2017
ANNUAL
REPORT
DANAKALI LIMITED
ABN 56 097 904 302
FOR THE YEAR ENDED 31 DECEMBER 2017
Executive summary
Danakali is focused on the development of
the world class Colluli Potash Project, the most
advanced and economically attractive SOP
greenfield development project.
Shallow mineralisation
Colluli is the shallowest evaporite deposit in the world, with
mineralisation starting at just 16m, allowing open-cut mining.
Compelling business case
Front End Engineering Design (FEED) confirmed a post-
tax project NPV of US$902M and post-tax IRR of 29.9%1
for Colluli. There is no other known SOP greenfield
development project that has completed FEED.
Salts extracted in solid form
Colluli is the only SOP resource that allows extraction
of potassium salts in solid form. Primary production of
SOP typically comes from potassium rich brines, which
require considerable evaporation.
Colluli meets the criteria for a Tier 1 project:
Industry leading capital intensity;
•
Forecast first quartile operating costs;
•
•
Proximity to coast and global markets;
• Outstanding grade; and
•
Exceptionally long mine life (approximately 200 years).
Colluli is a standout greenfield development opportunity.
Fully permitted
Colluli is fully permitted following the signing of
the Mining Agreement in February 2017; and the
subsequent awarding of the requisite Mining Licenses.
FEED completion transitions Colluli from
study phase into project execution phase
FEED provides offtakers and funders with a high level of
detail, accuracy and confidence, and provides a robust
platform for project execution.
The modular development approach underpins a highly
scalable, long life project. Module I is expected to
produce 472ktpa of premium SOP product. Module II will
increase total SOP production to 944ktpa1.
World class resource and reserve
The Colluli deposit, located in the Danakil Depression in
Eritrea, comprises a massive JORC-2012 compliant Ore
Reserve estimate of 1,100Mt @ 10.5% K2O for 203Mt
of contained Sulphate of Potash (SOP) equivalent.
The Danakil Depression is the only potash basin in the
world that exhibits the most favourable combination of
potassium salts for low cost, high yield production of SOP.
Extracting the salts in solid form provides superior economic
outcomes: it enables the salts to be processed immediately,
significantly reducing the time between mining and revenue
generation; and it reduces the evaporation pond footprint
contributing to a lower capital intensity.
Simple, energy efficient, commercially-
proven processing
The processing method to be utilised at Colluli is the
most commonly used, low cost process for production
of SOP. Colluli salt composition is ideal for low energy,
high yield conversion to SOP at ambient temperatures.
Proximity to coast and established
infrastructure
Colluli is the closest SOP deposit to a coastline, only
75km from the Red Sea coast.
Colluli is 230km from the established port of
Massawa. The port of Massawa is equipped with bulk
and container loading facilities.
An outstanding economic, social and
community dividend
Positive impact through infrastructure, job
creation, taxes, royalties, and associated economic
development. Creation of hundreds of permanent jobs
for Eritrean nationals. Long term training for trades
and professionals.
Industry leading project economics
Positively unique
•
• Open-cut mining
•
•
Proximate to coast
Simple, proven processing
1
Modules I & II, Module II commences in the 6th year of production
Page 2
Danakali Annual Report 2017DANAKALI LIMITED Colluli highlights
Exceptional
economics
Low development
capital
Industry leading
capital intensity
NPV US$902M
IRR of 29.9%
MODULE I
US$302M
MODULE II
US$202M
US$534/t
First quartile
operating costs
Exceptional
cashflow
Most advanced
greenfield
SOP project
US$242/t
FOB Port of Massawa
>US$10B
Undiscounted over first 60 years
ü FEED complete
ü Fully permitted
Simple,
commercially
proven processing
High grade primary
production SOP
Closest SOP
deposit to coast
Well understood,
low risk approach
Chloride free and
multi-nutrient
Only 75km from
Red Sea coast
Large scale,
long life Reserve
Supportive mining
jurisdiction
Economic, social
and community
dividends
~200 years mine life
1.1Bt Ore Reserve
Strong government relationship
>300 Eritrean jobs
(Module I)
NOTE: All results over Module I and II unless stated
Page 3
Danakali Annual Report 2017DANAKALI LIMITED
Corporate Information
Directors
Seamus Ian Cornelius
Paul Michael Donaldson
John Daniel Fitzgerald
Zhang Jing
Robert Gordon Connochie
Andre Liebenberg
Executive Management
Danny Goeman
Stuart Tarrant
Company Secretary
Catherine Grant Edwards
Melissa Chapman
(Non-Executive Chairman)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
(Chief Executive Officer)
(Chief Financial Officer)
(Joint Company Secretary)
(Joint Company Secretary)
Registered Office and Principal Place of Business
Level 1, 234 Churchill Avenue
Churchill Court
SUBIACO WA 6008
Telephone:
+61 (0)8 6315 1444
Bank
National Australia Bank
Level 12, 100 St Georges Terrace
PERTH WA 6005
Share Register
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
PERTH WA 6000
Telephone:
Telephone:
Facsimile:
www.computershare.com
1300 850 505 (Inside Australia)
+61 (0)3 9415 4000 (Outside Australia)
+61 (0)3 9473 2500
Auditors
Ernst and Young
11 Mounts Bay Road
PERTH WA 6000
Website
www.danakali.com
Stock Exchange Listing
Danakali Limited (Code: DNK) is listed on the Australian Securities Exchange with trading also available on the
Frankfurt and Berlin Stock Exchanges:
Frankfurt: SO3-Fra: http://en.boerse-frankfurt.de/stock/Danakali-share
Berlin: SO3-Ber: https://www.boerse-berlin.de/index.php/Aktien?isin=AU000000DNK9
American Depository Receipts
The Bank of New York Mellon sponsors DNK’s Level 1 American Depository Receipts Program (ADR) in the
United States of America. DNK’s ADRs are traded on the over-the-counter (OTC) securities market in the US
under the symbol DNKLY and CUSIP: 23585T101. One ADR represents one ordinary share in DNK.
US OTC Market information is available here:
DNK’s ADR information can also be viewed here: https://www.adrbnymellon.com/?cusip=23585T101
ADR Holders seeking information on their shareholding should contact: shrrelations@bnymellon.com OR
http://www.otcmarkets.com/stock/DNKLY/quote
LONDON NEW YORK
Rick Maehr
Mark Lewis
richard.maehr@bnymellon.com
mark.lewis@bnymellon.com
Telephone +1 212 815 2275
Telephone +44 207 163 7407
Page 4
Danakali Annual Report 2017DANAKALI LIMITED
Contents
Chairman’s Letter
Chief Executive Officer’s Letter
Overview of Danakali and Colluli
Directors’ Report
Audit Independence Letter
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Audit Report
ASX Additional Information
How to invest
Competent Persons and Responsibility Statements
Page
6
7
9
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50
52
53
54
55
56
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89
89
Page 5
Danakali Annual Report 2017DANAKALI LIMITED Chairman’s Letter
Dear fellow shareholders,
Thank you for your continued support over the past
year.
2017 represented another important year of progress
for Danakali. The FEED study was completed for
the Colluli Potash Project allow the Offtake and
Project Financing processes to advance further. In
addition, the Mining Agreement was signed and
Mining Licenses granted for our 50:50 joint venture
company, CMSC. Colluli is now not only the best
and most important pre-production SOP asset in
the world, it is also the most advanced towards
production.
None of the tremendous achievements of recent
years would have been possible without the hard
work of our executive team and supporting teams
across Australia and Eritrea, the continued support
of our joint venture partners ENAMCO, and the
enthusiasm of all our shareholders. Paul Donaldson,
who recently transitioned from Managing Director
& CEO to Non-Executive Director, and Danny
Goeman, our newly promotion CEO, deserve
special acknowledgement for their outstanding
contributions.
One of our priorities for 2018 is to build our capacity,
both within Danakali and Colluli, to transition away
from the study phase into project execution. Having
experienced the quality and quantity of progress from
the Danakali team over the past year and having
worked in some high-performance environments, I
can safely say that few people are as committed or
work as hard as the Danakali executive team.
In 2018 we have set ourselves several objectives
within a clearly established framework with the
intention of driving value for our shareholders and
all other stakeholders. These objectives include
dual-listing Danakali in London, securing binding,
bankable off-take for 80 to 85% of phase 1 SOP
production, appointing a lead bank to arrange our
project finance, and commencing project execution.
Naturally, with a genuinely strategic tier 1,
exceptionally long life and high quality asset such as
Colluli, we cannot ignore the possibility that other
opportunities, from outside the planned value driving
framework mentioned above, present themselves
during the course of this year. I can assure all
shareholders that should any other opportunities
present themselves they will be given full and proper
consideration at the relevant time.
In a world where so much seems to be changing at
an ever-increasing pace, certain fundamental things
remain the same. Global population continues to rise,
increasing the demand for reliable sources of food
and decreasing arable land. This transition requires
improved efficiencies in agriculture whilst consuming
less water.
Colluli is uniquely placed to supply SOP and
other premium, chloride free fertilisers to hungry
populations for many generations to come. One of
the “hidden” benefits of Colluli and SOP is that when
a farmer applies SOP as a fertiliser, far less water is
wasted in the agricultural process. SOP is chloride
free and therefore the farmer does not have to pour
huge quantities of water on the soil to wash away
the chlorides and prevent salt built up in the soil.
We will also provide jobs and skills training to
the people of Eritrea both in the short term and
across generations. A key part of our social and
environmental plan is to ensure that Colluli reaches its
potential as a transformational asset for generations
of people in Eritrea, across Africa, the Middle East
and India.
I look forward to another year of positive progress
and constant improvement in all areas.
Yours sincerely
Seamus Cornelius
Non-executive Chairman
Page 6
DANAKALI LIMITED
Danakali Annual Report 2017
CEO’s Letter
Dear shareholders,
2017 and early 2018 has been an important period
for Danakali with considerable progress in several key
areas including the recent completion of Front-End
Engineering Design (FEED). The FEED outcomes for
Colluli were the culmination of a long period of high
quality work from our study team and consultants.
FEED has further strengthened Colluli’s position as the
most progressed greenfield primary sulphate of potash
(SOP) project in the world. It has delivered industry
leading capital intensity, first quartile operating
costs, and highly attractive economic returns. FEED
provides us with a much greater degree of accuracy
and certainty, with key cost and valuation outcomes
improving significantly. Together with the completion
of permitting in 2017, FEED further enhances
Danakali and CMSC’s ability to finalise binding offtake
agreements, advance towards financial close, and
execute the Project.
2017 saw a marginal price recovery for the more
common potash type, potassium chloride (muriate of
potash or MOP). Further investment appetite for MOP
projects, however, has diminished, due to the impact
of historical investment in new capacity from existing
producers and new entrants. MOP supply growth is
expected to continue to outpace demand growth
suggesting limited scope for material price uplifts in the
next decade. In contrast, the SOP industry is forecast to
tighten compared to 2017 levels throughout the next
decade. SOP prices have remained resilient due mainly
to the lack of new primary production capacity outside
of China, and growing demand for SOP products.
Several sources have cited supply shortages in 2017,
with waiting periods for high quality granular SOP
product from selective suppliers in Europe reportedly
exceeding 4 months. The premium of SOP over MOP
in 2017 averaged ~US$270/mt, and the market is
expected to remain supply constrained, with new
supply after 2022 doing little to mitigate a tightening
supply situation which becomes increasingly tighter up
to 2026, expected to lead to increasing SOP prices.
2017 has been another year of significant progress in
several key areas for both Danakali and CMSC. This
includes the approval of the Colluli Mining Agreement
and subsequent award of Mining Licenses in February
2017. Further to the completion of FEED, the key
catalysts for project financing are the advancement
of offtake and key commercial contracts. During the
year, the Company entered into heads of agreement
with several offtake parties, with negotiations in the
December 2017 Quarter focussing primarily on the
finalisation of a few remaining commercial terms
contained in the binding bankable offtake agreements.
The Company also progressed several key operational
contracts including (i) EPCM, (ii) Mining, and (iii)
Power. Danakali continued to receive support from the
investment community, evidenced by the successful
A$12.25M share placement in May 2017, and a share
price appreciation of 49% over the 12-month period.
The Company has conducted extensive social
and environmental impact analysis, assessment
and planning. The Eritrean government and local
communities firmly support the Colluli development.
The Project has the potential to provide long-term
economic, social and community dividends, with
local communities set to benefit from jobs and skills
development. Danakali and the Eritrean government
are focused on sustainable development for the benefit
of all stakeholders.
Turning our attention to 2018, the year has started
positively with strong progress on offtake negotiations.
In addition, the negotiation and appointment of the
key EPCM, Mining and Power contracts position Colluli
for project execution, upon completion of project
financing. The scheduled dual listing on the London
Stock Exchange further complements our already
strong Australian equity market support.
I would like to thank the Company’s shareholders
for their ongoing support and express my sincere
appreciation to the Danakali and CMSC management
teams for their assiduous contribution to the Project.
2018 is poised to be a defining year for Danakali, and
I am excited about the opportunities ahead that will
enable us to progress to project execution.
Yours sincerely
Danny Goeman
Chief Executive Officer
DANAKALI LIMITED
Danakali Annual Report 2017
Page 7
FORWARD LOOKING STATEMENTS AND DISCLAIMER
“Colluli is the premier and most
advanced SOP greenfield development
project globally. It has industry leading
capital intensity, forecast first quartile
operating costs, and highly attractive
economic returns. We are focused on
working with our joint venture partner
to ensure the successful development
of Modules I and II, and unlocking
the significant expansion and multi-
commodity potential of the resource.”
Danny Goeman, CEO
FORWARD LOOKING STATEMENTS AND DISCLAIMER
The information in this document is published to inform you about Danakali Limited (the Company or Danakali) and its activities. Danakali has endeavoured to
ensure that the information enclosed is accurate at the time of release, and that it accurately reflects the Company’s intentions. All statements in this document,
other than statements of historical facts, that address future production, project development, reserve or resource potential, exploration drilling, exploitation
activities, corporate transactions and events or developments that the Company expects to occur, are forward-looking statements. Although the Company
believes the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and
actual results or developments may differ materially from those in forward-looking statements.
Factors that could cause actual results to differ materially from those in forward-looking statements include market prices of potash and, exploitation and
exploration successes, capital and operating costs, changes in project parameters as plans continue to be evaluated, continued availability of capital and
financing and general economic, market or business conditions, as well as those factors disclosed in the Company’s filed documents.
There can be no assurance that the development of the Colluli Potash Project (Colluli or the Project) will proceed as planned. Accordingly, readers should not
place undue reliance on forward looking information. Mineral Resources and Ore Reserves have been reported according to the JORC Code, 2012 Edition. To
the extent permitted by law, the Company accepts no responsibility or liability for any losses or damages of any kind arising out of the use of any information
contained in this document. Recipients should make their own enquiries in relation to any investment decisions.
Mineral Resource, Ore Reserve and financial assumptions made in this document are consistent with assumptions detailed in the Company’s ASX
announcements dated 25 February 2015, 4 March 2015, 19 May 2015, 23 September 2015, 30 November 2015, 15 August 2016, 1 February 2017, 29
January 2018 and 19 February 2018, which continue to apply and have not materially changed. The Company is not aware of any new information or data that
materially affects assumptions made.
Page 2
Page 8
Danakali Annual Report 2017DANAKALI LIMITED “Colluli is the premier and most
advanced SOP greenfield development
project globally. It has industry leading
capital intensity, forecast first quartile
operating costs, and highly attractive
economic returns. We are focused on
working with our joint venture partner
to ensure the successful development
of Modules I and II, and unlocking
the significant expansion and multi-
commodity potential of the resource.”
Danny Goeman, CEO
FORWARD LOOKING STATEMENTS AND DISCLAIMER
The information in this document is published to inform you about Danakali Limited (the Company or Danakali) and its activities. Danakali has endeavoured to
ensure that the information enclosed is accurate at the time of release, and that it accurately reflects the Company’s intentions. All statements in this document,
other than statements of historical facts, that address future production, project development, reserve or resource potential, exploration drilling, exploitation
activities, corporate transactions and events or developments that the Company expects to occur, are forward-looking statements. Although the Company
believes the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and
actual results or developments may differ materially from those in forward-looking statements.
Factors that could cause actual results to differ materially from those in forward-looking statements include market prices of potash and, exploitation and
exploration successes, capital and operating costs, changes in project parameters as plans continue to be evaluated, continued availability of capital and
financing and general economic, market or business conditions, as well as those factors disclosed in the Company’s filed documents.
There can be no assurance that the development of the Colluli Potash Project (Colluli or the Project) will proceed as planned. Accordingly, readers should not
place undue reliance on forward looking information. Mineral Resources and Ore Reserves have been reported according to the JORC Code, 2012 Edition. To
the extent permitted by law, the Company accepts no responsibility or liability for any losses or damages of any kind arising out of the use of any information
contained in this document. Recipients should make their own enquiries in relation to any investment decisions.
Mineral Resource, Ore Reserve and financial assumptions made in this document are consistent with assumptions detailed in the Company’s ASX
announcements dated 25 February 2015, 4 March 2015, 19 May 2015, 23 September 2015, 30 November 2015, 15 August 2016, 1 February 2017, 29
January 2018 and 19 February 2018, which continue to apply and have not materially changed. The Company is not aware of any new information or data that
materially affects assumptions made.
Page 2
Project overview
Resource & Reserve
Standout development opportunity
Danakali Limited (ASX: DNK) (Danakali, or the
Company) is focused on the development of the world
class Colluli Potash Project (Colluli or the Project) located
in the Danakil region of Eritrea, East Africa. Colluli is
100% owned by the Colluli Mining Share Company
(CMSC), a 50:50 joint venture between Danakali and the
Eritrean National Mining Corporation (ENAMCO).
Colluli is located in the Danakil Depression region of
Eritrea and is approximately 230km by road south-east of
the port of Massawa, which is Eritrea’s key import/export
facility. The Danakil Depression is an emerging potash
province, which commences in Eritrea and extends south
across the border into Ethiopia.
Colluli is located approximately 75km from the Red Sea
coast, providing unrivalled future logistics potential. The
Project resides on the Eritrean side of the border, giving
Colluli a significant advantage relative to the other potash
development projects in the Danakil Depression, which
need to ship from the Tadjoura Port in Djibouti – over
790km by road from the closest project on the Ethiopian
side of the border1. Colluli boasts the shallowest evaporite
mineralisation globally and consequently has significant
mining, logistics and, in turn, capital and operating cost
benefits over other potash development projects in the
Danakil Depression and elsewhere.
The resource is amenable to open-cut mining: a
proven, high productivity mining method. Open-cut
mining provides higher resource recoveries relative to
underground and solution mining methods, and is
generally safer and more easily expanded.
The Project carries a significantly lower level of complexity
due to predictable processing plant feed grade,
predictable production rates – given low reliance on
weather conditions – and simple, commercially proven
mineral processing technology.
Colluli is fully permitted following the signing of the
Mining Agreement in February 2017; and the subsequent
awarding of the requisite Mining Licenses. The project is
rapidly progressing to construction.
Massive 1.1Bt Ore Reserve
The Danakil Depression is located in the Southern region
of Eritrea and extends over 300km into Eastern Ethiopia.
It hosts the youngest evaporite deposit and the largest
unexploited potash basin in the world. Over 6Bt of
potassium bearing salts suitable for production of potash
fertilisers have been identified in the region to date2.
The deposit differentiates itself by its depth and
composition. With mineralisation commencing at just
16m, Colluli is the shallowest known potash deposit in
the world, making it amenable to open-cut mining. In
contrast, most potash evaporite deposits typically sit at
depths of up to 1km beneath the earth’s surface. Deep,
underground potash deposits have high development
costs, and exposure to cost and time overruns.
The Colluli resource comprises three potassium bearing
salts in solid form: Sylvinite, Carnallitite and Kainitite.
These salts are suitable for high yield, low energy
production of SOP.
The salt composition in the Danakil Depression provides
the ability to produce a suite of potash products including
SOP, Sulphate of Potash-Magnesia (SOP-M) and MOP.
Such potash product diversification cannot be achieved
by any other known potash deposit region in the world.
Colluli is high grade. The JORC-2012 compliant Mineral
Resource for Colluli is estimated at 1.289Bt @ 11% K2O
for 260Mt of contained SOP equivalent. The JORC-2012
compliant Ore Reserve estimate for Colluli is estimated
at 1,100Mt @ 10.5% K2O for 203Mt of contained
SOP equivalent. The Measured and Indicated Mineral
Resources are inclusive of those Mineral Resources
modified to produce the Ore Reserves.
Colluli has significant diversification potential beyond
potash, including the option to produce additional
salt products such as Kieserite (MgSO4.H2O), Gypsum
(CaSO4.2H2O), Magnesium Chloride (MgCl2) and Rock
Salt (NaCl). Colluli contains a JORC-2012 compliant rock
salt Mineral Resource of 347Mt @ 96.9% NaCl.
