TIDMDNK
RNS Number : 7412X
Danakali Limited
23 December 2019
Announcement Monday, 23 December 2019
============= =========================
US$200M senior debt documentation executed
-- CMSC has executed the documentation for the US$200M senior
debt facility with AFC and Afreximbank
-- Allows drawdown of CMSC senior debt on satisfaction of
customary conditions precedent
-- Confirms total funding commitment to date of US$250M for
Colluli, following the recently announced US$50M equity commitment
from AFC
-- Colluli project execution has commenced, and production is
expected in 2022
Danakali Limited (ASX: DNK, LSE: DNK, Danakali or the Company)
is pleased to announce that the Colluli Mining Share Company (CMSC,
50% owned by Danakali), Africa Finance Corporation (AFC) and
African Export Import Bank (Afreximbank, together with AFC the
Mandated Lead Arrangers), have executed definitive documentation
for the provision of US$200M in senior debt finance to CMSC (the
Facility). US$100M from each Mandated Lead Arranger. This Facility
represents the majority of funding required for the development and
construction of the Colluli Sulphate of Potash Project (Colluli or
the Project) in the Danakil Depression region of Eritrea, East
Africa.
The finalisation of the Facility documentation follows the
recent announcement of AFC's US$50M equity commitment to Danakali
(the first tranche of US$21.5M has since been received, refer 3
December 2019 and 10 December 2019 announcements). The execution of
Facility documentation satisfies one of the conditions necessary to
complete the second tranche of AFC's US$50M equity investment.
With US$250M of funding commitment completed in December project
execution has commenced and production is expected in 2022. The
Company is well progressed with a range of options for the balance
of funding required.
The Export Credit Insurance Corporation of South Africa SOC
Limited (ECIC) will provide credit support for AFC's portion of the
Facility. ECIC is South Africa's statutory export credit and
foreign investment insurance provider.
Chief Executive Officer of Danakali, Niels Wage, said: "The
finalisation of the US$200M CMSC senior debt facility is another
major milestone for Colluli. Danakali is very pleased to be working
with two leading development finance institutions, AFC and
Afreximbank, to advance Colluli through construction and into
production, fostering sustainable development in Eritrea and
delivering value for our shareholders."
ENAMCO General Manager, Berhane Habtemariam, said: "The
finalisation of debt funding for Colluli brings it one step closer
to making a significantly positive impact on the Eritrean economy
and its people. Colluli has the potential to significantly boost
the Eritrean economy while providing benefits to Eritreans through
improved agricultural productivity, training and employment."
Chief Executive Officer of AFC, Samaila D. Zubairu, said: "AFC
is excited by the opportunity to accelerate development in Eritrea
through investment in Colluli. Our strategic focus relies on
financially and technically strong partnerships and we look forward
to continuing to foster economic growth and industrial development
alongside the Eritrean Government."
President of Afreximbank, Benedict Okey Oramah, said: "The
Colluli Project will bring significant positive impact to the
Eritrean economy. Afreximbank is proud to have been given the
opportunity to be a financier of this important project. We see the
project as a continuation of the rapid and positive changes that
are taking place in Eritrea and look forward to future
opportunities to support the country and its people."
Key terms of the Facility
The Facility will provide CMSC with US$200M (subject to
satisfaction of customary conditions precedent).
The key terms of the Facility are set out below:
Term Description
===================== =============================================================
Facility type * Senior loan facility of US$200M
and value
Issuer
* CMSC
--------------------- -------------------------------------------------------------
Mandated Lead
Arrangers / Lenders * AFC; and
* Afreximbank
--------------------- -------------------------------------------------------------
Guarantors
* Danakali, STB Eritrea Pty Ltd (fully owned subsidiary
of Danakali) and ENAMCO
--------------------- -------------------------------------------------------------
Tenor
* 7 years from financial close repaid quarterly
--------------------- -------------------------------------------------------------
Security
* Secured senior debt facility
--------------------- -------------------------------------------------------------
Availability
* From satisfaction of conditions precedent until the
completion of the construction and execution of the
Project
--------------------- -------------------------------------------------------------
Margin
* 8.5% p.a. over 3 month USD LIBOR
--------------------- -------------------------------------------------------------
Covenants
* Customary positive, negative and financial covenants
and undertakings for a funding facility of this
nature
--------------------- -------------------------------------------------------------
CMSC shareholder
distributions * Occur on satisfaction of the project completion
tests; and
* when six consecutive repayments have been made to the
senior lenders
--------------------- -------------------------------------------------------------
Conditions precedent
* Conditions precedent are typical for a project
financing facility of this kind and include:
_ all project approvals required to develop the
project; and
_ the balance of the equity contribution having
been raised
--------------------- -------------------------------------------------------------
Other
* Fees and early repayment terms typical of such a
project financing facility
===================== =============================================================
Advisers
Endeavour Financial is acting as financial adviser for the
Facility. Norton Rose Fulbright is acting as legal adviser for the
Facility.
