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4-Traders Homepage  >  Equities  >  AUSTRALIAN SECURITIES EXCHANGE LIMITED  >  Danakali Ltd    STB   AU000000DNK9

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Danakali : Placement to raise A$12.25M to continue positive advancement of Colluli potash project development

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05/17/2017 | 06:12am CEST
ASX Release 17 May 2017 Placement to raise A$12.25M to continue positive advancement of Colluli potash project development

Danakali Limited ("DNK" or "the Company") is pleased to announce that it has received commitments from institutional and sophisticated investors in the United Kingdom and Australia to subscribe for approximately 20 million new ordinary shares of the Company to raise gross proceeds of approximately A$12.25M ("Placement"). Proceeds from the Placement 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 including mining and Engineering Procurement and Construction (EPC), completion of offtake and financing activities, on the ground work to reduce the project development timeline, working capital and transaction costs.

The Colluli Project definitive feasibility study (DFS)1 was completed in November 2015 and outlined the production of sulphate of potash (SOP) using a two-module development approach. The DFS demonstrates industry leading capital intensity and expected bottom quartile operating cost curve position. The expected mine life at the DFS production rates exceeds 200 years1. Optimisation work completed to date has successfully liberated over 10% of expected production capacity, increasing the planned production rate from 425kt per annum per module to 472kt per annum per module2.

Managing Director, Paul Donaldson said "This Placement is testimony of how the international profile of the Colluli Project is growing and is a clear endorsement of the project, the jurisdiction and the Company. The project is by all accounts world class and is the most advanced stage greenfield Sulphate of Potash development project globally. The resource is positively unique and has outstanding potential. We believe that the industry leading capital intensity, bottom quartile operating costs, unrivalled product diversification potential and proximity to coast and global markets, as demonstrated by the completed DFS makes the Colluli Project the most compelling greenfield potash development project in the world. We are very pleased with the Placement and specifically with the addition of more UK based institutional investors to our share register."

Hannam and Partners and Arlington Group Asset Management acted as joint-lead Managers to the Placement with support from Australian based financial advisory firm, Baillieu Holst and placed approximately 20 million new ordinary shares in the Company at a price of A$0.62 per Share. The issue price of A$0.62 represents a 7.4% discount to the last closing price of $0.67 on ASX and a 7.9% discount to the 30-day ASX VWAP.

The Placement Shares are to be issued under a single tranche under the Company's 15% placement

capacity pursuant to ASX Listing Rule 7.1 (expected to settle on Friday, 19 May 2017).

For more information, please contact:

Paul Donaldson Managing Director

+61 8 6315 1444

1: For more information on the Definitive Feasibility Study, refer ASX Announcement dated 30 November 2015. Danakali is not aware of any new information or data that materially affects the information in the announcement and confirms that the material assumptions used in the DFS continue to apply and have not materially changed.

2. ASX Announcement, 3rd May 2017, FEED Optimisation Increases Planned SOP Production Capacity

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.

Competent Persons Statement (Rock Salt Resource)

Colluli has a JORC 2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 347Mt @97% NaCl. The resource contains 28Mt @ 97% NaCl of Measured Resources, 180Mt @ 97% NaCl of Indicated Resources and 139Mt @ 97% NaCl of Inferred Resources.

The information relating to the Colluli Rock Salt Mineral Resource estimate was compiled by Mr. John Tyrrell. Mr. Tyrrell is a member of the Australasian Institute of Mining and Metallurgy (AusIMM) and a full-time employee of AMC. Mr. Tyrrell has more than 25 years' experience in the field of Mineral Resource estimation. He has sufficient experience relevant to the style of mineralisation and type of the deposit under consideration, and in resource model development, to qualify as a Competent Person as defined in the JORC Code.

Mr Tyrrell consents to the inclusion of the information relating to the rock salt Mineral Resource in the form and context in which it appears

Competent Persons Statement (Sulphate of Potash Resource)

Colluli has a JORC 2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 1,289Mt @11% K20. The resource contains 303Mt @ 11% K20 of Measured Resources, 951Mt @ 11% K20 of Indicated Resources and 35Mt @ 10% K20 of Inferred Resources.

The information relating to the 2015 Colluli Mineral Resource estimate was compiled by Mr. John Tyrrell, under the supervision of Mr. Stephen Halabura M. Sc. P. Geo. Fellow of Engineers Canada (Hon), Fellow of Geoscientists Canada, and as a geologist with over 25 years' experience in the potash mining industry. Mr. Tyrrell is a member of the Australian Institute of Mining and Metallurgy and a full-time employee of AMC. Mr. Tyrrell has more than 25 years' experience in the field of Mineral Resource estimation.

Mr. Halabura is a member of the Association of Professional Engineers and Geoscientists of Saskatchewan, a Recognised Professional Organisation (RPO) under the JORC Code and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code).

Mr. Tyrrell & Mr. Halabura consent to the inclusion of information relating to the 2015 Resource Statement in the form and context in which it appears.

Competent Persons Statement (Sulphate of Potash Reserve)

The November 2015 Colluli Ore Reserve is reported according to the JORC Code and estimated at 1,113Mt @10% K2O Equiv. The Ore Reserve is classed as 286Mt @ 11% K2O Equiv Proved and 827Mt @ 10% K2O Equiv Probable. The Competent Person for the estimate is Mr Mark Chesher, a mining engineer with more than 30 years' experience in the mining industry. Mr. Chesher is a Fellow of the AusIMM, a Chartered Professional, a full-time employee of AMC Consultants Pty Ltd, and has sufficient open pit mining activity experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the JORC Code. Mr Chesher consents to the inclusion of information relating to the Ore Reserve in the form and context in which it appears.

In reporting the Mineral Resources and Ore Reserves referred to in this public release, AMC Consultants Pty Ltd acted as an independent party, has no interest in the outcome of the Colluli Project and has no business relationship with Danakali Ltd 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 Consultants Pty Ltd 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.

4

Halite blanks and duplicate samples are submitted with each hole. Chemical analyses were conducted by Kali-UmwelttechnikGmBHSondershausen, Germany utilising flame emission spectrometry, atomic absorption spectroscopy and ionchromatography. Kali- Umwelttechnik (KUTEC) Sondershausen1 have extensive experience in analysis of salt rock and brine samples and is certified according by DIN EN ISO/IEC 17025 by the Deutsche AkkreditierungssystemPrüfwesen GmbH (DAR). The laboratory follows standard procedures for the analysis of potash salt rocks chemical analysis (K+, Na+, Mg2+, Ca2+, Cl-, SO 2-, H2O) 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 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.

Danakali Ltd. published this content on 17 May 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 17 May 2017 04:12:13 UTC.

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Financials ( AUD)
Sales 2017 0,90 M
EBIT 2017 -3,85 M
Net income 2017 -3,25 M
Finance 2017 67,5 M
Yield 2017 -
P/E ratio 2017 -
P/E ratio 2018
EV / Sales 2017 132x
EV / Sales 2018 323x
Capitalization 186 M
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 1,12  AUD
Spread / Average Target 48%
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NameTitle
Paul Michael Donaldson Chief Executive Officer, Executive Director & MD
Seamus Ian Cornelius Independent Non-Executive Chairman
Christiaan Philippus Els Chief Financial Officer & Secretary
Liam Raymond Cornelius Non-Executive Director
John Daniel Fitzgerald Independent Non-Executive Director
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