1
2
Peer announcement
ASX announcement 25 February 2015 and peer announcements
Page 9
Danakali Annual Report 2017DANAKALI LIMITED FEED results summary
FEED firmly establishes Colluli as the most advanced and attractive SOP greenfield
development project
•
• Danakali share of NPV of US$439M with IRR of 31.3%
Enhanced project economics with considerably
higher level of accuracy
•
•
Industry leading capital intensity and forecast first
quartile operating costs
Project level NPV of US$902M with IRR of 29.9%
for Modules I and II
• Operating and capital cost accuracy level of ±10%
• Critical milestone for offtake and debt processes
• No other known SOP greenfield development
project has completed FEED
Table 4: Key Colluli FEED economic estimates and outcomes1
100% of the Project (equity / pre-debt basis)
Annualised SOP production
Strip ratio (waste:ore)
Module I development capital5
Incremental Module II development capital5
Capital intensity5
Incremental Module II capital intensity5
Average mine gate cash costs6
Average total cash costs6,7
Average annual undiscounted free cash flows6
Post tax NPV (10% real)
Post tax IRR
Module 1 payback period8
Danakali’s 50% share of the Project (post-finance basis)
Average annual undiscounted free cash flows6
Post finance NPV (10% real)
Post finance IRR
Module I2
Module I & II3,4
472ktpa
944ktpa
1.9
2.1
US$302M
US$202M
US$640/t
US$534/t
US$427/t
US$165/t
US$149/t
US$258/t
US$242/t
US$88M
US$173M
US$505M
US$902M
28.1%
29.9%
3.25 years
US$43M
US$85M
US$242M
US$439M
29.7%
31.3%
1 Economic estimates and outcomes reported in US$ real
2 Assumed that Module I is 60% debt / 40% equity funded
3 Module II production expected to commence in year 6
4 Assumed that module is 100% funded from project cash flows
and third-party debt
5 Including contingency, excluding sustaining and working capital
6 Average for first 60 years of production
7 Includes mine gate cash costs, product logistics, and royalties
8 Distance to port for Colluli and greenfield potash developments
in Australia and Ethiopia
Page 10
Colluli is the only known SOP greenfield development
project that has completed FEED
Typical accuracy levels of mining project study phases
+100%
-50%
Scoping Study
PFS
DFS
FEED
Colluli – improved economic outcomes and increased accuracy1
COLLULI STUDY
ACCURACY
25%
15%
10%
SOP PRODUCTIO N
850
ktpa
850
ktpa
944
ktpa
US$428M
US$298M
US$302M
I
E
L
U
D
O
M
I
I
E
L
U
D
O
M
DEV ELOPMENT
CAP ITAL 2
CAPITAL
INTENSITY 2
AVERAGE MINE GATE
CAS H COSTS 3,4
POS T TAX NPV
(10% REAL)
US$835/t
US$556/t
US$534/t
US$202M
US$162/t
US$168/t
US$165/t
US$846M
US$860M
US$902M
POST TAX IRR
24.7%
29.0%
29.9%
Source: ASX announcements 30-Nov-15 and 29-Jan-18, AACE
1 All results for Modules I & II unless stated
2 Including contingency, excluding sustaining and working capital
3 Average for first 60 years of production
4 Includes mine gate cash costs, product logistics, and royalties
Danakali Annual Report 2017DANAKALI LIMITED FEED results summary
FEED firmly establishes Colluli as the most advanced and attractive SOP greenfield
development project
higher level of accuracy
•
•
•
Enhanced project economics with considerably
• Danakali share of NPV of US$439M with IRR of 31.3%
Industry leading capital intensity and forecast first
quartile operating costs
Project level NPV of US$902M with IRR of 29.9%
for Modules I and II
• Operating and capital cost accuracy level of ±10%
• Critical milestone for offtake and debt processes
• No other known SOP greenfield development
project has completed FEED
Table 4: Key Colluli FEED economic estimates and outcomes1
100% of the Project (equity / pre-debt basis)
Annualised SOP production
Strip ratio (waste:ore)
Module I development capital5
Incremental Module II development capital5
Capital intensity5
Incremental Module II capital intensity5
Average mine gate cash costs6
Average total cash costs6,7
Average annual undiscounted free cash flows6
Post tax NPV (10% real)
Post tax IRR
Module 1 payback period8
Post finance NPV (10% real)
Post finance IRR
Danakali’s 50% share of the Project (post-finance basis)
Average annual undiscounted free cash flows6
Module I2
Module I & II3,4
472ktpa
944ktpa
1.9
2.1
US$302M
US$640/t
US$534/t
US$202M
US$427/t
US$165/t
US$149/t
US$258/t
US$242/t
US$88M
US$173M
US$505M
US$902M
28.1%
29.9%
3.25 years
US$43M
US$85M
US$242M
US$439M
29.7%
31.3%
1 Economic estimates and outcomes reported in US$ real
5 Including contingency, excluding sustaining and working capital
2 Assumed that Module I is 60% debt / 40% equity funded
6 Average for first 60 years of production
3 Module II production expected to commence in year 6
7 Includes mine gate cash costs, product logistics, and royalties
4 Assumed that module is 100% funded from project cash flows
8 Distance to port for Colluli and greenfield potash developments
and third-party debt
in Australia and Ethiopia
FEED accuracy
Colluli is the only known SOP greenfield development
Colluli is the only known SOP greenfield development
FEED is the final study stage before project execution and represents the
project that has completed FEED
project that has completed FEED
culmination of several years of robust technical work that has continually
delivered high quality outcomes
Typical accuracy levels of mining project study phases
Typical accuracy levels of mining project study phases
+100%
+100%
-50%
-50%
Scoping Study
Scoping Study
PFS
PFS
DFS
DFS
FEED
FEED
Colluli – improved economic outcomes and increased accuracy1
Colluli – improved economic outcomes and increased accuracy1
CO LLULI STU DY
CO LLULI STUDY
ACC URACY
ACC URACY
25%
25%
15%
15%
10%
10%
SO P PRODUCTI ON
SO P PRODUC TION
850
850
ktpa
ktpa
850
850
ktpa
ktpa
944
944
ktpa
ktpa
DEVELO PM ENT
DEVELO PM ENT
CA PITAL 2
CA PITAL 2
I
I
E
E
L
L
U
U
D
D
O
O
M
M
I
I
I
I
E
E
L
L
U
U
D
D
O
O
M
M
CA PITAL
CA PITAL
IN TE NSITY 2
IN TE NSITY 2
AVERAGE MINE GATE
AVERAGE MINE GATE
CASH C OSTS 3, 4
CASH C OSTS 3, 4
PO ST TAX NPV
PO ST TAX NPV
(10 % REAL)
(10 % REAL)
US$428M
US$428M
US$298M
US$298M
US$302M
US$302M
US$835/t
US$835/t
US$556/t
US$556/t
US$534/t
US$534/t
US$202M
US$202M
US$162/t
US$162/t
US$168/t
US$168/t
US$165/t
US$165/t
US$846M
US$846M
US$860M
US$860M
US$902M
US$902M
PO ST TAX I RR
PO ST TAX I RR
24.7%
24.7%
29.0%
29.0%
29.9%
29.9%
Source: ASX announcements 30-Nov-15 and 29-Jan-18, AACE
Source: ASX announcements 30-Nov-15 and 29-Jan-18, AACE
1 All results for Modules I & II unless stated
1 All results for Modules I & II unless stated
2 Including contingency, excluding sustaining and working capital
2 Including contingency, excluding sustaining and working capital
3 Average for first 60 years of production
3 Average for first 60 years of production
4 Includes mine gate cash costs, product logistics, and royalties
4 Includes mine gate cash costs, product logistics, and royalties
Page 11
Danakali Annual Report 2017DANAKALI LIMITED
Peer comparison
Colluli is clearly more advanced and economically
attractive than any other greenfield SOP development1
Colluli is more advanced and economically attractive than any other SOP
greenfield development project1
Colluli2
Danakali
Yara Dallol
Yara
Servier Lakes
Crystal Peak
Beyondie3
Kalium Lakes
Lake Wells4
Salt Lake Potash
SOLID SALTS
SOLID SALTS
PLAYA BRINE
BRINE
BRINE
Mackay
Agrimin
BRINE
Operating costs
Colluli’s positively unique attributes enable forecast first quartile cash costs
If operating in 2016, Danakali would have been the lowest cost SOP producer outside of China.
Mine gate costs outside of China in 2016 (US$/t)
Mine gate costs outside of China in 2016 (US$/t)
Open-cut
Solution
Trench & well
Trench & bore
Trench & bore
Trench
S TU DY L EVE L CO MPLETE D
FEED
DFS
DFS
PFS
SCOPING
STUDY
SCOPING
STUDY
CO NTA IN ED SO P EQUIVA LEN T RE S ERV E
203Mt
No disclosed
reserve
7.7Mt
2.7Mt
No reserve
No reserve
P RO DUCTI O N
944
ktpa
CA PI TA L IN TEN SITY
600
ktpa
298
ktpa
150
ktpa
400
ktpa
370
ktpa
US$534/t
US$1,233/t
US$1,221/t
US$1,1735/t
US$5355/t
US$700/t
P OS T-TAX IRR
29.9%
P ER MI TTI NG
FULLY
PERMITTED
No disclosed
IRR
MINING
AGREEMENT
SIGNED
20.8%
22.5%
No public
IRR
No public
IRR
NOT FULLY
PERMITTED
NOT FULLY
PERMITTED
NOT FULLY
PERMITTED
NOT FULLY
PERMITTED
ü 1.1Bt Ore Reserve
ü Outstanding grade
ü Shallow mineralisation
ü Open-cut mining
ü Favourable combination of potassium salts
enable simple, proven, low cost, high yield
processing methods
ü Proximity to coast and established port
ü Approximately 200 year mine life
Source: ASX announcements 29-Jan-18 and 19-Feb-18, and peer announcements
1 SOP development projects covered are a representative but non-exhaustive
selection of SOP greenfield development projects
2 Colluli metrics shown for Modules I & II
3 Beyondie metrics shown for 150ktpa SOP production scenario (also have
75ktpa and 300ktpa scenarios)
4 Lake Wells metrics shown for 400ktpa SOP production scenario (also have a
200ktpa scenario)
5 Converted to US$ using assumed exchange rate of US$0.80/A$
ü Conventional truck and shovel methods utilised,
complemented by continuous surface miners
ü Scale of resource and shallowness allows a modular
development approach
ü Solid salt extraction and resulting small
evaporation pond footprint
Attractive FEED outcomes are made possible by Colluli’s positively unique features
Page 12
t
/
$
S
U
t
/
$
S
U
500
450
500
400
450
350
400
300
350
250
300
200
250
150
200
100
150
50
100
50
Colluli
Module I
Colluli
Module I
1,000
1,000
SOP production capacity (kt)
2,000
2,000
3,000
3,000
4,000
4,000
Source: Integer Research and Danakali analysis
SOP production capacity (kt)
Source: Integer Research and Danakali analysis
Danakali Annual Report 2017DANAKALI LIMITED Operating costs
Colluli’s positively unique attributes enable forecast first quartile cash costs
If operating in 2016, Danakali would have been the lowest cost SOP producer outside of China.
Mine gate costs outside of China in 2016 (US$/t)
t
/
$
S
U
500
450
400
350
300
250
200
150
100
50
Colluli
Module I
1,000
2,000
SOP production capacity (kt)
3,000
4,000
Source: Integer Research and Danakali analysis
Attractive FEED outcomes are made possible by Colluli’s positively unique features
ü 1.1Bt Ore Reserve
ü Outstanding grade
ü Shallow mineralisation
ü Open-cut mining
ü Favourable combination of potassium salts
enable simple, proven, low cost, high yield
processing methods
ü Proximity to coast and established port
ü Approximately 200 year mine life
ü Conventional truck and shovel methods utilised,
complemented by continuous surface miners
ü Scale of resource and shallowness allows a modular
development approach
ü Solid salt extraction and resulting small
evaporation pond footprint
Page 13
Danakali Annual Report 2017DANAKALI LIMITED Mining
Simple, low cost, open-cut mining
Single open-cut mine, with a progressive working face
that provides access to each of the mineralised layers
simultaneously. Mining will be conducted by mining
contractors using conventional mechanised equipment
(including surface miners, excavators, bulldozers and
haul trucks) and methods. No drill and blast is required.
Colluli’s shallow mineralisation results in a low average
strip ratio.
The overburden contains industrial Rock Salt,
which is extracted at a rate of more than 1.8Mtpa.
Commercialisation of this Rock Salt is expected to offset
a portion of the mining costs in the future. This has not
been reflected in the FEED results.
Processing
Simple, energy efficient, commercially-
proven processing
The processing method to be utilised at Colluli is the
most commonly used, low cost process for production of
SOP. The ore body consists of three main members being
Sylvinite, Carnallitite and Kainitite which are fed as ore feed
into the processing plant, and from which the minerals
Sylvite, Carnallite and Kainite are extracted and mixed to
produce SOP. Colluli is one of the few resources globally
comprising Sylvite, Carnallite and Kainite in an ideal ratio to
combine using conventional flotation and mixing processes
to produce SOP at ambient temperature. Ambient
temperature processing has a positive impact on process
yield, and requires significantly lower energy inputs relative
to Kainite brine conversion. Further, the availability of the
salts in solid form means that no pre-evaporation ponds
are necessary, reducing capital requirements and time to
revenue (as illustrated on the next page).
Potassium yields are further improved using recovery
ponds which collect brines exiting the processing plant.
Highly favourable weather conditions within the Danakil
Depression provide an environment with extremely
high evaporation rates, which significantly reduce pond
size requirements and allow rapid recovery of remnant
potassium that is recirculated to the processing plant.
Processing plant water is planned to be pumped along an
87km pipeline from an abstraction and desalination facility
on the Red Sea coast, and will be supplemented by a small
number of water bores at the Colluli site.
Product
CMSC will produce a high grade
premium SOP product
Production at Colluli will initially focus on Standard
and Granular SOP, with expansion to include Soluble
SOP and Standard, Granular and Soluble SOP-M as the
Project progresses.
Colluli SOP samples have properties which place the
product at the high end of the quality spectrum. These
properties are a result of the process plant design and
the liberation characteristics of the salts within the Colluli
resource. Representative CMSC SOP samples have been
assessed and well received by prospective offtakers.
Page 14
SOP-M is chloride free and contains potassium,
sulphur and magnesium. Colluli SOP-M samples
demonstrate high solubility which is sought-after by
end-markets.
Rock Salt is scheduled for stockpiling to enable
commercialisation. Colluli Rock Salt has been found to
be highly effective for deicing across the varying cut-
off grades modelled.
Product specifications for all potential CMSC products
are available at: danakali.com.au/products
Danakali Annual Report 2017DANAKALI LIMITED Simple, low cost, open-cut mining
Colluli’s shallow mineralisation results in a low average
strip ratio.
Single open-cut mine, with a progressive working face
that provides access to each of the mineralised layers
simultaneously. Mining will be conducted by mining
contractors using conventional mechanised equipment
(including surface miners, excavators, bulldozers and
haul trucks) and methods. No drill and blast is required.
The overburden contains industrial Rock Salt,
which is extracted at a rate of more than 1.8Mtpa.
Commercialisation of this Rock Salt is expected to offset
a portion of the mining costs in the future. This has not
been reflected in the FEED results.
Mining
Processing
Simple, energy efficient, commercially-
proven processing
The processing method to be utilised at Colluli is the
most commonly used, low cost process for production of
SOP. The ore body consists of three main members being
Sylvinite, Carnallitite and Kainitite which are fed as ore feed
into the processing plant, and from which the minerals
Sylvite, Carnallite and Kainite are extracted and mixed to
produce SOP. Colluli is one of the few resources globally
comprising Sylvite, Carnallite and Kainite in an ideal ratio to
combine using conventional flotation and mixing processes
to produce SOP at ambient temperature. Ambient
temperature processing has a positive impact on process
yield, and requires significantly lower energy inputs relative
to Kainite brine conversion. Further, the availability of the
salts in solid form means that no pre-evaporation ponds
are necessary, reducing capital requirements and time to
revenue (as illustrated on the next page).
Potassium yields are further improved using recovery
ponds which collect brines exiting the processing plant.
Highly favourable weather conditions within the Danakil
Depression provide an environment with extremely
high evaporation rates, which significantly reduce pond
size requirements and allow rapid recovery of remnant
potassium that is recirculated to the processing plant.
Processing plant water is planned to be pumped along an
87km pipeline from an abstraction and desalination facility
on the Red Sea coast, and will be supplemented by a small
number of water bores at the Colluli site.
Product
CMSC will produce a high grade
premium SOP product
Production at Colluli will initially focus on Standard
and Granular SOP, with expansion to include Soluble
SOP and Standard, Granular and Soluble SOP-M as the
Project progresses.
Colluli SOP samples have properties which place the
product at the high end of the quality spectrum. These
properties are a result of the process plant design and
the liberation characteristics of the salts within the Colluli
resource. Representative CMSC SOP samples have been
assessed and well received by prospective offtakers.
SOP-M is chloride free and contains potassium,
sulphur and magnesium. Colluli SOP-M samples
demonstrate high solubility which is sought-after by
end-markets.
Rock Salt is scheduled for stockpiling to enable
commercialisation. Colluli Rock Salt has been found to
be highly effective for deicing across the varying cut-
off grades modelled.
Product specifications for all potential CMSC products
are available at: danakali.com.au/products
TIME BETWEEN SALT EXTRACTION
Colluli has the unique ability to process solid salts, leading to industry leading capital intensity
AND REVENUE GENERATION
and shortest extraction to port timeframe of any SOP greenfield development project
SOLID SALTS NEAR SURFACE – OPEN-CUT (COLLULI)
COST & TIME SAVINGS
Less than one week from extraction to port
MINE
PROCESS
TRUCK
SHIP
SOLID SALTS AT DEPTH – SOLUTION
WATER
PUMP
TREATMENT
DISSOLVE PUMP
EVAPORATE
MINE
PROCESS
TRUCK
SHIP
Several months (at least) from extraction to port
LAKE WATER BRINE
LAKE WATER
PUMP
EVAPORATE
MINE
PROCESS
TRUCK
SHIP
Several months (at least) from extraction to port
PLAYA BRINE
TRENCH
BORE
PUMP
EVAPORATE
MINE
PROCESS
TRUCK
SHIP
Several months (at least) from extraction to port
Page 15
Danakali Annual Report 2017DANAKALI LIMITED Logistics
Eritrea
3 K M
1 1
Asmara
Massawa Port
230K
M
Danakil (Circum)
Yara Dallol (Yara)
Marsa
Fatuma
Anfile Bay
87KM
Proposed
water pipeline
Road
Port terminal
Potential port terminal
Colluli Potash Project
Potash development project
Water pipeline
DANAKIL
DEPRESSION
Ethiopia
7
9
0
K
M
+
Djibouti
Tadjoura Port
Colluli is only 230km by road from the
established Port of Massawa
Once processed, SOP precipitate will be dried and
compacted before being loaded onto containers for
export. Loaded containers will be transported by truck on
the established coastal road to the Port of Massawa.
Colluli is only 75km from the Red Sea coast (87km
from a potential port export terminal at Anfile Bay)
and 230km from the Port of Massawa, making Colluli
the closest SOP deposit to a coastline (see illustration
below compared to Australian projects and other
projects in the Danakil Depression). The proximity to
the coast and established port infrastructure gives
Colluli unrivalled access to the global export markets
via one of the busiest trade routes in the world.
Massawa is an existing, well established port providing
the necessary infrastructure and skills required to satisfy
the multi-commodity trade in and out of Eritrea including
the exports of products from existing mines in Eritrea.
Located on the major Red Sea shipping channel, it allows
direct access to the key markets of India, Southeast Asia,
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
the Middle East, Europe and the rest of Africa. Colluli has
been assigned a lay down area at the Port of Massawa.
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
Distance to port for Colluli and other SOP greenfield development projects
The alternative product exporting option at Anfile Bay
will be subject to further review and has the potential
to unlock significant value for Colluli, by enabling the
low cost export of additional volumes resulting from (i)
additional modules, and (ii) the expansion of the product
suite (including non-potash materials).
¢AUSTRALIAN PROJECTS ¢ETHIOPIAN PROJECTS
¢AUSTRALIAN PROJECTS ¢ETHIOPIAN PROJECTS
790km+
Circum (Danakil)
Circum
Tadjoura, Djibouti
790km+
Circum (Danakil)
Circum
Tadjoura, Djibouti
860km
860km
Beyondie
Beyondie
Kalium Lakes
Kalium Lakes
Geraldton, WA
Geraldton, WA
790km
790km
Yara Dallol
Yara Dallol
Yara
Yara
Tadjoura, Djibouti
Tadjoura, Djibouti
877km
Lake Disappointment
Reward
Port Headland, WA
877km
Lake Disappointment
Reward
Port Headland, WA
988km
988km
Lake Wells
Lake Wells
Salt Lake Potash
Salt Lake Potash
Esperance, WA
Esperance, WA
1320km
1320km
Mackay
Mackay
Agrimin
Agrimin
Darwin, NT
Darwin, NT
1495km
1495km
Karinga
Karinga
Lakes
Lakes
Verdant
Verdant
Darwin, NT
Darwin, NT
87km
Colluli (potential)
Anfile Bay
87km
Colluli (potential)
Anfile Bay
Port
Port
Port
Port
230km
Colluli
Massawa
230km
Colluli
Massawa
Page 16
Red SeaDanakali Annual Report 2017DANAKALI LIMITED Logistics
Project execution
Upside potential
Eritrea
Asmara
3 K M
1 1
Massawa Port
Marsa
Fatuma
230K
M
Danakil (Circum)
Yara Dallol (Yara)
Anfile Bay
87KM
Proposed
water pipeline
DANAKIL
DEPRESSION
Ethiopia
7
9
0
K
M
+
Road
Port terminal
Potential port terminal
Colluli Potash Project
Potash development project
Water pipeline
Djibouti
Tadjoura Port
Colluli is only 230km by road from the
established Port of Massawa
Once processed, SOP precipitate will be dried and
compacted before being loaded onto containers for
export. Loaded containers will be transported by truck on
the established coastal road to the Port of Massawa.
Massawa is an existing, well established port providing
the necessary infrastructure and skills required to satisfy
the multi-commodity trade in and out of Eritrea including
the exports of products from existing mines in Eritrea.
Located on the major Red Sea shipping channel, it allows
direct access to the key markets of India, Southeast Asia,
Colluli is only 75km from the Red Sea coast (87km
from a potential port export terminal at Anfile Bay)
and 230km from the Port of Massawa, making Colluli
the closest SOP deposit to a coastline (see illustration
below compared to Australian projects and other
projects in the Danakil Depression). The proximity to
the coast and established port infrastructure gives
Colluli unrivalled access to the global export markets
via one of the busiest trade routes in the world.
The alternative product exporting option at Anfile Bay
will be subject to further review and has the potential
to unlock significant value for Colluli, by enabling the
low cost export of additional volumes resulting from (i)
the Middle East, Europe and the rest of Africa. Colluli has
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
additional modules, and (ii) the expansion of the product
been assigned a lay down area at the Port of Massawa.
suite (including non-potash materials).
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
Distance to port for Colluli and other SOP greenfield development projects
87km
87km
Colluli (potential)
Colluli (potential)
Anfile Bay
Anfile Bay
Port
Port
Port
Port
230km
230km
Colluli
Colluli
Massawa
Massawa
¢AUSTRALIAN PROJECTS ¢ETHIOPIAN PROJECTS
¢AUSTRALIAN PROJECTS ¢ETHIOPIAN PROJECTS
790km+
790km+
Circum (Danakil)
Circum (Danakil)
Circum
Circum
Tadjoura, Djibouti
Tadjoura, Djibouti
860km
860km
Beyondie
Beyondie
Kalium Lakes
Kalium Lakes
Geraldton, WA
Geraldton, WA
1320km
1320km
Mackay
Mackay
Agrimin
Agrimin
Darwin, NT
Darwin, NT
790km
790km
Yara Dallol
Yara Dallol
Yara
Yara
Tadjoura, Djibouti
Tadjoura, Djibouti
877km
877km
Lake Disappointment
Lake Disappointment
Reward
Reward
Port Headland, WA
Port Headland, WA
1495km
1495km
Karinga
Karinga
Lakes
Lakes
Verdant
Verdant
Darwin, NT
Darwin, NT
988km
988km
Lake Wells
Lake Wells
Salt Lake Potash
Salt Lake Potash
Esperance, WA
Esperance, WA
High degree of expandability and
multi-commodity potential
The modular development approach delivers low upfront
development costs and a high degree of expandability,
underpinning a scalable, long life project. Module I will be
utilised as a platform for growth.
The Project has significant multi-commodity potential
presenting major additional value upside. The potassium
salt composition in the resource provides the option to
diversify the potash product suite as the project grows.
Colluli has unrivalled potash product versatility. Potash
products including SOP, MOP, and SOP-M all have the
potential to be produced at Colluli.
The production of other agri and salt products including
Rock Salt, Kieserite, Gypsum and Magnesium Chloride,
is also possible from the Colluli resource. A port
development at Anfile Bay could assist in unlocking
this potential.
FEED completion transitions Colluli
into project execution phase
The completion of FEED unlocks Danakali’s ability to focus on
financial close and project execution. FEED provides offtakers
with additional confidence on project execution and fundability,
and project financiers with a level of certainty which further
de-risks the investment proposition and underpins the Financial
Model. FEED also provides the platform for detailed engineering
and design to commence as the first step in the development
phase of Colluli.
Colluli will be developed to its full potential by adopting
the principles of risk management, resource utilisation and
modularity. CMSC will develop the resource through a de-
risked modular development approach, initially focussing
on SOP production:
• Module I is expected to produce 472ktpa of premium
SOP product; and
• Module II, commencing production in year 6 of the Project,
will increase total SOP production to 944ktpa
The Project’s execution phase will incorporate engineering
design, procurement, construction, management and
commissioning of facilities. CMSC intend to engage an
experienced Engineering, Procurement, Construction &
Management (EPCM) provider to manage the project. The
EPCM provider will be responsible for all aspects of design,
procurement and construction, management and pre-
commissioning of the complete process plant and associated
infrastructure, including provision of all temporary construction
facilities. The management aspect will include provision of all
engineering, drafting, procurement, contracting, construction
and project services to complete the project scope.
