Front End Engineering Design (FEED) strongly confirm Colluli as the world’s most advanced, economically attractive, and fundable Sulphate of Potash (SOP) greenfield development project
Danakali Ltd (ASX:DNK) has further improved the economics of its tier-1 Colluli Potash Project in Eritrea with a new study delivering industry-leading capital intensity and first quartile operating costs.
The front end engineering design (FEED) study has confirmed Colluli as the world’s most advanced, economically attractive, and fundable Sulphate of Potash (SOP) greenfield development project.
No other known SOP greenfield development project in the world has completed FEED, which provides offtakers and funders with a high level of detail and accuracy.
The Project is 100% owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).
FEED provides offtakers and funders with a high level of study detail and accuracy
- The FEED results provide a higher level of financial certainty to project financiers, further de-risking the investment proposition and underpinning the Financial Model
- Completion of well-defined procurement and supplier lists concludes the pre-requisites for the participation of Export Credit Agencies, which form a key component of the project finance strategy
- FEED provides offtakers with additional confidence on Project certainty and fundability, which will support finalization of binding bankable offtake agreements
FEED carries a high level of accuracy, and is the final study stage before project execution
- FEED study carries an operating and capital cost accuracy level of ±10%
- Fluor acted as lead consultant during FEED and was supported by a selection of highly qualified, industry recognized consultants with intimate knowledge of the Project obtained in previous study phases
- Optimisation opportunities across the entire mining and infrastructure supply chain were identified and evaluated during FEED and are included in the final assessment
- The majority of the cost estimates are supported by formal vendor/contractor pricing
The FEED results reaffirm the outstanding project economics of Colluli
- Industry-leading capital intensity achieved in the DFS (ASX announcement 30 November 2015) further reduced as a result of lower development capital requirements for Module I and increased annual production rate
- Forecast first quartile operating costs
- Net Present Value (NPV) of US$902M
- Internal Rate of Return (IRR) of 29.9%
- Danakalishare of NPV of US$439M with IRR of 31.3%
Modular development approach underpins highly scalable, long life project
- Module I is expected to produce 472ktpa of premium SOP product
- Module II, commencing production in year 6 of the Project, will increase total SOP production to 944ktpa
- The Project has significant expansion and multi-commodity potential presenting additional value upside
- Expected mine life of approximately 200 years at FEED production rates
Danakali’s Chief Executive Officer, Danny Goeman said:
“We are extremely happy with the FEED outcomes for Colluli, which are the culmination of a long period of high quality work from our study team and consultants. Colluli is the premier and most progressed SOP greenfield development project globally. It has industry leading capital intensity, forecast first quartile operating costs, and highly attractive economic returns. As such, the FEED results confirm what we already knew, but importantly, provide us with a much greater degree of accuracy and certainty, with key cost and valuation outcomes improving significantly.
“The successful completion of FEED, as well as the completion of permitting in 2017, further enhances Danakali and CMSC’s ability to finalise binding offtake agreements, advance towards financial close, and execute the Project. We are looking forward to working with our joint venture partners to ensure the successful development of Project Modules I and II, and unlocking the significant expansion and multi-commodity potential of the resource.”
ENAMCO General Manager, Berhane Habtemariam said:
“We are very pleased that FEED has been completed and has improved the Project’s already highly attractive valuation outcomes. Colluli has the potential to make a significantly positive impact in Eritrea. Our economy and people stand to benefit through considerable revenue generation, the expansion of our mining industry, the development of skills, and the flow-on effects to associated industries. Our joint venture with Danakali continues to achieve its stated goals in a timely and professional manner, we expect this to continue as CMSC focuses on binding offtake, funding, and development in the immediate term.”