Danakali Limited · OTC:SBMSF
Danakali — Melbourne and Sydney Luncheon Presentation (June 2016)
31 slides from Danakali's conference presentation, June 2016
Slide 1: The premier potash and multi agri-commodity opportunity
The premier potash and multi agri-commodity opportunity Melbourne and Sydney Luncheon Presentation Paul Donaldson, Managing Director Slide 1
Slide 2: Forward looking statements and disclaimer
Forward looking statements and disclaimer The information in this presentation is published to inform you about Danakali Limited (the “Company” or “DNK”) and its activities. DNK has endeavoured to ensure that the information enclosed is accurate at the time of release, and that it accurately reflect
Slide 3: Overview
Overview • Corporate snapshot • SOP – the premium potash type • Colluli – a positively unique resource • Simple, proven process • Superior resource size and feed grade • Superior economics • De-risked development approach • Significant social, environmental and economic benefits • Significant upside
Slide 4: Corporate snapshot
Corporate snapshot COLLULI IS A PREMIER POTASH DEPOSIT LOCATED IN THE WORLD CLASS DANAKIL BASIN Financial information Share price performance (YTD) (As of 24 June 2016) Share price (A$) Volume traded (m) 0.50 2.0 Share price A$0.380 0.40 1.6 Number of shares 200.6m Market capitalisation A$76.3m 0.30
Slide 5: Fertiliser growth underpinned by population growth
Fertiliser growth underpinned by population growth Population (bn) 12 Potash demand is 9 fundamentally a Growing at 80m people p.a. population growth 6 Developing story 3 Developed - 1950 1970 1990 2010 2030 2050 Source: United Nations, FAO Potash: potassium bearing minerals and manufactured chemi
Slide 6: Potash comes in a variety of forms
Potash comes in a variety of forms SOP AND SOP-M ARE PREMIUM PRODUCTS THAT REALISE HIGHER PRICES AND MAXIMISE RETURNS FOR INVESTORS Muriate of potash (“MOP”) Sulphate of potash (“SOP”) Potassium chloride Suitable for chloride intolerant crops Most common form of potash Global supply shortage
Slide 7: Sulphate of Potash (SOP) is the premium potash type
Suphate of Potash (SOP) is the PREMIUM POTASH TYPE SOP IS A PREMIUM AGRICULTURAL COMMODITY Chloride Free Potassium Limited supply • Potassium is an essential, consumed, • Limited economically exploitable primary non-substitutable macro-nutrient resources • SOP critical for chloride intolerant • Over
Slide 8: SOP achieves a significant price premium over potassium chloride
SOP achieves a significant price premium over the more common potash type, potassium chloride ECONOMICALLY EXPLOITABLE RESOURCES FOR PRIMARY PRODUCTION OF SOP ARE GEOLOGICALLY SCARCE • SOP is a premium, chloride free multi-nutrient Historic MOP and SOP prices (US$/t)1 potash type 1,200 • Used on hig
Slide 9: Fertiliser demand growth will continue; the world needs to eat!