“We are extremely happy with the FEED outcomes for Colluli, which are the
culmination of a long period of high quality work from our study team and
consultants. The FEED results provide us with a much greater degree of accuracy
and certainty, with key cost and valuation outcomes improving significantly. The
successful completion of FEED, as well as the completion of permitting in 2017,
further enhances Danakali and CMSC’s ability to finalise binding offtake agreements,
advance towards financial close, and execute the Project.”
CEO, Danny Goeman
Page 17
Red SeaDanakali Annual Report 2017DANAKALI LIMITED Introduction to potash
Danakali is concentrating on Sulphate of Potash (SOP)
the premium potash type
Danakali is concentrating on SOP, the premium potash type
NITROGEN
Adds crop volume through
enhancing protein and
chlorophyll production
N
K
P
POTASSIUM
Improves crop strength and quality, increases nitrogen
uptake, increases water use efficiencies, and raises
resistance to infection and parasites
PHOSPHATE
Helps transfer energy
and is the key to
photosynthesis
BARLEY
OATS
BRAN
RICE
CORN
2 highest volume potash
types: MOP and SOP
MOPKCI
The bulk potash
~61Mtpa demand in 20161
Low value chloride tolerant crops
Demand is elastic (easy to substitute)
Market is well supplied by global potash majors
Generally higher development costs
SOPK2S04
The premium potash
~7Mtpa demand in 20161
High value chloride sensitive crops
Demand is inelastic (difficult to substitute)
Global supply shortage of primary resources
High margin
Preliminary Colluli focus
SOP market dynamics1,2
SOP historical prices and premium to MOP1
Over 50% of SOP supply produced through costly
secondary production
Generates price floor to advantage of primary
SOP producers
China consumes all that it produces and exports
are limited
Significant demand upside if application rates in
developing countries rise to US and Chinese levels
SOP NW Europe FOB
(US$/t)
US$600
US$400
US$200
SOP price premium (US$/t)
2013
2014
2015
2016
2017
2018
Source:
1.
2.
Integer Research
Danakali analysis
Page 18
Danakali Annual Report 2017DANAKALI LIMITED Introduction to potash
Danakali is concentrating on Sulphate of Potash (SOP)
Danakali is concentrating on Sulphate of Potash (SOP)
SOP market overview
The SOP market is profitable, growing
and increasingly undersupplied
SOP commands a price premium over MOP, in part
because of its suitability for application on higher-value
chloride sensitive crops and lack of primary supply. SOP
is generated by either primary or secondary production
processes.
Primary production occurs directly from suitable
economically exploitable resources. These resources are
geologically scarce and currently insufficient to meet
demand outside of China. The demand shortfall is
supplemented by secondary production which involves
the conversion of MOP to SOP by adding sulphuric
acid in a high cost thermal conversion process (the
Mannheim Process). Over 50% of the world’s SOP
supply is produced this way, generating a price floor to
the advantage of primary producers who tend to have
significantly lower production costs. Historically, SOP
prices command a price premium over MOP and this
premium has increased to more than US$270/t in the
last 3 years.
Expandability of existing operations outside of
China is constrained and there are limited greenfield
developments for primary production of SOP at an
advanced stage. The SOP market outside of China
is likely to become increasingly undersupplied in the
coming years without significant capacity investment.
the premium potash type
the premium potash type
Danakali is concentrating on SOP, the premium potash type
NITROGEN
NITROGEN
Adds crop volume through
Adds crop volume through
enhancing protein and
enhancing protein and
chlorophyll production
chlorophyll production
N
N
K
K
P
P
PHOSPHATE
PHOSPHATE
Helps transfer energy
Helps transfer energy
and is the key to
and is the key to
photosynthesis
photosynthesis
POTASSIUM
POTASSIUM
Improves crop strength and quality, increases nitrogen
Improves crop strength and quality, increases nitrogen
uptake, increases water use efficiencies, and raises
uptake, increases water use efficiencies, and raises
resistance to infection and parasites
resistance to infection and parasites
BARLEY
BARLEY
OATS
OATS
BRAN
BRAN
RICE
RICE
CORN
CORN
2 highest volume potash
2 highest volume potash
types: MOP and SOP
types: MOP and SOP
MOPKCI
MOPKCI
The bulk potash
The bulk potash
~61Mtpa demand in 20161
~61Mtpa demand in 20161
Low value chloride tolerant crops
Low value chloride tolerant crops
Demand is elastic (easy to substitute)
Demand is elastic (easy to substitute)
Market is well supplied by global potash majors
Market is well supplied by global potash majors
Generally higher development costs
Generally higher development costs
SOPK2S04
SOPK2S04
The premium potash
The premium potash
~7Mtpa demand in 20161
~7Mtpa demand in 20161
High value chloride sensitive crops
High value chloride sensitive crops
Demand is inelastic (difficult to substitute)
Demand is inelastic (difficult to substitute)
Global supply shortage of primary resources
Global supply shortage of primary resources
High margin
High margin
Preliminary Colluli focus
Preliminary Colluli focus
SOP market dynamics1,2
SOP market dynamics1,2
SOP historical prices and premium to MOP1
SOP historical prices and premium to MOP1
SOP NW Europe FOB
SOP NW Europe FOB
(US$/t)
(US$/t)
Over 50% of SOP supply produced through costly
Over 50% of SOP supply produced through costly
secondary production
secondary production
Generates price floor to advantage of primary
Generates price floor to advantage of primary
SOP producers
SOP producers
are limited
are limited
China consumes all that it produces and exports
China consumes all that it produces and exports
Significant demand upside if application rates in
Significant demand upside if application rates in
developing countries rise to US and Chinese levels
developing countries rise to US and Chinese levels
US$600
US$600
US$400
US$400
US$200
US$200
Source:
Source:
1. Integer Research
Integer Research
1.
2. Danakali analysis
Danakali analysis
2.
SOP price premium (US$/t)
SOP price premium (US$/t)
2013
2013
2014
2014
2015
2015
2016
2016
2017
2017
2018
2018
CHANGING NEEDS
There is also a limit in the extent to which existing secondary
producers can increase output to service growing demand.
Hydrochloric acid (HCl) is produced as a by-product in
OUR FUTURE GLOBAL SOCIETY HAS
Reduction in arable land per person in comparison to a soccer pitch
Reduction in arable land means more fertiliser required to increase crop yields.
Reduction in arable land per person in comparison to a football field
62%
1960
4,500m2
33%
2005
2,400m2
25%
2050
1,800m2
Source: the content on this page was generated utilising industry insights from Integer Research, the data in the infographic is
sourced from the Food and Agriculture Organization of the United Nations
Page 19
secondary production. For every 1t of SOP produced via the
Mannheim Process, 1.2t of HCl is produced. HCl is costly to
handle and transport. In some cases, HCl disposal can result
in negative values for producers, making some secondary
SOP production ultimately unprofitable.
SOP’s growth fundamentals are underpinned by four
key drivers:
1. Global population growth
2. Reduction in arable land
3. Evolving dietary preferences
4. Under-application in developing countries
Global demand outside of China is expected to be driven
particularly from Latin America, South Asia, Africa, and
the fertiliser producing countries in Western Europe.
There is significant upside potential in the SOP market
if India changes its fertiliser pricing policy. India is the
second largest SOP crop growing country in the world
after China, but currently utilises very little SOP due
to the fertiliser subsidy scheme which applies to MOP
and drives irrational purchasing behaviour (currently
MOP in India is heavily subsidised). The global SOP
market has a potential size far greater than current
consumption if application rates increase to levels
comparable to those applied in the US market.
The expected SOP demand and supply dynamics
supports the premise that the industry will tighten
throughout the next 10 years, supporting a robust
pricing environment.
Danakali Annual Report 2017DANAKALI LIMITED Overview of Eritrea
Danakali has been operating in Eritrea
since 2009 and has found the country to
be safe, stable and development focused
Eritrea is located on the Horn of Africa. It is bordered by
Sudan in the west, Ethiopia in the south, and Djibouti
in the southeast. The north-eastern and eastern parts of
Eritrea have an extensive coastline along the Red Sea.
Eritrea is one of the youngest countries in the world,
achieving its independence in 1991. Eritrea has a stable
government and is one of the fastest growing economies
globally1. Drivers of the economy include mineral exports,
agricultural output and infrastructure development. The
Eritrean government promotes principles of self-reliance.
Eritrea was the only sub-Saharan African country to meet
its Millennium Development Goals by 20152. Eritrea
achieved large reductions in malaria, maternal mortality
and HIV/AIDs prevalence, while improving access to
potable water and almost doubling adult literacy rates.
The Eritrean government is focused on developing
food security and agricultural production; infrastructure
development; and human resources. Great emphasis
is placed on community and individual rights as well
as issues of social justice, such as access to education,
health, food and equitable access to services.
Mining and investment
in Eritrea
Eritrea’s development aspiration is to
achieve rapid, balanced, home-grown
and sustainable economic growth
while ensuring social equity and justice;
and mineral exports are recognised as
fulfilling a key role in achieving this
Eritrea has supportive laws for mining investment including
low import duties on capital development, accelerated tax
depreciation and 10 year carry forward of losses. Progression
of the mining industry has seen Eritrea experience some
of the highest economic growth rates in Africa1, primarily
driven by the development of the Bisha Copper-Zinc Mine
which has been operational since 2010 and has completed
three subsequent expansions.
With a stable and maturing mining jurisdiction, a pipeline of
mining projects has developed. The Zara (Koka) Gold Mine
is commissioned and producing, the Asmara Copper-Zinc-
Gold-Silver Project is in advanced stages of development
and Colluli sits fourth in the country’s pipeline of projects.
Prominent global institutional investors have made
major investments in Nevsun (NSU.TSE)3 and Danakali.
1
2
3
World Bank, The Economist
World Health Organisation
Morningstar
Asmara, Eritrea
Page 20
Danakali Annual Report 2017DANAKALI LIMITED Overview of Eritrea
Mining and investment
Government support and strategic alliance
Danakali has been operating in Eritrea
since 2009 and has found the country to
be safe, stable and development focused
Eritrea is located on the Horn of Africa. It is bordered by
Sudan in the west, Ethiopia in the south, and Djibouti
in the southeast. The north-eastern and eastern parts of
Eritrea have an extensive coastline along the Red Sea.
Eritrea is one of the youngest countries in the world,
achieving its independence in 1991. Eritrea has a stable
government and is one of the fastest growing economies
globally1. Drivers of the economy include mineral exports,
agricultural output and infrastructure development. The
Eritrean government promotes principles of self-reliance.
Eritrea was the only sub-Saharan African country to meet
its Millennium Development Goals by 20152. Eritrea
achieved large reductions in malaria, maternal mortality
and HIV/AIDs prevalence, while improving access to
potable water and almost doubling adult literacy rates.
The Eritrean government is focused on developing
food security and agricultural production; infrastructure
development; and human resources. Great emphasis
is placed on community and individual rights as well
as issues of social justice, such as access to education,
health, food and equitable access to services.
1
2
3
World Bank, The Economist
World Health Organisation
Morningstar
in Eritrea
Eritrea’s development aspiration is to
achieve rapid, balanced, home-grown
and sustainable economic growth
while ensuring social equity and justice;
and mineral exports are recognised as
fulfilling a key role in achieving this
Eritrea has supportive laws for mining investment including
low import duties on capital development, accelerated tax
depreciation and 10 year carry forward of losses. Progression
of the mining industry has seen Eritrea experience some
of the highest economic growth rates in Africa1, primarily
driven by the development of the Bisha Copper-Zinc Mine
which has been operational since 2010 and has completed
three subsequent expansions.
With a stable and maturing mining jurisdiction, a pipeline of
mining projects has developed. The Zara (Koka) Gold Mine
is commissioned and producing, the Asmara Copper-Zinc-
Gold-Silver Project is in advanced stages of development
and Colluli sits fourth in the country’s pipeline of projects.
Prominent global institutional investors have made
major investments in Nevsun (NSU.TSE)3 and Danakali.
“We were very impressed with
the country itself, and with Colluli.
Management has a very good
relationship with the Government.”
Hartleys, research note, November 2016
Asmara, Eritrea
Permitting
The Eritrean government has
been transparent, collaborative
and responsive
Danakali has a strong, effective working relationship
with the Eritrean government through its joint
venture agreement with ENAMCO. ENAMCO and
Danakali each hold a 50% ownership in CMSC.
The CMSC Board was established following the
incorporation of CMSC in March 2014. The CMSC
Board is overseeing project development. The CMSC
Board has 5 members; 3 members from Danakali and
2 from ENAMCO. The structure allows the Eritrean
government direct insight into the mining industry,
which is an important part of Eritrea’s development.
“The government is pragmatic in
its approach to the development
of the Eritrean mining industry.
The Eritrean people are friendly,
patriotic and exhibit no signs of
corruption.”
Baillieu Holst research: Postcard from Eritrea,
July 2016
Colluli is fully permitted
The Social and Environmental Impact Assessment (SEIA)
and Social and Environmental Management Plans (SEMP),
conducted according to the Equator Principles, were
submitted by CMSC in Q2 2016 and approved by the Eritrean
Ministry of Land, Water and Environment in Q4 2016.
The application for Mining Licenses was submitted by CMSC
in Q2 2016 and awarded in Q1 2017, along with approval
of the Mining Agreement. The Mining Agreement provides
exclusive access to CMSC over the 1.289Bt SOP Mineral
Resource. The Mining Licenses span over 60km2 of the
100km2 Mining Agreement area and represent more than
60 years of the approximately 200 year mine life. Additional
Mining Licenses can be applied for within the agreement area
as required to sustain and/or grow operations.
The Mining Licenses allow exploitation of potassium, calcium,
sodium, and magnesium salts from the Colluli resource, as
well as bromine. This facilitates significant growth potential
through the diversification of potash product types and
monetisation of other salts within the resource.
Page 21
Danakali Annual Report 2017DANAKALI LIMITED Danakali Board
An experienced, multi-disciplinary and international board
Seamus Cornelius
Chairman
Technical background
Corporate lawyer (LLB, LLM).
Relevant experience
Andre Liebenberg
Non-Executive Director
Technical background
MBA, BSc (Elec) Eng.
Relevant experience
• Corporate lawyer with over 20 years’ experience in
the resource sector, including in complex cross-
border commercial negotiations
• Mining industry professional with extensive investor,
market, finance, business development and
leadership experience
•
Former partner at one of Australia’s leading law firms
• Chairman of Duketon Mining, Montezuma
Mining, and Buxton Resources
• Over 25 years in private equity and investment banking,
and senior roles at BHP Billiton and QKR Corporation
Robert Connochie
Non-Executive Director
Technical background
Civil Engineering (B.A. Sc.), MBA
Relevant experience
Paul Donaldson
Non-Executive Director
Technical background
Masters Degree (Mining Engineering), Masters Degree
(Business and Technology), BEng Chemical (Hons),
Assoc Dip. Applied Science (Metallurgy).
Relevant experience
•
•
•
Potash and mining specialist with over 40 years of
industry experience
•
Extensive senior line management experience
in the potash industry, including corporate
development, evaluations, marketing, financing
and acquisitions
Previously Chairman of Canpotex, Chairman of Behre
Dolbear, Chairman and CEO of Potash Company of
America, CEO of Asia Pacific Potash, and Director of
Athabasca Potash
John Fitzgerald
Non-Executive Director
Technical background
Chartered Accountant, Fellow of FINSIA,
BSc Applied Science.
Relevant experience
•
•
Extensive project finance and corporate advisory
experience in the resource sector
Previously at Optimum Capital, NM Rothschild and
Sons, Investec Bank Australia and HSBC Precious Metals
• Non-Executive Director of Northern
Star Resources
Page 22
Extensive operational, technical marketing
and supply chain management from senior
management positions within BHP Billiton
• Managed large scale, open-cut mining operations,
significant growth and sustaining capital projects,
and complex pyro metallurgical, beneficiation and
manufacturing processes
• High-level business improvement, integrated
supply chain management, technical operational
management and frontline leadership experience
Zhang Jing
Non-Executive Director
Technical background
Master’s Degree in International Consultancy
and Accounting.
Relevant experience
•
•
Extensive international trading and business
development experience in China
Investment and project management roles held in
public listed companies in China
Danakali Annual Report 2017DANAKALI LIMITED Danakali senior management
Danny Goeman, a highly experienced mining industry professional, assumed the
role of CEO in late 2017
Danny Goeman
Chief Executive Officer
•
Joined Danakali in 2016 and has since developed
the offtake strategy and offtake contract
frameworks, and led the offtake negotiations on
behalf of CMSC
• More than 25 years’ experience in sales and
marketing, strategy development, and high level
commercial negotiations
• More than 20 years with the Rio Tinto group of
companies
•
•
Experience across multiple commodities in multiple
jurisdictions
Significant customer engagement experience
Stuart Tarrant
Chief Financial Officer
William Sandover
Head of Corporate Development & External Affairs
•
•
Extensive exposure in the mining industry
•
Financial modelling, financial systems deployment,
procurement, budgeting, and cost analysis and
optimisation experience
Extensive investment banking and corporate
advisory experience at UBS, Macquarie and
Vesparum
• Has been involved in raising more than A$10B in
equity and hybrid capital for ASX-listed companies
• Has held a series of senior financial positions,
including at BHP
Tony Harrington
Project Manager
•
Appointed as Project Manager in May 2017 ahead of
the project execution phase for Colluli
• Over 30 years’ experience delivering EPC, EPCM and
lump sum projects, in the capacity of both client
representative and service provider, over a diverse
range of commodities, with a wide range of mineral
processing units, and across multiple jurisdictions
including East and West Africa, Southern Africa,
China, Continental Europe, UK and Australia
•
Tony has acted as overall Project Manager, or one of the
Senior Managers on over 25 development projects globally
Selected project experience:
•
•
•
•
•
Base Resources, Kwale Mineral Sands Project, Kenya
Barrick Mining, Chimiwungo expansion at the
Lumwana Copper Mine, Zambia
Ashanti Goldfields, Sansu Gold Mine BIOX Gold
Plant, Ghana
Dundee Precious Metals, Chelopech Gold Mine, Bulgaria
Billiton, Groote Eylandt Manganese Mine Upgrade,
Australia (Gulf of Carpentaria)
Page 23
Danakali Annual Report 2017DANAKALI LIMITED Values
Our core values are our guiding
principles that define our internal
conduct and our relationships with the
external operating environment and
will not be compromised
People
Our employees, customers, local communities,
business partners, shareholders and other
stakeholders are vital to our business success and
future growth. The health, safety and wellbeing of
our people are paramount. Our business success is
underpinned by educating our employees about our
business, embracing diversity, encouraging ideas
that improve our business, demonstrating a “can
do“ attitude, respecting each other, promoting and
rewarding teamwork, and aligning ourselves to a set
of common goals.
Integrity
We conduct ourselves with uncompromising
integrity and honesty as individuals and as a
company. This means standing up for what we
believe in, speaking out against something that
is wrong and putting values ahead of short term
results. We are forthright with bad news and
difficult issues. We strive to earn enduring credibility
with others, which we believe is essential to long-
term personal and business relationships. This means
doing what we say we will do.
Planet
We respect our operating environment at local,
national and international levels and are focussed
on continually reducing the environmental footprint
of our business. We achieve this through creating
environmental management plans, using energy
efficiently, conserving water, minimising waste
generation and managing waste responsibly.
Performance
We are a performance driven organisation, and
continually strive for improvement in the things that
matter most to our business. We embrace innovation,
responsibility and accountability, and always consider
short, medium and long term time horizons.
Simplicity
We embrace the principle that everything should be
as simple as possible. We maintain simplicity in our
internal processes and procedures with objectives that
are succinct, quantitative, and time bound.
Please see Danakali’s 2017 CSR Report, expected to be released soon after Danakali’s 2018 Investor
Pack, for information on Danakali’s Environmental, Social and Governance policies and outlook.
Page 24
Danakali Annual Report 2017DANAKALI LIMITED Values
Our core values are our guiding
principles that define our internal
conduct and our relationships with the
external operating environment and
will not be compromised
Planet
results. We are forthright with bad news and
difficult issues. We strive to earn enduring credibility
with others, which we believe is essential to long-
term personal and business relationships. This means
doing what we say we will do.
People
Our employees, customers, local communities,
business partners, shareholders and other
stakeholders are vital to our business success and
future growth. The health, safety and wellbeing of
our people are paramount. Our business success is
underpinned by educating our employees about our
business, embracing diversity, encouraging ideas
that improve our business, demonstrating a “can
do“ attitude, respecting each other, promoting and
rewarding teamwork, and aligning ourselves to a set
of common goals.
Integrity
We conduct ourselves with uncompromising
integrity and honesty as individuals and as a
company. This means standing up for what we
believe in, speaking out against something that
is wrong and putting values ahead of short term
We respect our operating environment at local,
national and international levels and are focussed
on continually reducing the environmental footprint
of our business. We achieve this through creating
environmental management plans, using energy
efficiently, conserving water, minimising waste
generation and managing waste responsibly.
Performance
We are a performance driven organisation, and
continually strive for improvement in the things that
matter most to our business. We embrace innovation,
responsibility and accountability, and always consider
short, medium and long term time horizons.
Simplicity
We embrace the principle that everything should be
as simple as possible. We maintain simplicity in our
internal processes and procedures with objectives that
are succinct, quantitative, and time bound.
Please see Danakali’s 2017 CSR Report, expected to be released soon after Danakali’s 2018 Investor
Pack, for information on Danakali’s Environmental, Social and Governance policies and outlook.
DANAKALI LTD
DIRECTORS’
REPORT
FOR THE YEAR ENDED
31 DECEMBER 2017
Page 25
Danakali Annual Report 2017DANAKALI LIMITED Directors’ Report
The directors present their report together with the financial statements of the consolidated entity being, Danakali Ltd
(“Danakali” or the “Company”) and its controlled entities (“the Group”) for the financial year ended 31 December 2017.
DIRECTORS
The names and details of the Company’s directors in office during the financial period and until the date of this report are
as follows. Where applicable, all current and former directorships held in listed public companies over the last three years
have been detailed below. Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities:
Seamus Ian Cornelius
Non-Executive Chairman, LLB, LLM, appointed 15 July 2013
Mr Cornelius is a corporate lawyer and former partner of one of Australia’s leading international law firms. He has a high
degree of expertise in cross-border transactions, particularly in the resources and finance sectors.
Mr Cornelius has been based in China since 1993, and has advised global companies, banks, major resource companies
and Chinese State-owned entities on resource project investments both within China and abroad.
Mr Cornelius is currently the Non-Executive Chairman of Buxton Resources Ltd (appointed 29 November 2010),
Montezuma Mining Company Ltd (appointed 30 June 2011), and Duketon Mining Ltd (appointed 8 February 2013).
Special Responsibilities:
Mr Cornelius is a member of the Audit Committee and a member of the Technical and Risk Committee.
Paul Michael Donaldson
Managing Director and Chief Executive Officer; Master’s Degree - Mining Engineering, Master’s Degree - Business and
Technology, BEng Chemical (Honours, University Medal), Assoc Dip. Applied Science (Metallurgy), initially appointed Chief
Operating Officer 29 November 2012, transitioned to Chief Executive Officer 1 February 2013 and additionally appointed
Managing Director 29 April 2014, transitioned from Chief Executive Office and Managing Director role to Non-Executive
Director role on 21 December 2017.
Mr Donaldson joined Danakali from a series of senior management roles spanning more than 25 years with BHP Billiton
(“BHP”). At BHP Mr Donaldson managed large scale, open cut mining operations, significant growth and sustaining capital
projects, and complex pyro metallurgical, beneficiation and manufacturing processes. Mr Donaldson headed the BHP
Carbon Steel Materials Technical Marketing Team, managed the Port Hedland iron ore facility as well as occupying key
roles in product and infrastructure planning across large scale supply chains.
Mr Donaldson also brings extensive experience in high-level business improvement and logistics from base metal
operations and a high degree of integrated supply chain management, technical operational management and frontline
leadership experience in the steel industry.
