“As an international financial institution with a mandate to support infrastructure and industrial development in Africa (…) AFC is in discussion with Danakali with a view to finding a funding structure suitable to both parties that will ensure the commencement of construction of the project as soon as possible,” Samaila D Zubairu, president and CEO of AFC, said in a statement.
The bank, Danakali’s largest shareholder, had already deferred the second tranche investment at the end of March, saying it wanted to allow for the “stabilization of global markets.”
In June it extended the deadline for Danakali to complete the terms of the subscription agreement to November.
Analysts from Canadian bank Canaccord Genuity said Zubairu’s statement suggested another solution would be found to fill the funding gap.
They noted, however, that the lack of second tranche was “negative for project development.”
Beginning of construction in sight
Danakali chief executive Niels Wage said in August that the project had attracted $200 million in senior debt and $50 million in equity funding commitments.
The sum was close, but not enough, to the $302 million pre-production capital Danakali needs, not considering an extra $20 million working capital requirement.
Despite the funding setbacks Colluli, a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO), is on track for production in 2022, the company said.
In the initial phase of operations, the mine would produce more than 472,000 tonnes a year of sulphate of potash (SOP), a premium grade fertilizer.
Annual output could rise to almost 944,000 tonnes if Danakali decides to go ahead with a second phase of development, as the project has a possible 200-year plus mine-life.
Danakali’s shares dropped by 50% during the covid- 19 market rout in February and March. They have since rebounded 24%, but remain down 36% year-to-date.