Danakali Limited - Kieserite Adds To Multi Agri-Commodity Potential

Danakali Limited - Kieserite Adds To Multi Agri-Commodity Potential

Danakali confirms a Kieserite resource of more than 85Mt contained within the Colluli project in Eritrea. Kieserite is a chloride free, multi-nutrient fertiliser containing magnesium and sulphur typically used in agriculture, and further adds to the pipeline of Colluli’s multi-agri, high value product suite. The definitive feasibility study on Colluli demonstrates a world class sulphate of potash project, in close proximity to the coast and with a mine life of circa 200 years.


Highlights

  • In excess of 85 million tonne Kieserite mineral resource contained within the Colluli Project JORC 2012 compliant Mineral Resource estimate(1) 
  • Kieserite is a chloride free, multi-nutrient fertiliser containing magnesium and sulphur typically used in cropping, horticulture, palm oil, market gardening and maize production
  • Kieserite reported to trade at approximately US$100 to US$120 per tonne(2) 
  • Kieserite further adds to the pipeline of Colluli’s multi agri product suite
  • Colluli Project definitive feasibility study (DFS) demonstrates a world class sulphate of potash (SOP) project, in close proximity to the coast, with a mine life of over 200 years(3) 
  • Kieserite expected to be mined as part of the plant feed material for SOP production
  • In addition to SOP and kieserite potential, sulphate of potash magnesia (SOPM) has been produced from the Colluli Project salts for marketing purposes
  • MOUs have been signed for 800kt per annum of SOP and 200kt per annum of SOPM(4) 

Danakali Limited (“Danakali”, ASX:DNK) is pleased to announce that the kieserite content in the Colluli Project Resource has been quantified. Kieserite (“Magnesium sulphate monohydrate”, MgSO4.H2O) is a commonly used chloride free, multi-nutrient fertiliser with limited current primary production centres globally.

Managing Director, Paul Donaldson said “This further adds to what we believe is a compelling investment case and further substantiates the Colluli Project as a positively unique, world class project with multi agri-commodity potential. Kieserite is a sought after fertiliser for magnesium deficient soils which are common in jurisdictions proximate to Colluli. The monetisation potential adds to the industry leading capital intensity, superior project economics and bottom quartile operating costs determined in the definitive feasibility study for the production of sulphate of potash. The geological history of the Danakil Depression has provided a unique resource composition relative to other potash basins throughout the world, enabling it to produce a broad suite of fertiliser products and providing unrivalled product diversification and project upside potential. The project has no peer.”

The Colluli Project Mineral Resource Estimate completed by AMC Consultants (AMC) demonstrates that the majority of the kieserite within the Resource sits within the lower carnallitite layer, at a content of approximately 22%. Additional kieserite is contained within the upper carnallitite and kainitite layers of the Resource(1) . These salts may be extracted to produce SOP. Metallurgical test work indicates that the kieserite will report to the tailings stream of the processing plant with the design developed in the definitive feasibility study (DFS). Test work was completed at the Saskatchewan Research Council (SRC) using salts from the Colluli Project Resource. Preliminary liberation testing indicates the kieserite can be separated from the salt in the tailings.

Next Steps

Work will commence in the near future on the recovery of kieserite from the tailings salt and the associated capital and operating costs required for its separation.

About Kieserite

Kieserite is a multi-nutrient fertiliser comprising sulphur and magnesium. It represents an ideal fertiliser for magnesium deficient soils, which are common in India, Africa and South America.

Kieserite is primarily obtained from deep underground mining of minerals in Germany. It occurs in marine evaporites in association with halite, carnallite, polyhalite and kainite. It is an effective magnesium and sulphur source for all crops and in all types of soil. Fine crystalline kieserite is sold for direct application to soil, or it is granulated to a larger particle size that is better suited for mechanical fertilizer spreading or for bulk blending with other fertilisers(5).

Many soils are low in magnesium (Mg) and require supplemental nutrients to support crop yield and quality. Sandy-textured soils and soils with a low pH (such as highly weathered tropical soils) are frequently characterized by a low Mg supply for plants. Under these conditions, it is a prerequisite to raise the Mg content in the soil by adequate fertilisation(5).

Fertiliser Mg application rates vary depending on factors such as the specific crop requirement, the quantity removed during harvest, and the ability of soil minerals to release adequate Mg in a timely manner to support crop yield and quality. Kieserite application rates are typically in the range of 200 to 300 kg/ha for many crops(5).

Current market prices for kieserite can be in the order of US$100 to US$120 per tonne FOB(2), based on supplier quotes (Runzichem (3 August 2016), Anderson Chemicals (3 August 2016), Aussie Fertichem (4 August 2016)). There is no certainty that kieserite will be successfully mined from the Colluli Project. In addition, if kieserite is successfully mined in economically viable quantities, there is no certainty that the Company will realise a sale price based on the current supplier quotes for kieserite.

Two key nutrients in one particle – magnesium and sulphur

Magnesium (Mg): The central chemical component of chlorophyll, the pigment molecule responsible for absorbing sunlight during photosynthesis. Providing Mg and K in the proper balance helps increase plant strength and builds resistance to winter kill, drying, insect attack and spray damage.

Sulphur (S): Helps build proteins in plants and is a key component of many unique traits. S puts the “green and leafy” into crops like spinach, gives garlic and asparagus their distinctive flavours and improves the baking quality of wheat. Deficiencies of S are of particular concern, as sulphur dioxide emission-reduction programs cause less S to be returned to the soil via the atmosphere. The sulphate form of the S aids initial root growth, and promotes seed production and vigorous plant growth(5) .