Special Responsibilities:
Mr Donaldson is a Chairman of the Technical and Risk Committee and a member of the Remuneration and Nomination
Committee.
John Daniel Fitzgerald
Independent Non-Executive Director, CA, appointed 19 February 2015
Mr Fitzgerald has over 30 years of finance and corporate advisory experience in the resource sector.
Previously, he held senior positions at NM Rothschild and Sons, Investec Bank Australia, Commonwealth Bank, HSBC
Precious Metals and Optimum Capital.
Mr Fitzgerald is Non-Executive Chairman of Carbine Resources Limited (appointed 13 April 2016) and Novo Litio Minerals
Limited (appointed 23 December 2015) and a Non-Executive Director of Northern Star Resources Limited (appointed 30
November 2012),
Previously Mr Fitzgerald was Non-Executive Chairman of Atherton Resources Limited (14 December 2009 to 9 November
2015).
Mr Fitzgerald is a Chartered Accountant, a Fellow of the Financial Services Institute of Australasia (FINSIA) and a graduate
member of the Australian Institute of Company Directors.
Special Responsibilities:
Mr Fitzgerald is Chairman of the Audit Committee and member of the Remuneration and Nomination Committee.
Ms Zhang has more than 15 years of international trading and business development experience in China and previously
held investment and project managerial roles in public listed companies.
Ms Zhang holds a Master’s degree in International Consultancy and Accounting from the university or Reading in the United
Directors’ Report
Zhang Jing
Non-Executive Director, M. Sc, appointed 17 June 2016
Kingdom.
None
Special Responsibilities:
Robert Gordon Connochie
Independent Non-Executive Director, B.A. Sc, M.B.A., appointed 6 February 2017
Mr Connochie is a highly-experienced potash and mining specialist with over 40 years of industry experience. He brings
extensive senior line management experience from the potash industry, including marketing, corporate development,
evaluations, financing and acquisitions.
Chairman of Behre Dolbear Capital, Inc.
Previously, Mr. Connochie held positions as Chairman of Canpotex (a world leading potash exporter for over 40 years) and
Further, Mr Connochie was Chairman and CEO of Potash Company of America, CEO Asia Pacific Potash, Director of
Athabasca Potash, Chairman of the Phosphate and Potash Institute, Director of the Fertiliser Institute, and Director of the
Saskachewan Potash Producers Association.
Special Responsibilities:
Mr Connochie is a member of the Technical and Risk Committee.
Andre Liebenberg
Independent Non-Executive Director, MBA, BSc (Elec) Eng., appointed 2 October 2017
Mr. Liebenberg is an experienced mining industry professional with extensive investor, market, finance, business
development and leadership experience, and has spent over 25 years in private equity, investment banking, and held senior
roles within QKR Corporation and BHP Billiton.
In a previous role, Mr. Liebenberg had the opportunity to visit Eritrea and is familiar with the jurisdiction. In addition to the
CFO role at QKR Corporation, Mr. Liebenberg occupied senior executive roles within BHP Billiton including Head of Group
Investor Relations, as well as CFO roles for the Energy Coal and Diamonds and Speciality Products divisions. These roles
were based in London, Melbourne and Sydney.
Mr. Liebenberg’s experience within BHP Billiton also included key roles in the BHP Billiton merger, the bid for Rio Tinto and
the bid for Potash Corp. of Saskatchewan. Prior to BHP Billiton, Mr. Liebenberg worked at UBS in London and Standard
Bank Group in South Africa.
Special Responsibilities:
Anthony William Kiernan
Mr Liebenberg is Chairman of the Remuneration and Nomination Committee and a member of the Audit Committee.
Independent Non-Executive Director, LLB, appointed 15 October 2012, resigned 6 February 2017
Mr Kiernan has over 25 years of experience in the mining industry and was previously a commercial lawyer. He is currently
a corporate advisor and has extensive experience in the administration and operation of public listed companies. He brings
skills in the areas of Government relations, corporate strategy and corporate governance.
Mr Kiernan is currently the Non-Executive Chairman of Pilbara Minerals Ltd (appointed 1 July 2016), Venturex Resources
Limited (appointed 14 July 2010) and Chalice Gold Mines Ltd (appointed 15 February 2007).
In addition, Mr Kiernan is Chairman of the Fiona Wood Foundation which focuses on research into burn injuries.
Previously Mr Kiernan was Non-Executive Chairman of BC Iron Ltd (11 October 2006 until 7 December 2016).
Special Responsibilities:
Audit and Risk Committee.
During his appointment Mr Kiernan was Chairman of the Remuneration and Nomination Committee and a member of the
DANAKALI LIMITED
Page 26
ABN 56 097 904 302
4
DANAKALI LIMITED
ABN 56 097 904 302
5
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
The directors present their report together with the financial statements of the consolidated entity being, Danakali Ltd
(“Danakali” or the “Company”) and its controlled entities (“the Group”) for the financial year ended 31 December 2017.
DIRECTORS
The names and details of the Company’s directors in office during the financial period and until the date of this report are
as follows. Where applicable, all current and former directorships held in listed public companies over the last three years
have been detailed below. Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities:
Seamus Ian Cornelius
Non-Executive Chairman, LLB, LLM, appointed 15 July 2013
Mr Cornelius is a corporate lawyer and former partner of one of Australia’s leading international law firms. He has a high
degree of expertise in cross-border transactions, particularly in the resources and finance sectors.
Mr Cornelius has been based in China since 1993, and has advised global companies, banks, major resource companies
and Chinese State-owned entities on resource project investments both within China and abroad.
Mr Cornelius is currently the Non-Executive Chairman of Buxton Resources Ltd (appointed 29 November 2010),
Montezuma Mining Company Ltd (appointed 30 June 2011), and Duketon Mining Ltd (appointed 8 February 2013).
Mr Cornelius is a member of the Audit Committee and a member of the Technical and Risk Committee.
Special Responsibilities:
Paul Michael Donaldson
Managing Director and Chief Executive Officer; Master’s Degree - Mining Engineering, Master’s Degree - Business and
Technology, BEng Chemical (Honours, University Medal), Assoc Dip. Applied Science (Metallurgy), initially appointed Chief
Operating Officer 29 November 2012, transitioned to Chief Executive Officer 1 February 2013 and additionally appointed
Managing Director 29 April 2014, transitioned from Chief Executive Office and Managing Director role to Non-Executive
Director role on 21 December 2017.
Mr Donaldson joined Danakali from a series of senior management roles spanning more than 25 years with BHP Billiton
(“BHP”). At BHP Mr Donaldson managed large scale, open cut mining operations, significant growth and sustaining capital
projects, and complex pyro metallurgical, beneficiation and manufacturing processes. Mr Donaldson headed the BHP
Carbon Steel Materials Technical Marketing Team, managed the Port Hedland iron ore facility as well as occupying key
roles in product and infrastructure planning across large scale supply chains.
Mr Donaldson also brings extensive experience in high-level business improvement and logistics from base metal
operations and a high degree of integrated supply chain management, technical operational management and frontline
leadership experience in the steel industry.
Mr Donaldson is a Chairman of the Technical and Risk Committee and a member of the Remuneration and Nomination
Independent Non-Executive Director, CA, appointed 19 February 2015
Mr Fitzgerald has over 30 years of finance and corporate advisory experience in the resource sector.
Previously, he held senior positions at NM Rothschild and Sons, Investec Bank Australia, Commonwealth Bank, HSBC
Precious Metals and Optimum Capital.
Mr Fitzgerald is Non-Executive Chairman of Carbine Resources Limited (appointed 13 April 2016) and Novo Litio Minerals
Limited (appointed 23 December 2015) and a Non-Executive Director of Northern Star Resources Limited (appointed 30
Mr Fitzgerald is a Chartered Accountant, a Fellow of the Financial Services Institute of Australasia (FINSIA) and a graduate
member of the Australian Institute of Company Directors.
Special Responsibilities:
Mr Fitzgerald is Chairman of the Audit Committee and member of the Remuneration and Nomination Committee.
Special Responsibilities:
Committee.
John Daniel Fitzgerald
November 2012),
2015).
DANAKALI LIMITED
ABN 56 097 904 302
Directors’ Report
Zhang Jing
Non-Executive Director, M. Sc, appointed 17 June 2016
Ms Zhang has more than 15 years of international trading and business development experience in China and previously
held investment and project managerial roles in public listed companies.
Ms Zhang holds a Master’s degree in International Consultancy and Accounting from the university or Reading in the United
Kingdom.
Special Responsibilities:
None
Robert Gordon Connochie
Independent Non-Executive Director, B.A. Sc, M.B.A., appointed 6 February 2017
Mr Connochie is a highly-experienced potash and mining specialist with over 40 years of industry experience. He brings
extensive senior line management experience from the potash industry, including marketing, corporate development,
evaluations, financing and acquisitions.
Previously, Mr. Connochie held positions as Chairman of Canpotex (a world leading potash exporter for over 40 years) and
Chairman of Behre Dolbear Capital, Inc.
Further, Mr Connochie was Chairman and CEO of Potash Company of America, CEO Asia Pacific Potash, Director of
Athabasca Potash, Chairman of the Phosphate and Potash Institute, Director of the Fertiliser Institute, and Director of the
Saskachewan Potash Producers Association.
Special Responsibilities:
Mr Connochie is a member of the Technical and Risk Committee.
Andre Liebenberg
Independent Non-Executive Director, MBA, BSc (Elec) Eng., appointed 2 October 2017
Mr. Liebenberg is an experienced mining industry professional with extensive investor, market, finance, business
development and leadership experience, and has spent over 25 years in private equity, investment banking, and held senior
roles within QKR Corporation and BHP Billiton.
In a previous role, Mr. Liebenberg had the opportunity to visit Eritrea and is familiar with the jurisdiction. In addition to the
CFO role at QKR Corporation, Mr. Liebenberg occupied senior executive roles within BHP Billiton including Head of Group
Investor Relations, as well as CFO roles for the Energy Coal and Diamonds and Speciality Products divisions. These roles
were based in London, Melbourne and Sydney.
Mr. Liebenberg’s experience within BHP Billiton also included key roles in the BHP Billiton merger, the bid for Rio Tinto and
the bid for Potash Corp. of Saskatchewan. Prior to BHP Billiton, Mr. Liebenberg worked at UBS in London and Standard
Bank Group in South Africa.
Special Responsibilities:
Mr Liebenberg is Chairman of the Remuneration and Nomination Committee and a member of the Audit Committee.
Anthony William Kiernan
Independent Non-Executive Director, LLB, appointed 15 October 2012, resigned 6 February 2017
Mr Kiernan has over 25 years of experience in the mining industry and was previously a commercial lawyer. He is currently
a corporate advisor and has extensive experience in the administration and operation of public listed companies. He brings
skills in the areas of Government relations, corporate strategy and corporate governance.
Mr Kiernan is currently the Non-Executive Chairman of Pilbara Minerals Ltd (appointed 1 July 2016), Venturex Resources
Limited (appointed 14 July 2010) and Chalice Gold Mines Ltd (appointed 15 February 2007).
In addition, Mr Kiernan is Chairman of the Fiona Wood Foundation which focuses on research into burn injuries.
Previously Mr Fitzgerald was Non-Executive Chairman of Atherton Resources Limited (14 December 2009 to 9 November
Previously Mr Kiernan was Non-Executive Chairman of BC Iron Ltd (11 October 2006 until 7 December 2016).
Special Responsibilities:
During his appointment Mr Kiernan was Chairman of the Remuneration and Nomination Committee and a member of the
Audit and Risk Committee.
4
DANAKALI LIMITED
ABN 56 097 904 302
Page 27
5
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Liam Raymond Cornelius
Non-Executive Director, BApp.Sc, appointed 21 August 2001, resigned 17 November 2017
Mr Cornelius graduated from Curtin University of Technology with a BApp.Sc in Geology and has been involved in the
exploration industry within Australia, Asia and Africa for over 20 years. Mr Cornelius has experience with a wide range of
commodities including gold, nickel, copper, platinum, uranium and potash.
As a founding member of Danakali Ltd, Mr Cornelius has played a key role in outlining areas of interest for the Company.
Special Responsibilities:
During his appointment Mr Cornelius was a member of the Remuneration and Nomination Committee.
COMPANY SECRETARY
Catherine Grant-Edwards and Melissa Chapman
Appointed Joint Company Secretary 7 July 2017
Ms Melissa Chapman (Certified Practicing Accountant (CPA), AGIA/ACIS, GAICD) and Ms Catherine Grant-Edwards
(Chartered Accountant (CA)) were appointed as Joint Company Secretary on 7 July 2017. Ms Chapman and Ms Grant-
Edwards are directors of Bellatrix Corporate Pty Ltd (Bellatrix), a company that provides company secretarial and
accounting services to a number of ASX listed company. Between them, Ms Chapman and Ms Grant-Edwards have over
30 years’ experience in the provision of accounting, finance and company secretarial services to public listed resource and
private companies in Australia and the UK, and in the field of public practice external audit.
Christiaan Philippus Els
B. Com (Hons), CA, appointed 1 February 2016, resigned 7 July 2017
Mr Els is an associate member of the Chartered Institute of Management Accountants, a member of the Certified Practicing
Accountants of Australia and the Chartered Global Management Accountants. Mr Els was appointed as Chief Financial
Officer from 3 December 2015.
INTERESTS IN SHARES, OPTIONS AND PERFORMANCE RIGHTS OF THE COMPANY
As at the date of this report, the interests of the directors in the shares, options and performance rights of Danakali Limited
were:
Director
S I Cornelius
P M Donaldson
J D Fitzgerald
Z Jing
R G Connochie
A Liebenberg
PRINCIPAL ACTIVITIES
Ordinary
Shares
Options over Ordinary
Shares
Performance
Rights
9,798,184
2,768,334
258,334
-
-
-
1,675,000
600,000
1,475,000
100,000
500,000
-
-
800,000
-
-
-
-
The principal activity of the Group during the period was advancing the Colluli Potash Project in Eritrea, East Africa. There
was no significant change in the nature of the Group’s activities during the financial year ended 31 December 2017.
CORPORATE STRUCTURE
Danakali Limited is a company limited by shares that is incorporated and domiciled in Australia.
DANAKALI LIMITED
Page 28
ABN 56 097 904 302
6
7
Directors’ Report
REVIEW OF OPERATIONS
PROJECT OVERVIEW
The Colluli Potash Project (Colluli, or the Project) is located in the Danakil Depression region of Eritrea, East Africa. Colluli
is approximately 177km south-east of the capital, Asmara, and 180km from the port of Massawa, which is Eritrea’s key
import/export facility. The Project is a joint venture between the Eritrean National Mining Company (ENAMCO) and Danakali
with each having 50% ownership of the joint venture company, the Colluli Mining Share Company (CMSC). CMSC is
responsible for the development of the Project.
The Danakil Depression is an emerging potash province, which commences in Eritrea and extends south across the border
into Ethiopia. It is one of the largest unexploited potash basins globally; over 6Bt of potassium bearing salts suitable for
production of potash fertilisers have been identified in the region to date (ASX announcement 25 February 2015 and
http://circumminerals.com/resources).
Colluli is located approximately 75km from the Red Sea coast providing unrivalled future logistics potential. The Project
resides on the Eritrean side of the border, giving Colluli a significant advantage relative to all other potash development
projects in the Danakil Depression, which need to ship from the Tadjoura Port in Djibouti – over 600km by road from the
closest project on the Ethiopian side of the border.
Colluli boasts the shallowest mineralisation in the Danakil Depression. Mineralisation commences at just 16m below
surface. In addition, the potassium bearing salts are present in solid form (in contrast with production of SOP from brines).
Shallow access to salts in solid form provides Colluli with significant mining, logistics and, in turn, capital and operating cost
advantages over other potash development projects globally. The Project also carries a significantly lower level of
complexity as a consequence of predictable processing plant feed grade and predictable production rates due to low
reliance on ambient conditions.
Shallow mineralisation makes the resource amenable to open cut mining: a proven, high productivity mining method. Open
cut mining provides higher resource recoveries relative to underground and solution mining methods, is generally safer,
and can be more easily expanded.
The Colluli resource comprises three potassium bearing salts in solid form: Sylvinite, Carnallitite and Kainitite. These salts
are suitable for high yield, low energy production of Sulphate of Potash (SOP), which is a high-quality potash fertiliser
carrying a price premium over the more common Muriate of Potash (MOP). SOP is chlorine free and is commonly applied
to high value crops such as fruit, vegetables, nuts, and coffee. Economic resources for primary production of SOP are
geologically scarce and there are few current primary producers.
The JORC-2012 compliant Mineral Resource for Colluli is estimated at 1.289Bt @ 11% K2O for 260Mt of contained SOP
equivalent (ASX announcement 25 February 2015). The JORC-2012 compliant Ore Reserve estimate for Colluli is
estimated at 1,100Mt @ 10.5% K2O for 203Mt of contained SOP equivalent (ASX announcement 19 February 2018). The
Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore
Reserves.
Colluli will be developed to its full potential by adopting the principles of risk management, resource utilisation and
modularity, using the first module as a platform for growth. The Colluli FEED modules are:
• Module I – 472ktpa SOP production
• Module II – additional 472ktpa SOP production commencing in year 6
The massive Colluli Ore Reserve has significant capacity to underpin further expansions and support decades of growth
beyond Modules I and II.
Colluli has significant diversification potential beyond SOP, including the option to produce additional potash and salt
products such as MOP, SOP-M, kieserite (MgSO4.H2O), gypsum (CaSO4.2H2O), magnesium chloride (MgCl2), and rock
salt (NaCl). The Colluli SOP Mineral Resource also comprises an 85Mt Kieserite (magnesium sulphate) Mineral Resource
(ASX announcement 15 August 2016). Kieserite is a suitable fertiliser for magnesium deficient soils. A 347Mt Rock Salt
(sodium chloride) Mineral Resource (ASX announcement 23 September 2015) has also been established at Colluli.
Unprocessed Rock Salt can be used for de-icing, processed Rock Salt can be used as table salt.
Subsequent to year end, on 29 January 2018, the Company announced it had completed the Front-End Engineering Design
(FEED) for Colluli. FEED firmly establishes Colluli as the most progressed, economically attractive, and fundable SOP
greenfield development project globally. It provides offtakers and funders with a high level of study detail and accuracy and
is the final study stage before project execution.
The FEED results reaffirm the outstanding project economics of Colluli. Industry leading capital intensity achieved in the
DFS (ASX announcement 30 November 2015) further reduced as a result of lower development capital requirements for
Module I and increased annual production rate. This, combined with forecast first quartile operating costs, resulted in a
Project Net Present Value (NPV10) of US$902M and Internal Rate of Return (IRR) of 29.9%. The Danakali economic
outcomes were an NPV10 of US$439M and IRR of 31.3%.
Mining Agreement Executed and Mining Licenses Awarded
As announced on 1 February 2017, CMSC entered into a mining agreement (Mining Agreement) with the Eritrean Ministry
of Energy and Mines (MoEM) and was awarded mining licenses (Mining Licenses) for the exploitation of mineral resources
within the Colluli tenements.
DANAKALI LIMITED
ABN 56 097 904 302
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Liam Raymond Cornelius
Non-Executive Director, BApp.Sc, appointed 21 August 2001, resigned 17 November 2017
Mr Cornelius graduated from Curtin University of Technology with a BApp.Sc in Geology and has been involved in the
exploration industry within Australia, Asia and Africa for over 20 years. Mr Cornelius has experience with a wide range of
commodities including gold, nickel, copper, platinum, uranium and potash.
As a founding member of Danakali Ltd, Mr Cornelius has played a key role in outlining areas of interest for the Company.
Special Responsibilities:
During his appointment Mr Cornelius was a member of the Remuneration and Nomination Committee.
COMPANY SECRETARY
Catherine Grant-Edwards and Melissa Chapman
Appointed Joint Company Secretary 7 July 2017
Ms Melissa Chapman (Certified Practicing Accountant (CPA), AGIA/ACIS, GAICD) and Ms Catherine Grant-Edwards
(Chartered Accountant (CA)) were appointed as Joint Company Secretary on 7 July 2017. Ms Chapman and Ms Grant-
Edwards are directors of Bellatrix Corporate Pty Ltd (Bellatrix), a company that provides company secretarial and
accounting services to a number of ASX listed company. Between them, Ms Chapman and Ms Grant-Edwards have over
30 years’ experience in the provision of accounting, finance and company secretarial services to public listed resource and
private companies in Australia and the UK, and in the field of public practice external audit.
Christiaan Philippus Els
B. Com (Hons), CA, appointed 1 February 2016, resigned 7 July 2017
Mr Els is an associate member of the Chartered Institute of Management Accountants, a member of the Certified Practicing
Accountants of Australia and the Chartered Global Management Accountants. Mr Els was appointed as Chief Financial
Officer from 3 December 2015.
INTERESTS IN SHARES, OPTIONS AND PERFORMANCE RIGHTS OF THE COMPANY
As at the date of this report, the interests of the directors in the shares, options and performance rights of Danakali Limited
were:
Director
S I Cornelius
P M Donaldson
J D Fitzgerald
Z Jing
R G Connochie
A Liebenberg
Ordinary
Shares
Options over Ordinary
Shares
Performance
Rights
9,798,184
2,768,334
258,334
-
-
-
1,675,000
600,000
1,475,000
100,000
500,000
-
800,000
-
-
-
-
-
PRINCIPAL ACTIVITIES
The principal activity of the Group during the period was advancing the Colluli Potash Project in Eritrea, East Africa. There
was no significant change in the nature of the Group’s activities during the financial year ended 31 December 2017.
CORPORATE STRUCTURE
Danakali Limited is a company limited by shares that is incorporated and domiciled in Australia.
Directors’ Report
REVIEW OF OPERATIONS
PROJECT OVERVIEW
The Colluli Potash Project (Colluli, or the Project) is located in the Danakil Depression region of Eritrea, East Africa. Colluli
is approximately 177km south-east of the capital, Asmara, and 180km from the port of Massawa, which is Eritrea’s key
import/export facility. The Project is a joint venture between the Eritrean National Mining Company (ENAMCO) and Danakali
with each having 50% ownership of the joint venture company, the Colluli Mining Share Company (CMSC). CMSC is
responsible for the development of the Project.
The Danakil Depression is an emerging potash province, which commences in Eritrea and extends south across the border
into Ethiopia. It is one of the largest unexploited potash basins globally; over 6Bt of potassium bearing salts suitable for
production of potash fertilisers have been identified in the region to date (ASX announcement 25 February 2015 and
http://circumminerals.com/resources).
Colluli is located approximately 75km from the Red Sea coast providing unrivalled future logistics potential. The Project
resides on the Eritrean side of the border, giving Colluli a significant advantage relative to all other potash development
projects in the Danakil Depression, which need to ship from the Tadjoura Port in Djibouti – over 600km by road from the
closest project on the Ethiopian side of the border.
Colluli boasts the shallowest mineralisation in the Danakil Depression. Mineralisation commences at just 16m below
surface. In addition, the potassium bearing salts are present in solid form (in contrast with production of SOP from brines).
Shallow access to salts in solid form provides Colluli with significant mining, logistics and, in turn, capital and operating cost
advantages over other potash development projects globally. The Project also carries a significantly lower level of
complexity as a consequence of predictable processing plant feed grade and predictable production rates due to low
reliance on ambient conditions.
Shallow mineralisation makes the resource amenable to open cut mining: a proven, high productivity mining method. Open
cut mining provides higher resource recoveries relative to underground and solution mining methods, is generally safer,
and can be more easily expanded.
