Junior sulfate of potash (SOP) developer Danakali Ltd., Subiaco, Western Australia, announced on Oct. 3 that it has executed a term sheet with China’s state-owned infrastructure construction firm Sichuan Road and Bridge Group Co. Ltd. (SRBG), Sichuan, China, for US$166 million in upfront cash and deferred payments.
Sichuan has agreed to purchase 100% of the shares held by Danakali’s wholly-owned subsidiary, STB Eritrea Pty Ltd (STB), in Colluli Mining Share Co. (CMSC), which is developing a SOP project in Eritrea. Danakali said that net of taxes it will receive $121 million. Danakali and the Eritrean government are 50-50 joint venture partners in CMSC.
The Danakali Board of Directors said the sale of STB’s shareholding in CMSC provides shareholders with an attractive post-tax value outcome in the absence of a full equity funded solution for the project. As the transaction constitutes the disposal of Danakali’s main undertaking, it is subject to Danakali obtaining shareholder approval. Subject to all conditions being satisfied or waived, it currently expects the transaction to be completed between March 31-May 31, 2023.
If the transaction proceeds to completion, Danakali intends to distribute 90% of the net proceeds to shareholders and continue as a listed company to identify new projects and growth opportunities.
SRBG is listed on the Shanghai Stock Exchange, and its parent company, Shudao Investment Group Co. Ltd. (SDIG), Chengdu, China, is a global company in transportation infrastructure design and construction. SDIG’s diversified business covers minerals and new materials investment, clean energy investment, transportation and logistics, and new urbanization construction. SDIG’s business covers more than 30 countries and regions.
Back in 2018 (GM June 15, 2018), CSMC executed a binding take-or-pay offtake agreement with EuroChem Group AG, Zug, Switzerland, for up to 100% of Module I Sulfate of Potash (SOP) production from the Colluli Potash Project. EuroChem was to take, pay, market, and distribute up to 100% (minimum 87%) of Colluli Module I SOP production.
At the time, EuroChem said the agreement envisaged total annual output of 472,000 mt. With EuroChem taking at least 87%, CMSC had the option to sell up to 13% through alternative sales channels.