Fertiliser demand growth will continue; the world needs to eat! POTASSIUM IS AN ESSENTIAL, NON-SUBSTITUTABLE NUTRIENT, WHICH IS PROVIDED BY THE ADDITION OF POTASH FERTILISER • SOP is a multi-nutrient potash type that provides Historic and forecast global SOP demand (Mtpa) both potassium and sulphur
Slide 10: Chloride free fertilisers are becoming increasingly important
Chloride free fertilisers are becoming increasingly important Salinity index for potash types • 25% of the world’s irrigated 120 land is affected by salinity1 • 2000 hectares of farm soil 100 lost daily to salt induced 80 degradation1 • Recommended action for 60 dealing with salinity is to 40 avoid
Slide 11: Colluli – a positively unique resource
Colluli – a positively unique resource • There is only one Colluli ! • Shallow mineralisation allows open cut mining. If everyone Colluli has no peer could do it, they would; ‒ A proven, safer method than underground mining ‒ Massive conversion of resource to reserve (over 85%) ‒ Low incremental gro
Slide 12: Large, low cost, long life potash resource close to the coast
Large, low cost, long life potash resource in close proximity to the coast Ore Reserve estimates for selected potash Sealed road running from Massawa Colluli has the best and simplest (MOP and SOP) projects2 towards Colluli logistics in the Danakil Million tonnes (capital city) 200+ year 1200 1 1000
Slide 13: Eritrea is on the doorstep of key markets
Eritrea is on the doorstep of key markets Historical and forecast global population growth (billions)1 Potash demand is Europe fundamentally a 0.66 0.74 0.71 China 1.40 1.38 population growth 1970 2015 2050 95% of global population growth 0.81 story centred in Africa, India and other Asia 1 1970 201
Slide 14: Simple commercially proven technology
Simple commercially proven technology PRODUCTION OF SOP FROM COLLULI SALTS OCCURS WITH SIMPLE PROCESSES INCLUDING FLOTATION, MIXING AND DRYING Colluli process design Colluli plant image Simple processing – Crush – Float – Mix – Dry - Truck Notes: 1 Sourced from Gustavson Associates 2 Sourced from co
Slide 15: Colluli salts and process design yield the highest quality product
Colluli salts and process design yield the highest quality product DEMONSTRATED CAPACITY TO PRODUCE A HIGH QUALITY SOP PRODUCT • Over 300kg of high grade SOP produced from Colluli salts in pilot tests • Colluli SOP is at the top end of the quality spectrum SOP products (%K2O vs. product) Granular SO
Slide 16: Unrivalled feed grade for SOP production
Unrivalled feed grade for SOP production INDUSTRY LEADING CAPITAL INTENSITY FACILITATED BY EXTRACTING AND PROCESSING SALTS IN SOLID FORM • Colluli is the only resource in the Kilograms of potassium per tonne world that has the ideal 100 composition of salts for SOP production that can be extracted 9
Slide 17: Grade is king – lower capital expenditure and intensity
Grade is king – superior grade of Colluli means lower capital expenditure and intensity EVAPORATION POND FOOTPRINT UP TO 160x SMALLER THAN BRINE OPERATIONS FOR EQUIVALENT PRODUCTION Smaller ponds = lower costs Pond size (km2) for SOP projects – normalised for 425ktpa SOP production rate1 200 Potassi
Slide 18: Stand out Ore Reserve Estimate
Stand out Ore Reserve Estimate COLLULI HAS THE HIGHEST MINING CERTAINTY WITH THE LARGEST PROVEN RESERVES Ore Reserves (mt) • Colluli is a world class resource 1,200 • Massive 1.1 Billion Tonne Ore Reserve Probable Proven with high conversion from 1.3 Billion 1,000 tonne Mineral Resource gives over 2
Slide 19: Outstanding DFS economics
Outstanding DFS economics COLLULI DOMINATES OTHER PROJECTS WITH RESPECT TO VALUATION OUTCOMES Key DFS results Post-tax IRR (%) Metric Phase I Phase I and II 35 30 Production 425kt 850kt 25 Strip ratio 1.91 1.93 20 Post tax NPV (10% real) US$439m US$860m 15 10 Post tax IRR 25.4% 29.0% 5 Capital US$29
Slide 20: Industry leading capital intensity