The Colluli resource comprises three potassium bearing salts in solid form: Sylvinite, Carnallitite and Kainitite. These salts
are suitable for high yield, low energy production of Sulphate of Potash (SOP), which is a high-quality potash fertiliser
carrying a price premium over the more common Muriate of Potash (MOP). SOP is chlorine free and is commonly applied
to high value crops such as fruit, vegetables, nuts, and coffee. Economic resources for primary production of SOP are
geologically scarce and there are few current primary producers.
The JORC-2012 compliant Mineral Resource for Colluli is estimated at 1.289Bt @ 11% K2O for 260Mt of contained SOP
equivalent (ASX announcement 25 February 2015). The JORC-2012 compliant Ore Reserve estimate for Colluli is
estimated at 1,100Mt @ 10.5% K2O for 203Mt of contained SOP equivalent (ASX announcement 19 February 2018). The
Measured and Indicated Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore
Reserves.
Colluli will be developed to its full potential by adopting the principles of risk management, resource utilisation and
modularity, using the first module as a platform for growth. The Colluli FEED modules are:
• Module I – 472ktpa SOP production
• Module II – additional 472ktpa SOP production commencing in year 6
The massive Colluli Ore Reserve has significant capacity to underpin further expansions and support decades of growth
beyond Modules I and II.
Colluli has significant diversification potential beyond SOP, including the option to produce additional potash and salt
products such as MOP, SOP-M, kieserite (MgSO4.H2O), gypsum (CaSO4.2H2O), magnesium chloride (MgCl2), and rock
salt (NaCl). The Colluli SOP Mineral Resource also comprises an 85Mt Kieserite (magnesium sulphate) Mineral Resource
(ASX announcement 15 August 2016). Kieserite is a suitable fertiliser for magnesium deficient soils. A 347Mt Rock Salt
(sodium chloride) Mineral Resource (ASX announcement 23 September 2015) has also been established at Colluli.
Unprocessed Rock Salt can be used for de-icing, processed Rock Salt can be used as table salt.
Subsequent to year end, on 29 January 2018, the Company announced it had completed the Front-End Engineering Design
(FEED) for Colluli. FEED firmly establishes Colluli as the most progressed, economically attractive, and fundable SOP
greenfield development project globally. It provides offtakers and funders with a high level of study detail and accuracy and
is the final study stage before project execution.
The FEED results reaffirm the outstanding project economics of Colluli. Industry leading capital intensity achieved in the
DFS (ASX announcement 30 November 2015) further reduced as a result of lower development capital requirements for
Module I and increased annual production rate. This, combined with forecast first quartile operating costs, resulted in a
Project Net Present Value (NPV10) of US$902M and Internal Rate of Return (IRR) of 29.9%. The Danakali economic
outcomes were an NPV10 of US$439M and IRR of 31.3%.
Mining Agreement Executed and Mining Licenses Awarded
As announced on 1 February 2017, CMSC entered into a mining agreement (Mining Agreement) with the Eritrean Ministry
of Energy and Mines (MoEM) and was awarded mining licenses (Mining Licenses) for the exploitation of mineral resources
within the Colluli tenements.
DANAKALI LIMITED
ABN 56 097 904 302
6
DANAKALI LIMITED
ABN 56 097 904 302
Page 29
7
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
The Mining Agreement is applicable to the entire 1.3Bt JORC-2012 compliant Mineral Resource and provides exclusive
rights to CMSC to apply for mining licenses to exploit the potassium, magnesium, calcium and sodium salts within the
resource, as well as bromine.
The award of the Mining Licenses follows the completion of a series of pre-requisites including the completion and
submission of the DFS, submission of a comprehensive social and environmental impact assessment and associated
management plans, a series of pre and post DFS stakeholder engagements with local and regional communities and
stakeholders, and the signing of the Mining Agreement.
Front End Engineering Design (FEED)
As announced on 9 January 2017, internationally recognised and highly reputable construction and engineering company
Fluor, was awarded the contract to conduct the FEED and optimisation work for the Colluli project. Global Potash Solutions
(GPS), Elemental Engineering (EE) and Knight Piésold joined the FEED team to optimise and refine the DFS engineering,
further refine capital and operating cost estimates and prepare the project for construction.
GPS oversaw the metallurgical test program, process flowsheet development and initial optimisation work for Colluli
throughout the prefeasibility and definitive feasibility study phases of the project and have worked closely with the Fluor
process engineering team and EE to finalise the process, select the plant equipment and develop commissioning
procedures.
FEED was finalised during the 2017 year, with results announced on 29 January 2018. FEED builds upon the disciplined
study execution and project de-risking approach adopted by Danakali and its joint venture partner ENAMCO. FEED has
established Colluli as the most progressed SOP greenfield development project globally. There is no other known SOP
greenfield development project that has completed FEED.
FEED results underpin the Financial Model prepared for the debt providers and provides offtakers with additional confidence
on project economics and fundability, which will support finalisation of bankable offtake agreements. FEED is the final study
stage before execution of the Project (ASX announcement 29 January 2018).
Operational Contracts
Operating cost estimates for FEED were supported by competitive bids in the key operating contract areas of mining and
power generation. The operational contracts help to firm the Project economics as Colluli advances towards construction,
and act as key inputs to support the ongoing funding discussions.
Mining – Mining contract technical and commercial evaluation complete
Following a comprehensive bidding process for the Colluli mining contract, the technical and commercial compliance
process is complete. Participating bidders visited Eritrea, the Port of Massawa, and the future Colluli mine site. A
comprehensive review of the Colluli mine plan and selected mining method was also undertaken.
Conforming bids have been evaluated and incorporated into the FEED results. The technical and commercial compliance
was evaluated and confirmed by AMC Consultants and the FEED mining costs were in line with DFS estimates.
The mining bids have been shortlisted to two competitive bids from highly qualified bidders. Commercial negotiations are
currently in progress.
Power – Finalising negotiations with preferred power provider
Inglett and Stubbs International has been appointed as the preferred power provider.
EPCM – Evaluations underway, preliminary negotiations expected in March 2018 Quarter
Towards the end of the year, Danakali developed an Engineering Procurement Construction & Management (EPCM)
enquiry document in consultation with project management consultants Turner & Townsend. The EPCM enquiry document
was issued to targeted industry participants seeking competitive bids. The EPCM enquiry period has now closed, and
submissions are under evaluation.
Danakali is seeking to commence negotiations with the preferred EPCM consultants by March 2018, with the aim of
confirming appointments within the June 2018 Quarter.
MARKETING AND PROJECT FINANCE UPDATE
Off-take
The Company is progressing its offtake strategy on behalf of CMSC and is working with several offtakers who continue to
express a strong interest in securing a future supply of granular and standard SOP product. Negotiations in the December
2017 Quarter were focused primarily on finalising remaining commercial terms contained in the bankable offtake
agreements. Norton Rose Fulbright, who has significant experience in developing potash offtake agreements, continue to
support negotiations and associated legal drafting.
Negotiations are advancing with several parties close to final binding offtake agreements.
Project Financing
Danakali and CMSC continues to work with its debt advisor, Endeavour Financial, on the funding solution for the project
development.
commodity potential of the Project.
DANAKALI LIMITED
Page 30
ABN 56 097 904 302
8
DANAKALI LIMITED
ABN 56 097 904 302
9
The Project is fully permitted and ready to advance into engineering and construction upon securing funding. A Social and
Environmental Impact Assessment (SEIA) and associated Social and Environmental Management Plans have been
completed to ensure consistency with the Equator Principles. Stakeholder engagements have been completed throughout
the study phases, and the Project has strong support from local communities.
During the year, independent experts visited Colluli on behalf of potential debt providers. The completion of FEED is a key
milestone in advancing the debt funding discussions, it provides potential debt providers with a high level of study detail
and accuracy; updated financials; and completion of equipment and supplier lists. Other key debt funding milestones include
the finalisation of key operational contracts and the bankable offtake agreements.
A site visit was conducted by independent experts on behalf of potential debt providers towards the end of 2017. Meetings
were held with the Ministry of Energy and Mines, the Ministry of Land, Water and Environment, and elders and
administrators of communities close to Colluli. Visits were made to the key project locations including Colluli, Massawa
Port, and Anfile Bay.
A Colluli Financial Model has been prepared for potential debt providers which incorporates the FEED results.
Kieserite resource defined – in excess of 85 million tonnes
In August 2016, the Kieserite content in the Colluli Mineral Resource was quantified by AMC Consultants (refer the
Resource and Reserve section of this report). Kieserite (magnesium sulphate monohydrate) is a commonly used, chloride
free, multi-nutrient fertiliser with limited primary production centres globally.
The Resource contains 18Mt of Kieserite in Measured Resource, 66Mt in Indicated Resource, and 3Mt in Inferred Resource.
Table 1: Kieserite contained by Resource Classification
Measured
Contained
Indicated
Contained
Inferred
Contained
Kieserite (Mt) Mt
Kieserite (Mt) Mt
Kieserite (Mt)
Total1
Contained
Kieserite
Kieserite (Mt)
%
0
16
2
18
160
303
488
951
0
59
7
66
15
15
5
35
0
3
0
3
Total
(Mt)
265
398
626
1,289
0
78
9
87
0.03%
20%
1%
7%
Sylvinite
Carnallitite
Kainitite
Total
Mt
90
80
133
303
1 Weighted Average
Kieserite is suitable for magnesium deficient soils which are common in South East Asia, Africa and Eastern South America.
Figure: Distribution of Magnesium deficient soils (Source: CRU Consultants)
Metallurgical test work indicates that Kieserite will report to the tailings stream of the planned processing plant. Test work
was completed at the Saskatchewan Research Council using salts from the Colluli resource. Preliminary liberation testing
indicates the Kieserite can be separated from the tailings salt. The large volume of Kieserite adds to the multi-agri
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
The Mining Agreement is applicable to the entire 1.3Bt JORC-2012 compliant Mineral Resource and provides exclusive
rights to CMSC to apply for mining licenses to exploit the potassium, magnesium, calcium and sodium salts within the
resource, as well as bromine.
The award of the Mining Licenses follows the completion of a series of pre-requisites including the completion and
submission of the DFS, submission of a comprehensive social and environmental impact assessment and associated
management plans, a series of pre and post DFS stakeholder engagements with local and regional communities and
stakeholders, and the signing of the Mining Agreement.
Front End Engineering Design (FEED)
As announced on 9 January 2017, internationally recognised and highly reputable construction and engineering company
Fluor, was awarded the contract to conduct the FEED and optimisation work for the Colluli project. Global Potash Solutions
(GPS), Elemental Engineering (EE) and Knight Piésold joined the FEED team to optimise and refine the DFS engineering,
further refine capital and operating cost estimates and prepare the project for construction.
GPS oversaw the metallurgical test program, process flowsheet development and initial optimisation work for Colluli
throughout the prefeasibility and definitive feasibility study phases of the project and have worked closely with the Fluor
process engineering team and EE to finalise the process, select the plant equipment and develop commissioning
procedures.
FEED was finalised during the 2017 year, with results announced on 29 January 2018. FEED builds upon the disciplined
study execution and project de-risking approach adopted by Danakali and its joint venture partner ENAMCO. FEED has
established Colluli as the most progressed SOP greenfield development project globally. There is no other known SOP
greenfield development project that has completed FEED.
FEED results underpin the Financial Model prepared for the debt providers and provides offtakers with additional confidence
on project economics and fundability, which will support finalisation of bankable offtake agreements. FEED is the final study
stage before execution of the Project (ASX announcement 29 January 2018).
Operational Contracts
Operating cost estimates for FEED were supported by competitive bids in the key operating contract areas of mining and
power generation. The operational contracts help to firm the Project economics as Colluli advances towards construction,
and act as key inputs to support the ongoing funding discussions.
Mining – Mining contract technical and commercial evaluation complete
Following a comprehensive bidding process for the Colluli mining contract, the technical and commercial compliance
process is complete. Participating bidders visited Eritrea, the Port of Massawa, and the future Colluli mine site. A
comprehensive review of the Colluli mine plan and selected mining method was also undertaken.
Conforming bids have been evaluated and incorporated into the FEED results. The technical and commercial compliance
was evaluated and confirmed by AMC Consultants and the FEED mining costs were in line with DFS estimates.
The mining bids have been shortlisted to two competitive bids from highly qualified bidders. Commercial negotiations are
currently in progress.
Power – Finalising negotiations with preferred power provider
Inglett and Stubbs International has been appointed as the preferred power provider.
EPCM – Evaluations underway, preliminary negotiations expected in March 2018 Quarter
Towards the end of the year, Danakali developed an Engineering Procurement Construction & Management (EPCM)
enquiry document in consultation with project management consultants Turner & Townsend. The EPCM enquiry document
was issued to targeted industry participants seeking competitive bids. The EPCM enquiry period has now closed, and
submissions are under evaluation.
Danakali is seeking to commence negotiations with the preferred EPCM consultants by March 2018, with the aim of
confirming appointments within the June 2018 Quarter.
MARKETING AND PROJECT FINANCE UPDATE
Off-take
The Company is progressing its offtake strategy on behalf of CMSC and is working with several offtakers who continue to
express a strong interest in securing a future supply of granular and standard SOP product. Negotiations in the December
2017 Quarter were focused primarily on finalising remaining commercial terms contained in the bankable offtake
agreements. Norton Rose Fulbright, who has significant experience in developing potash offtake agreements, continue to
support negotiations and associated legal drafting.
Negotiations are advancing with several parties close to final binding offtake agreements.
Danakali and CMSC continues to work with its debt advisor, Endeavour Financial, on the funding solution for the project
Project Financing
development.
DANAKALI LIMITED
ABN 56 097 904 302
The Project is fully permitted and ready to advance into engineering and construction upon securing funding. A Social and
Environmental Impact Assessment (SEIA) and associated Social and Environmental Management Plans have been
completed to ensure consistency with the Equator Principles. Stakeholder engagements have been completed throughout
the study phases, and the Project has strong support from local communities.
During the year, independent experts visited Colluli on behalf of potential debt providers. The completion of FEED is a key
milestone in advancing the debt funding discussions, it provides potential debt providers with a high level of study detail
and accuracy; updated financials; and completion of equipment and supplier lists. Other key debt funding milestones include
the finalisation of key operational contracts and the bankable offtake agreements.
A site visit was conducted by independent experts on behalf of potential debt providers towards the end of 2017. Meetings
were held with the Ministry of Energy and Mines, the Ministry of Land, Water and Environment, and elders and
administrators of communities close to Colluli. Visits were made to the key project locations including Colluli, Massawa
Port, and Anfile Bay.
A Colluli Financial Model has been prepared for potential debt providers which incorporates the FEED results.
Kieserite resource defined – in excess of 85 million tonnes
In August 2016, the Kieserite content in the Colluli Mineral Resource was quantified by AMC Consultants (refer the
Resource and Reserve section of this report). Kieserite (magnesium sulphate monohydrate) is a commonly used, chloride
free, multi-nutrient fertiliser with limited primary production centres globally.
The Resource contains 18Mt of Kieserite in Measured Resource, 66Mt in Indicated Resource, and 3Mt in Inferred Resource.
Table 1: Kieserite contained by Resource Classification
Measured
Contained
Indicated
Contained
Kieserite (Mt) Mt
160
0
Kieserite (Mt) Mt
15
0
Inferred
Contained
Kieserite (Mt)
0
16
2
18
303
488
951
59
7
66
15
5
35
3
0
3
Total1
Contained
Kieserite (Mt)
0
78
9
87
Total
(Mt)
265
398
626
1,289
Kieserite
%
0.03%
20%
1%
7%
Sylvinite
Carnallitite
Kainitite
Total
Mt
90
80
133
303
1 Weighted Average
Kieserite is suitable for magnesium deficient soils which are common in South East Asia, Africa and Eastern South America.
Figure: Distribution of Magnesium deficient soils (Source: CRU Consultants)
Metallurgical test work indicates that Kieserite will report to the tailings stream of the planned processing plant. Test work
was completed at the Saskatchewan Research Council using salts from the Colluli resource. Preliminary liberation testing
indicates the Kieserite can be separated from the tailings salt. The large volume of Kieserite adds to the multi-agri
commodity potential of the Project.
8
DANAKALI LIMITED
ABN 56 097 904 302
Page 31
9
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
CORPORATE
Board Changes
During the year, the Company made the following changes to its Board:
▪ Mr Robert Connochie was appointed as a non-executive director 6 February 2017;
▪ Mr Andre Liebenberg was appointed as a non-executive director 2 October 2017;
▪ Mr Paul Donaldson transitioned from an executive to non-executive director role 21 December 2017;
▪ Mr Anthony Kiernan resigned as a non-executive director 6 February 2017; and
▪ Mr Liam Cornelius resigned as a non-executive director 17 November 2017.
Chief Executive Officer Appointment
Mr Danny Goeman was appointed as Chief Executive Officer (CEO) of the Company from 21 December 2017, upon
transition of Mr Paul Donaldson from Managing Director to a non-executive director role.
Mr Goeman is a highly experienced mining industry professional who joined Danakali in 2016 as Head of Marketing and
has since developed the offtake strategy and offtake contract frameworks and led the offtake negotiations on behalf of
CMSC. Prior to joining Danakali Mr Goeman worked within Rio Tinto, with leading roles in commodity price negotiations,
market analysis, market segmentation, and price forecasting. He has experience across multiple commodities in multiple
jurisdictions and has significant customer engagement and international experience.
Chief Financial Officer Appointment
During the year, the board announced the appointment of Mr Stuart Tarrant as the Company’s new Chief Financial Officer
effective 12 June 2017. Mr Tarrant, formerly Head of Finance of Danakali, a fellow of the Association of Chartered Certified
Accountants (ACCA) and former accounting executive with both BHP and HWE Mining has extensive experience in the
mining industry with core skills in financial modelling, financial systems development, procurement, budgeting, and cost
analysis and optimisation. Mr Tarrant has established relationships with Endeavour Financial who are progressing the
procurement led funding process for the project financing of the Colluli Sulphate of Potash Project and was responsible for
the development and integrity of the Colluli financial model underpinning the prefeasibility and definitive feasibility studies.
Head of Corporate Development and External Affairs Appointment
Mr William Sandover was appointed as Head of Corporate Development and External Affairs on 12 October 2017. Prior to
his appointment, Mr Sandover was an executive director at independent capital markets advisory form, Vesparum Capital,
and is a former employee of top tier investment banks including Macquarie and UBS.
Mr Sandover has extensive experience in the areas of corporate strategy, equity capital markets, advanced financial
modelling and project valuation, mergers and acquisitions, and strategic partnerships. During his career, Mr Sandover has
carried out high profile transactions and provided corporate advisory services for companies such as Barrick Gold, Galaxy
Resources, Goodman Group, and QBE. He has also acted as strategic investor relations advisor to numerous mid-cap
ASX listed companies across the metals and mining, financial services, funds management, and sustainable technology
sectors, and possesses skills in the sophisticated analysis of markets, sectors, valuations, and funding sources.
Company Secretary Change
Effective 7 July 2017, Ms Catherine Grant-Edwards and Ms Melissa Chapman were appointed joint company secretaries
of Danakali. Mr Christiaan Els resigned as company secretary of the Company on 7 July 2017.
Project Manager Appointment
During the year, Mr Tony Harrington was appointed as Project Manager for the construction phase of the Colluli Potash
Project. Mr. Harrington has over 37 years’ experience in the mining industry delivering EPC, lump sum and EPCM projects
in the capacity of both client representative and service provider over a diverse range of commodities, with a wide range of
mineral processing units, across multiple jurisdictions including East Africa, West Africa, Southern Africa, China, Continental
Europe, UK and Australia. Mr. Harrington has extensive experience in construction and assembly of surface infrastructure,
materials handling systems, flotation circuits, pumping systems, tanks, cyclones, liberation circuits, thickeners and tailings
storage facilities. He brings significant experience and an excellent track record in working in remote locations in developing
jurisdictions.
Restructure of Board Committees
During the year, the board committees were restructured to support the transition of the Company to Project execution. As
31 December 2017, the committees were made up as follows:
Annual General Meeting
▪ Remuneration and Nomination Committee - Mr Liebenberg as Chairman, with Mr Fitzgerald and Mr Donaldson as
The Company’s annual general meeting was held on 19 May 2017 (AGM). All resolutions put to the meeting were passed.
members;
▪ Audit Committee – Mr Fitzgerald as Chairman, with Mr Liebenberg and Mr Cornelius as members (on 21
December 2017, the former Audit and Risk Committee was consolidated to become the Audit Committee); and
Technical and Risk Committee - Mr Donaldson as Chairman, with Mr Cornelius and Mr Connochie as members.
▪
Placement
On 23 May 2017, Danakali issued 19,920,645 shares (Placement Shares) to institutional and sophisticated investors in
the United Kingdom and Australia to raise gross proceeds of A$12.35 million at an issue price of $0.62 cents per share
Sustainable Development Framework
Danakali and CMSC have a strong commitment to sustainable development which is underpinned by the principles that
mineral projects should be financially, technically and environmentally sound and socially responsible.
Therefore, the company implemented a Sustainable Development Framework to govern its Corporate Social
Responsibilities (CSR) and Sustainability and is aligned with its Corporate Governance Framework. The policies developed
using this framework directly supported the management plans associated with the SEIA and SEMP for the project.
DANAKALI LIMITED
Page 32
ABN 56 097 904 302
10
DANAKALI LIMITED
ABN 56 097 904 302
11
Directors’ Report
(Placement).
Shares
The Placement Shares were issued using the Company’s 15% capacity pursuant to Listing Rule 7.1.
During the year, the Company issued the following fully paid ordinary shares:
19,920,645 shares at an issue price of $0.62 each (being the Placement Shares);
1,356,365 shares on exercise of unlisted options at $0.35 each
351,000 shares on exercise of unlisted options at $0.405 each
200,000 shares on exercise of unlisted options at $0.408 each
4,600,000 shares on exercise of unlisted options at $0.278 each
775,000 shares on vesting of performance rights (Class 2: 75,000; Class 4: 700,000)
At 31 December 2017, there were a total of 251,475,868 fully paid ordinary shares on issue.
Options
During the year, the Company issued the following unlisted options:
1,440,000 unlisted options exercisable at $0.94 each expiring 19 May 2020
400,000 unlisted options exercisable at $0.96 each expiring 20 June 2019
The following unlisted options were exercised and converted to shares during the year:
1,356,365 unlisted options exercisable at $0.35 each expiring 30 March 2018
351,000 unlisted options exercisable at $0.405 each expiring 13 May 2018
200,000 unlisted options exercisable at $0.408 each expiring 4 November 2018
4,600,000 unlisted options exercisable at $0.278 each expiring 17 November 2017
The following unlisted options were cancelled during the year:
800,000 unlisted options exercisable at $0.408 each expiring 4 November 2018
550,000 unlisted options exercisable at $0.543 each expiring 7 October 2019
There were no unlisted options that expired during the year.
dates.
Performance Rights
During the year, the Company issued the following performance rights:
100,000 Class 5 performance rights
50,000 Class 6 performance rights
50,000 Class 7 performance rights
100,000 Class 8 performance rights
The following performance rights vested and were converted to shares during the year:
75,000 Class 2 performance rights vested and converted to shares
700,000 Class 4 performance rights vested and converted to shares
The following performance rights were forfeited during the year:
75,000 Class 2 performance rights were forfeited
At 31 December 2017, there were a total of 1,408,000 performance rights on issue in the following classes:
308,000 Class 1 performance rights
800,000 Class 4 performance rights
100,000 Class 5 performance rights
50,000 Class 6 performance rights
50,000 Class 7 performance rights
100,000 Class 8 performance rights
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
At 31 December 2017, there were a total of 19,195,821 unlisted options on issue at various exercise prices and expiry
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
CORPORATE
Board Changes
Directors’ Report
(Placement).
The Placement Shares were issued using the Company’s 15% capacity pursuant to Listing Rule 7.1.