Colluli Project is ideally located for Magnesium deficient regions

The Colluli Project is located in a highly favourable geographical location relative to key agricultural regions with magnesium deficient soils(Figure 1) which are predominantly in India, Sub-Sahara Africa, South East Asia and South America.

Kieserite within the Colluli Project Resource estimate

The local geology of the Colluli Project is dominated by an expansive evaporite sequence, formed when the Red Sea was connected by seaway to the Danakil Depression. The mineralisation is a layered evaporite sequence, covering an area of approximately 10km north to south by 5km east to west.

The Colluli Mineral Resource Estimate completed by AMC Consultants demonstrates that the majority of the kieserite within the resource exists within the lower carnallitite layer, at a content of approximately 22%. Additional kieserite is contained within the upper carnallitite and kainitite layers of the resource. Kieserite was not reported as part of the Colluli Project Mineral Resource in 2015 as a recovery process had not yet been demonstrated. A recent metallurgical review has identified a potential process to recover kieserite from the Colluli tailings, after original test work demonstrated kieserite will report to the process plant tailings stream.

The Resource estimate is based on drill hole assay data from the original exploration drilling campaign conducted from 2010 to 2012, with additional QAQC drilling in late 2014. The deposit was originally sampled using 100% diamond core from surface. A total of 103 diamond holes have been drilled into the deposit of which 102 holes had geological logging, assaying or geophysical logging and were available for resource estimation. Diamond core was cut in half using a diesel powered core saw. No water was used for lubrication or dust suppression to ensure no core dissolution occurred. Core selected for duplicate analysis was further cut as quartered core with both quarters submitted individually for analysis.

The 2014 drilling was for data validation purposes only and was not directly used in the Mineral Resource estimate. Geological interpretation was carried out by Danakali (previously South Boulder) and AMC, with Mineral Resource estimation and reporting by AMC.

AMC reinterpreted the mineralisation (based on previous work conducted by Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau mbH(Ercosplan)) and produced a set of wire-framed shapes to represent the geological and mineralisation boundaries. These wire-frames were used to develop a three-dimensional block model.

AMC validated the data and requested four diamond drill holes to be twinned for QAQC purposes, and audited previous data, data collection processes and operational procedures for the estimate.

A total of twelve rock units have been interpreted in the current model, with six of these identified as potential economic resource. These are Upper, Middle, and Lower Sylvinite members, Upper and Lower Carnallitite members and the Kainitite member.

A block volume model was created using the wire-framed mineralisation interpretation and grade was estimated for K, Mg, Na, Cl, Ca, SO4, KCl, K2O, Sylvite, Carnallite, Kainite, Polyhalite, Halite, Bischofite, Kieserite and Anhydrite into the model. The selection of the estimation parameters was based on studies of the statistics and variography of the input drill hole assay data. All grades were estimated into parent cells, with sub-cells receiving the same grade as the parent. Sub-cells were allowed to form in order to honour the interpreted wire-frame volume for each domain. Grade estimation was completed by using ordinary kriging.

Open pit mining is the intended method of extraction, to enable the selective extraction of the salt and potash ore units, minimise dilution and ore loss, and eliminate the requirement for drill and blast.

Social and environmental baseline studies, impact assessments and management plans have been completed and submitted to the Eritrean Ministry of Energy and Mines. All environmental and socioeconomic baseline studies have been completed and reviewed by the Department of Environment. There are believed to be no related issues that do not have a reasonable likelihood of being resolved.

Table 1 lists the 2015 Mineral Resource for Colluli with the Kieserite content now reported. The Mineral Resource Estimate prepared has been classified and reported under the guidelines of the 2012 JORC Code as Measured, Indicated and Inferred Resources as set out in Table 2.

The Resource contains 18 million tonnes of kieserite in Measured Resource, 66 million tonnes of kieserite in Indicated Resource and 3 million tonnes of kieserite in Inferred Resource.

About Colluli

In November 2015, Danakali released a highly positive DFS for Colluli which demonstrates industry leading capital intensity and lowest development costs relative to all SOP projects at DFS level in the world. Bottom quartile operating costs are predicted. Mine life is estimated at over 200 years at the DFS production rate, providing the project with substantial growth potential.

The Colluli Mining Share Company is focussing on developing a multi-agri commodity and salt business using the principles of modularity, risk mitigation and full resource utilisation. The shallow mineralisation, close proximity to coast, highly favourable suite of potassium bearing salts and multi agri-commodity diversification potential combine to make Colluli positively unique. It is an unrivalled greenfield project and has no peer. Colluli is a multi-decade potash project in the world and demonstrates superior economic outcomes in comparison with other advanced potassium sulphate projects.

In 2015, a JORC 2012 compliant 300 million tonne high quality rock salt resource was quantified. The salt, which has an average grade of 97%, is intended to be extracted to access the potassium bearing salts(1) .

The potassium bearing resource of the Danakil Depression has the unique capability to produce three of the four potash types in the global potash market which comprises potassium sulphate (sulphate of potash or SOP), potassium chloride (muriate of potash or MOP), potassium magnesium sulphate (sulphate of potash magnesia or SOP-M) and potassium nitrate (nitrate of potash or NOP).

(1) Colluli Mineral Resource Estimate, February 2015. For a breakdown of Measured, Indicated and Inferred Resources refer to table 2.
(2) Based on supplier quotes – Runzichem (3 August 2016), Anderson Chemicals (3 August 2016), Aussie Fertichem (4 August 2016). There is no certainty that kieserite will be successfully mined. In addition, if kieserite is successfully mined in economically viable quantities and is sold, there is no certainty that the Company will realise a sale price based on the current supplier quotes for kieserite.
(3) ASX announcement, 30 November 2015
(4) ASX announcements, 19 April 2016, 20 July 2016, 22 July 2016, 25 July 2016
(5) International Plant Nutrition Institute

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