Danakali to sell stake in flagship Colluli potash project in Eritrea

Danakali explored the use of filtered seawater at Colluli. (Image courtesy of Danakali.)

Australia’s Danakali (ASX: DNK) is selling its 50% stake in the Colluli potash project in Eritrea, Africa, almost 13 years after partnering with the Eritrean National Mining Corporation (ENAMCO) to build the mine.

Subject to conditions, the deal with Chinese company Sichuan Road and Bridge Group is expected to be finalized between March and May next year, leaving Danakali with $121 million cash, of which 90% will be distributed back to shareholders.

The miner said it would use the remaining cash — about $12 million —to identify new projects “and potential new alternative growth opportunities.”

The Colluli potash project is considered one of the world’s most significant and lowest-cost sources of sulphate of potash (SOP), a premium grade fertilizer.

The project has the world’s largest JORC compliant reserve at 1.1 billion tonnes. It also contains other fertilizer products, such as muriate of potash (MOP) and gypsum, along with rock salt.

There is also potential for kieserite and mag chloride to be commercialized with minimal further processing required.

A United Nations report published in 2019 suggested that Colluli could significantly boost the economy of Eritrea.

The project is the only known source of potash that allows extraction of the fertilizer in solid form. It also has access to solar, wind and geothermal energy systems – the East African rift. 

The operating environment weighed heavily on Danakali’s decision, as Eritrea is ruled by one of the world’s most oppressive regimes and was until 2018 on the UN’s sanctions list.

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