Danakali Ltd (ASX:DNK) is focussed on the world class Colluli Potash Project in Eritrea, where a DFS has demonstrated the lowest capital intensity of all advanced SOP projects.
SOP, otherwise known as Sulphate of Potash, is a high quality, chloride free potash type with limited economically exploitable primary resources.
The project is located at the epicentre of booming population growth in Africa and Asia, while lying close to traditional Middle Eastern and European markets.
The opportunity comes from the predicted bottom quartile cost curve position means Colluli will generate sustainable industry-leading returns throughout the commodity cycle.
Paul Donaldson, managing director for Danakali, spoke exclusively to Proactive Investors Australia about the impact from the temporary suspension of K+S’s Hattorf and Unterbreizbach mines on SOP supply to Europe.
"The suspension is the result of saline water discharge management issues and will take effect from the 1st of April.
"K+S is Europe’s largest SOP producer, and the Hattorf, Wintershall, Unterbreizbach and Merkers mines combined represent the key production centre for speciality fertilisers including SOP.
"In a market that comprises over 50% high cost secondary production, due to the lack of high quality primary production projects, further reducing supply will continue to support the sustained price premium that SOP has demonstrated over the more common potash type, potassium chloride (MOP).”
Donaldson talks Colluli SOP
Danakali completed a definitive feasibility study for the production of SOP from Colluli in December 2015.
Colluli is 100% owned by the Colluli Mining Share Company, which is a 50:50 joint venture between Danakali and the Eritrean National Mining Company.
Donaldson added: “The completed DFS demonstrates the Colluli is the premier premium potash and multi agri-commodity opportunity.
"It demonstrates industry leading capital intensity, bottom quartile operating costs, is highly fundable, has significant diversification potential, is in close proximity to coast and established import/export infrastructure, and has a mine life in excess of 200 years. It truly is world class.”
Danakali has recently completed a $5.5 million raise and is well funded to advance funding, offtake and construction discussions.
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