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Danakali Limited (DNK)

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Tuesday 28 January, 2020

Danakali Limited

Colluli Update - EPCM Phase 1 commenced

RNS Number : 1233B
Danakali Limited
28 January 2020
 

Announcement

Tuesday, 28 January 2020

 

Colluli Sulphate of Potash Project update

 

EPCM Phase 1 commenced

 

·  CMSC's Owner's team established and embedded in to EPCM Consultants Project team

·  Phase 1 EPCM FEED review commenced by DRA Global

·  Purchase Agreement for the Reverse Osmoses plant nearing completion

·  Phase 2 to commence mid-February, followed by geotechnical investigation

 

Danakali Limited (ASX: DNK, LSE: DNK, Danakali or the Company), is pleased to provide an update on the progress made within Phase 1 of the Engineering, Procurement and Construction Management (EPCM), with a number of workstreams commenced.

 

Project Team

 

The Colluli Mining Share Company (CMSC) Board approved the establishment of the Owner's Project Team, which includes key project personnel led by Project Director, Tony Harrington. All Owner's Team personnel will be based at the DRA Global (DRA) Project office in Johannesburg during the first three EPCM phases. Turner & Townsend, a multinational professional services company, will also be providing a number of key members for all phases.

 

FEED review, Water and Geotechnical Study

 

Further to issuing of the Notice to Proceed, DRA has started the review of the Colluli Front End Engineering Design (FEED), which includes developing and establishing of Project Systems, Project Controls and Progress measurement monitoring.

 

DRA has also commenced project management activities and mobilised its own engineering group for the Process Plant and associated infrastructure work, which has started in Johannesburg. The Water Intake Area (WITA) design is being undertaken and commenced at the DRA office in Cape Town.

 

The agreement for the purchase of the Reverse Osmoses (RO) plant is nearing completion, with the order for critical equipment on track for February. This facility will be used to provide potable and construction water prior to the commissioning of the main Anfile Bay WITA. Delivery of the RO plant to site is to coincide with mobilisation of the Early Works Contractor. The plant will consist of a pre-tested desalination facility for the on-site bores and portable water.

 

Phase 2 will start mid-February, followed by geotechnical investigation works that will commence in March 2020. Data collected will help optimise the geotechnical foundation design and outline any other investigation work if required going forward.

 

Project Director, Tony Harrington, said: "I am very pleased with the progress achieved since commencement. We are near completion in formalising our partnership with DRA and are firmly moving into development phase with some key works and activities in progress. As part of the Mobilisation phase (1 & 2) the Project Team has put in place a robust execution strategy as a basis of delivery throughout the life of the project, which includes controls services, procurement and contracts and logistics        coordination, engineering and construction management and HSE."

 

For more information, please contact:

 

Danakali

 

Niels Wage

Chief Executive Officer

+61 8 6189 8635

Todd Romaine

Chief Sustainability Officer

 

 

Corporate Broker - Numis Securities

 

UK IR/PR - Instinctif Partners

John Prior / James Black / Paul Gillam

+44 (0)20 7260 1000

Mark Garraway / Sarah Hourahane / Dinara Shikhametova

[email protected]

+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 CEO of Danakali.

 

 

Appendix A: About DRA and Turner & Townsend

 

DRA is a diversified global engineering, project delivery and operations management group headquartered in Perth, Australia, with an impressive track record spanning more than three decades. Known for its collaborative approach and extensive experience in project development and delivery, as well as turnkey operations and maintenance services, DRA delivers optimal solutions that are tailored to meet clients' needs.

 

With expertise in the areas of project development, mining, mineral processing, plant optimisation, operational readiness, systems integration, operations & maintenance and related water, energy, industrial and infrastructure requirements, DRA delivers truly comprehensive solutions to the resources sector. DRA employs over 4,500 people and offers flexible engineering & operations management services worldwide through 18 offices.

 

For more information visit www.draglobal.com.

 

Turner & Townsend is a multinational professional services company headquartered in Leeds, United Kingdom, with extensive expertise in project management consulting to the mining, infrastructure and property sectors. As an independent consultancy, it is committed to achieving high standards of openness and transparency across all aspects of a project. Turner & Townsend employ over 6,000 people in 110 offices across 45 countries with presence in Africa, Asia Pacific, Europe, Middle East and the Americas.

 

For more information visit www.turnerandtownsend.com.

 

 

 

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 to make a US$50M strategic equity investment in Danakali. The receipt of the first tranche of US$21.6M (A$31.8M) allowed commencement of the development. Second tranche will consist of approximately US$28.5M (A$42.0M) and is expected in March 2020.

 

Project execution has commenced and SOP production is expected during 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 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% K20 Equiv. and 7% Kieserite. The Mineral Resource contains 303Mt @ 11% K20 Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K20 Equiv. and 7% Kieserite of Indicated Resource and 35Mt @ 10% K20 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.

 

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 [email protected] or visit www.rns.com.
 
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