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Danakali defers second tranche of funding for Colluli project

Published by
World Fertilizer,


Danakali has provided an update on business measures related to the Covid-19 crisis and the Africa Finance Corp's (AFC) strategic equity investment in Danakali's Colluli sulfate of potash (SOP) project in Eritrea.

Covid-19

Danakali is monitoring the potential impact of Covid-19 and its effects on its operations and has rolled out a business continuity plan and has mobilised all resources to continue to work on various workstreams according to the EPCM plan. At this stage, the company has made significant progress with the delivery of Phase 1 and has commenced Phase 2.

Danakali has increased precautionary measures including working from home and suspending all non-essential projects.

AFC investment

In light of the rapid spread of Covid-19 and its significant impact on global financial markets, Tranche 2 of AFC’s equity funding (Tranche 2) will be deferred to allow for the stabilisation of market and global conditions.

AFC remains fully supportive of Danakali and the Colluli SOP project, and advancing Tranche 2. AFC’s confidence of the ultimate success of Colluli is evidenced by the Board appointments of two nominees that it is entitled to appoint under the US$50 million Subscription Agreement between Danakali and AFC.

Danakali considers AFC to be a key strategic investor and partner in the project and accordingly, given the requirement for financing in addition to AFC’s investment, Tranche 2 will not be advanced whilst the critical market conditions are unfavourable and uncertain. The deferment of Tranche 2 will:

  • Allow the parties to work through satisfying many of the remaining conditions precedent to Danakali’s debt financing, and
  • Give Danakali additional time to reassess its overall funding strategy in view of the changed market environment and review a range of options appropriate to the Project’s funding requirements beyond the completion of EPCM Phases 1 and 2.

With the receipt of Tranche 1 of AFC’s investment of US$21.5 million (AUS$31.8 million), Danakali is well funded to complete the current activities and close out the balance of the funding.

AFC has confirmed that prior to the advance of Tranche 2 it requires satisfaction of certain conditions precedent relating to CMSC’s debt financing and execution of certain of the documents ancillary to that debt financing, in addition to the senior debt agreements already executed.

Danakali and AFC are working in good faith to agree the extent of AFC’s requirements, which of these documents require execution before Tranche 2 can be advanced and a realistic timeframe for satisfaction of these requirements if that is beyond the existing deadline for satisfaction of the Tranche 2 conditions which is 2 June 2020. A further announcement will be made in due course. Approval of Danakali’s shareholders remains a further condition precedent, as previously announced.

Read the article online at: https://www.worldfertilizer.com/project-news/31032020/danakali-defers-second-tranche-of-funding-for-colluli-project/

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