Danakali (DNK) is trying to keep things as simple as possible with its 50 per cent-owned Colluli fertiliser project: funded through the traditional debt/equity split and then start preparing the openpit. This makes it quite different to fellow fertiliser hopeful Sirius Minerals. One complicating factor, however, is the deposit’s location in Eritrea.
The denouement between the country and its former enemy Ethiopia last year has been a great help in terms of perceived risk, because Danakali owns Colluli in a joint venture with the Eritrean state mining company and operates next to the border.
Danakali chief executive Niels Wage told us the dictatorship was “facilitating wherever they can” as the project moves towards construction. That process has been helped along by the approval of a $200m (£165m) loan this week from Africa Finance Corporation and African Export Import Bank, with another $100m to come through equity finance.
If all goes to plan, Danakali will be producing sulphate of potash (SOP) in early 2022, with plant construction and pre-stripping where the money will go. From there, the offtake deal with EuroChem takes care of the first 10 years of production. SOP currently goes for around $500 per tonne, according to Danakali. The mine gate cash cost is forecast at $165/t and it will cost another $73 a tonne to truck it 230km to the nearest port.
As production gets closer, Danakali will have to import major amounts of equipment into the country, including plant equipment and more than 100 trucks. This is often a point where corruption can come up, and Eritrea is ranked 157th out of 180 countries in Transparency International’s corruption perceptions index.
Mr Wage said he recognised the appearance of corruption risk, but had not come across any dodgy dealings, with Eritrea lacking the moneyed government class seen in other developing nations with natural resources.