For more information, please contact:
Danakali
Niels Wage William Sandover
Chief Executive Officer Head of Corporate Development &
+61 8 6189 8635 External Affairs
+61 499 776 998
Corporate Broker - Numis Securities UK IR/PR - Instinctif Partners
John Prior / James Black / Paul Mark Garraway / Sarah Hourahane
Gillam / Dinara Shikhametova
+44 (0)20 7260 1000 danakali@instinctif.com
+44 (0)207 457 2020
Visit the Company's website: www.danakali.com
Follow Danakali on LinkedIn:
www.linkedin.com/company/danakali-limited
Subscribe to Danakali on YouTube:
www.youtube.com/channel/UChGKN4-M4lOvPKxs9b-IJvw
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation. Upon the publication of this
announcement via Regulatory Information Service, this inside
information is now considered to be in the public domain.
Announcement authorised for release by the board of
Danakali.
Appendix A: About AFC and Afreximbank
AFC is a private sector-led investment bank and development
finance institution created to help mobilise and channel required
capital towards driving Africa's economic development. AFC offers a
unique value proposition as an Africa-focused multilateral
financial institution covering 3 complementary service areas:
project development, financial advisory and principal investing. In
addition to these core services AFC has significant experience and
expertise in project management and will ensure that the objectives
of all parties involved are met through careful monitoring of the
project from beginning to end. AFC's core mission is to address
Africa's infrastructure development needs while seeking a
competitive return on capital for its shareholders.
For more information, visit www.africafc.org.
About Afreximbank
Afreximbank is the foremost Pan-African multilateral financial
institution devoted to financing and promoting
intra- and extra-African trade. The bank was established in
October 1993 by African governments, African
private and institutional investors, and non-African investors.
Afreximbank's mission is to stimulate a consistent
expansion, diversification and development of African trade
while operating as a first class, profit-oriented,
socially responsible financial institution and a centre of
excellence in African trade matters. Afreximbank has
won numerous awards for their work.
For more information, visit afreximbank.com/.
About ECIC
ECIC is a self-sustained, state-owned national export credit
agency that provides political and commercial risk insurance
primarily to South African exporters of capital goods and related
services. It has a particular focus on emerging markets in Africa.
Its overarching goal - and its mandate from the South African
government as its sole shareholder - is to make South African
exporters attractive to international buyers to attract foreign
income, stimulate domestic economic growth and create local jobs.
ECIC's various insurance products are formulated to protect all
parties involved in cross-border projects, from the institutions
that provide financing, to the foreign buyers, to the exporters
themselves. Based in Pretoria, ECIC has exposure in Ghana, Zambia,
Zimbabwe, Mozambique, Tanzania, Iran, Liberia, Angola, Lesotho,
Sierra Leone, and now Eritrea.
For more information, visit https://www.ecic.co.za/.
- - -S - - -
About Danakali
Danakali Limited (ASX: DNK, LSE: DNK) (Danakali, or the Company)
is an ASX- and LSE-listed potash company focused on the development
of the Colluli Sulphate of Potash Project (Colluli or the Project).
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).
The Project is located in the Danakil Depression region of
Eritrea, East Africa, and is 75km from the Red Sea coast, making it
one of the most accessible potash deposits globally. Mineralisation
within the Colluli resource commences at just 16m, making it the
world's shallowest known potash deposit. The resource is amenable
to open cut mining, which allows higher overall resource recovery
to be achieved, is generally safer than underground mining, and is
highly advantageous for modular growth.
The Company has completed a Front End Engineering Design (FEED)
for the production of potassium sulphate, otherwise known as
Sulphate of Potash or SOP. SOP is a chloride free, specialty
fertiliser which carries a substantial price premium relative to
the more common potash type; potassium chloride (or MOP). Economic
resources for production of SOP are geologically scarce. The unique
composition of the Colluli resource favours low energy input, high
potassium yield conversion to SOP using commercially proven
technology. One of the key advantages of the resource is that the
salts are present in solid form (in contrast with production of SOP
from brines) which reduces infrastructure costs and substantially
reduces the time required to achieve full production capacity.
