Australia’s Danakali (ASX, LON:DNK)
is closer than ever to begin developing its world-class Colluli potash project
in Eritrea, expected to become one of the world’s most significant and lowest
cost sources of sulphate of potash (SOP), a premium grade fertilizer.
A key step toward that goal was
taken late last year, when Danakali signed a $200 million funding mandate with
a syndicate of African Export-Import Bank (Afreximbank) and Africa Finance
Corporation (AFC)
Colluli has the potential to meet the entire world’s potash demand for 30 years.
Danakali’s chief executive, Niels Wage.
Once those credit
approvals are confirmed, something the Perth-based company estimates it
will happen “any day” now, Danakali will kick off development of
the 1.1 billion-tonnes potash project.
Construction of the mine, 100%
owned by Colluli Mining Share Company (CMSC), a 50:50 joint venture between the
Aussie miner and the Eritrean National Mining Corporation (ENAMCO), is expected to take two and a half years.
“The government will benefit
from the longer-term development of the project, and the expected significant
boost to royalties, taxation and exports, and from jobs and skills and economic
development of the region,” Wage told MINING.COM.
According to chief executive Niels
Wage, Eritrea is set to start reaping the benefits of the project right away.
Game changer
A United Nations report published in January suggested
that Colluli could significantly boost the economy of Eritrea, a country that
until last year was on the UN’s sanctions list.
The independent report estimated that Colluli would contribute 3% of the country’s GDP by 2021 and 50% of the nation’s exports by 2030, while providing 10,000 direct and indirect local jobs.
The report also identified how the
mine
could help Eritrea advance its sustainable development
agenda, in particular 13 priority Sustainable Development Goals
(SDGs). These include: no poverty, zero hunger, quality education, gender
equality, clean water and sanitation, sustainable economic growth and decent
work, industry, innovation and infrastructure, reduced inequalities, climate
action, peace, justice and strong institutions and partnerships for the
SDGs.
In the initial phase of operation, Wage
said, Colluli would produce more than 472,000 tonnes a year of SOP. Annual
output could rise to almost 944,000 tonnes if Danakali decides to go ahead with
a second phase of development, as the project has a possible 200-year plus
mine-life.
Hard to match
There are a number of aspects that
make Colluli attractive. One of the most important, perhaps, is that
extracting potash at the site appears to be far simpler than rival operations
in Europe and North America.
“With mineralization at only 16m below the surface, Colluli is one of the shallowest and therefore lowest cost potash developments globally,” Wage noted.
It is also the largest known
deposit of the fertilizer in the world. Given that current consumption of GOP
is about seven million tonnes a year, Colluli could meet the entire world’s
demand for 30 years.
There are also benefits associated
with its location. On one hand, being only 75 km (47 miles) from the Red
Sea coast, by the nation’s eastern border, makes it one of the world’s most
accessible potash deposits.
“The site is 230km from the
established port of Massawa, which provides access to the Red Sea shipping
channel and thereby to key markets such as India, Southeast Asia, the Middle
East, Europe and the rest of Africa,” Wage said.
The project is also by the border
with Ethiopia, with which Eritrea held one of Africa’s deadliest border wars.
In June 2018, the ruling coalition of Ethiopia (Ethiopian People’s
Revolutionary Democratic Front), headed by Prime Minister Abiy Ahmed,
agreed to fully implement the peace treaty signed with Eritrea in
2000, with peace declared by both parties in July last year.
Colluli has potential to produce
other fertilizer products, such as Sulphate of Potash Magnesium (SOP-M),
muriate of potash (MOP) and gypsum, along with rock salt.
There is also potential for kieserite and mag chloride to be commercialized with minimal further processing required.