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FeRtILIseR sPotLIGHt

Danakali

keeps itself

busy in

lockdown

otash junior Danakali Ltd is weathering
Pthe inevitable impacts of the COVID-19
pandemic and remains hopeful it can stay on
track with development of its Colluli potash
project in Eritrea.
Danakali announced in April that the Af-
rican Finance Corporation (AFC) had post-
poned the second tranche of its proposed Danakali is blessed by quality, low-cost infrastructure options in Eritrea
investment in the company in response to
the global uncertainty created by the coro- largest development finance institutions with the market once there is something there.
navirus. This would usually be a heavy blow $US4.5 billion of assets under management. “The timing has to be right and as oth-
to a would-be developer but for Danakali the Along with Afreximbank it has approved ers assess what the pandemic means for
arrival of bad news could not have been bet- a $US200 million debt facility for Colluli’s their businesses, we have been able to
ter timed. construction and in December took $US21.5 continue discussions with the investors out
“This is the world’s crisis and we are not million in Danakali shares as part of a two- there which is good. We will push on, but it
immune to that, but we are seeing different stage $US50 million investment. will clearly take a bit more time in the current
ways of working,” Danakali chief executive While the second tranche has been de- environment than it would’ve a few months
Niels Wage told Paydirt. “It will impact the layed, Wage said AFC remained committed ago.”
way we operate to some extent but we have to the project. Aiding Danakali in investor discussions is
gone through our Phase 1 EPCM work and “We have the cash from the first tranche a robust SoP market.
in Phase 2 a lot of the work is done from the which was received from December so we “The SoP situation has been relatively
desktop so we have been able to keep pro- can continue to work as planned,” he said. good in these current circumstances,” Wage
ductivity up.” “The discussion with AFC is now about look- said. “The fertiliser market in general has
Colluli is poised to be Africa’s first major ing at the conditions precedent on the sen- seen some supply chain issues but people
potash operation with the company plan- ior debt, which they are also the significant still need to eat and farmers need to put
ning to produce 472,000 tpa of SoP in its first provider of. It is a question of what the best fertiliser on the ground. So, there is a lot of
module. In contrast to other potash projects, time is to raise the final funding required for support in countries for the farmers and ferti-
Colluli is a solid salt deposit close to surface, the project. liser industries. In India, they have exempted
allowing for conventional mining which will “The good thing is AFC are in very close agriculture from the lockdown so the flows
likely lead to the lowest cash costs in the contact and they are committed to the continue. If you look at SoP in particular it
global potash space. agreement and the project and they remain has been pretty robust. Production has been
Wage said those fundamentals – less a strategic partner for Danakali and Col- good, and on price it is one of the areas in
than $US150/t compared to an average of luli. They are committed to developing Africa fertilisers which has been holding up pretty
$US250/t for other development projects and Eritrea and they are a big believer in the well.”
– meant interest in the project had been re- SoP market and developing that region. Eritrea is one of the most isolated coun-
tained despite the pandemic-induced global “We are confident that second tranche will tries in Africa and a countrywide lockdown
economic crisis. come at the right time when global markets has meant cases of coronavirus are still
“Good projects will always be financed are less volatile than today.” comparatively low. Wage said while the
and we always see a lot of interest in this While the $US200 million credit facility in-country team could continue work from
project,” Wage said. “It is unique because it and $US50 million investment will see Da- home, the company would eventually need
is coming from solid salts, it is very low cost nakali close in on Colluli’s $US302 million to get back on the ground.
and significant quality and long life. It is fair to capex price tag, Wage said the company “At some stage we will need to work at site
say that even in the current global financial was still pursuing further financing options. with the technical team but when that will be
market it is something people are still look- “We have a range of options on the table is the same crystal ball question everyone is
ing at.” particularly when you think about Colluli as facing. Things may be slower and a bit differ-
This includes AFC despite its recent deci- an impact investment,” he said. “Our project ent but at this stage we can still continue with
sion to postpone its second tranche invest- is a very green fertiliser project and will have the EPCM and FEED work.”
ment. Lagos-based AFC is a private sector a significant development impact for Eritrea
investment bank, largely focused on infra- which makes for a lot of interest. We are also – Dominic Piper
structure developments. It is one of Africa’s talking to strategic investors. We will update

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