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Danakali going ahead with East Africa project’s development

ASX-listed Danakali is proceeding with Phase 2 of the engineering, procurement, construction and management (EPCM) at its Colluli potash project, in Eritrea.

The Colluli project is 100% owned by the Colluli Mining Share Company (CMSC), a joint venture between Danakali and the Eritrean National Mining Corporation (Enamco). CMSC’s aim is to become a producer and exporter of sulphate of potash (SoP) during 2022.

A water desalination plant order has also been placed, and design work has been completed, along with long lead items having been ordered and manufacturing having started, although the latter is currently on hold owing to the Covid-19 lockdown in South Africa.

According to Danakali CEO Niels Wage, “the evolving environment is likely to cause some project development delays”, and he laments the difficulty in providing an exact assessment in regard to a revised project delivery timeline.

Turning towards the company’s financial position, outgoings for the quarter, ended March 31, include US$8.3-million of non-recurring expenditure related to lender and advisers’ fees associated with the successful debt financing activities in December 2019.

An in-depth review of activities has been undertaken with the aim of re-prioritising activities which are now considered non-essential in light of Covid-19 restrictions. As such, project spend for the second quarter of this year has been assessed and restricted to those critical for the long-term success of the Colluli development, Danakali said.

Key activities planned for the remainder of the year will include the continuous monitoring of developments in financial markets to revise Danakali’s financing plans in response to Covid-19, while also continuing with the completion of conditions necessary to allow for the senior debt drawdown for CMSC.

Additionally, the company said that it would continue to execute its equity strategy for the remaining project financing and capital requirements, though this is subject to the recovery of the global market.

In response to the Covid-19 pandemic, Danakali has temporarily suspended on-site work activities until restrictions are lifted. The desk-based nature of the majority of the work that was already under way has enabled the company to focus all available remote-working resources on the EPCM workstreams and to investigate optimisation opportunities.

Geotechnical investigation works have also been temporarily deferred pending the lifting of travel restrictions.

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