http://www.proactiveinvestors.com.au/companies/news/172459
Danakali awarded crucial mining licences at Colluli
01 Feb 2017
The Colluli Potash Project has an estimated value of US$860 million.
Danakali (ASX:DNK) has achieved a significant milestone by having been awarded all seven of the mining licences it applied for at its world class Colluli Potash Project in Eritrea.
This follows the signing of a mining agreement with the Eritrean government providing exclusive access over the 1.3 billon tonne potassium resource and associated minerals.
The mining licenses which span over 60 square kilometres of the 100 square kilometre agreement area represent over 60 years of the 200-year mine life as determined in the definitive feasibility study.
Paul Donaldson, managing director, commented: “There is a clear and compelling investment case that supports the Colluli development and we have consistently stated that our joint venture partnership is a project enabler.
“The fact that Colluli is the most advanced sulphate of potash (SOP) project in the world is a testament to that.”
Background
Danakali has a 50% equity interest in Colluli through a joint venture with the Eritrean National Mining Company.
The definitive feasibility study was completed in November 2015 and forecast the project to have industry leading capital intensity, bottom quartile operating costs and an ore reserve of 1.1 billion tonnes.
The study estimated a post-tax net present value (NPV) of US$860 million and an internal rate of return (IRR) of 29%.
Most recently, Danakali made its final appointments to the front end engineering design (FEED) team, which is being led by globally recognised, multi-national engineering and construction firm, Fluor.
An expression of interest process for the tendering of the mining contract is underway.
Analysis
This represents a very significant milestone for Danakali as the mining licences were a critical part to the process in realising the value of Colluli.
Furthermore, the award of the agreement and mining licenses are a clear demonstration that business can be done in the African country of Eritrea.
Colluli is one of the most advanced greenfield sulphate of potash (SOP) developments in the world.
It demonstrates outstanding economics including bottom quartile operating costs, close proximity to coast and key markets and unrivalled product diversification potential.
Shares in Danakali are trading up 80% over the past three months, currently priced at $0.71.
The licenses allow exploitation of potassium, calcium, sodium, and magnesium salts from the Colluli resource, as well as bromine.
The focus of the favourable definitive feasibility study is a two-stage modular development for the production of SOP, a high quality potash type with limited primary production centres globally.
There is significant growth potential through the monetisation of other salts within the resource and diversification of potash product types.
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CMSC enters into Mining Agreement for World Class Colluli Project
Wednesday, 01 February 2017
http://www.danakali.com.au/images/stories/axs-announcements/2017/4_CMSC_enters.pdf
Received on Wed Feb 01 2017 - 04:38:47 EST