During the year, the Company made the following changes to its Board:
Shares
▪ Mr Robert Connochie was appointed as a non-executive director 6 February 2017;
▪ Mr Andre Liebenberg was appointed as a non-executive director 2 October 2017;
▪ Mr Paul Donaldson transitioned from an executive to non-executive director role 21 December 2017;
▪ Mr Anthony Kiernan resigned as a non-executive director 6 February 2017; and
▪ Mr Liam Cornelius resigned as a non-executive director 17 November 2017.
Chief Executive Officer Appointment
Mr Danny Goeman was appointed as Chief Executive Officer (CEO) of the Company from 21 December 2017, upon
transition of Mr Paul Donaldson from Managing Director to a non-executive director role.
Mr Goeman is a highly experienced mining industry professional who joined Danakali in 2016 as Head of Marketing and
has since developed the offtake strategy and offtake contract frameworks and led the offtake negotiations on behalf of
CMSC. Prior to joining Danakali Mr Goeman worked within Rio Tinto, with leading roles in commodity price negotiations,
market analysis, market segmentation, and price forecasting. He has experience across multiple commodities in multiple
jurisdictions and has significant customer engagement and international experience.
Chief Financial Officer Appointment
During the year, the board announced the appointment of Mr Stuart Tarrant as the Company’s new Chief Financial Officer
effective 12 June 2017. Mr Tarrant, formerly Head of Finance of Danakali, a fellow of the Association of Chartered Certified
Accountants (ACCA) and former accounting executive with both BHP and HWE Mining has extensive experience in the
mining industry with core skills in financial modelling, financial systems development, procurement, budgeting, and cost
analysis and optimisation. Mr Tarrant has established relationships with Endeavour Financial who are progressing the
procurement led funding process for the project financing of the Colluli Sulphate of Potash Project and was responsible for
the development and integrity of the Colluli financial model underpinning the prefeasibility and definitive feasibility studies.
Head of Corporate Development and External Affairs Appointment
Mr William Sandover was appointed as Head of Corporate Development and External Affairs on 12 October 2017. Prior to
his appointment, Mr Sandover was an executive director at independent capital markets advisory form, Vesparum Capital,
and is a former employee of top tier investment banks including Macquarie and UBS.
Mr Sandover has extensive experience in the areas of corporate strategy, equity capital markets, advanced financial
modelling and project valuation, mergers and acquisitions, and strategic partnerships. During his career, Mr Sandover has
carried out high profile transactions and provided corporate advisory services for companies such as Barrick Gold, Galaxy
Resources, Goodman Group, and QBE. He has also acted as strategic investor relations advisor to numerous mid-cap
ASX listed companies across the metals and mining, financial services, funds management, and sustainable technology
sectors, and possesses skills in the sophisticated analysis of markets, sectors, valuations, and funding sources.
Effective 7 July 2017, Ms Catherine Grant-Edwards and Ms Melissa Chapman were appointed joint company secretaries
of Danakali. Mr Christiaan Els resigned as company secretary of the Company on 7 July 2017.
Company Secretary Change
Project Manager Appointment
During the year, Mr Tony Harrington was appointed as Project Manager for the construction phase of the Colluli Potash
Project. Mr. Harrington has over 37 years’ experience in the mining industry delivering EPC, lump sum and EPCM projects
in the capacity of both client representative and service provider over a diverse range of commodities, with a wide range of
mineral processing units, across multiple jurisdictions including East Africa, West Africa, Southern Africa, China, Continental
Europe, UK and Australia. Mr. Harrington has extensive experience in construction and assembly of surface infrastructure,
materials handling systems, flotation circuits, pumping systems, tanks, cyclones, liberation circuits, thickeners and tailings
storage facilities. He brings significant experience and an excellent track record in working in remote locations in developing
jurisdictions.
Restructure of Board Committees
During the year, the board committees were restructured to support the transition of the Company to Project execution. As
31 December 2017, the committees were made up as follows:
▪ Audit Committee – Mr Fitzgerald as Chairman, with Mr Liebenberg and Mr Cornelius as members (on 21
December 2017, the former Audit and Risk Committee was consolidated to become the Audit Committee); and
▪
Technical and Risk Committee - Mr Donaldson as Chairman, with Mr Cornelius and Mr Connochie as members.
On 23 May 2017, Danakali issued 19,920,645 shares (Placement Shares) to institutional and sophisticated investors in
the United Kingdom and Australia to raise gross proceeds of A$12.35 million at an issue price of $0.62 cents per share
members;
Placement
DANAKALI LIMITED
ABN 56 097 904 302
During the year, the Company issued the following fully paid ordinary shares:
▪
▪
▪
▪
▪
▪
19,920,645 shares at an issue price of $0.62 each (being the Placement Shares);
1,356,365 shares on exercise of unlisted options at $0.35 each
351,000 shares on exercise of unlisted options at $0.405 each
200,000 shares on exercise of unlisted options at $0.408 each
4,600,000 shares on exercise of unlisted options at $0.278 each
775,000 shares on vesting of performance rights (Class 2: 75,000; Class 4: 700,000)
At 31 December 2017, there were a total of 251,475,868 fully paid ordinary shares on issue.
Options
During the year, the Company issued the following unlisted options:
▪
▪
1,440,000 unlisted options exercisable at $0.94 each expiring 19 May 2020
400,000 unlisted options exercisable at $0.96 each expiring 20 June 2019
The following unlisted options were exercised and converted to shares during the year:
▪
▪
▪
▪
1,356,365 unlisted options exercisable at $0.35 each expiring 30 March 2018
351,000 unlisted options exercisable at $0.405 each expiring 13 May 2018
200,000 unlisted options exercisable at $0.408 each expiring 4 November 2018
4,600,000 unlisted options exercisable at $0.278 each expiring 17 November 2017
The following unlisted options were cancelled during the year:
▪
▪
800,000 unlisted options exercisable at $0.408 each expiring 4 November 2018
550,000 unlisted options exercisable at $0.543 each expiring 7 October 2019
There were no unlisted options that expired during the year.
At 31 December 2017, there were a total of 19,195,821 unlisted options on issue at various exercise prices and expiry
dates.
Performance Rights
During the year, the Company issued the following performance rights:
▪
▪
▪
▪
100,000 Class 5 performance rights
50,000 Class 6 performance rights
50,000 Class 7 performance rights
100,000 Class 8 performance rights
The following performance rights vested and were converted to shares during the year:
▪
▪
75,000 Class 2 performance rights vested and converted to shares
700,000 Class 4 performance rights vested and converted to shares
The following performance rights were forfeited during the year:
▪
75,000 Class 2 performance rights were forfeited
At 31 December 2017, there were a total of 1,408,000 performance rights on issue in the following classes:
▪
▪
▪
▪
▪
▪
308,000 Class 1 performance rights
800,000 Class 4 performance rights
100,000 Class 5 performance rights
50,000 Class 6 performance rights
50,000 Class 7 performance rights
100,000 Class 8 performance rights
Annual General Meeting
▪ Remuneration and Nomination Committee - Mr Liebenberg as Chairman, with Mr Fitzgerald and Mr Donaldson as
The Company’s annual general meeting was held on 19 May 2017 (AGM). All resolutions put to the meeting were passed.
Sustainable Development Framework
Danakali and CMSC have a strong commitment to sustainable development which is underpinned by the principles that
mineral projects should be financially, technically and environmentally sound and socially responsible.
Therefore, the company implemented a Sustainable Development Framework to govern its Corporate Social
Responsibilities (CSR) and Sustainability and is aligned with its Corporate Governance Framework. The policies developed
using this framework directly supported the management plans associated with the SEIA and SEMP for the project.
10
DANAKALI LIMITED
ABN 56 097 904 302
Page 33
11
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
The following policies were approved during 2017:
•
•
•
•
•
DNK Human Rights Policy
DNK Health and Safety Policy
DNK Environmental Policy
DNK Community Policy
DNK Anti-Corruption Policy
This framework and policies were endorsed and adopted by joint venture partner, CMSC.
RESERVE AND RESOURCE OVERVIEW
Colluli has a JORC-2012 compliant resource of 1.289 billion tonnes as shown in Table 2 as at 31 December 2016. Apart
from the inclusion of Kieserite as discussed earlier in this report, there have been no changes to the Mineral Resource
since 25 February 2015.
The Colluli JORC-2012 compliant mineral resource estimate as at 31 December 2016 is as follows:
Table 2: Colluli Mineral Resource Estimate, 25 February 2015, with Kieserite added
Rock Unit
Sylvinite
Upper Carnallitite
Lower Carnallitite
Kainitite
Total
Tonnes
Mt
265
51
347
626
1,289
Density
t/m3
2.2
2.1
2.1
2.1
2.1
K2O Equiv.
%
12%
12%
7%
12%
11%
Kieserite
%
0.03%
3%
22%
1%
7%
Within the JORC-2012 compliant, 1.289 billion tonnes, Mineral Resource Estimate, the JORC-2012 compliant Ore Reserve
Estimate for Colluli’s potassium sulphate potash fertiliser is approximately 1.1 billion tonnes comprising 287 million tonnes
of Proved and 827 million tonnes of Probable Ore Reserve and is shown below in Table 3. The Ore Reserve was updated
in line with FEED and this update is included below (ASX announcement 19 February 2018).
The Colluli JORC-2012 compliant Ore Reserve estimate by potash mineral as at 29 January 2018 is as follows:
Finalise negotiations with preferred power provider Inglett & Stubbs International
Table 3: JORC-2012 Colluli Potassium Sulphate Ore Reserve as at 29 January 2018
Proved
Probable
Total
Occurrence
Sylvinite
(KCl.NaCl)
Carnallitite
(KCl.MgCl2.H2O)
Kainitite
(KCl.MgSO4.H2O)
Total
Mt
77
77
131
285
K2O
Equiv %
15.0%
Mt
173
K2O
Equiv %
12.1%
6.9%
279
7.8%
Mt
250
356
K2O
Equiv %
K2SO4
Equiv %
K2SO4
Equiv Mt1
FINANCE REVIEW
13.0%
7.6%
11.8%
11.3%
363
815
11.2%
494
11.4%
10.3%
1,100
10.5%
18.5
205
1 Equivalent K2SO4 (SOP) calculated by multiplying %K2O by 1.85
In addition to potassium sulphate, substantial quantities of rock salt exist. A JORC-2012 compliant Rock Salt Mineral
Resource Estimate of over 300 million tonnes has been completed for the area considered for mining in the DFS as shown
in Table 4. There have been no changes to the Mineral Resource estimate since 23 September 2015.
As at 31 December 2016, the JORC-2012 compliant Rock Salt Mineral Resource is as follows:
Table 4: JORC 2012 Colluli Rock Salt Mineral Resource as at 23 September 2015
Classification
Tonnes (Mt)
Measured
Indicated
Inferred
Total
SAFETY
28
180
139
347
NaCl
97.2
96.6
97.2
96.9
K
0.05
0.07
0.05
0.06
Mg
0.05
0.06
0.05
0.05
CaSO4
Insolubles
2.2
2.3
1.8
2.1
0.23
0.24
0.25
0.24
Danakali is committed to ensuring all work activities are carried out safely with all practical measures taken to remove risks
to health, safety and welfare of workers, contractors, authorised visitors, and anyone else who may be affected by the
Group’s activities.
Since the Company commenced exploration in 2010, no injuries have been reported. This safety performance, along with
a strong safety culture, bodes well for the company as it moves into the construction and production phases at Colluli.
DANAKALI LIMITED
Page 34
ABN 56 097 904 302
12
DANAKALI LIMITED
ABN 56 097 904 302
13
Directors’ Report
ENVIRONMENT
The Group is subject to environmental regulation in respect to its exploration and development activities. Danakali aims to
ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance
with relevant environmental legislation. There were no breaches of environmental legislation for the period under review.
EVENTS OCCURRING AFTER THE BALANCE DATE
On 29 January 2018, the Company announced the results of the FEED phase for the Colluli Potash Project. On 31 January
2018 the Company released a presentation detailing the FEED results.
On 19 February, the Company released an updated JORC-2012 Colluli Potassium Sulphate Ore Reserve.
Subsequent to balance date up to the reporting date, the Company issued the following fully paid ordinary shares:
▪
▪
400,000 shares on exercise of unlisted options at $0.405 each
775,000 shares on exercise of unlisted options at $0.35 each
Subsequent to balance date up to the reporting date, the Company issued 25,000 shares on the vesting of performance
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
rights.
financial years.
ACTIVITIES PLANNED FOR 2018
The following key activities are scheduled over the coming year:
• Progress negotiations to final binding offtake agreements
Finalise negotiations with shortlisted EPCM contract bidders
Finalise negotiations with shortlisted mining contract bidders
• Dual listing on the London Stock Exchange
Finalise arrangements with commercial lenders
The Group recorded a net loss after tax of $6,839,936 for the financial year to 31 December 2017 compared to a loss of
$4,925,558 for the financial year to 31 December 2016. As the Group is still in the exploration and development stage,
revenue streams mainly relate to interest earned on investing of surplus funds from capital raisings. The net losses after
tax reflect the Groups’ exploration and development expenditure on the Colluli Potash Project and ongoing administration
costs.
The Groups’ net assets increased by 19.2% compared to the net assets as at 31 December 2016, which is consistent with
the increase in cash balance due to the successful equity raises during 2017 and the net increase in the investment and
loan to the Colluli Mining Share Company.
Total consolidated cash on hand at the end of the financial year was $15,559,980 (31 December 2016: $10,904,760).
Operating activities utilised $1,279,679 (31 December 2016: $1,670,534 utilised) of net cash flows. Net cash outflow from
investing activities of $7,721,815 (31 December 2016: $2,955,454) was primarily in relation to expenditure made to advance
the Colluli Project in relation to:
Execution of Mining Agreement and award of Mining Licenses for the Colluli project
Completion of the FEED
Advancing off-take agreement negotiations
Advancing financing negotiations
Advancing key operational contracts
Net cash inflow from financing activities of $13,656,714 (31 December 2016: $12,774,407) was due to the placement of
shares and the exercise of options to fund the ongoing exploration and development work to advance the project.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no other significant changes in the Company’s state of affairs other than that referred to in the financial
statements or notes thereto.
•
•
•
•
•
•
•
•
•
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
The following policies were approved during 2017:
•
•
•
•
•
DNK Human Rights Policy
DNK Health and Safety Policy
DNK Environmental Policy
DNK Community Policy
DNK Anti-Corruption Policy
This framework and policies were endorsed and adopted by joint venture partner, CMSC.
RESERVE AND RESOURCE OVERVIEW
Colluli has a JORC-2012 compliant resource of 1.289 billion tonnes as shown in Table 2 as at 31 December 2016. Apart
from the inclusion of Kieserite as discussed earlier in this report, there have been no changes to the Mineral Resource
since 25 February 2015.
The Colluli JORC-2012 compliant mineral resource estimate as at 31 December 2016 is as follows:
Table 2: Colluli Mineral Resource Estimate, 25 February 2015, with Kieserite added
Rock Unit
Sylvinite
Upper Carnallitite
Lower Carnallitite
Kainitite
Total
Tonnes
Mt
265
51
347
626
1,289
Density
t/m3
2.2
2.1
2.1
2.1
2.1
K2O Equiv.
%
12%
12%
7%
12%
11%
Kieserite
%
0.03%
3%
22%
1%
7%
Within the JORC-2012 compliant, 1.289 billion tonnes, Mineral Resource Estimate, the JORC-2012 compliant Ore Reserve
Estimate for Colluli’s potassium sulphate potash fertiliser is approximately 1.1 billion tonnes comprising 287 million tonnes
of Proved and 827 million tonnes of Probable Ore Reserve and is shown below in Table 3. The Ore Reserve was updated
in line with FEED and this update is included below (ASX announcement 19 February 2018).
The Colluli JORC-2012 compliant Ore Reserve estimate by potash mineral as at 29 January 2018 is as follows:
Table 3: JORC-2012 Colluli Potassium Sulphate Ore Reserve as at 29 January 2018
Proved
Probable
Total
Occurrence
Sylvinite
(KCl.NaCl)
Carnallitite
(KCl.MgCl2.H2O)
Kainitite
(KCl.MgSO4.H2O)
Total
Mt
77
77
131
285
K2O
Equiv %
15.0%
11.8%
11.3%
Mt
173
363
815
1 Equivalent K2SO4 (SOP) calculated by multiplying %K2O by 1.85
6.9%
279
7.8%
K2O
Equiv %
12.1%
Mt
250
356
13.0%
7.6%
11.2%
494
11.4%
10.3%
1,100
10.5%
18.5
205
In addition to potassium sulphate, substantial quantities of rock salt exist. A JORC-2012 compliant Rock Salt Mineral
Resource Estimate of over 300 million tonnes has been completed for the area considered for mining in the DFS as shown
in Table 4. There have been no changes to the Mineral Resource estimate since 23 September 2015.
As at 31 December 2016, the JORC-2012 compliant Rock Salt Mineral Resource is as follows:
Table 4: JORC 2012 Colluli Rock Salt Mineral Resource as at 23 September 2015
Classification
Tonnes (Mt)
CaSO4
Insolubles
28
180
139
347
NaCl
97.2
96.6
97.2
96.9
K
0.05
0.07
0.05
0.06
Mg
0.05
0.06
0.05
0.05
2.2
2.3
1.8
2.1
0.23
0.24
0.25
0.24
Danakali is committed to ensuring all work activities are carried out safely with all practical measures taken to remove risks
to health, safety and welfare of workers, contractors, authorised visitors, and anyone else who may be affected by the
Since the Company commenced exploration in 2010, no injuries have been reported. This safety performance, along with
a strong safety culture, bodes well for the company as it moves into the construction and production phases at Colluli.
Measured
Indicated
Inferred
Total
SAFETY
Group’s activities.
DANAKALI LIMITED
ABN 56 097 904 302
Directors’ Report
ENVIRONMENT
The Group is subject to environmental regulation in respect to its exploration and development activities. Danakali aims to
ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance
with relevant environmental legislation. There were no breaches of environmental legislation for the period under review.
EVENTS OCCURRING AFTER THE BALANCE DATE
On 29 January 2018, the Company announced the results of the FEED phase for the Colluli Potash Project. On 31 January
2018 the Company released a presentation detailing the FEED results.
On 19 February, the Company released an updated JORC-2012 Colluli Potassium Sulphate Ore Reserve.
Subsequent to balance date up to the reporting date, the Company issued the following fully paid ordinary shares:
▪
▪
400,000 shares on exercise of unlisted options at $0.405 each
775,000 shares on exercise of unlisted options at $0.35 each
Subsequent to balance date up to the reporting date, the Company issued 25,000 shares on the vesting of performance
rights.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
ACTIVITIES PLANNED FOR 2018
The following key activities are scheduled over the coming year:
Finalise negotiations with shortlisted EPCM contract bidders
Finalise negotiations with shortlisted mining contract bidders
Finalise negotiations with preferred power provider Inglett & Stubbs International
• Progress negotiations to final binding offtake agreements
•
•
•
• Dual listing on the London Stock Exchange
•
Finalise arrangements with commercial lenders
K2O
Equiv %
K2SO4
Equiv %
K2SO4
Equiv Mt1
FINANCE REVIEW
The Group recorded a net loss after tax of $6,839,936 for the financial year to 31 December 2017 compared to a loss of
$4,925,558 for the financial year to 31 December 2016. As the Group is still in the exploration and development stage,
revenue streams mainly relate to interest earned on investing of surplus funds from capital raisings. The net losses after
tax reflect the Groups’ exploration and development expenditure on the Colluli Potash Project and ongoing administration
costs.
The Groups’ net assets increased by 19.2% compared to the net assets as at 31 December 2016, which is consistent with
the increase in cash balance due to the successful equity raises during 2017 and the net increase in the investment and
loan to the Colluli Mining Share Company.
Total consolidated cash on hand at the end of the financial year was $15,559,980 (31 December 2016: $10,904,760).
Operating activities utilised $1,279,679 (31 December 2016: $1,670,534 utilised) of net cash flows. Net cash outflow from
investing activities of $7,721,815 (31 December 2016: $2,955,454) was primarily in relation to expenditure made to advance
the Colluli Project in relation to:
•
•
•
•
•
Execution of Mining Agreement and award of Mining Licenses for the Colluli project
Completion of the FEED
Advancing off-take agreement negotiations
Advancing financing negotiations
Advancing key operational contracts
Net cash inflow from financing activities of $13,656,714 (31 December 2016: $12,774,407) was due to the placement of
shares and the exercise of options to fund the ongoing exploration and development work to advance the project.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no other significant changes in the Company’s state of affairs other than that referred to in the financial
statements or notes thereto.
12
DANAKALI LIMITED
ABN 56 097 904 302
Page 35
13
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
DEVELOPMENTS AND EXPECTED RESULTS
Directors’ Report
OPTIONS
Details of important developments occurring in this financial year have been covered in the Review of Operations section
of the Directors’ Report. The Group will continue to invest in the Colluli Potash Project to advance activities in the
exploration, evaluation and development of the project with the objective of developing a significant mining operation. Any
significant information or data will be released to the market and the shareholders pursuant to the Continuous Disclosure
rules as and when they come to hand.
At the date of this report, unissued ordinary shares in respect of which options are outstanding are as follows:
Balance at the beginning of the year
Movements of share options during the financial year ended 31 December 2017:
Number of options
25,213,186
DIVIDENDS
No dividends were paid or declared during the financial year to 31 December 2017. No recommendation for payment of
dividends has been made.
DIRECTORS’ MEETINGS
The number of meetings of the Company’s Board of Directors held during the financial year ended 31 December 2017 and
the number of meetings attended by each Director were:
Director
S I Cornelius
P M Donaldson
J D Fitzgerald
J Zhang
R Connochie
A Liebenberg
L R Cornelius
A W Kiernan
Total
Directors
Meetings
9
9
9
9
9
4
8
-
Total
Audit and Risk
Committee
Meetings
2
-
2
-
2
-
-
-
Total
Audit and Risk
Committee
Meetings
Attended
2
-
2
-
2
-
-
-
Total
Remuneration
and Nomination
Committee
Meetings
2
-
3
-
-
-
3
1
Total
Remuneration
and Nomination
Committee
Meetings
Attended
2
-
3
-
-
-
3
1
Total
Directors
Meetings
Attended
9
9
9
6
9
4
8
-
There were no Technical and Risk Committee meetings held during the year.
Exercised, exercisable at $0.278 on or before 17 November 2017
Exercised, exercisable at $0.408 on or before 4 November 2018
Exercised, exercisable at $0.405 on or before 13 May 2018
Exercised, exercisable at $0.350 on or before 30 March 2018
Cancelled, exercisable at $0.408, on or before 4 November 2018
Cancelled, exercisable at $0.543, on or before 7 October 2019
Issued, exercisable at $0.940, on or before 19 May 2020
Issued, exercisable at $0.960, on or before 20 June 2019
Share options outstanding at 31 December 2017
Movements of share options during period since the financial year ended 31 December 2017:
Exercised, exercisable at $0.405, on or before 13 May 2018
Exercised, exercisable at $0.350, on or before 13 May 2018
Exercised, exercisable at $0.350, on or before 30 March 2018
Total number of share options outstanding as at the date of this report
Exercise price
Number of options
Expiry date
30 March 2018
13 May 2018
13 May 2018
29 May 2018
31 May 2018
23 June 2018
4 November 2018
31 December 2018
8 August 2019
7 October 2019
19 May 2020
20 June 2019
$0.350
$0.350
$0.405
$0.527
$0.550
$0.450
$0.550
$0.550
$0.558
$0.543
$0.940
$0.960
Total number of share options outstanding at the date of this report
No option holder has any right under the option to participate in any share issue of the Company or any other entity. No
options were granted to key management personnel of the Company since the end of the financial year.
