Danakali (ASX:DKM) sulphate of potash project in the Danakil region of Eritrea


by Melissa Darmawan

Danakali Limited (ASX:DKM) Executive Chairman Seamus Cornelius discusses the company's Colluli project, including financing and economics, and the positive impact of the project on the region.

Melissa Darmawan: Hello. Melissa Darmawan for the Finance News Network. Joining me from Danakali (ASX:DNK, LSE:DNK) is Executive Chairman Seamus Cornelius. Seamus, nice to meet you and welcome to FNN.

Seamus Cornelius: Thanks very much, Melissa. It's great to be here, and I'm really happy to have this opportunity to talk to your viewers.

Melissa Darmawan: It's great to have you. First off, can you start with an introduction to the company?

Seamus Cornelius: Danakali is a public company listed on the ASX and on the LSE, and we're developing the Colluli sulphate of potash project in Eritrea, in a joint venture with the Eritrea National Mining Corporation.

Melissa Darmawan: By the way, where does the name "Danakali" come from?

Seamus Cornelius: So, the asset, Colluli, is in the Danakil Basin, which is the D-A-N-A part, the "Dana", and then "kali" is salt. So, we just put the two together, Danakali.

Melissa Darmawan: When we did speak to you last, you were in a financing stage with the project. How has that progressed?

Seamus Cornelius: With COVID going on last year, we didn't make as much progress as we thought we'd make. But if I start looking at things from this year in March, we've really gone forward really well. We just did a very important capital raise. It was only just over $20 million, but it's very significant because it lets us start the early work, and it will trigger some further developments on the debt side of the project. So, we have US$200 million dollars of debt signed up, properly documented, and we are working on getting some more senior debt, which has been going very well, and closing the equity gap in a very short frame of time.

Melissa Darmawan: And, Seamus, can you remind us about the economics of the project?

Seamus Cornelius: Danakali is in a 50/50 joint venture with ENAMCO, which is the Eritrean National Mining Corporation. So, when I talk about the numbers now, I'll talk about Danakali numbers. We will be getting US$43 million per year on an average basis, free cashflow. So, that is fantastic for Danakali. When we have two modules, our free cashflow every year will be US$85 million coming to Danakali. So, that's post-finance, post-tax, those two numbers. Our total capital cost, as defined in our FEED study, is about $302 million. There'll be some working capital on top of that, so you're probably looking at somewhere around, altogether, $340 to $350 million, including contingencies and provisions, and actual capital spend. So, you can do the calculations and see that free cashflow that we get as Danakali is really strong compared to the total project capex, most of which is going to be funded by third-party debt at the project company level. So, we think it's really compelling.

Melissa Darmawan: How does that stack up in terms of social and environmental impact, and carbon footprint?

Seamus Cornelius: We're really conscious of the fact that, when you have an asset like Colluli, it will be producing for 200 years, and it's in Eritrea, which is in the Horn of Africa. And we know that there's a lot of population and economic growth coming in that part of the world. And therefore, there's a strong demand for fertiliser. And the fertiliser that we'll produce in the first instance is SOP, sulphate of potash. That's basically the best kind of potash. We're not producing anything other than first-grade fertiliser that goes on first-class food for people to eat, so that's really strong. Besides that, we will indirectly contribute to about 10,000 jobs in Eritrea, which is really significant. The reason I know these numbers, and, more broadly, the kind of impact we will have socially and environmentally, is because very uniquely for us, the United Nations Development Program has done a study just on Colluli. We will have a very positive impact on 13 of the 17 United Nations sustainable development goals. People should look it up. You can find it from the UNDP website.

Melissa Darmawan: Last question. Is there anything else you'd like to add?

Seamus Cornelius: Most people don't know much about the Danakil, but if they know anything, it's that it's one of the hottest and the driest places in the world. So, we have abundant solar energy. We've been collecting wind data for quite a long time. And, more recently, we've started to talk about the geothermal potential that exists at Colluli, because it's right on top of the East African Rift, which is the really large, well-known, well-studied geothermal source of energy. So, those three things combined make it very obvious for us to transition from not being a zero-carbon producer when we turn the plant on, and going as quickly as we can to becoming a zero-carbon producer. It's part of our whole approach to doing the right thing at Colluli, and making sure that we don't just get the economic benefits, but we get all of the social and environmental and other benefits as well -- for our company, for our shareholders, for our partners, but also for all our consumers. I think people will be very happy to take a zero-carbon Colluli SOP and put it onto their plants. We think that drives real value, and also it helps the environment, and it helps people.

Colluli is a really superior asset. It's going to give superior returns, and have superior social and environmental impacts as well. So that's really good. The way that you get involved in Colluli is through Danakali. That's how you can access it. We're committed to honouring the obligations that we have by being involved in an asset like Colluli. These things don't come along very often. As we like to say, there's only one Colluli, and there's only one way to get involved, and that's through Danakali.

Melissa Darmawan: Seamus Cornelius, it was nice to meet you. I look forward to hearing from you on your next update.

Seamus Cornelius: Thanks very much, Melissa.


United Nations Development Programme report on the potential contributions of Colluli to Eritrea’s Sustainable Development Goalshttps://www.danakali.com.au/the-colluli-project/undep-report

Danakali corporate videos: https://www.danakali.com.au/medias/project-videos

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