The resource is favourably positioned to supply the world's
fastest growing markets. A binding take-or-pay offtake agreement
has been confirmed with EuroChem Trading GmbH (EuroChem) for up to
100% (minimum 87%) of Colluli Module I SOP production.
Development Finance Institutions, Africa Finance Corporation
(AFC) and African Export Import Bank (Afreximbank, together the
Mandated Lead Arrangers), have executed documentation for the
provision of US$200M in senior debt finance to CMSC. AFC has also
executed a Subscription Agreement to make a US$50M strategic equity
investment in Danakali.
Project execution has commenced and SOP production is expected
in 2022. The Company's vision is to bring Colluli into production
using the principles of risk management, resource utilisation and
modularity, using the starting module (Module I) as a growth
platform to develop the resource to its full potential.
Competent Persons Statement (Sulphate of Potash and Kieserite
Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and
Inferred Mineral Resource estimate of 1,289Mt @11% K(2) 0 Equiv.
and 7% Kieserite. The Mineral Resource contains 303Mt @ 11% K(2) 0
Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K(2) 0
Equiv. and 7% Kieserite of Indicated Resource and 35Mt @ 10% K(2) 0
Equiv. and 9% Kieserite of Inferred Resource.
The information relating to the Colluli Mineral Resource
estimate is extracted from the report entitled "Colluli Review
Delivers Mineral Resource Estimate of 1.289Bt" disclosed on 25
February 2015 and the report entitled "In excess of 85 million
tonnes of Kieserite defined within Colluli Project Resource adds to
multi agri-commodity potential" disclosed on 15 August 2016, which
are available to view at www.danakali.com.au. The Company confirms
that it is not aware of any new information or data that materially
affects the information included in the original market
announcement and, in the case of estimates of Mineral Resources or
Ore Reserves, that all material assumptions and technical
parameters underpinning the estimates in the relevant market
announcement continue to apply and have not materially changed. The
Company confirms that the form and context in which the Competent
Person's findings are presented have not been materially modified
from the original market announcement.
Competent Persons Statement (Sulphate of Potash Ore Reserve)
Colluli Proved and Probable Ore Reserve is reported according to
the JORC Code and estimated at 1,100Mt @ 10.5% K(2) O Equiv. The
Ore Reserve is classified as 285Mt @ 11.3% K(2) O Equiv. Proved and
815Mt @ 10.3% K(2) O Equiv. Probable. The Colluli SOP Mineral
Resource includes those Mineral Resources modified to produce the
Colluli SOP Ore Reserves.
The information relating to the January 2018 Colluli Ore Reserve
is extracted from the report entitled "Colluli Ore Reserve update"
disclosed on 19 February 2018 and is available to view at
www.danakali.com.au. The Company confirms that it is not aware of
any new information or data that materially affects the information
included in the original market announcement and, in the case of
estimates of Mineral Resources or Ore Reserves, that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. The Company confirms that the form and context
in which the Competent Person's findings are presented have not
been materially modified from the original market announcement.
Competent Persons Statement (Rock Salt Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and
Inferred Mineral Resource estimate of 347Mt @ 96.9% NaCl. The
Mineral Resource estimate contains 28Mt @ 97.2% NaCl of Measured
Resource, 180Mt @ 96.6% NaCl of Indicated Resource and 139Mt @
97.2% NaCl of Inferred Resource.
The information relating to the Colluli Rock Salt Mineral
Resource estimate is extracted from the report entitled "+300M
Tonne Rock Salt Mineral Resource Estimate Completed for Colluli"
disclosed on 23 September 2015 and is available to view at
www.danakali.com.au. The Company confirms that it is not aware of
any new information or data that materially affects the information
included in the original market announcement and, in the case of
estimates of Mineral Resources or Ore Reserves, that all material
assumptions and technical parameters underpinning the estimates in
the relevant market announcement continue to apply and have not
materially changed. The Company confirms that the form and context
in which the Competent Person's findings are presented have not
been materially modified from the original market announcement.