PERFORMANCE RIGHTS
Details of performance rights over unissued shares in Danakali Ltd as at the date of this report are set out below:
(4,600,000)
(200,000)
(351,000)
(1,356,365)
(800,000)
(550,000)
1,440,000
400,000
19,195,821
(400,000)
(100,000)
(675,000)
18,020,821
8,981,821
700,000
1,949,000
750,000
600,000
200,000
750,000
1,000,000
1,000,000
250,000
1,440,000
400,000
18,020,821
Number of rights
1,958,000
300,000
(775,000)
(75,000)
1,408,000
(25,000)
1,383,000
Balance at the beginning of the year
Movements of performance rights during the year
Issued
Vested and Exercised (a)
Forfeited (b)
Performance rights outstanding at 31 December 2017
Movements since the financial year ended 31 December 2017:
Total number of performance rights as at the date of this report
Vested
Note:
DANAKALI LIMITED
Page 36
ABN 56 097 904 302
(a) Performance rights vested upon the grant of the mining lease.
(b) Performance rights forfeited upon the resignation of non-executive director, Anthony Kiernan on 6 February 2017.
No performance rights holder has any right to participate in any other share issue of the company or any other entity.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
An indemnity agreement has been entered into with each of the directors and company secretary of the Company named
earlier in this report. Under the agreements, the Company has agreed to indemnify those officers against any claim or for
Indemnification
DANAKALI LIMITED
ABN 56 097 904 302
14
15
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
DEVELOPMENTS AND EXPECTED RESULTS
Details of important developments occurring in this financial year have been covered in the Review of Operations section
of the Directors’ Report. The Group will continue to invest in the Colluli Potash Project to advance activities in the
exploration, evaluation and development of the project with the objective of developing a significant mining operation. Any
significant information or data will be released to the market and the shareholders pursuant to the Continuous Disclosure
rules as and when they come to hand.
No dividends were paid or declared during the financial year to 31 December 2017. No recommendation for payment of
DIVIDENDS
dividends has been made.
DIRECTORS’ MEETINGS
The number of meetings of the Company’s Board of Directors held during the financial year ended 31 December 2017 and
the number of meetings attended by each Director were:
Total
Directors
Meetings
Total
Directors
Meetings
Attended
Total
Audit and Risk
Remuneration
Audit and Risk
Committee
and Nomination
Committee
Meetings
Meetings
Attended
Committee
Meetings
Total
Total
Total
Remuneration
and Nomination
Committee
Meetings
Attended
Director
S I Cornelius
P M Donaldson
J D Fitzgerald
J Zhang
R Connochie
A Liebenberg
L R Cornelius
A W Kiernan
9
9
9
9
9
4
8
-
9
9
9
6
9
4
8
-
2
-
2
-
2
-
-
-
2
-
2
-
2
-
-
-
2
-
3
-
-
-
3
1
2
-
3
-
-
-
3
1
There were no Technical and Risk Committee meetings held during the year.
Directors’ Report
OPTIONS
At the date of this report, unissued ordinary shares in respect of which options are outstanding are as follows:
Balance at the beginning of the year
Movements of share options during the financial year ended 31 December 2017:
Number of options
25,213,186
Exercised, exercisable at $0.278 on or before 17 November 2017
Exercised, exercisable at $0.408 on or before 4 November 2018
Exercised, exercisable at $0.405 on or before 13 May 2018
Exercised, exercisable at $0.350 on or before 30 March 2018
Cancelled, exercisable at $0.408, on or before 4 November 2018
Cancelled, exercisable at $0.543, on or before 7 October 2019
Issued, exercisable at $0.940, on or before 19 May 2020
Issued, exercisable at $0.960, on or before 20 June 2019
Share options outstanding at 31 December 2017
Movements of share options during period since the financial year ended 31 December 2017:
Exercised, exercisable at $0.405, on or before 13 May 2018
Exercised, exercisable at $0.350, on or before 13 May 2018
Exercised, exercisable at $0.350, on or before 30 March 2018
Total number of share options outstanding as at the date of this report
(4,600,000)
(200,000)
(351,000)
(1,356,365)
(800,000)
(550,000)
1,440,000
400,000
19,195,821
(400,000)
(100,000)
(675,000)
18,020,821
Expiry date
30 March 2018
13 May 2018
13 May 2018
29 May 2018
31 May 2018
23 June 2018
4 November 2018
31 December 2018
8 August 2019
7 October 2019
19 May 2020
20 June 2019
Exercise price
$0.350
$0.350
$0.405
$0.527
$0.550
$0.450
$0.550
$0.550
$0.558
$0.543
$0.940
$0.960
Total number of share options outstanding at the date of this report
Number of options
8,981,821
700,000
1,949,000
750,000
600,000
200,000
750,000
1,000,000
1,000,000
250,000
1,440,000
400,000
18,020,821
No option holder has any right under the option to participate in any share issue of the Company or any other entity. No
options were granted to key management personnel of the Company since the end of the financial year.
PERFORMANCE RIGHTS
Details of performance rights over unissued shares in Danakali Ltd as at the date of this report are set out below:
Balance at the beginning of the year
Movements of performance rights during the year
Issued
Vested and Exercised (a)
Forfeited (b)
Performance rights outstanding at 31 December 2017
Movements since the financial year ended 31 December 2017:
Vested
Total number of performance rights as at the date of this report
Note:
Number of rights
1,958,000
300,000
(775,000)
(75,000)
1,408,000
(25,000)
1,383,000
(a) Performance rights vested upon the grant of the mining lease.
(b) Performance rights forfeited upon the resignation of non-executive director, Anthony Kiernan on 6 February 2017.
No performance rights holder has any right to participate in any other share issue of the company or any other entity.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Indemnification
An indemnity agreement has been entered into with each of the directors and company secretary of the Company named
earlier in this report. Under the agreements, the Company has agreed to indemnify those officers against any claim or for
DANAKALI LIMITED
ABN 56 097 904 302
14
DANAKALI LIMITED
ABN 56 097 904 302
Page 37
15
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
any expense or cost which may arise as a result of work performed in their respective capacities to the extent permitted by
law. There is no monetary limit to the extent of this indemnity.
Insurance
During the period, the Company paid an insurance premium in respect of Directors’ and Officers’ insurance. The premiums
relate to costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and
whatever their outcome, and other liabilities that may arise from their position, with the exception of conduct involving a
wilful breach of duty or improper use of information or position to gain a personal advantage. Premiums totalling $35,625
(2016: $8,000) were paid in respect of directors’ and officers’ liability cover. The insurance policies outlined above do not
contain details of the premiums paid in respect of individual officers of the Company.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst and Young, as part of the terms
of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No
payment has been made to indemnify Ernst and Young during or since the financial year.
AUDIT COMMITTEE
The Audit and Risk Committee (consolidated during the year to become the Audit Committee) has a documented charter,
approved by the Board. All members are non-executive directors. The committee advises on the establishment and
maintenance of a framework of internal control and appropriate ethical standards for the management of the Group.
The members of the Audit Committee are:
• Mr John Fitzgerald - Chairman
• Mr Seamus Cornelius - Member
• Mr Andre Liebenberg - Member
The Audit and Risk Committee met twice during the year and the committee members’ attendance record is disclosed in
the table of Directors’ meetings in section of the Directors’ Report.
NON-AUDIT SERVICES
The Board has considered the non-audit services provided during the financial year by the auditor and is satisfied that the
provision of those non-audit services is compatible with, and did not compromise, the auditor’s independence requirements
of the Corporations Act 2001.
All non-audit services provided during the financial year were subject to the corporate governance procedures adopted by
the Company and have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor;
and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or
jointly sharing risks and rewards.
During the period, Ernst and Young, the Company’s auditors, performed the following services in addition to their statutory
duties:
• Preparation and lodgement of income tax returns.
• Corporate Advisory Services.
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young
CORPORATE GOVERNANCE
2017
$
2016
$
41,391
41,391
6,000
6,000
33,621
33,621
33,103
33,103
The Company’s corporate governance statement can be found at the following URL: http://www.danakali.com.au/our-
business/corporate-governance.
Directors’ Report
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the company for all or any part of those proceedings.
No proceedings have been brought or intervened in or on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
AUDITOR’S INDEPENDENCE DECLARATION
separately in this report.
REMUNERATION REPORT (AUDITED)
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
The Remuneration Report outlines the director and executive remuneration arrangements of the Group in accordance with
the requirements of the Corporations Act 2001 (Cth) and its Regulations. For the purposes of this report, Key Management
Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of
the Company. For the purposes of this report, the term ‘Executive’ includes the Chief Executive Officer and senior
executives of the Group.
The Key Management Personnel of Danakali Ltd and the Group during the financial year to 31 December 2017 were:
Non-Executive Chairman
Non-Executive Director (Transitioned from Managing Director and Chief Executive Officer to Non-
Directors
S I Cornelius
P M Donaldson
J D Fitzgerald
J Zhang
R Connochie
A Liebenberg
A W Kiernan
L R Cornelius
Executive Director 21 December 2017)
Non-Executive Director
Non-Executive Director
Non-Executive Director (Appointed 6 February 2017)
Non-Executive Director (Appointed 2 October 2017)
Non-Executive Director (Resigned 6 February 2017)
Non-Executive Director (Resigned 17 November 2017)
Named Executives
D Goeman
S Tarrant
M Chapman
C P Els
Chief Executive Officer (Appointed 21 December 2017)
Chief Financial Officer (Appointed 12 June 2017)
C Grant-Edwards
Joint Company Secretary (Appointed 7 July 2017)
Joint Company Secretary (Appointed 7 July 2017)
Chief Financial Officer (Resigned 12 June 2017) and Company Secretary (Resigned 7 July 2017)
All of the above persons were key management personnel during the financial year to 31 December 2017 unless otherwise
stated. The information provided in this remuneration report has been audited as required by section 308 (3C) of the
Corporations Act 2001.
Key Elements of Key Management Personnel / Executive Remuneration Strategy
The remuneration strategy for Danakali Ltd is designed to provide rewards that achieve the following:
attract, retain, motivate and reward executives;
reward executives for Company and individual performance against targets set by reference to appropriate
benchmarks;
link reward with the strategic goals and performance of the Company;
provide remuneration that is competitive by market standards;
align executive interests with those of the Company’s shareholders; and
comply with applicable legal requirements and appropriate standards of governance.
•
•
•
•
•
•
The Company is satisfied that its remuneration framework reflects current business needs, shareholder views and
contemporary market practice and is appropriate to attract, motivate, retain and reward employees.
DANAKALI LIMITED
Page 38
ABN 56 097 904 302
16
DANAKALI LIMITED
ABN 56 097 904 302
17
Danakali Annual Report 2017DANAKALI LIMITED
any expense or cost which may arise as a result of work performed in their respective capacities to the extent permitted by
PROCEEDINGS ON BEHALF OF THE COMPANY
Directors’ Report
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the company for all or any part of those proceedings.
No proceedings have been brought or intervened in or on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
separately in this report.
REMUNERATION REPORT (AUDITED)
The Remuneration Report outlines the director and executive remuneration arrangements of the Group in accordance with
the requirements of the Corporations Act 2001 (Cth) and its Regulations. For the purposes of this report, Key Management
Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and
controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of
the Company. For the purposes of this report, the term ‘Executive’ includes the Chief Executive Officer and senior
executives of the Group.
The Key Management Personnel of Danakali Ltd and the Group during the financial year to 31 December 2017 were:
Directors
S I Cornelius
P M Donaldson
J D Fitzgerald
J Zhang
R Connochie
A Liebenberg
A W Kiernan
L R Cornelius
Named Executives
Non-Executive Chairman
Non-Executive Director (Transitioned from Managing Director and Chief Executive Officer to Non-
Executive Director 21 December 2017)
Non-Executive Director
Non-Executive Director
Non-Executive Director (Appointed 6 February 2017)
Non-Executive Director (Appointed 2 October 2017)
Non-Executive Director (Resigned 6 February 2017)
Non-Executive Director (Resigned 17 November 2017)
D Goeman
S Tarrant
C Grant-Edwards
M Chapman
C P Els
Chief Executive Officer (Appointed 21 December 2017)
Chief Financial Officer (Appointed 12 June 2017)
Joint Company Secretary (Appointed 7 July 2017)
Joint Company Secretary (Appointed 7 July 2017)
Chief Financial Officer (Resigned 12 June 2017) and Company Secretary (Resigned 7 July 2017)
All of the above persons were key management personnel during the financial year to 31 December 2017 unless otherwise
stated. The information provided in this remuneration report has been audited as required by section 308 (3C) of the
Corporations Act 2001.
Key Elements of Key Management Personnel / Executive Remuneration Strategy
The remuneration strategy for Danakali Ltd is designed to provide rewards that achieve the following:
•
•
•
•
•
•
attract, retain, motivate and reward executives;
reward executives for Company and individual performance against targets set by reference to appropriate
benchmarks;
link reward with the strategic goals and performance of the Company;
provide remuneration that is competitive by market standards;
align executive interests with those of the Company’s shareholders; and
comply with applicable legal requirements and appropriate standards of governance.
The Company is satisfied that its remuneration framework reflects current business needs, shareholder views and
contemporary market practice and is appropriate to attract, motivate, retain and reward employees.
Directors’ Report
law. There is no monetary limit to the extent of this indemnity.
Insurance
During the period, the Company paid an insurance premium in respect of Directors’ and Officers’ insurance. The premiums
relate to costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and
whatever their outcome, and other liabilities that may arise from their position, with the exception of conduct involving a
wilful breach of duty or improper use of information or position to gain a personal advantage. Premiums totalling $35,625
(2016: $8,000) were paid in respect of directors’ and officers’ liability cover. The insurance policies outlined above do not
contain details of the premiums paid in respect of individual officers of the Company.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst and Young, as part of the terms
of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No
payment has been made to indemnify Ernst and Young during or since the financial year.
AUDIT COMMITTEE
The Audit and Risk Committee (consolidated during the year to become the Audit Committee) has a documented charter,
approved by the Board. All members are non-executive directors. The committee advises on the establishment and
maintenance of a framework of internal control and appropriate ethical standards for the management of the Group.
The members of the Audit Committee are:
• Mr John Fitzgerald - Chairman
• Mr Seamus Cornelius - Member
• Mr Andre Liebenberg - Member
The Audit and Risk Committee met twice during the year and the committee members’ attendance record is disclosed in
the table of Directors’ meetings in section of the Directors’ Report.
NON-AUDIT SERVICES
of the Corporations Act 2001.
The Board has considered the non-audit services provided during the financial year by the auditor and is satisfied that the
provision of those non-audit services is compatible with, and did not compromise, the auditor’s independence requirements
All non-audit services provided during the financial year were subject to the corporate governance procedures adopted by
the Company and have been reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor;
and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or
jointly sharing risks and rewards.
During the period, Ernst and Young, the Company’s auditors, performed the following services in addition to their statutory
duties:
• Preparation and lodgement of income tax returns.
• Corporate Advisory Services.
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young
CORPORATE GOVERNANCE
business/corporate-governance.
The Company’s corporate governance statement can be found at the following URL: http://www.danakali.com.au/our-
2017
$
2016
$
41,391
41,391
6,000
6,000
33,621
33,621
33,103
33,103
DANAKALI LIMITED
ABN 56 097 904 302
16
DANAKALI LIMITED
ABN 56 097 904 302
Page 39
17
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
A summary of the key elements of the current remuneration arrangement is as follows:
Remuneration of Non-Executive Directors
and
Company’s
achievement
Performance Based
Short Term Incentive (STI)
• Cash bonus
Provide reward to executives
for
of
the
Group
individual
performance targets linked to
the
strategic
objectives.
Link to
Performance
Executive performance and
remuneration packages are
reviewed at least annually by
the Board and Remuneration
and Nomination Committee.
The review process includes
consideration of the individual’s
performance in addition to the
overall performance of
the
Group.
Award of STI linked directly to
achievement of KPI’s and
performance targets.
Remuneration
Component
Fixed Remuneration
Item
Purpose
• Base salary
• Superannuation
contributions
• Other benefits
Provide
competitive
remuneration with reference to
the role and responsibilities,
market and experience,
to
attract high calibre people.
Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of the
directors. Non-executive Directors are remunerated with both cash salary and annual option grants to enable the company
to preserve cash reserves and to align the Directors interests to those of the shareholders. The Board views this approach
to be reasonable relative to the stage of development of its flagship project. Non-executive directors’ fees and payments
are reviewed annually by the Board. The Board at times receives advice from independent remuneration consultants to
ensure non-executive Directors fees and payments are appropriate and in line with the market. No advice was received
during the period.
The general principles of non-executive Directors compensation are:
Non-executive Directors are paid a base fee ($40,000 per annum) prior to any statutory superannuation payments;
Additional fees are paid to non-executive Directors who serve on the board sub-committees;
Under the current remuneration structure and subject to shareholder approval, an annual grant of Options is made;
Any options granted and approved have a term of at least 3 years and will be struck at significant premium to the
30-day VWAP. This is typically 140% of the 30 day VWAP;
The amount of options proposed for each non-executive director is proportional to the equivalent underlying cash
fees; and
Adjustments may be made in the event that a specific non-executive Director’s contribution warrants an
adjustment. Such adjustments are at the recommendation of the board.
Chairman’s fees are determined independently to the fees of non-executive directors based on comparative roles in the
external market and the specific requirements that the Company has of the Chairman.
The Chairman is not present at any of the discussions relating to the determination of his own remuneration.
Fees for the Chairman and non-executive directors are determined within an aggregate directors’ fee pool limit of $400,000
as approved by shareholders on 17 November 2014. The disclosed Chairman and non-executive directors’ fees are
inclusive of committee fees.
Remuneration of Key Management Personnel
The Company’s remuneration and reward framework is designed to ensure reward structures are aligned with shareholders’
interest by:
being market competitive to attract and retain high calibre individuals;
rewarding high individual performance;
Company; and
ensuring that long term incentives are linked to shareholder value.
recognising the contribution of each key management personnel to the contributed growth and success of the
To achieve these objectives, the remuneration of key management personnel may comprise a fixed salary component and
an ‘at risk’ variable component linked to performance of the individual and the Company as a whole. Fixed remuneration
comprises base salary, superannuation contributions and other defined benefits. ‘At risk’ variable remuneration comprises
both short term and long-term incentives.
The remuneration and reward framework for key management personnel may consist of the following areas:
•
•
•
•
•
•
•
•
•
•
•
i)
ii)
iii)
Fixed Remuneration
Variable Short-Term Incentives
Variable Long-Term Incentives
i)
Fixed Remuneration
The combination of these would comprise the key management personnel’s total remuneration.
The fixed remuneration for each senior executive is influenced by the nature and responsibilities of each role and
knowledge, skills and experience required for each position. Fixed remuneration provides a base level of
remuneration which is market competitive and comprises a base salary and statutory superannuation. It is structured
as a total employment cost package, which may be delivered as a combination of cash and prescribed non-financial
benefits at the executives’ discretion.
Key management personnel are offered a competitive base salary that comprises the fixed component of pay and
rewards. External remuneration consultants may provide analysis and advice to ensure base pay is set to reflect the
market for a comparable role. No external advice was taken this period. Base salary for key management personnel
is reviewed annually to ensure the executives’ pay is competitive with the market. The pay of key management
personnel is also reviewed on promotion. There is no guaranteed pay increase included in any key management
personnel’s contract.
Performance Based:
Long Term Incentive (LTI)
• Shares
• Options
• Performance Rights Plan
Provide reward to executives
for their continued service and
their contribution to achieving
corporate objectives set by the
Board to ensure the long-term
growth of the Company.
Award of LTI linked directly to
strategic
achievement
Company objectives.
of
The Remuneration Report has been set out under the following headings:
a) Decision Making Authority for Remuneration
b) Principles Used to Determine the Nature and Amount of Remuneration
c) Voting and Comments Made at the Last Annual General Meeting
d) Details of Remuneration
e) Service Agreements
f) Details of Share Based Compensation
g) Equity Instruments Held by Key Management Personnel
h)
i) Other Transactions with Key Management Personnel
j) Additional Information
Loans to Key Management Personnel
a) Decision Making Authority for Remuneration
The Company’s remuneration policy and strategies are overseen by the Remuneration and Nomination Committee on
behalf of the Board. The Remuneration and Nomination Committee is responsible for making recommendations to the
Board on all aspects of remuneration arrangements for key management personnel including:
•
•
•
•
•
the Company’s remuneration policy and framework;
the remuneration arrangements for the Chief Executive Officer and other senior executives;
the terms and conditions of long term incentives and short-term incentives for the Chief Executive Officer and other
senior executives;
the terms and conditions of employee incentive schemes; and
the appropriate remuneration to be paid to non-executive Directors.
The Remuneration and Nomination Committee Charter is approved by the Board and is published on the Company’s
website. Remuneration levels of the Directors and Key Management Personnel are set by reference to other similar sized
mining and exploration companies with similar risk profiles and are set to attract and retain executives capable of managing
the Group’s operations.
Remuneration levels for the Chief Executive Officer and key management personnel are determined by the Board based
upon recommendations from the Remuneration and Nomination Committee. Remuneration of non-executive directors is
determined by the Board within the maximum levels approved by the shareholders from time to time.
b) Principles Used to Determine the Nature and Amount of Remuneration
The Company’s remuneration practices are designed to attract, retain, motivate and reward high calibre people capable of
delivering the strategic objectives of the Company. The Company’s Key Management Personnel remuneration framework
aligns their remuneration with the achievement of strategic objectives and the creation of value for shareholders and
conforms with market practice for delivery of reward.
The Remuneration and Nomination Committee ensures that the remuneration of Key Management Personnel is competitive
and reasonable, acceptable to shareholders and aligns remuneration with performance. The structure and level of
remuneration for key management personnel is conducted annually by the Remuneration and Nomination Committee
relative to the Company’s circumstances, size, nature of business and performance.
DANAKALI LIMITED
Page 40
ABN 56 097 904 302
18
DANAKALI LIMITED
ABN 56 097 904 302
19
Danakali Annual Report 2017DANAKALI LIMITED
A summary of the key elements of the current remuneration arrangement is as follows:
Remuneration of Non-Executive Directors
Directors’ Report
Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of the
directors. Non-executive Directors are remunerated with both cash salary and annual option grants to enable the company
to preserve cash reserves and to align the Directors interests to those of the shareholders. The Board views this approach
to be reasonable relative to the stage of development of its flagship project. Non-executive directors’ fees and payments
are reviewed annually by the Board. The Board at times receives advice from independent remuneration consultants to
ensure non-executive Directors fees and payments are appropriate and in line with the market. No advice was received
during the period.
The general principles of non-executive Directors compensation are:
•
•
•
•
•
•
Non-executive Directors are paid a base fee ($40,000 per annum) prior to any statutory superannuation payments;
Additional fees are paid to non-executive Directors who serve on the board sub-committees;
Under the current remuneration structure and subject to shareholder approval, an annual grant of Options is made;
Any options granted and approved have a term of at least 3 years and will be struck at significant premium to the
30-day VWAP. This is typically 140% of the 30 day VWAP;
The amount of options proposed for each non-executive director is proportional to the equivalent underlying cash
fees; and
Adjustments may be made in the event that a specific non-executive Director’s contribution warrants an
adjustment. Such adjustments are at the recommendation of the board.
Chairman’s fees are determined independently to the fees of non-executive directors based on comparative roles in the
external market and the specific requirements that the Company has of the Chairman.
•
The Chairman is not present at any of the discussions relating to the determination of his own remuneration.
Fees for the Chairman and non-executive directors are determined within an aggregate directors’ fee pool limit of $400,000
as approved by shareholders on 17 November 2014. The disclosed Chairman and non-executive directors’ fees are
inclusive of committee fees.
