The deal represents a strong endorsement for the Project and instrumental in unlocking project funding.
BY TESFANEWS *
Danakali Ltd (ASX:DNK), on behalf of its partner Colluli Mining Share Company (CMSC), have signed a binding take-or-pay offtake agreement with EuroChem Trading GmbH (EuroChem) for up to 100% of module I sulphate of potash (SOP) production from the Colluli Potash Project in Eritrea.
The Colluli potash project is owned by CMSC, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).
As per the offtake deal, EuroChem will take, pay, market and distribute up to 100% (minimum 87%) of Colluli module I SOP production.
EuroChem may use a portion of the Colluli SOP to produce complex Nitrogen Phosphate Potassium (NPK) fertilisers at its facilities in Antwerp, Belgium and Nevinnomyssk, Russia.
The balance of SOP provided to EuroChem will be sold through their international channels. CMSC has the option to sell up to 13% through alternative sales channels.
The term of the agreement is 10 years from the date of commissioning of the Colluli SOP processing plant, with an option to extend for a further 3 years if agreed by EuroChem and CMSC.
EuroChem may terminate the agreement if first commercial production has not occurred by 1 July 2022, well beyond CMSC’s production commencement expectations.
Either party may terminate the Agreement if a project financing agreement has not been executed and first drawdown achieved within 14 months of the signing of the Agreement.
The Danakali and CMSC Boards, and the Eritrean Ministry of Energy and Mines, have approved CMSC’s entry into the Agreement.
Importantly, the agreement is expected to be instrumental in unlocking project funding for the Colluli Potash Project.
Danakali chief executive officer Danny Goeman said: “We could not be happier with this result.
“EuroChem is an outstanding partner for the project. EuroChem has a wealth of experience and expertise in the fertiliser sector.
“We would like to thank EuroChem for their part in what was a smooth and productive negotiation process that has resulted in an excellent outcome for both parties.”
“The Agreement encourages the maximisation of netback pricing through the marketing and distribution of products into the highest value markets. This is a huge step in de-risking the Colluli and Danakali investment propositions. Colluli has no peer; it is the most advanced and economically attractive SOP greenfield development project.”
* Danakali and Proactive Investors contributed to the story.