding the process plant and associated
infrastructure, and confirms the robustness of the 2018 FEED
results
- Water Intake Treatment Area ( WITA ) optimisation confirms
environmental benefits using beach well solution
- Dry harvesting confirmed for recovery pond salt harvesting, an
improved and simplifying solution
- Test work, necessary to finalise designs for the plant, commenced during Q3
Contracting progress
- Appointment of RA International ( RAI ) as Preferred Camp Provider - 20 August 2020
- RAI will deliver a pre-manufactured, high quality camp that is
containerized and ready to mobilize
Environmental, Social and Governance (ESG) progress
- Considerable progress advancing the CMSC operational management systems
- Systems align with the Equator Principles, IFC standards and World Bank Group Guidelines.
Key activities planned for Q4 2020
Project financing
- Advancement of project funding
- Continue to satisfy conditions precedent necessary to allow
CMSC senior debt drawdown
Project development
- Continue technical workstreams including optimizing process
test work and process streams
- Continue desktop study for further opportunities with the
Water Intake Treatment Area
Corporate & Financial
- Neil Gregson, highly experienced mining and financial
executive ex JP Morgan and Credit Suisse appointed as a
Non-Executive Director to Danakali Board
- Retirement from the Board of Andre Liebenberg and Paul
Donaldson
- Cash balance of A$12.4M as at 30 September 2020
Project
The on-site activities were recommenced, with the in-country
team completing its first site visit on 18 August 2020 after
COVID-19 restrictions were lifted in Eritrea.
EPCM Phase 2 completed
EPCM progress
EPCM Phase 1 and 2 review of FEED study deliverables and
procurement packages related to the process plant and associated
infrastructure work have been completed. The completion of these
Phases provides greater certainty of the scope of definition
following the third-party review by DRA Global .
Additional test work and potential opportunities continues
EPCM Phase 2 led to the identification of optimization
opportunities which continued to be investigated during Q3. A
direct result of this initiative has been the implementation of Dry
Harvesting, and a Beach Well Water Intake System at the WITA, which
has helped to reduce our environmental footprint and offset capital
cost.
The testing of filtered sea water, in leu of desalinated water
for SOP wash is currently under investigation.
Due to the COVID-19 travel restrictions CMSC have reviewed the
order of workstreams of the EPCM phases and continue to advance
test work to optimize process streams and flowsheets further. This
work would normally be in parallel with detailed engineering
commencement. CMSC continues to identify and implement improvement
opportunities wherever possible to advance the project during the
current COVID -19 challenges.
Mine Development Approval
On 21 July 2020 CMSC was informed of the acceptance of its
Notice of Commencement of Mine Development by the Eritrean Ministry
of Energy and Mines. In accepting this Notice, additional support
was shown to CMSC by granting time to mid-December 2022 to commence
commercial production which will be within 36 months from the date
of the submission of Notice. Furthermore, the Ministry of Energy
and Mines consented to the security being granted in support of
CMSC and to the account structure for the financing for the Colluli
Project.
The following preconditions were satisfied by CMSC in order for
the Notice to be issued:
-- Mining Agreement executed and Mining Licenses issued
-- Submissions and approval for Social & Environmental
Impact Assessments Study and Social & Environmental Management
Plans; and
-- Submission to the MoEM of Sulphate of Potash Production
forecasts over the Life of Mine (LOM).
Preferred Contractor for Accommodation Services
RA International (RAI) was appointed on 20 August as Preferred
Contractor for Accommodation and Support Services. The camp has
capacity for 600 persons with the ability to expand to 1,115
persons during the construction phase.
RAI will supply, deliver, and install the mine accommodation
camp as well as plant administration and service facilities for the
Colluli mine site. The very high quality camp is already built and
is stored in containers, ready to be mobilized at short notice.
WITA opportunity
The trade-off study on the WITA confirmed the use of a beach
well intake method versus a subsea pipeline as the preferred water
intake option, as announced on 2 September. This optimization
outcome was considered to benefit the environment by minimizing the
risk to the subsea and coastal habitats by avoiding onshore
pipeline construction and offshore installation. In addition to
these environment benefits, the optimized design eliminates
chlorine dosing and improves the quality of the discharge water as
the pre-treatment feedwater requires less chemicals.
Project Financing & Board Appointment
Investor Engagement
The Company has advanced its equity raising efforts in order to
secure the remaining financing needed for Colluli development.
Virtual equity investor and face-to-face broker meetings continued
in Q3 with Danakali's executive team and Non-Executive Chairman,
Seamus Cornelius, presenting to various institutional and strategic
investor groups in the United Kingdom, Germany, Middle East and
Australia.
Danakali, along with our partners including ENAMCO, AFC,
Afreximbank, Eurochem, advisers and brokers are all focused on
bringing Colluli into production as soon as possible.
Financial Resilience
DNK Board has maintained strong oversight of the Q3 spending
with particular focus on keeping working capital costs low and
prioritize critical Project spend tied to the long-term success of
Colluli development. Reduced salaries for Board, executives and
staff continued through the quarter.
Environmental, Social and Governance (ESG)
Danakali has considerably advanced the CMSC operational
management systems that will align with the Equator Principles, IFC
standards for Environmental and Social Performance and the World
Bank Group Environment, Health and Safety Guidelines.
Danakali has also commissioned an independent human rights
impact scoping exercise to identity future salient risks for the
project and suggested mitigation approaches prior to
construction.
On 30 July Danakali hosted a webinar with leading ESG
specialists in international human rights and environmental
management who provided an update on the progress to date with
respect to the various Colluli management systems that have been
established for the project. The webinar also included a
presentation by Vita, an international NGO that has a long
successful history of setting up social investment projects in both
Eritrea and Ethiopia.
