Danakali (ASX:DNK) has achieved an important milestone in marketing products from its Colluli potash project in Eritrea by publishing product specification sheets for key fertiliser ingredients.
The company has published technical specifications and safety data for three products within the potash strain known as potassium sulphate or sulphate of potash (SOP).
The reports compliment the production earlier this year of 300 kilograms of product samples grading more than 98% SOP, or greater than 52% K2O equivalent. SOP is a high-quality potash fertiliser carrying a price premium over the more common potassium chloride (MOP) due to its practicality in low-rainfall regions.
Danakali’s SOP products have been generated exclusively from potash salts extracted from Colluli and demonstrate the project’s favourable salt combination to simply and economically produce high-purity SOP.
Publication of the spec sheets will support discussions regarding sales agreements with potential offtake parties as Danakali showcases the products around the world.
This marketing effort is expected to benefit not only from the outstanding technical specifications delivered in the latest spec sheets but also from the variability in product types offered by Colluli’s excellent geology.
The potassium bearing salts at the project have the unique capability of producing a diverse range of potash types including SOP, MOP and sulphate of potash magnesia (SOPM or potassium magnesium sulphate).
Substantial upside for the project also exists from the exploitation of other contained products within the resource such as magnesium chloride, gypsum and high-purity rock salt.
The definition of a significant rock salt resource at Colluli in September enhanced the economic potential of the project by offering a possible additional income stream at the developing mine.
The overburden is estimated to hold 347 million tonnes of rock salt within Area A – the area of focus for the DFS mining schedules.
Commercialisation of this material, which sits directly above the primary potash deposit, has the potential to provide further economic benefits to the project.
The rock salt resource, unprocessed, is suitable for de-icing and other applications in nearby jurisdictions and has the potential to be a significant salt business in its own right.
Colluli’s DFS is well underway and is expected to be delivered in Q4 2015.
High expectations for the study are supported by prefeasibility work that indicated the project would become one of the world’s most significant and lowest cost potassium sulphate production centres.
A string of new resource and operational testwork milestones has also contributed to development momentum, with hydrological work resulting in a 60% reduction in plant water requirements. Less water consumption improves Colluli’s production efficiency and provides a critical economic boost given the arid nature of Eritrea.
Advancements have likewise been achieved in the local approvals process, mine planning progress and several operational flowsheet optimisations.
Materials handling trials have also been completed to determine the anti-caking requirements for the final SOP product.
The provision of detailed specifications for the SOP products produced at Colluli is a major milestone internally and facilitates the company’s ongoing marketing process by fulfilling a key requirement for securing product sales agreements.
This step forward in commercializing Colluli also supports Danakali’s growth by satisfying an important facet of the project funding process.
Shares in Danakali have gained 47% in value since the beginning of the year, indicating growing investor consciousness of the marketability of Colluli’s SOP products and various by-product options.
This long-term price momentum may be further spurred by upcoming catalysts including the delivery this year of the DFS, which is expected to confirm Colluli’s status as one of the lowest-cost SOP operations in the world. The project is projected to be in the bottom quartile cost curve position.
Future catalysts are also expected to include the securing of product sales agreements as the project advances, a mining agreement submission and the continuation of dialogues regarding debt funding.