Leader of the Year Nomination - Paul D

Our very own Paul Donaldson has been nominated for Emerging Leader of the Year by Mining News.

Below is the write up.

MNN Awards: Donaldson grows fertiliser project value

THE market finally began waking up to the potential of ASX-listed Danakali and its Colluli SOP premium fertiliser project in Eritrea around March last year, with the company’s share price more than tripling since then and the enterprise’s value rising more than 500%.

• Michael Quinn​
• 19 Jul 2017​
• 9:48​

Danakali MD and CEO Paul Donaldson on site

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TOPICS (select for more information):

PotashDanakaliEritrea
The appreciation has been some time coming, though given the venture is not a stock, standard gold mine in Western Australia, arguably not overly-so.
Two years prior to the market starting to stir from its slumber, chemical engineer Paul Donaldson had been appointed as Danakali’s managing director, having arrived about 18 months prior to that as the COO (and soon after the CEO) of then named-South Boulder Mines.
His appointment as MD in February 2013 came with chairman-Seamus Cornelius praising the “game-changing” contribution made by Donaldson to the company’s strategy at Colluli.
Previously the project had been planned as a large scale (and consequent large capital!) development producing potassium chloride, a commodity that according to Donaldson was “clearly” moving into an oversupply situation.
Add to that its location in Eritrea and the market’s caution with the caper back then was probably wholly unsurprising.
However Donaldson saw the potential to change Colluli’s product to potassium sulphate, a premium potash type with much better market fundamentals that allowed the investment to be scaled back (and de-risked), while still delivering “industry leading returns”.
By early last year the definitive feasibility study had been completed and eight offtake MoUs had been sighed with multinational customers.
Voila, growing investor interest, with consultant CRU suggesting in October that Danakali had perhaps “made the most progress of all greenfield SOP projects over the last 12 months”.
While the growing market interest has been very welcome, it’s fair to say Donaldson – a two-decade veteran of BHP who as well as being a chemical engineer also holds a Masters Degree in Business and Technology from the University of New South Wales – has been a tad mystified at the general modus operandi of the junior equity market during Danakali/Colluli’s gestation to date.
“The approach taken from the investment community on how they make decisions has been particularly surprising to me,” Donaldson told MNN.
“My general observations for Colluli are that there is more conversation on the joint venture structure [involving Eritrean National Mining Company (ENAMCO)] than the industry leading return on investment expected for Danakali; NPV seems to be favoured over return on capital, and; a low-quality resource in a comfortable jurisdiction will get more attention than a high-quality resource in an emerging jurisdiction with a track record.
“These simply do not make sense to me. For emerging jurisdictions in particular, we talk often internally about the investment paradox. Investors would like to see exceptionally high NPVs which are typically achieved by scaling up the size of the projects. Then they don’t want to invest because capital is too high and risky.”
Donaldson believes there are three keys to Danakali’s emerging and ongoing success; getting the team right, understanding the resource and its capability (and thus the appropriate development strategy), and maintaining strong relationships.
The latter especially includes Danakali’s relationship with state-based ENAMCO, which Donaldson sees as “a key enabler to the success of the project”.
The Danakali MD maintains that all who have visited Eritrea have come away very positive sentiments towards the jurisdiction from an operating perspective, with three new mining projects have been developed in the country in recent years a proof of its bona fides.
Donaldson describes his management style as “pragmatic and hands on”, while suggesting he is fully cognisant that teams at junior companies need to have a “high degree of autonomy”.
He subscribes to the learnings and teachings of American business consultant Jim Collins (author of “Good to great”), and specifically cites three individuals he’s worked with in the mining sector as most influencing his management approach.
“The most influential ones include Eddy Hagel, who currently heads up BHPs Nickel division and is the best mining operations execution professional I have worked for; Dean Dalla Vale who is now head of Pacific National and a leader who really drove alignment on outcomes from his team; and Peter Toth, who heads up Rio Tinto’s corporate development team and is one of the best strategic thinkers I have worked with.”
Colluli is now fully permitted and Donaldson and his team claim it to be “the most fundable and advanced stage SOP project in the world”.
It has an NPV (for its first stage) of US$439 million, with the second stage’s NPV rising to $860 million.
Given progress to date, it seems Donaldson and his team are well placed to buck the conventional market wisdom that says projects of this size and shape are not the domain of juniors.
Paul Donaldson is a nominee for New/Emerging Leader of the Year in the MNN Awards.