Danakali Limited is pleased to provide this quarterly update on the activities and financial position of the Company and its Colluli Potash Project, located in Eritrea, East Africa. The project is 100% owned by the Colluli Mining Share Company, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation.
- US$200M debt finance mandate and term sheet executed by CMSC1.
- Afreximbank and AFC acting as the Mandated Lead Arrangers.
- Mandated Lead Arrangers visited Eritrea during the quarter to meet with Colluli stakeholders and execute the Mandate.
- Lifting of UN sanctions on Eritrea which had been in place since 2009.
- The UN has recognised rapid diplomatic progress within the Horn of Africa.
- Danakali hosted a senior EuroChem delegation in Eritrea.
- Included visits to Massawa port and Colluli, as well as meetings with key Colluli stakeholders in Asmara.
Key activities planned for the March 2019 Quarter
- Work towards credit approval with the Mandated Lead Arrangers.
- Finalise contracts with DRA, Inglett & Stubbs and preferred mining contractor.
- Senior management visits to Eritrea to meet with and host various stakeholders and potential partners.
- Cash position of AUS$9.6 million as of 31 December 2018.
Colluli is execution ready. Danakali and CMSC are focused on logistics and other technical collaboration aspects with offtake partner EuroChem, operational contracts, operations readiness, funding and corporate social responsibility initiatives.
Project financing – US$200M debt finance mandate executed
In December 2018 CMSC executed a mandate to provide fully underwritten debt finance facilities of US$200M (the Facility) to fund the construction and development of Colluli. African development financial institutions (DFIs) African Export-Import Bank (Afreximbank) and Africa Finance Corporation (AFC) are acting as Mandated Lead Arrangers. Executing the debt finance mandate (Mandate) is a critical project financing and execution milestone for CMSC and Danakali.
Afreximbank and AFC are highly reputable African DFIs with extensive experience in providing project financing to African projects across the continent and were chosen as Mandated Lead Arrangers due to their extensive African project finance experience and the strength of their investor reach. In 2017 Afreximbank was lead or co-lead arranger on 11 syndicated debt transactions totalling over US$3Bn. In the same period AFC was mandated on over US$1Bn of transactions.
“The execution of the Mandate represents a significant milestone for the Colluli project funding. We are very pleased to be partnering with strong, experienced African financial institutions. Initial bank due diligence and subsequent negotiations have significantly advanced the project financing process and built on the finalisation of the binding offtake agreement with EuroChem placing CMSC in strong position to advance Colluli,” says Chief Financial Officer of Danakali, Stuart Tarrant.
Since execution of the Mandate, momentum has continued with respect to engagement with the Mandated Lead Arrangers. The Company and its debt advisor, Endeavour Financial, are working with the Mandated Lead Arrangers to advance their due diligence. The due diligence is necessary for the Mandated Lead Arrangers to obtain credit approval and includes:
- Social & environmental.
- Taxation and model review.
All workstreams are progressing in parallel with each resulting in a report to the Mandated Lead Arrangers. The Mandated Lead Arrangers and their advisers are also reviewing the provisions of the draft commercial contracts (Engineering Procurement Construction Management (EPCM), power, mining), as they become available. A site visit to Colluli by the Mandated Lead Arrangers and their advisors is expected to take place in the March 2019 Quarter.
Outside of the CMSC senior debt process, the Company continues to move the Project’s funding requirements forward through the following avenues:
- Carrying out extensive awareness exercises to further raise the profile of Danakali and Colluli.
- Mobilisation of strategic, institutional and private client interest globally.
- Moving towards financial close for Colluli Module I in close consultation with the debt funding process.
A video interview with Executive Chairman, Seamus Cornelius, post the execution of the Mandate can be found at the following link.
Colluli and Massawa port site visit – EuroChem engagement continues Danakali hosted a senior delegation from EuroChem in Eritrea, with visits to the Massawa port and Colluli, and meetings with key stakeholders in Asmara, including Eritrean Government Ministries and ENAMCO. EuroChem noted their positive impressions of Colluli, Massawa port, and Eritrea more broadly as a result of the visit. The Company and CMSC are pleased to continue their engagement with EuroChem with respect to logistics and product optimisation, after the signing of a binding take-or-pay offtake agreement for 100% (minimum 87%) of Colluli Module I SOP in 2018.
Read the article online at: https://www.worldfertilizer.com/special-reports/01022019/danakali-limited-releases-4q18-results-and-project-updates/