Where Is Danakali Going?

  • Jan 16, 2019 AEDT
  • Team Kalkine
Where Is Danakali Going?

Danakali Limited (ASX: DNK) is a company engaged in potash exploration and development. In last year December, i.e., 2018, to provide fully underwritten debt finance facilities of US$200M which was used to fund the construction and development of the Colluli Potash Project in Eritrea, East Africa, the company announced that the Colluli Mining Share company had executed a mandate. The Mandate follows the non-binding indicative term sheet signing of a US$200M.

The company issued around 8,571 new fully paid ordinary shares instead of fees to its corporate advisors and this application has been made to the UK Listing Authority. The company is developing Colluli which is advanced and economically attractive potash (SOP) development project. The project economics has exceptional results with Net Present Value (NPV) US $902 million and Internal Rate of Return (IRR) of 29.9%. The company has the industry-leading capital intensity of US $534 /tpa, and the first quartile operating costs is the US $242/t.

The company is going to make the most of the food demand, and it is expected to increase from 2005 levels by 59%-98% till 2050. The company has supportive major shareholders and high levels of Board and Senior Management ownership. It had a strong share price change during the Colluli study phase and witnessed an increase of more than 290% since January 2015. The company inaugurated trading on the LSE on 24 July 2018 with supportive major shareholders including Capital Group (6.3%), J.P. Morgan Asset Management (7.6%), and Well Efficient (13.2%).

The company had an enterprise value of A $186.3 million on ASX and £104.6M on LSE as at October 24, 2018, and October 23, 2018 respectively. Compared to other SOP greenfield development projects, a group of attributes that allows for low risk, proven, simple, processing and logistics and low-cost mining, and outstanding project economics. Relative to other SOP greenfield development projects FEED completion confirms Colluli as an advanced stage and economically attractive project.

Danakali was supposed to be one of the lowest cost SOP producers, Colluli’s closeness to established port infrastructure gives unrivaled access to the global export markets. Colluli is materially fully permitted and has achieved binding take-or-pay offtake and is the only project known for SOP greenfield development that has completed FEED. Danakali is providing cash flow certainty to unlock project funding and at the same time it is the only known SOP developer with a take-or-pay offtake agreement. It is also making rapid progress in South Africa.

Danakali Limited (ASX: DNK) is trading higher by 0.709% is at $0.710, and in the past year, the stock has seen a performance change in 0.71%. With the above results and projects underway the company is moving in the right direction. The company has a market capitalization of $186.42 million at the current prevailing market price.


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