Danakali Ltd (ASX:DNK) (LSE:DNK) has passed a major milestone along the road to executing the world-class Colluli Potash Project in Eritrea with credit approval received for a US$200 million senior debt facility.
Africa Finance Corporation (AFC) and African Export Import Bank (Afreximbank) have obtained formal credit approval to provide the Colluli Mining Share Company (CMSC) with the facility.
The facility will be part of the overall project funding package used for development and construction of the Colluli project in Eritrea’s Danakil Depression region.
Danakali’s chief executive officer Niels Wage said: “Final credit approval from leading development finance institutions AFC and Afreximbank for US$200 million of senior debt represents outstanding progress and a significant de-risking milestone for the Colluli project financing.
“The facility is set to provide the majority of the funding required for construction and project execution".
It is funded equally and underwritten by the mandated lead arrangers and includes formal approval of export credit support from the Export Credit Insurance Corporation of South Africa SOC Limited (ECIC).
This milestone transaction will represent the first time they have provided export credit support to a non-South African bank.
Credit approval is a critical project financing and execution milestone and represents the conclusion of an extensive due diligence process by the mandated lead arrangers and ECIC.
Due diligence included site visits by the mandated lead arrangers and independent experts; meetings with the Eritrean National Mining Corporation (ENAMCO), Eritrean Ministries and other key Eritrean stakeholders; and extensive technical, marketing, environmental, social and legal evaluations including the assessment of independent expert reports.
Wage said: “We look forward to working with the mandated lead arrangers to complete conditions precedent and reach financial close.
“I am very pleased to achieve credit approval as it represents one of the last remaining milestones prior to project execution.”
Completion of the credit approval process is a strong endorsement for Eritrea, the calibre of the project, the strength of the binding take-or-pay offtake agreement executed with EuroChem and the quality of the Front-End Engineering Design (FEED) study.
CMSC and the mandated lead arrangers will now proceed to final documentation and ultimately execution of the facility, which is on track to be the first mining senior debt project financing drawdown in Eritrea.
Endeavour Financial is acting as debt financial adviser to Danakali and CMSC while Standard Chartered is acting as corporate financial adviser to Danakali, including with respect to discussions with potential strategic investors.
Danakali is assessing a range of options for funding the balance of the capital required to bring Colluli into production, including advanced discussions with a number of potential strategic investors who have expressed interest in supporting the development of the project.