Danakali : Issue of Shares– Appendix 3B and S708A Notice

Danakali Ltd (ASX:DNK) ("Danakali" or "Company") is pleased to advise that the private placement announced by the Company on 17th May 2017 of approximately 20 million shares at A$0.62 per share to institutional and sophisticated investors in the United Kingdom and Australia to raise gross proceeds of approximately A$12.25million ("Placement"), has completed.

On 23rd May 2017 the Company issued 19,920,645 shares at A$0.62 ("Placement Shares") to raise gross proceeds of $12,350,800.

The Placement Shares have been issued in a single tranche under the Company's 15% capacity pursuant to Listing Rule 7.1.

A completed Appendix 3B has been lodged together with this announcement.

Secondary Trading Exemption

Danakali gives notice under section 708A(5)(e) of the Corporations Act 2001 (Cth) ("Act") of the following:

1. the Placement Shares were issued without disclosure under Part 6D 2 of the Act;

2. this notice is being given under section 708A(5)(e) of the Act;

3. as at the date of this notice, the Company has complied with:

4. the provisions of Chapter 2M of the Act as they apply to the Company; and

5. section 674 of the Act; and

6. as at the date of this notice, there is no information:

7. that has been excluded from a continuous disclosure notice in accordance with the ASX Listing Rules; and

8. that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

9. the assets and liabilities, financial position and performance, profits and losses and prospects of the Company; or

10. the rights and liabilities attaching to the shares.

11. Shareholders can view all Danakali's announcements on the ASX website (www.asx.com.au) and Danakali's website (www.danakali.com).

    For more information, please contact:

    Paul Donaldson Managing Director

    +61 8 6315 1444

    About Danakali Ltd

    Danakali is an ASX listed company and 50% owner of the Colluli Potash Project in Eritrea, East Africa. The company is currently developing the Colluli Project in partnership with the Eritrean National Mining Corporation (ENAMCO).

    The project is located in the Danakil Depression region of Eritrea, 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 potash deposit. The resource is amenable to open pit 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 definitive feasibility study for the production of potassium sulphate, otherwise known as SOP. SOP is a chloride free, specialty fertiliser which carries a substantial price premium relative to the more common potash type; potassium chloride. 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) with 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.

    Our vision is to bring the Colluli project into production using the principles of risk management, resource utilisation and modularity, using the starting module as a growth platform to develop the resource to its full potential.

    Forward Looking Statements and Disclaimer

    The information in this document is published to inform you about Danakali Limited (the "Company" or "DNK") and its activities. DNK 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 the Colluli Project 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 and financial assumptions made in this presentation are consistent with assumptions detailed in the Company's ASX announcements dated 25 February 2015, 4 March 2015, 19 May 2015, 23 September 2015, 30 November 2015, 15 August 2016 and 1 February 2017 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.

    Appendix 3B New issue announcement

    Appendix 3B

    Rule 2.7, 3.10.3, 3.10.4, 3.10.5

    New issue announcement, application for quotation of additional securities and agreement

    Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX's property and may be made public.

    Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

    Name of entity

    DANAKALI LTD

    ABN

    56 097 904 302

    We (the entity) give ASX the following information.

    Part 1 - All issues

    You must complete the relevant sections (attach sheets if there is not enough space).

    1.Fully paid ordinary shares

    1 +Class of +securities issued or to be issued

    1. 19,920,645 fully paid ordinary shares

12. Number of +securities issued or to be issued (if known) or maximum number which may be issued

    1. Fully paid ordinary shares

13. Principal terms of the +securities (e.g. if options, exercise price and expiry date; if partly paid

    +securities, the amount outstanding and due dates for payment; if +convertible securities, the conversion price and dates for conversion)

    + See chapter 19 for defined terms.

    04/03/2013 Appendix 3B Page 1

    Appendix 3B

    New issue announcement

    1.Yes - fully paid ordinary shares

14. Do the +securities rank equally in all respects from the +issue date with an existing +class of quoted

    +securities?

    If the additional +securities do not rank equally, please state:

    • the date from which they do

    • the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment

    • the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment

      1. $0.62 per fully paid share

15. Issue price or consideration

    1. Funds raised will be used to complete the development cost reduction and optimisation work identified in the front-end engineering design process, completion of the tendering processes for key contracts, completion of offtake and financing activities, on the ground work to reduce the project development timeline, working capital and transaction costs.

16. Purpose of the issue

(If issued as consideration for the acquisition of assets, clearly identify those assets)

Yes

6a Is the entity an +eligible entity that has obtained security holder approval under rule 7.1A?

If Yes, complete sections 6b - 6h in relation to the +securities the subject of this Appendix 3B, and comply with section 6i

19 May 2017

6b The date the security holder resolution under rule 7.1A was passed

1. 19,920,645 fully paid ordinary shares

6c Number of +securities issued without security holder approval under rule 7.1

Nil

6d Number of +securities issued with security holder approval under rule 7.1A

+ See chapter 19 for defined terms.

Appendix 3B Page 2 04/03/2013