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Danakali eyes production amidst surging potash demand

14 October 2021 10:34
ASX: DNK

Amid surging prices, Danakali Limited hopes to soon begin production from the mammoth Colluli Potash project located in Eritrea.

The company, boasting a 1.1 billion tonne ore reserve and almost 200-year mine life, is predicting high prices on potash will continue climbing as demand for higher calorie food escalates around the world.

When production commences, it will be among the world’s shallowest known potash deposits supplying into a seller’s market, presently commanding an average price of $US647 per tonne, 13 per cent up on August’s average price.

Danakali said for every ten per cent increase in the potash price, the Colluli project’s net present value increased by $US250 million.

“Colluli is a unique game-changing asset on so many levels,” chairman Seamus Cornelius said.

 “It’s more than fair to say that given Colluli will operate in the bottom quartile of the cost curve if we were producing today at these prices, the margins on this project would be nothing short of spectacular.” 

The long-term average price outlook across Colluli’s target markets is $US668 per tonne. The analysis expects all speciality potash fertiliser prices to increase through 2021-23, with a pullback from 2024-2027, then a steady price rise until 2040.

Project execution commenced at Colluli, with Danakali planning to maximise the site to its fullest potential.

The company’s Australian Stock Market listed price is trading at 43c (8:00m GMT + 8 hours).

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