12/06/2018

Press release: EuroChem to purchase future SOP output from upcoming project in Africa

Zug, Switzerland, June 12, 2018 – EuroChem Group AG (“EuroChem” or the “Group”), a leading global fertilizer company, today announces a take-or-pay agreement for the purchase of up to 100% of expected future Sulphate of Potash (SOP) output from the Colluli Potash Project in Eritrea, East Africa.

The contract is for a 10-year term with an option to extend for a further three years. It is the first such agreement by EuroChem in Africa. The deal will provide EuroChem with access to an economically attractive SOP greenfield project which is favorably positioned to supply the world’s fastest-growing markets.

Owned by the Colluli Mining Share Company (CMSC), the Colluli Potash Project is a 50-50 joint venture between Danakali Limited (Danakali, ASX: DNK) and the Eritrean National Mining Corporation (ENAMCO). The project comprises a 1.1 billion tonne JORC-2012 SOP ore reserve containing potassium-bearing salts in solid form that is suitable for potash fertilizer production.

The agreement with EuroChem envisages annual output of 472,000 tonnes, although CMSC has the option to sell up to 13% of its output through alternative channels. Other commercial terms of the agreement have not been disclosed.

SOP is a premium fertilizer product suited for use with crops such as fruit, vegetables and coffee, and represents EuroChem’s increased focus on premium products. These include the Nitrophoska® range of complex fertilizers and the innovative stabilized nitrogen fertilizers of EuroChem’s ENTEC® series. SOP sells at a premium to Muriate of Potash (MOP), a more common potash fertilizer, which EuroChem is beginning to produce in Russia. As the Usolskiy and VolgaKaliy greenfield potash projects come on stream this year, EuroChem will become one of three companies worldwide to produce fertilizers in all three primary nutrient categories, and a top-five global producer by total nutrient capacity. EuroChem may use some of the SOP processed at Colluli for the production of complex NPK fertilizers at its facilities in Antwerp, Belgium and Nevinnomyssk, Russia, and the rest will be sold internationally.

EuroChem Group AG Chief Executive Officer Dmitry Strezhnev said: “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.”

Danakali Chief Executive Officer Danny Goeman said: “We could not be happier with this result. EuroChem is an outstanding partner for the Project. EuroChem has a wealth of experience and expertise in the fertilizer sector.”

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