AMN - ERITREA: Offtake deal for Colluli Potash Project

Colluli Mining Share Company (CMSC), a joint venture between Danakali Limited and the Eritrean National Mining Corporation (ENAMCO) has signed an offtake agreement with EuroChem Trading GmbH regarding the Colluli Potash Project in Eritrea. The binding take-or-pay agreement is for up to 100% of module I Sulphate of Potash (SOP) production from the project.

EuroChem will take, pay, market and distribute a minimum of 87% and up to 100% of Colluli module I SOP production.

EuroChem may use a portion of 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 three years if agreed by EuroChem and CMSC. EuroChem may terminate the agreement if first commercial production has not occurred by July 1, 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.

EuroChem is an outstanding partner with global reach and extensive fertiliser expertise and experience. The agreement represents a strong endorsement for the project.

EuroChem has agreed to provide technical support to the project on terms to be agreed. EuroChem Group AG (EuroChem Group) will also provide a parent company guarantee as part of the agreement.

The agreement is instrumental in unlocking project funding. The take-or-pay nature of the agreement provides cash flow certainty and strengthens the Colluli and Danakali investment propositions.

Other important debt milestones are also well progressed, including operational contract and procurement and supplier list finalisation.

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.” EuroChem Group AG CEO Dmitry Strezhnev said: “We are excited about participating in this project with CMSC, as part of our growing global presence.

“Colluli is one of the closest SOP deposits to a coastline anywhere in the world and, in solid form, the salts at Colluli can be processed immediately, significantly reducing the time between mining and revenue generation.”

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