Shore Capital UK

Good to finally see someone in the UK discuss Danakali.
Shore Capital have a large retail investor list.
Numis have been useless so let's hope they are gone.

Shore Capital went over the top promoting Sirius Minerals to over 85,000 retail investors in England.
They all got massively burned believing in that disaster which was unfortunate.

Let's hope they try to make their money back by switching into DNK.

Extract from the report:

DANAKALI^ (DNK, NR, CNP) – Chairman Seamus Cornelius makes further on-market purchase;
Eritrea successfully flattening COVID-19 curve.

Chairman Seamus Cornelius clearly has significant faith in Danakali’s prospects:

He has purchased on-market another 50k shares @ A$0.3753/share (i.e. c. A$18.8k’s worth, or c.£10k).

• He had previously purchased: earlier this month, 44.6k shares @ A$0.3699/share (A$16.5k or £8.6k); and, in February 2020, 77.9k shares @ A$0.57/share (c.A$44.3k or c.£23k). As a result, he now has direct and indirect interests in 5.0m shares and 5.5m shares, respectively. Danakali currently has 318.7m shares in issue.
• The Chairman hasn’t been the only buying. Encouragingly, just last week, CEO Niels Wage bought A$18.8k’s (c.£10k) worth of Danakali shares (50k shares @ A$0.375/share, or c.19.5p/share).
• 
  Meanwhile, according to the blog of the UNDP (United Nations Development Programme) Africa, Eritrea has been successfully leveraging on social capital to “flatten the [COVID-19] Curve”. At the time the article was published (1st May, 2020), Eritrea reportedly had only 39 infections and zero deaths. The article credited this to the Eritrean government’s communal approach, which involved “engaging communities as frontline disseminators of risk-communication, and promoting social distancing”.
• 
  Danakali is developing the Colluli SOP (Sulphate of Potash) project in Eritrea. According to the company’s March 2020 report, Phase 2 of the Engineering, Procurement & Construction Management (EPCM) programme is “materially on track”, and that Danakali remains relatively well-funded for the time being (ending the period with A$22.7m of cash).

• Much of the Phase 2 EPCM work currently underway is desk-based in nature, focused on completing the capital re-estimate and revision of the project schedule.
• The cash pile is sufficient to last 8.8 quarters, assuming March 2020 quarter’s burn rate (excluding one-offs) – with the possibility of even longer, given that Danakali anticipates “prudent spending” (restricted to areas critical to Colluli’s development) resulting in a lower burn rate from Q2 2020.
  Colluli is a 50:50 joint venture (CMSC) with the Eritrean National Mining Corporation (ENAMCO).

• The project has a JORC 2012-compliant resource of 1.1Bt @ 10.5% K2O for 203Mt of contained SOP-equivalent, which in theory could potentially allow a mine life of nearly 200 years.
• Colluli is currently envisaged as a 60-year project developed in two stages: Module I is to produce 472ktpa SOP; Module II would see this increasing to 944ktpa from Year 6.
• A FEED study was completed in January 2018, wherein the capital cost of Module I was estimated at US$302m. On a 100% basis, FEED estimates of post-tax NPV10% (real) and IRR were US$902m and 29.9%, respectively, assuming an average SOP price of US$569/t and a standard:granular product split of 56:44.
• Danakali has previously estimated that it would need to raise US$322m (£243m) to fund construction of Module I. The company was targeting 30% equity for Module I, with Danakali funding ENAMCO’s share (provided as an interest-free loan repayable from project cashflows). Assuming a 10% debt shortfall (i.e. debt:equity split of 60:40), Danakali estimated that its 50% share of the project (post-finance basis) would have NPV10% and IRR of US$439m and 31.3%, respectively. (If the final funding requirement remains US$322m, the debt:equity split would be c.62:38 assuming US$200m of total debt).

In December 2019, credit documentation for a 7-year US$200m senior debt facility from Afreximbank and AFC (US$100m each) was executed. AFC also agreed a US$50m (A$74m; A$0.60/share) investment for a 32% interest in Danakali, the US$21.5m (A$31.8m) Tranche 1 of which has been received.

The US$28.5m Tranche 2 is being deferred until global financial market conditions stabilise, since Danakali requires financing in addition to AFC’s equity investment.

In any case, Tranche 2 has certain conditions precedent which the parties are currently working together to satisfy. Danakali had also said that the deferment would provide additional time for the company to reassess its overall funding strategy and review a range of options appropriate to Colluli’s funding requirements beyond Phases 1 and 2 of the project’s EPCM programme.