Investor Relations
Presentations
Danakali Talks Episode 2 was released 5 August and focused on
the topic of Soil Fertility and Fertilizer systems in Africa. This
webinar was hosted by CEO Niels Wage who spoke with Dr James
Mutegi, Senior Program Manager, East and Southern Africa from the
African Plant Nutrition Institute. The programme outlined why
Sulphate of Potash is essential for soil fertility and how properly
managed fertilizer applications lead to increased production and
farmer profitability, enhanced protection, and improved
sustainability. The recording can be accessed here .
On 3 September, Danakali's CEO Niels Wage hosted another live
webinar "Colluli Development - a Global Game Changer for Premium
Potash" and was joined by Osam Iyahen from Africa Finance
Corporation (AFC), and recently appointed Non-Executive Director
Neil Gregson. The webinar provided an update on AFC's investment
strategy and Colluli as intergenerational investment opportunity.
The recordings of this event can be found on Danakali's YouTube
page and the copy of the investor presentation - here .
Danakali Talks Episode 3 focused on the topic of global food
systems and nutrition security. On 1 September, Danakali's
Non-Executive Chairman Seamus Cornelius hosted Dr Sylvain
Charlebois from Dalhousie University in Hallifax. Dr Charlebois is
the Senior Director of Agri-food analytics Lab and is known as "The
food Professor". He is one of the worlds most citied scholars in
food supply chain management, food value chains and traceability.
The series focused on the impact of COVID-19 and how it has changed
nutrition habits, the importance of fertilizers in agriculture,
food security, and the role Colluli could play in establishing
stable and sustainable food chains. The recording can be accessed
here .
Interviews and Media Releases
Danakali's Chairman Seamus Cornelius and its Chief Executive
Officer, Niels Wage, gave interviews to a number of global media
publications, including:
-- Australian Financial Review - Eritrea venture set to ride the
global growth, 17 September 2020
-- SA Mining July/August - Food for thought.
-- Smallcaps- Danakali eyes finish line for Eritrea potash project, 6 Aug 2020, link
-- Smallcaps- Danakali outlines huge potash potential on its
African doorstep, 8 September 2020, link
-- Stockhead Special Report, Premium fertilizer project could
help drive development of this East African country, 18 Sep 2020,
link
-- Stockhead Podcast with Barry FitzGerald, DNK's African
Colluli potash project has world beater potential, 25 August 2020,
link
-- Stockhead -Bevis Yeo, These premium grade potash plays are
forging ahead as demand remains strong, 17
August 2020, link
AGM
Danakali's AGM was held on July 15(th) , 2020 in a first and new
virtual set up to make engagement with all shareholders possible in
a COVID-19 constrained world.
Conferences
In addition to the above presentations, CEO Niels Wage,
presented and was on the industry panel on 15 September at the CRU
African Fertilizer Agribusiness 2020 Virtual Conference, with
subject focused on "Investing in African fertilizer production and
distribution."
Capital
Cash
Consolidated cash on hand was A$12.4M as at 30 September 2020.
Please refer to the Appendix 5B for the quarter for more
detail.
Securities
As at 30 September 2020, there were a total of 318,741,306 fully
paid ordinary shares on issue. There were no fully paid ordinary
shares issued during the September 2020 Quarter.
As at 30 September 2020, there were a total of 5,211,153
unlisted options on issue at various exercise prices and expiry
dates. No unlisted options were exercised or lapsed during the
September 2020 Quarter. During the September 2020 Quarter, the
Company issued the following unlisted options:
-- 200,000 unlisted options at $0.664 expiring 8 July 2023
-- 947,041 unlisted options at $0.000 expiring 31 December 2021.
As at 30 September 2020, there were a total of 1,260,000
performance rights on issue. No performance rights were issued or
converted during the period. A total of 800,000 performance rights
(class 4) lapsed during the period.
Related Party Transactions
In accordance with ASX Listing Rule 5.3.5, payments to related
parties of the Company and their associates during the quarter
totaled A$0.104m. The Company advises that this relates to
Non-executive Director fees. Refer to the Remuneration Report in
the Annual Report for further details on director remuneration.
Interests in mining tenements
The 7 Mining Licenses awarded to CMSC span over 60km2 of the
100km2 Mining Agreement area. There were no mining exploration
activities undertaken during the quarter.
Tenement holdings
Tenement Colluli,
Eritrea
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Nature of interest Owned
==================== ================
License type Mining Licenses
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Current equity 50%
==================== ================
There was no change in tenement holding during the September
2020 Quarter.
For more information, please contact:
Danakali
Niels Wage Mark Riseley
Chief Executive Officer Senior Corporate Development Manager
+61 8 6189 8635 +61 8 6189 8635
Corporate Broker - Canaccord UK IR/PR - Instinctif Partners
Genuity
James Asensio / Angelos Vlatakis Mark Garraway / Dinara Shikhametova
+44 (0)20 7523 4680 / Sarah Hourahane
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
Announcement authorised for release by the board of
Danakali.
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 also executed a Subscription Agreement and made a strategic
equity investment in Danakali. The receipt of the first tranche of
US$21.6M (A$31.8M) allowed commencement of development.
Project execution has commenced, and SOP production is currently
expected to start in 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 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% K2O Equiv. and
7% Kieserite. The Mineral Resource contains 303Mt @ 11% K2O Equiv.
and 6% Kieserite of Measured Resource, 951Mt @ 11% K2O Equiv. and
7% Kieserite of Indicated Resource and 35Mt @ 10% K2O 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% K2O Equiv. The Ore
Reserve is classified as 285Mt @ 11.3% K2O Equiv. Proved and 815Mt
@ 10.3% K2O 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+, Mg2+, Ca2+, Cl , SO42-, H2O)
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.
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