Danakali's Colluli to cost $415m

A definitive feasibility study on potash explorer Danakali’s Colluli project in Africa has found a 30 per cent reduction in development costs to $US298 million ($A415 million).

Danakali, which owns the Colluli project in a 50:50 joint venture with the Eritrean National Mining Corporation, said phase one development costs had been reduced by 30 per cent, with the project expected to produce about 425,000 tonnes per annum of sulphate of potash (SOP) when commissioned at the end of 2018.

Phase two of the project is expected to begin after six years of production and boost the project’s output to 850,000t/year of SOP at an additional cost of $US175 million.

Colluli, which has an expected 200-year mine life, has a net present value of $US860 million based on an SOP price of $US572 per tonne.

The SOP price is currently about $US588/t.

Danakali, formerly known as South Boulder Mines, has also estimated a capital payback period of 3.5 years.

Managing director Paul Donaldson said the definitive feasibility study confirmed Colluli as a robust, low capital intensive, low-operating-cost project with attractive economic returns and a high level of expandability.

“The 1.1 billion tonne ore reserve that underpins the project, in combination with the suite of potassium salts and proximity to coast and furniture markets, makes Colluli positively unique,” Mr Donaldson said.

“We believe that over the decades to come, Colluli has the potential to grow to an ultimate capacity of 4 million to 5 million tonnes per annum of potash products.”

Danakali shares were 7.1 per cent higher to 30 cents each at midday.