AMC Consultants Pty Ltd (AMC) independence
In reporting the Mineral Resources and Ore Reserves referred to
in this public release, AMC acted as an independent party, has no
interest in the outcomes of Colluli and has no business
relationship with Danakali other than undertaking those individual
technical consulting assignments as engaged, and being paid
according to standard per diem rates with reimbursement for
out-of-pocket expenses. Therefore, AMC and the Competent Persons
believe that there is no conflict of interest in undertaking the
assignments which are the subject of the statements.
Quality control and quality assurance
Danakali exploration programs follow standard operating and
quality assurance procedures to ensure that all sampling techniques
and sample results meet international reporting standards. Drill
holes are located using GPS coordinates using WGS84 Datum, all
mineralisation intervals are downhole and are true width
intervals.
The samples are derived from HQ diamond drill core, which in the
case of carnallite ores, are sealed in heat-sealed plastic tubing
immediately as it is drilled to preserve the sample. Significant
sample intervals are dry quarter cut using a diamond saw and then
resealed and double bagged for transport to the laboratory.
Halite blanks and duplicate samples are submitted with each
hole. Chemical analyses were conducted by Kali-Umwelttechnik GmBH,
Sondershausen, Germany, utilising flame emission spectrometry,
atomic absorption spectroscopy and ion chromatography.
Kali-Umwelttechnik (KUTEC) has extensive experience in analysis of
salt rock and brine samples and is certified according by DIN EN
ISO/IEC 17025 by the Deutsche Akkreditierungsstelle GmbH (DAR). The
laboratory follows standard procedures for the analysis of potash
salt rocks chemical analysis (K(+) , Na(+) , Mg(2+) , Ca(2+) ,
Cl(-) , SO(4) (2-) , H(2) O) and X-ray diffraction (XRD) analysis
of the same samples as for chemical analysis to determine a
qualitative mineral composition, which combined with the chemical
analysis gives a quantitative mineral composition.
Forward looking statements and disclaimer
The information in this document is published to inform you
about Danakali and its activities. Danakali has endeavoured to
ensure that the information enclosed is accurate at the time of
release, and that it accurately reflects the Company's intentions.
All statements in this document, other than statements of
historical facts, that address future production, project
development, reserve or resource potential, exploration drilling,
exploitation activities, corporate transactions and events or
developments that the Company expects to occur, are forward looking
statements. Although the Company believes the expectations
expressed in such statements are based on reasonable assumptions,
such statements are not guarantees of future performance and actual
results or developments may differ materially from those in
forward-looking statements.
Factors that could cause actual results to differ materially
from those in forward-looking statements include market prices of
potash and, exploitation and exploration successes, capital and
operating costs, changes in project parameters as plans continue to
be evaluated, continued availability of capital and financing and
general economic, market or business conditions, as well as those
factors disclosed in the Company's filed documents.
There can be no assurance that the development of Colluli will
proceed as planned. Accordingly, readers should not place undue
reliance on forward looking information. Mineral Resources and Ore
Reserves have been reported according to the JORC Code, 2012
Edition. To the extent permitted by law, the Company accepts no
responsibility or liability for any losses or damages of any kind
arising out of the use of any information contained in this
document. Recipients should make their own enquiries in relation to
any investment decisions.
Mineral Resource, Ore Reserve, production target, forecast
financial information and financial assumptions made in this
announcement are consistent with assumptions detailed in the
Company's ASX announcements dated 25 February 2015, 23 September
2015, 15 August 2016, 1 February 2017, 29 January 2018, and 19
February 2018 which continue to apply and have not materially
changed. The Company is not aware of any new information or data
that materially affects assumptions made.
No representation or warranty, express or implied, is or will be
made by or on behalf of the Company, and no responsibility or
liability is or will be accepted by the Company or its affiliates,
as to the accuracy, completeness or verification of the information
set out in this announcement, and nothing contained in this
announcement is, or shall be relied upon as, a promise or
representation in this respect, whether as to the past or the
future. The Company and each of its affiliates accordingly
disclaims, to the fullest extent permitted by law, all and any
liability whether arising in tort, contract or otherwise which it
might otherwise have in respect of this announcement or any such
statement.
The distribution of this announcement outside the United Kingdom
may be restricted by law and therefore any persons outside the
United Kingdom into whose possession this announcement comes should
inform themselves about and observe any such restrictions in
connection with the distribution of this announcement. Any failure
to comply with such restrictions may constitute a violation of the
securities laws of any jurisdiction outside the United Kingdom.
This information is provided by RNS, the news service of the
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contact rns@lseg.com or visit www.rns.com.
END
MSCPGGRCPUPBGCP
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