Danakali on behalf of Colluli Mining Share Company (CMSC), announced that a binding take-or-pay offtake agreement has been reached with EuroChem Trading GmbH (EuroChem) for up to 100% of Module I Sulphate of Potash (SOP) production from the Colluli potash project (the Agreement).
The project, located in Eritrea, East Africa, is 100% owned by CMSC, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).
EuroChem will take, pay, market and distribute up to 100% (minimum 87%) of Colluli Module I SOP production.
EuroChem may use a portion of Colluli SOP to produce complex nitrogen phosphate potassium (NPK) fertilisers at its facilities in Antwerp, Belgium and Nevinnomyssk, Russia.
The balance of SOP provided to EuroChem will be sold through their international channels. CMSC has the option to sell up to 13% through alternative sales channels.
The term of the Agreement is 10 years from the date of commissioning of the Colluli SOP processing plant, with an option to extend for a further three years if agreed by EuroChem and CMSC.
Either party may terminate the Agreement if a project financing agreement has not been executed and first drawdown achieved within 14 months of the signing of the Agreement.
EuroChem has agreed to provide technical support to the project on terms to be agreed. EuroChem Group AG (EuroChem Group) will provide a parent company guarantee as part of the Agreement.
The Agreement is instrumental in unlocking project funding. The take-or-pay nature of the Agreement (and associated terms) provides cash flow certainty and strengthens the Colluli and Danakali investment propositions.
“EuroChem has a wealth of experience and expertise in the fertiliser sector. We would like to thank EuroChem for their part in what was a smooth and productive negotiation process that has resulted in an excellent outcome for both parties,” comments Danakali CEO Danny Goeman.
“We are excited about participating in this project with CMSC, as part of our growing global presence. Colluli is one of the closest SOP deposits to a coastline anywhere in the world and in solid form, the salts at Colluli can be processed immediately, significantly reducing the time between mining and revenue generation.,” adds EuroChem Group AG CEO Dmitry Strezhnev.