Perth-based potash company Danakali has announced a US$50 million ($73 million) agreement with Africa Finance Corporation (AFC) that will fund the Colluli potash project in Eritrea.
In 2018, Colluli Mining Share Company (CMSC), Danakali and Eritrean National Mining Company’s (ENAMCO) joint venture, secured a US$200 million senior debt facility from AFC.
AFC and African Export Important Bank (Afreximbank) provided a majority of the overall project funding, which was used for development and construction of the Colluli project.
With the key step taken last year, the AFC’s total participation in the 1.1 billion billion-tonne potash project has grown to US$150 million, demonstrating a long-term commitment to the site.
The AFC’s latest placement will accelerate plans for Colluli’s fully permitted and construction-ready operations, with the commencement of project execution activities on track for production in 2022.
AFC’s placement will be undertaken in two tranches, the first consisting of 53 million new shares issued to AFC at a price of $0.60 in order for CMSC to raise US$21.5 million.
The second tranche is subject to shareholder approval, but will consist of an estimated 70 million new shares for AFC, at the same price, raising an additional US$28.5 million for CMSC.
The offer price represents a discount of 6 per cent to Danakali’s latest close price and a 5 per cent discount to Danakali’s 30-day VWAP.
Upon the placement’s completeion, AFC will hold 32 per cent of Danakali, granting the company’s right to to nominate up to two directors to Danakali’s board.
Danakali chief executive Niels Wage said the agreement marked a significant milestone for the company and continued its momentum towards financial close.
“An investor with the reputation of AFC is a great endorsement of the project and will provide a strong platform to attract further investment,” Wage said.
“Chief executive officer of AFC, Samalia D. Zubairu said they assess hundres of potential investment opportunities across Africa every year, and Colluli is different.
“Colluli stands apart from other opportunities due to its long life, low cost, low technical risk and proximity to infrastructure.”
Final conditions of placement details are scheduled to be settled next week, allowing a clear pathway towards completing all funding for the project.