Industry leading capital intensity INDUSTRY LEADING CAPITAL INTENSITY AND LOW DEVELOPMENT CAPITAL RENDERS COLLULI HIGHLY FUNDABLE Capital intensity (US$/t) Development capital (US$m) 2,000 1,200 1,000 1,600 800 1,200 600 800 400 400 200 - - Colluli Colluli Yara Sevier Lake Blawn Ochoa Colluli Collul
Slide 21: Colluli in the bottom quartile of the SOP cash cost curve
Colluli will be in the bottom quartile of the SOP cash cost curve Ex-works cash costs for SOP production (US$/t) Opportunity for Colluli to displace high cost secondary supply Tessenderlo and other European Mannheim Chinese Mannheim Migao and other Colluli is the only resource K+S that has the right
Slide 22: A lower risk development path
A lower risk development path COLLULI HAS THE LOWEST DEVELOPMENT CAPITAL AND THE HIGHEST RETURN OF ALL ADVANCED DEVELOPMENTS Internal Rate of Return • Colluli represents the most fundable Colluli Phase I + long life potash project in the world Phase II 30% • Salts for SOP production extracted in sol
Slide 23: Large scale potash developments carry high cost over run risk
Large scale potash developments carry high cost over run risk COLLULI CAN BE DEVELOPED FOR LESS THAN THE COST OF LARGE SCALE PROJECT OVER RUN Capital costs US$b 5.0 Recent potash projects demonstrate shaft +$US600m sinking represents a high capital risk1-3 4.5 +$US850m 4.0 3.5 3.0 +$US600m 2.5 2.0 1
Slide 24: Working in partnership with ENAMCO
Working in partnership with ENAMCO DNK AND ENAMCO ARE ADVANCING A WORLD CLASS POTASH PROJECT • The Colluli project is 100% owned by the Colluli Mining Share Company (“CMSC”) • The share company has equal ownership between Danakali and the Eritrean National Mining Company (“ENAMCO”) • The relationshi
Slide 25: Eritrea – a misunderstood jurisdiction
Eritrea – a misunderstood jurisdiction DANAKALI HAS BEEN OPERATING IN ERITREA SINCE 2009 AND HAS FOUND IT TO BE SAFE, STABLE AND DEVELOPMENT FOCUSED Positive Eritrean outlook Tour of Eritrea cycling race (April 2016) • The Danakali experience in Eritrea: ‒ Safe and friendly ‒ High degree of focus on
Slide 26: Significant benefits for a developing economy
Significant benefits for a developing economy ENGAGEMENT WITH COMMUNITY AND KEY STAKEHOLDERS HAS GENERATED STRONG SUPPORT FOR COLLULI DEVELOPMENT Expectations for Eritrean employee numbers at Colluli 500 450 400 350 300 250 200 150 100 50 0 2019 2025 Regional employees National employees Colluli wil
Slide 27: Unrivalled multi agri-commodity potential
On top of excellent economics, Colluli has unrivalled multi agri-commodity potential THE COLLULI RESOURCE CONTAINS A DIVERSE RANGE OF FERTILISER PRODUCTS WITH ESTABLISHED MARKETS MOP SOP SOP-M Kieserite Gypsum • Improves yield for • Danakali’s key focus • Demonstrated • An effective source of • Sour
Slide 28: Global potash and agri-commodity peers
Global potash and agri-commodity peers MULTI AGRI-COMMODITY POTENTIAL COULD PLACE DANAKALI IN THE LEAGUE OF LARGE GLOBAL PRODUCERS Market value of listed potash peers (A$m)1 Global agri- commodity Global SOP ASX potash developers businesses explorers/developers 6,020 3,342 435 82 76 58 55 44 43 12 K
Slide 29: Colluli is the best SOP project in the world
Colluli is the best SOP project in the world and Danakali has a compelling investment case • SOP is a high quality, chloride free potash with limited economically exploitable primary resources • Colluli is an advanced stage project and is the most fundable, scalable, long life, low operating cost SO
Slide 30: Colluli - Positively Unique
DANAKALI create. nurture. grow. Colluli - Positively Unique
Slide 31: Competent persons statement
Competent persons statement Resource statement The 2015 Colluli Potash Mineral Resource is reported according to the JORC Code and estimated at 1,289Mt @11% K2O Equiv. The Mineral Resource is classed as 303Mt @ 11% K2O Equiv Measured, 951Mt @ 11% K2O Equiv Indicated and 35Mt @ 10% K2O Equiv Inferred
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