By Danakali Ltd,
Danakali Limited (ASX:DNK) is pleased to announce that the Colluli Mining Share Company (“CMSC”) has entered into a Mining Agreement with the Eritrean Ministry of Energy and Mines.
CMSC is a 50:50 Joint Venture between Danakali Limited and the Eritrean National Mining Corporation (“ENAMCO”) and owns 100% of the world class Colluli Potash Project.
The Mining Agreement was signed in Asmara by the Minister of Energy and Mines, Gen. Sebhat Ephrem and the Chairman of the Colluli Mining Share Company, Mr. Seamus Cornelius.
The Agreement provides CMSC exclusive exploitation rights of all Mineral Resources within the Agreement area, the exclusive right to apply for and be granted one or more mining licenses within the Agreement area, and the exclusive right of land use within the agreement area over the life of the resource.
The Agreement area covers approximately 100km2 and covers the entire Colluli resource which includes a JORC-2012 Mineral Resource estimate of 1.3 billion tonnes of potassium bearing salts, an Ore Reserve estimate of over 1.1 billion tonnes, a rock salt Mineral Resource estimate of over 300 million tonnes and a kieserite (magnesium sulphate) Mineral Resource estimate of over 80 million tonnes.
The award of the Agreement is the key pre-requisite for submission of an application for mining licenses, each covering up to a maximum of 10km2. Provided the conditions of the mining licenses are met, the Agreement is applicable to the development phase, operational phase, and the reclamation and closure phases of the project.
The Agreement allows CMSC to undertake exploration, feasibility work, development, operation, and reclamation and closure concurrently within the license area. The Agreement also provides freedom to construct all industrial, administrative, residential, medical and other buildings and facilities necessary for mining operations, and, subject to applicable law allows access to and the right to use roads, bridges, airfields, port facilities and other transportation facilities and power, fuel, telephone or other communication and water services owned or provided by any agency or entity owned or controlled by the Government of Eritrea.
The Agreement also has provisions for offshore accounts, remittances of after tax profits and dividends accruing from the investment, principal, interest and amounts due on foreign loans, and proceeds from the sales of assets.
The signing of the Mining Agreement comes after the completion and submission of the definitive feasibility study (“DFS”) for the production of sulphate of potash (SOP) fertiliser, a comprehensive social and environmental impact assessment and associated management plans, and a series of pre- and post DFS stakeholder engagements with local and regional communities and stakeholders.
The DFS indicates bottom quartile operating costs, industry leading capital intensity and low incremental growth capital. Based on the production rates modelled in the DFS, the mine life is well in excess of 200 years.
Approval for the social and environmental impact assessment was granted by the Eritrean Ministry of Land, Water and Environment in December 2016 following a series of engagements with the project team in Asmara, and a visit to site by the delegated Impact Review Committee (IRC).
Managing Director, Paul Donaldson said
“This is a very significant milestone for both Danakali and the Colluli Mining Share Company. It represents the combined contribution of many key team members and stakeholders including the Eritrean Ministry of Energy and Mines, our joint venture partners, ENAMCO, the Danakali study team and supporting consultants, the CMSC team, and the Eritrean Ministry of Land, Water and Environment.
This achievement confirms that the Colluli Potash Project is one of the most advanced greenfield SOP developments in the world, with outstanding potential that extends well beyond the scope of the DFS in terms of production volume and products.
It also supports our belief that Eritrea is an attractive place for mining investments at par with the best emerging market peers. We look forward to the continued advancement of the project to construction and production. The project continues to attract resource industry leaders, as evidenced by the recent appointment of Fluor, Global Potash Solutions, Knight Piésold and Elemental Engineering to the front end engineering and design team.
Colluli has outstanding development and growth potential. Projects like this are rare.”