What a joke, page-42

or try this research report from late last year by London Equity house Hannam & partners - it won't fit on as an attachment because too big so Ive copied the summary page. they are calling it to 80p in London which is $1.45 in AUD. we think it should be sitting  nearer there than 30cents. then when the financing package is announced it can treat to relay move up. ...fingers crossed.

Danakali Limited | Equity Research 22nd September 2020
Danakali Limited
Salt for the Earth – World Class Potash in Eritrea
We resume coverage of Danakali Limited with a GBp 80 price target implying 194% upside from the current share price.
GICS Sector
Ticker
Market cap 21-Sep-20 (£m) Share price 21-Sep-20 (GBp)

Target price 31-Dec-20 (GBp)
+194%

Materials
DNK:LSE 80.8 27.5 80
World class SOP project nearing production
Danakali is developing the Colluli Potash Project in Eritrea, East Africa, which it operates through a 50/50 JV with the Eritrean National Mining Corporation (“ENAMCO”. Colluli is a fully permitted, high-grade Sulphate of Potash (SOP) project with a reserve of over one billion tonnes, sufficient for a mine life of over 200 years. The Company aims for first production in 2022, producing 472ktpa of premium SOP product from a single open pit, doubling production to 944ktpa in 2027. The SOP product offtake is covered with a take-or-pay offtake agreement with fertilizer industry giant Eurochem.
Favourable project characteristics resulting in low capital intensity
Colluli is a shallow resource, suitable for open pit mining via a single pit. The orebody contains an appropriate combination of sylvinite, carnallite and kainite salts for simple and high yield conversion to SOP at ambient temperature conditions using a proven, conventional processing technology. Key infrastructure for Colluli is already in place, namely an existing 230km road to the modern port of Massawa on the Red Sea coast. Shallow open pit mining, relatively simple processing and proximity to the coast, result in operating costs competitive with the SOP brine producers as well as the lowest capital intensity SOP projects currently in development.
Strong SOP market fundamentals
SOP is a speciality potash fertiliser representing ~7% of global potash usage. Crops linked to more affluent lifestyles such as tea, fruit and nuts rely on SOP. This has driven increased SOP demand in line with the emergence of middle- class consumers in developing economies, with China accounting for roughly 60% of global SOP use. We expect an ongoing tightening in global SOP markets unless new projects are discovered, funded and built. While our analysis suggests current SOP prices may be high enough to incentivise several as yet uncommitted projects, the feasibility, financing and construction of these operations will take time. As such, we believe Colluli stands out as one of very few viable near-term projects able to take advantage of SOP’s remarkably stable pricing dynamics.
US$250m funding package covers majority of US$302m upfront capital costs
The debt funding portion of the upfront US$302m capex requirement will be covered by a US$200m funding package from the Africa Finance Corporation (AFC) and Afreximbank. In addition, the AFC has provided US$21.5m of equity financing via a tranche 1 private placement with a further US$28.5 expected in November 2020. Consequently, a funding gap of only US$70m remains (including upfront working capital requirements) which Danakali plans to raise via a private placement from a mixture of existing and new shareholders before the end of 2020. The tranche 1 facility has allowed Danakali to continue its EPCM work, with a focus now on phase 3, which involves detailed final design work.
Our valuation shows strong Colluli economics
We have valued Danakali using a life-of-mine cash flow model. We arrive at an NPV of US$416m for Danakali’s share of Colluli, and apply a discount rate of 12%. We calculate Danakali’s IRR to be 28.7%., with steady state cash flows of US$87.5m (attributable to Danakali) following the Phase II expansion of Colluli.
Valuation & Catalysts
Using a 0.8x NPV multiple and a $550/t SOP price forecast, we arrive at a valuation for Danakali of US$340.9m, or GBp 80 per share. A key catalyst expect by year end is the completion of project funding for Colluli, which should lead to commencement of construction in H1 2020.
Upside from current share price to 80p/share risked NPV
28.7 %
Post-tax IRR for the DNK portion of Colluli project
GBp '000s
60 250
50 40 30 20 10
200 150 100 50
00
Volume (000's,RHS)
Danakali Ltd
FTSE All-share Mining
H&P Advisory Ltd is a Retained Advisor to Danakali Limited. The cost of producing this material has been covered by Dankali Limited as part of a contractual engagement with H&P; this report should therefore be considered an “acceptable minor non-monetary benefit” under the MiFID II Directive.
Andrei Kroupnik
Analyst, Mining Research T +44-207-907-8500
E [email protected]
Roger Bell
Director, Mining Research T +44-207-907-8534
E [email protected]
Jay Ashfield
Director, Mining Sales T +44-207-907-2022
E [email protected]
H&P Advisory Ltd
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