Published by Nicholas Woodroof, Assistant Editor
World Fertilizer, Thursday, 30 April 2020 10:30
Danakali has provided a quarterly update on the activities and financial position of the company and its Colluli potash project in Eritrea, East Africa. The project is 100% owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture (JV) between Danakali and the Eritrean National Mining Corp. (ENAMCO). CMSC’s aim is to become a leading producer and exporter of sulfate of potash (SOP) during 2022.
Key developments
- Significant progress on EPCM.
- Two Africa Finance Corporation (AFC) directors appointed to Danakali’s Board.
- Tranche 2 of AFC’s US$50 million strategic equity investment deferred.
- Environmental and Social Governance (ESG)
- Commence close out of Environmental and Social Action Plan (ESAP) to ensure full compliance with the Equator Principles and the IFC Performance Standards.
- Engaged with an independent consultant to conduct a Human Rights Impact Assessment (HRIA).
- Inaugural Sustainability report being finalised, underpinning Danakali’s commitment to best practice and transparent reporting on ESG and demonstrating Colluli’s potential to positively impact Eritrea’s ability to meet its United Nations Sustainable Development Goals (UN SDGs).
Financial position
- Cash position of AUS$22.7 million as at 31 March 2020
- Outgoings for the quarter include AUS$8.3 million of non-recurring expenditure related to lender and advisors’ fees associated with successful debt financing activities in December 2019
- Funding is estimated to be sufficient for more than 8 quarters.
- Board anticipates prudent spending resulting in a reduced burn rate from 2Q20.
- An in-depth review of activities has been undertaken with re-prioritising of activities which are now considered non-essential in light of COVID-19 restrictions.
- Project spend has been carefully assessed and restricted to those critical to the long-term success of Colluli development and adequate resourcing adjustments will be made.
Key activities planned for 2Q20
- Project financing
- Continue monitoring developments in financial markets to revise forward financing plans in response to COVID-19.
- Continue the satisfaction of conditions precedent necessary to allow CMSC senior debt drawdown.
- Continue to execute company equity strategy for remaining project financing and capital requirements subject to global market recovery.
- Project development
- Complete Phase 2 of EPCM including updating of FEED estimate and execution schedule.
- Continue to monitor and assess the impact of COVID-19 to advance the EPCM work.
- Identify and pursue appropriate opportunities, delivered on a desk top basis.
Niels Wage, CEO of Danakali, commented: “The team has made a good start with the development of the project with the completion of Phase 1 and commencement of Phase 2 of EPCM. Whilst immediately ensuring the wellbeing of our people in the face of the COVID-19 pandemic, we are working on key workstreams to progress the development of Colluli at a prudent pace as we are getting closer to start of construction.
The evolving environment is likely to cause some project development delays and it is difficult to provide an exact assessment in regard to a revised project delivery timeline. However, our close collaboration and shared commitment with our EPCM, equipment and financing partners will ensure that we maximize progress during this difficult time.
The business is well positioned financially with its existing cash resources and has substantial liquidity headroom. Moreover, we have taken prudent reduction measures in spend going into Q2, and this will be reflected in a lower burn rate. We will continue to follow consistent and disciplined implementation of our balanced capital allocation policy.
We will work closely with our partners with the completion of the funding for the project and assess the range of options and strategies available to us.
We are also proud to be publishing our inaugural Sustainability report this year. It is anchored on Our Values, that keep the team focused on the most material matters, ensuring consideration of societal and environmental impacts, and the UN SDGs framework, which places our Eritrea’s sustainability agenda at the center of our operations. The report provides a comprehensive summary of our most material ESG efforts and activities in the last two years. We will continue to strive for excellence in aligning with international best practice standards.”
