Danakali Rating Update

Danakali Limited, developing the Colluli potash project in Eritrea, has been classified as a late stage Phase I company and rated ‘3+’ on the five point PortfolioDirect rating scale where a ‘5’ is the highest rating on the risk adjusted quality scale. The company has released a definitive feasibility study for a potash mine and export facility at Colluli in Eritrea (ASX 30 November 2015). The feasibility study results were consistent with earlier guidance of a construction start in late 2016 and first production in late 2018. Operating costs are slightly higher than a March 2015 estimate primarily due to refinement of product logistics estimates but the feasibility study places the Colluli project in the lowest position on the sulphate of potash industry cost curve. The company had already received a rating which indicated a better than usual chance of proceeding to development. The feasibility study confirmed the validity of the prior assessment although the financing environment for late stage Phase I companies has deteriorated since the earlier PortfolioDirect reviews and the feasibility study were completed.