FEED Optimisation Increases Planned Sulphate of Potash Production Capacity at Colluli

FEED optimization at Colluli increases in expected sulphate of potash (SOP) output capacity
The optimization phase of the front-end engineering design (“FEED”) process of the Colluli Potash project has been completed. As a result, the expected SOP output capacity has been increased to 472,000 tons per annum from 425kt per annum.

BY DANAKALI LTD

Danakali Limited (ASX:DNK) and the Eritrean National Mining Corporation (“ENAMCO”) are pleased to advise that the optimisation phase of the front-end engineering design (“FEED”) process has been completed.

In addition to identifying a number of significant development capital reduction opportunities, systematic de-bottlenecking of the definitive feasibility study (“DFS”) processing plant configuration has liberated an additional 47,000 ton per annum of expected sulphate of potash (“SOP”) output capacity.



The additional expected capacity has been confirmed by the FEED lead engineer and is the result of a comprehensive process engineering and infrastructure review. The additional capacity increases the expected Module 1 annual SOP output to 472,000t per annum from the DFS planned output of 425kt per annum.

The DFS incorporated a long-term price estimate of US$572 per tonne SOP, with estimated mine gate and total cash costs for Module I (@425kt per annum) of US$167 per tonne SOP and US$255 per tonne SOP respectively, and mine gate and total cash costs for Module I and Module II combined1 (@850kt per annum) of US$141 per tonne SOP and US$227 per tonne SOP respectively.

The same assumptions have been applied to the revised production forecast pending a finalised set of FEED economics.

In addition to the increase in expected product output, the value engineering and optimisation work has identified further opportunities to reduce development capital and water consumption, which have been incorporated into the optimised configuration and are being costed as part of the FEED. The FEED process is well advanced and progressing to schedule.

Key areas of potential capital reduction include further optimisation of non-processing infrastructure, reducing the overall site footprint size and reducing recovery pond size following reconfiguration of the brine circuits and increasing brine density to the recovery ponds. This is expected to reduce process water requirements per tonne of SOP product. Refined water usage modelling is underway following the brine circuit optimisation.

Optimisation of the construction schedule has also commenced.

Key Points

• FEED optimisation complete
• Optimised processing plant SOP output increased by an expected 47,000 tons per annum
• Further development capital reduction opportunities identified
• Further process water consumption reduction expected
• FEED equipment lists and procurement strategy well advanced and integrated with funding work stream
• Pre-construction geotechnical work well progressed
• FEED process progressing to schedule
• Detailed mine schedules to be refined and aligned with modified SOP output rate

Managing Director, Paul Donaldson said

“This excellent result is a direct consequence of clever process plant design during the DFS. The liberation of over 10% production capacity with no expected increase in capital cost is clearly value accretive relative to the DFS and further improves on the industry leading capital intensity and outstanding economics demonstrated by the project. Refined and optimised pit schedules reflecting the optimised production rate will now be developed to support the mining contract tendering process. It is also pleasing that the optimisation work has been achieved with no impact on the expected delivery of the FEED.”

Mineral Resource and Ore Reserves

The Colluli resource comprises three potassium bearing salts in solid form: sylvinite, carnallitite and kainitite. These salts are suitable for high yield, low energy production of SOP, which is a high-quality potash fertiliser carrying a price premium over the more common MOP.

The salt composition in the Danakil region also provides the ability to produce a suite of potash products that not only includes potassium sulphate, but also potassium magnesium sulphate and potassium chloride. Such potash product diversification cannot be achieved by any other region in the world.

The JORC-2012 compliant mineral resource estimate for Colluli stands at 1.289 billion tons @ 11% K2O for 260 million tons of contained SOP. The JORC-2012 compliant ore reserve estimate for Colluli stands at 1.113Bt @ 10% K2O for 216Mt of contained SOP. The resource remains open to the south east of Area A and the north east of Area B.

Mining Method

The exploitation of the resource will be carried out by open pit mining using conventional truck and shovel techniques along with surface miners. A single pit will be developed. There are no blasting activities planned for the construction or operation of the Project. Mined ore will be transported by truck to a ROM pad adjacent to the processing plant.

Overburden and other waste materials (i.e. clastics, rock salt and bischofite) will be removed and stockpiled on site. Clean rock salt will be stockpiled separately in anticipation of future sales. Other mine waste materials will be used as backfill in the progressing pit void.

Material that cannot be used as backfill will be transported from the pit and placed to form waste rock landforms. Some mine waste material will also be used during construction to form embankments and foundations.

Processing Method

The processing method is the most commonly used, low cost process for the production of SOP via the addition of potassium chloride (sylvite) with kainite (from the salt kainitite). Kainitite represents approximately 50% of the Colluli resource with the remaining salts comprising sylvinite and carnallitite, which are commonly used for the production of potassium chloride.



Using well understood and proven processing principles, the ore containing sylvite and carnallite can be decomposed, and then recombined with decomposed kainite. The reaction occurs spontaneously under ambient conditions and provides a high potassium yield relative to alternate potassium sulphate production processes.

Potassium yields are further improved using a series of ponds to collect excess brines exiting the processing plant. With the Project being located in an area with highly favourable ambient conditions for solar evaporation, additional potassium salts will precipitate from the collection ponds. These will be collected and recirculated back through the processing plant.

Product Logistics Method

Dried SOP product from the processing plant will be stored in shipping containers at the processing plant before being loaded onto road haulage vehicles for transport to Eritrea’s primary import/export facility, the Port of Massawa.

Loading of product onto road haulage vehicles will take place continuously. The majority of the product storage is proposed to be at the Port of Massawa.

The Port of Massawa, which is located approximately 230km from the Colluli site has the capability to export both containerized and bulk materials. Product exporting options and infrastructure at Anfile Bay will be reviewed after Phase I commissioning.

Massawa has been exporting product from the Bisha mine, which has been operating since 2010.