Danakali Ltd on behalf of Colluli Mining Share Company (CMSC) announces that a binding take-or-pay offtake agreement has been reached with EuroChem Trading GmbH for up to 100% of Module I Sulphate of Potash (SOP) production from the Colluli Potash Project. The Project, located in Eritrea, East Africa, is 100% owned by CMSC, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).
EuroChem will take, pay, market and distribute up to 100% (minimum 87%) of Colluli Module I SOP production. EuroChem may use a portion of Colluli SOP to produce complex Nitrogen Phosphate Potassium (NPK) fertilisers at its facilities in Antwerp, Belgium and Nevinnomyssk, Russia. The balance of SOP provided to EuroChem will be sold through their international channels. CMSC has the option to sell up to 13% through alternative sales channels.
The project envisages the development of a single open-pit using conventional truck and shovel methods, complemented by continuous surface miners. The processing plant, using proven technologies, will primarily integrate ore receival, secondary crushing, ore storage and reclaim facilities, ore pulping and deslime units, sylvinite, carnallite and kainite processing units, SOP production facilities incorporating, drying, sizing and compaction units, and product load-out and haulage facilities.
The term of the Agreement is 10 years from the date of commissioning of the Colluli SOP processing plant, with an option to extend for a further three years if agreed by EuroChem and CMSC. EuroChem may terminate the Agreement if first commercial production has not occurred by 1 July 2022; well beyond CMSC’s production commencement expectations. Either party may terminate the Agreement if a project financing agreement has not been executed and first drawdown achieved within 14 months of the signing of the Agreement.
The Danakali and CMSC Boards, and the Eritrean Ministry of Energy and Mines, have approved CMSC’s entry into
the Agreement. “EuroChem is an outstanding partner with global reach and extensive fertiliser expertise and experience. The Agreement represents a strong endorsement for the Project. EuroChem has agreed to provide technical support to the Project on terms to be agreed.” EuroChem Group AG will also provide a parent company
guarantee as part of the Agreement. The Agreement is instrumental in unlocking project funding.
The take-or-pay nature of the Agreement (and associated terms) provides cash flow certainty and strengthens the Colluli and Danakali investment propositions. Other important debt milestones are also well progressed, including operational contract and procurement and supplier list finalisation.
EuroChem Group AG Chief Executive Officer Dmitry Strezhnev said: “We are excited about participating in this Project with CMSC, as part of our growing global presence. Colluli is one of the closest SOP deposits to a coastline anywhere in the world and, in solid form, the salts at Colluli can be processed immediately, significantly reducing the time between mining and revenue generation.”
