Danakali Ltd’s (ASX:DNK) (LSE:DNK) (OTCMKTS:SBMSF) Colluli project has been given the green light by Eritrea's Ministry of Energy & Mines (MoEM) for the Notice of Commencement of Mine Development.

This takes the company another step closer towards the development of the world-class sulphate of potash (SOP) project.

As well as accepting the notice lodged by Colluli Mining Share Company (CMSC), MoEM has also consented to the security and account structure for the financing of the project.

Pre-conditions satisfied

All development preconditions under the CMSC Mining Agreement have now been satisfied with permits also granted for infrastructure development and quarries.

The project is 100%-owned by CMSC, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).

Danakali chief executive officer Niels Wage said: “This year, the project team has made significant progress through management of DRA during Phase 1 and 2 of the EPCM works and most recently by commencing the necessary test works, enabling us to maintain forward momentum of the project development.

“I look forward to updating the market on the progress of our project in due course.”

Further MoEM support

In addition to approving the notice, MoEM has also shown support for financing of the Colluli project by:

• *Granting time to commence the commercial production within 36 months from submission of the notice (mid-December 2022);
• *Consenting to the security to be granted in support of the financing; and
• *Consenting to the account structure for the financing for the project.

Step towards financial close

Danakali said acceptance of the notice was one of the conditions precedent to the financing for the Colluli project and was a positive step toward achieving financial close of the project facilities.

With the issue of the notice, CMSC has satisfied the following key development pre-conditions:

• *Mining Agreement executed and mining licences issued;
• *Submitted and obtained approval for the Social & Environmental Impact Assessment Study and Social & Environmental Management Plans; and
• *Submitted the commercial sulphate of potash production expectations over the life of the mine.

CMSC submitted the notice to the MoEM on December 17, 2019, but the process took longer than expected due to COVID-19 related lockdowns in Eritrea.

Future plans

In accordance with the mining agreement, CMSC has 36 months from the submission date to spend US$200 million within the mining licence area.

CMSC has obtained all licences and permits within the Colluli Mining Licence, and along with the acceptance of the Notice, the MoEM has also granted all required permits, licences and authorisations for infrastructure construction and development outside the Colluli Mining Licence area.

Infrastructure to be developed and upgraded outside the Colluli Mine Licence area includes:

• *Sea Water Intake and Treatment Area at Anfile Bay (WITA);
• *Pipeline and access corridor of 87 kilometres between the WITA and the Colluli process plant; and
• *Colluli site access road of 57 kilometres connecting Colluli to Marsa Fatuma.

Danakali has completed a Front End Engineering Design (FEED) for the production of potassium sulphate, otherwise known as SOP, a chloride-free, specialty fertiliser which carries a substantial price premium relative to the more common potash type.

The project is in the Danakil Depression region of Eritrea and is about 75 kilometres from the Red Sea coast, making it one of the most accessible potash deposits globally.

Mineralisation commences at just 16 metres, which also makes Colluli the world’s shallowest known potash deposit.