Remuneration of Key Management Personnel
The Company’s remuneration and reward framework is designed to ensure reward structures are aligned with shareholders’
interest by:
•
•
•
•
being market competitive to attract and retain high calibre individuals;
rewarding high individual performance;
recognising the contribution of each key management personnel to the contributed growth and success of the
Company; and
ensuring that long term incentives are linked to shareholder value.
To achieve these objectives, the remuneration of key management personnel may comprise a fixed salary component and
an ‘at risk’ variable component linked to performance of the individual and the Company as a whole. Fixed remuneration
comprises base salary, superannuation contributions and other defined benefits. ‘At risk’ variable remuneration comprises
both short term and long-term incentives.
The remuneration and reward framework for key management personnel may consist of the following areas:
i)
ii)
iii)
Fixed Remuneration
Variable Short-Term Incentives
Variable Long-Term Incentives
The combination of these would comprise the key management personnel’s total remuneration.
i)
Fixed Remuneration
The fixed remuneration for each senior executive is influenced by the nature and responsibilities of each role and
knowledge, skills and experience required for each position. Fixed remuneration provides a base level of
remuneration which is market competitive and comprises a base salary and statutory superannuation. It is structured
as a total employment cost package, which may be delivered as a combination of cash and prescribed non-financial
benefits at the executives’ discretion.
Key management personnel are offered a competitive base salary that comprises the fixed component of pay and
rewards. External remuneration consultants may provide analysis and advice to ensure base pay is set to reflect the
market for a comparable role. No external advice was taken this period. Base salary for key management personnel
is reviewed annually to ensure the executives’ pay is competitive with the market. The pay of key management
personnel is also reviewed on promotion. There is no guaranteed pay increase included in any key management
personnel’s contract.
Directors’ Report
Remuneration
Component
Fixed Remuneration
Item
Purpose
Link to
Performance
• Base salary
• Superannuation
contributions
• Other benefits
Provide
competitive
Executive performance and
remuneration with reference to
remuneration packages are
the role and responsibilities,
reviewed at least annually by
market and experience,
to
the Board and Remuneration
attract high calibre people.
and Nomination Committee.
The review process includes
consideration of the individual’s
performance in addition to the
overall performance of
the
Group.
Performance Based
Short Term Incentive (STI)
• Cash bonus
Provide reward to executives
Award of STI linked directly to
for
the
individual
achievement
of
achievement of KPI’s and
and
Group
performance targets.
Performance Based:
Long Term Incentive (LTI)
• Shares
• Options
• Performance Rights Plan
Provide reward to executives
Award of LTI linked directly to
for their continued service and
achievement
of
strategic
their contribution to achieving
Company objectives.
performance targets linked to
the
Company’s
strategic
objectives.
corporate objectives set by the
Board to ensure the long-term
growth of the Company.
The Remuneration Report has been set out under the following headings:
a) Decision Making Authority for Remuneration
b) Principles Used to Determine the Nature and Amount of Remuneration
c) Voting and Comments Made at the Last Annual General Meeting
d) Details of Remuneration
e) Service Agreements
f) Details of Share Based Compensation
g) Equity Instruments Held by Key Management Personnel
h)
Loans to Key Management Personnel
i) Other Transactions with Key Management Personnel
j) Additional Information
a) Decision Making Authority for Remuneration
The Company’s remuneration policy and strategies are overseen by the Remuneration and Nomination Committee on
behalf of the Board. The Remuneration and Nomination Committee is responsible for making recommendations to the
Board on all aspects of remuneration arrangements for key management personnel including:
the Company’s remuneration policy and framework;
the remuneration arrangements for the Chief Executive Officer and other senior executives;
the terms and conditions of long term incentives and short-term incentives for the Chief Executive Officer and other
senior executives;
the terms and conditions of employee incentive schemes; and
the appropriate remuneration to be paid to non-executive Directors.
•
•
•
•
•
The Remuneration and Nomination Committee Charter is approved by the Board and is published on the Company’s
website. Remuneration levels of the Directors and Key Management Personnel are set by reference to other similar sized
mining and exploration companies with similar risk profiles and are set to attract and retain executives capable of managing
the Group’s operations.
Remuneration levels for the Chief Executive Officer and key management personnel are determined by the Board based
upon recommendations from the Remuneration and Nomination Committee. Remuneration of non-executive directors is
determined by the Board within the maximum levels approved by the shareholders from time to time.
b) Principles Used to Determine the Nature and Amount of Remuneration
The Company’s remuneration practices are designed to attract, retain, motivate and reward high calibre people capable of
delivering the strategic objectives of the Company. The Company’s Key Management Personnel remuneration framework
aligns their remuneration with the achievement of strategic objectives and the creation of value for shareholders and
conforms with market practice for delivery of reward.
The Remuneration and Nomination Committee ensures that the remuneration of Key Management Personnel is competitive
and reasonable, acceptable to shareholders and aligns remuneration with performance. The structure and level of
remuneration for key management personnel is conducted annually by the Remuneration and Nomination Committee
relative to the Company’s circumstances, size, nature of business and performance.
DANAKALI LIMITED
ABN 56 097 904 302
18
DANAKALI LIMITED
ABN 56 097 904 302
Page 41
19
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
ii)
Variable Remuneration – Short Term Incentives (STI)
The Danakali Ltd Short-Term Incentive Scheme applies to executives in the Company and is designed to link any
STI payment with the achievement by each Key Management Personnel of specified key performance indicators
(KPI’s) which are in turn linked to the Company’s strategic objectives and targets.
A maximum of up to 50% of the fixed remuneration can be payable under the STI and the Board has the discretion
to reduce or suspend any bonus payments where Company circumstances render it appropriate.
Given the current phase of Danakali’s life cycle, the Board determined that the LTI is a more appropriate incentive
measure to align KMP performance with company objectives. In reference to this, no KPI’s were set and no STI’s
granted in the current period.
iii)
Variable Remuneration – Long Term Incentives (LTI)
Long term incentives have been provided to directors and employees through the issue of options and performance
rights.
The Danakali Ltd Performance Rights Plan (PRP) was re-approved by shareholders at the general meeting held 17
November 2014. The PRP provides incentives, which promote the long-term performance and growth of the
Company. The performance conditions were chosen to strengthen the links between the Company objectives and
the role performed by its Directors and employees.
The PRP is designed to increase the range of potential incentives available to Directors and employees and to
recognise their contribution to the Company’s success.
Under the PRP, performance rights are granted over ordinary shares in the Company on an annual basis. The
vesting conditions in respect of performance rights issued to KMP under the PRP that are outstanding at 31
December 2017 are as follows:
Class 4:
• 800,000 upon commencement of construction of the production facility.
Class 6:
• 10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
• 15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of
finance support from a lending institution; and
• 25,000 upon term sheets being signed for the project financing of the Colluli project.
Class 7:
• 10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
• 10,000 upon market announcement on completion of FEED;
• 15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
• 15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
Details of options issued to key management personnel can be found in section f(i) below.
Details of performance rights issued to key management personnel can be found in section f(ii) below.
Further performance rights details can be found in Note 22.
All performance rights will automatically expire on the earlier of the expiry date or the date the holder ceases to be
an employee of the Company, unless the Board determines to vary the expiry date in the event the holder ceased
to be an employee because of retirement, redundancy, death or total and permanent disability and such other cases
the Board may determine. Performance rights granted under the PRP will carry no dividend or voting rights. When
the vesting conditions have been met, each performance right will be converted into one ordinary share.
c) Voting and Comments Made at the Last Annual General Meeting
The Company received approximately 95% of ‘yes’ votes on its Remuneration Report for the financial year ending 31
December 2016 and received no specific feedback on its Remuneration Report at the Annual General Meeting or
throughout the period.
d) Details of Remuneration
Details of the remuneration of the directors and other key management personnel of Danakali Ltd are set out in the following
table.
DANAKALI LIMITED
Page 42
ABN 56 097 904 302
20
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
ii)
Variable Remuneration – Short Term Incentives (STI)
The Danakali Ltd Short-Term Incentive Scheme applies to executives in the Company and is designed to link any
STI payment with the achievement by each Key Management Personnel of specified key performance indicators
(KPI’s) which are in turn linked to the Company’s strategic objectives and targets.
A maximum of up to 50% of the fixed remuneration can be payable under the STI and the Board has the discretion
to reduce or suspend any bonus payments where Company circumstances render it appropriate.
Given the current phase of Danakali’s life cycle, the Board determined that the LTI is a more appropriate incentive
measure to align KMP performance with company objectives. In reference to this, no KPI’s were set and no STI’s
granted in the current period.
iii)
Variable Remuneration – Long Term Incentives (LTI)
Long term incentives have been provided to directors and employees through the issue of options and performance
rights.
The Danakali Ltd Performance Rights Plan (PRP) was re-approved by shareholders at the general meeting held 17
November 2014. The PRP provides incentives, which promote the long-term performance and growth of the
Company. The performance conditions were chosen to strengthen the links between the Company objectives and
the role performed by its Directors and employees.
The PRP is designed to increase the range of potential incentives available to Directors and employees and to
recognise their contribution to the Company’s success.
Under the PRP, performance rights are granted over ordinary shares in the Company on an annual basis. The
vesting conditions in respect of performance rights issued to KMP under the PRP that are outstanding at 31
December 2017 are as follows:
• 800,000 upon commencement of construction of the production facility.
• 10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
• 15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of
finance support from a lending institution; and
• 25,000 upon term sheets being signed for the project financing of the Colluli project.
• 10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
• 10,000 upon market announcement on completion of FEED;
• 15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
• 15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
Details of options issued to key management personnel can be found in section f(i) below.
Details of performance rights issued to key management personnel can be found in section f(ii) below.
Further performance rights details can be found in Note 22.
All performance rights will automatically expire on the earlier of the expiry date or the date the holder ceases to be
an employee of the Company, unless the Board determines to vary the expiry date in the event the holder ceased
to be an employee because of retirement, redundancy, death or total and permanent disability and such other cases
the Board may determine. Performance rights granted under the PRP will carry no dividend or voting rights. When
the vesting conditions have been met, each performance right will be converted into one ordinary share.
c) Voting and Comments Made at the Last Annual General Meeting
The Company received approximately 95% of ‘yes’ votes on its Remuneration Report for the financial year ending 31
December 2016 and received no specific feedback on its Remuneration Report at the Annual General Meeting or
Class 4:
Class 6:
Class 7:
Details of the remuneration of the directors and other key management personnel of Danakali Ltd are set out in the following
throughout the period.
d) Details of Remuneration
table.
DANAKALI LIMITED
ABN 56 097 904 302
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Page 43
Danakali Annual Report 2017DANAKALI LIMITED
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2
2
Directors’ Report
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Financial Year to 31 December 2017
Fixed Remuneration
At risk – STI
At risk - LTI
Non-Executive Directors
Name
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
L Cornelius
A Kiernan
Executive Directors
P Donaldson
Other Key Management Personnel
D Goeman
S Tarrant
C Grant-Edwards
M Chapman
C Els
e) Service Agreements
D Goeman, Chief Executive Officer:
• Appointed 21 December 2017
• No set term of agreement.
59%
100%
55%
67%
28%
100%
48%
58%
54%
76%
76%
100%
100%
182%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41%
-
45%
33%
72%
-
52%
42%
46%
24%
24%
-
-
(82%)
Remuneration and other terms of employment for the executive managers are formalised in employment contracts. Other
major provisions of the agreements relating to remuneration are set out below.
• Base salary of $330,000 per annum plus statutory superannuation
• Notice period of six months, required to be given by either party for termination.
S Tarrant, Chief Financial Officer
• Appointed 12 June 2017
• Agreement expiry date 31 August 2018
• Base salary of $240,000 per annum plus statutory superannuation
• Notice period of three months, required to be given by either party for termination.
C Grant-Edwards and M Chapman, Joint Company Secretary
Ms Melissa Chapman and Ms Catherine Grant-Edwards were appointed as Joint Company Secretary on 22 November
2017. Ms Chapman and Ms Grant-Edwards are directors of Bellatrix Corporate Pty Ltd (Bellatrix), a company that
provides company secretarial and accounting services to a number of ASX listed company. Pursuant to an agreement,
Bellatrix is entitled to receive $36,000 per annum for the provision of company secretarial services to the Company. In
addition, Bellatrix also provides accounting services to the Company for an additional fee on an arms-length basis.
f) Details of Share Based Compensation
(i) Options
set out in the following table:
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as
Vesting and first
exercise date
19 May 2017 (a)
Expiry date
Number of
Exercise
Options
price
19 May 2020
1,440,000
$0.940
$0.202
Value per
option at
grant date
Vested and
exercisable
%
100%
1,440,000
Grant date
19 May 2017
Total Options
Note:
to the options.
out in the following table.
DANAKALI LIMITED
ABN 56 097 904 302
2
0
3
4
0
9
7
9
0
6
5
N
B
A
(a) The options were issued in recognition of skill and expertise brought to the Company and therefore, there were no conditions attached
Details of options over ordinary shares in the Company, provided as remuneration to key management personnel are set
Options will automatically expire on the earlier of the expiry date or the date the holder ceases to be an employee of the
Company, unless the Board determines to vary the expiry date in the event the holder ceased to be an employee because
of retirement, redundancy, death or total and permanent disability and such other cases the Board may determine.
23
D
E
T
M
L
I
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I
L
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A
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Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Non-Executive Directors
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
L Cornelius
A Kiernan
Executive Directors
P Donaldson
Other Key Management Personnel
D Goeman
S Tarrant
C Grant-Edwards
M Chapman
C Els
e) Service Agreements
Financial Year to 31 December 2017
Fixed Remuneration
At risk – STI
At risk - LTI
59%
100%
55%
67%
28%
100%
48%
58%
54%
76%
76%
100%
100%
182%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41%
-
45%
33%
72%
-
52%
42%
46%
24%
24%
-
-
(82%)
Remuneration and other terms of employment for the executive managers are formalised in employment contracts. Other
major provisions of the agreements relating to remuneration are set out below.
D Goeman, Chief Executive Officer:
• Appointed 21 December 2017
• No set term of agreement.
• Base salary of $330,000 per annum plus statutory superannuation
• Notice period of six months, required to be given by either party for termination.
S Tarrant, Chief Financial Officer
• Appointed 12 June 2017
• Agreement expiry date 31 August 2018
• Base salary of $240,000 per annum plus statutory superannuation
• Notice period of three months, required to be given by either party for termination.
C Grant-Edwards and M Chapman, Joint Company Secretary
Ms Melissa Chapman and Ms Catherine Grant-Edwards were appointed as Joint Company Secretary on 22 November
2017. Ms Chapman and Ms Grant-Edwards are directors of Bellatrix Corporate Pty Ltd (Bellatrix), a company that
provides company secretarial and accounting services to a number of ASX listed company. Pursuant to an agreement,
Bellatrix is entitled to receive $36,000 per annum for the provision of company secretarial services to the Company. In
addition, Bellatrix also provides accounting services to the Company for an additional fee on an arms-length basis.
f) Details of Share Based Compensation
(i) Options
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as
set out in the following table:
Grant date
19 May 2017
Total Options
Vesting and first
exercise date
19 May 2017 (a)
Expiry date
19 May 2020
Number of
Options
1,440,000
1,440,000
Exercise
price
$0.940
Value per
option at
grant date
$0.202
Vested and
exercisable
%
100%
Note:
(a) The options were issued in recognition of skill and expertise brought to the Company and therefore, there were no conditions attached
to the options.
Details of options over ordinary shares in the Company, provided as remuneration to key management personnel are set
out in the following table.
Options will automatically expire on the earlier of the expiry date or the date the holder ceases to be an employee of the
Company, unless the Board determines to vary the expiry date in the event the holder ceased to be an employee because
of retirement, redundancy, death or total and permanent disability and such other cases the Board may determine.
DANAKALI LIMITED
ABN 56 097 904 302
Page 45
23
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
When exercisable, each option is convertible into one ordinary share. Further information on the options is set out in note
22.
Year in
which
options
vest
2017
2017
2017
2017
2017
2017
2017
2017
2017
Year of
grant
2015
2015
2015
2017
2017
2017
2017
2017
2017
Number of
options
granted
200,000
300,000
300,000
300,000
100,000
250,000
190,000
100,000
500,000
2,240,000
Value of
options at
grant date
$25,270
$37,800
$37,800
$60,734
$20,245
$50,612
$38,465
$20,245
$101,224
Number of
options
vested during
the period
-
-
-
300,000
100,000
250,000
190,000
100,000
500,000
1,440,000
Vested
and
exercisable
-
-
-
100%
100%
100%
100%
100%
100%
Number of
options
forfeited during
the period
200,000
300,000
300,000
-
-
-
-
-
-
800,000
Name
C P Els
C P Els
C P Els
S I Cornelius
P M Donaldson
J D Fitzgerald
L Cornelius
Z Jing
R Connochie
Total Options
3,000,000 options held by key management personnel were exercised during the year, raising $898,100 for working capital
purposes.
Name
S I Cornelius
L Cornelius
P M Donaldson
C P Els
Total Options
Number of
options
exercised
1,300,000
1,000,000
200,000
500,000
3,000,000
Amount
Paid
$361,400
$278,000
$55,600
$203,100
$898,100
Fair Value
$942,550
$700,000
$140,000
$399,500
$2,182,050
(ii) Performance Rights
During the financial year, the following performance rights were granted to key management personnel.
Name
Class
Number
Date of Issue
S Tarrant
S Tarrant
20 June 2017
15 November 2017
Class 6
Class 7
50,000
50,000
Fair Value per Right
at 31 December
2017
$0.715
$0.715
Expiry Date
None
None
The terms and conditions of each grant of Performance Rights to key personnel in the current or a future reporting period
are as follows:
Performance rights
granted
Number of performance
rights vested
Name
A W Kiernan
S Tarrant
S Tarrant
L R Cornelius
P M Donaldson
Year of
grant
2013
2017
2017
2013
2014
Class
Class 2
Class 6
Class 7
Class 1
Class 4
Number
225,000
50,000
50,000
100,000
2,450,000
In prior
periods
75,000
-
-
50,000
950,000
In current
period
75,000
-
-
-
700,000
Performance
rights
cancelled
75,000
-
-
-
-
Total
Unvested
-
100%
100%
50%¹
33%
The performance rights on issue to key management personnel, as set out above, vest, subject to the following vesting
conditions:
300,000 upon completion of a Prefeasibility Study and the release of the study results to market (vested March
650,000 upon completion of a Definitive Feasibility Study and release of study results to market (vested November
700,000 upon awarding of the Colluli mining licence (vested February 2017); and
800,000 upon commencement of construction of the production facility.
10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of finance
support from a lending institution; and
25,000 upon term sheets being signed for the project financing of the Colluli project.
10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
10,000 upon market announcement on completion of FEED;
15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
During the year ended 31 December 2017, a total of 75,000 performance rights held by A Kiernan (Class 2) were forfeited
g) Equity Instruments Held by Key Management Personnel
No shares were granted as remuneration during the year ended 31 December 2017.
The number of shares in the Company held during the financial period by each director of Danakali Ltd and other key
management personnel of the Group, including their personally related parties, are set out in the following tables.
Financial Year to
Balance at
Granted as
Received
Received on
On market
Other
31 December 2017
31 December
compensatio
conversion of
purchases/
2016
n
on exercise of
remuneration
options
performance
rights
(sales)
Balance at
31 December
2017
8,493,046
1,203,128
15,682,041
258,334
1,300,000
1,000,000
5,138
9,798,184
75,000
(1,278,128)
(16,682,041)
258,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110,000
500,000
(365,000)
(245,000)
218,434
218,434
27,564,883
3,000,000
775,000
(359,862)
(17,986,735)
12,993,286
P M Donaldson
1,818,334
200,000
700,000
2,718,334
Class 4:
2015);
2015);
•
•
•
•
•
•
•
•
•
•
•
Class 6:
Class 7:
during the year.
(i) Shares
Shares
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
Other Key
Management
Personnel
D Goeman (e)
C P Els (f)
S Tarrant (g)
C Grant-Edwards(h)
M Chapman (h)
TOTAL
Note:
(ii) Options
DANAKALI LIMITED
ABN 56 097 904 302
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Upon his resignation on 6 February 2017, Mr Kiernan held 1,278,128 shares
Upon his resignation on 17 November 2017, Mr L Cornelius held 16,682,041 shares
Appointed 6 February 2017
Appointed 2 October 2017
Appointed 21 December 2017
Upon his resignation on 7 July 2017, Mr C Els held 245,000 shares
Upon his appointment on 12 June 2017, Mr Tarrant held 218,434 shares
Appointed 7 July 2017
DANAKALI LIMITED
Page 46
ABN 56 097 904 302
24
25
75,000 upon signing of the ENAMCO agreements for the Colluli Potash Project (vested November 2014);
75,000 upon granting of a Mining License for the Colluli Potash Project (vested February 2017); and
75,000 upon completion of securing finance for the development of the Colluli Potash Project (forfeited 6 February
2017).
308,000 upon completion of a Feasibility Study for the Colluli Potash Project (vested November 2015); and
308,000 upon completion of securing finance for the development of the Colluli Potash Project
Class 1:
•
•
Class 2:
•
•
•
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
•
Class 4:
•
Class 6:
•
•
10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of finance
support from a lending institution; and
25,000 upon term sheets being signed for the project financing of the Colluli project.
Number of
Value of
Number of
options
Vested
Number of
options
options at
grant date
vested during
and
forfeited during
the period
exercisable
the period
•
•
•
300,000 upon completion of a Prefeasibility Study and the release of the study results to market (vested March
2015);
650,000 upon completion of a Definitive Feasibility Study and release of study results to market (vested November
2015);
700,000 upon awarding of the Colluli mining licence (vested February 2017); and
800,000 upon commencement of construction of the production facility.
When exercisable, each option is convertible into one ordinary share. Further information on the options is set out in note
$25,270
$37,800
$37,800
$60,734
$20,245
$50,612
$38,465
$20,245
$101,224
-
-
-
300,000
100,000
250,000
190,000
100,000
500,000
-
-
-
100%
100%
100%
100%
100%
100%
200,000
300,000
300,000
-
-
-
-
-
-
3,000,000 options held by key management personnel were exercised during the year, raising $898,100 for working capital
2,240,000
1,440,000
800,000
22.
Name
C P Els
C P Els
C P Els
S I Cornelius
P M Donaldson
J D Fitzgerald
L Cornelius
Z Jing
R Connochie
Total Options
purposes.
Year in
which
options
vest
2017
2017
2017
2017
2017
2017
2017
2017
2017
Year of
grant
2015
2015
2015
2017
2017
2017
2017
2017
2017
options
granted
200,000
300,000
300,000
300,000
100,000
250,000
190,000
100,000
500,000
Number of
Amount
Fair Value
Name
options
exercised
Paid
S I Cornelius
1,300,000
$361,400
L Cornelius
1,000,000
$278,000
P M Donaldson
C P Els
200,000
500,000
Total Options
3,000,000
$55,600
$203,100
$898,100
$942,550
$700,000
$140,000
$399,500
$2,182,050
(ii) Performance Rights
During the financial year, the following performance rights were granted to key management personnel.
Name
Class
Number
at 31 December
Expiry Date
Date of Issue
Fair Value per Right
S Tarrant
S Tarrant
20 June 2017
15 November 2017
Class 6
Class 7
50,000
50,000
2017
$0.715
$0.715
None
None
The terms and conditions of each grant of Performance Rights to key personnel in the current or a future reporting period
are as follows:
Performance rights
Number of performance
Performance
granted
rights vested
Name
A W Kiernan
S Tarrant
S Tarrant
L R Cornelius
P M Donaldson
Year of
grant
2013
2017
2017
2013
2014
Class
Class 2
Class 6
Class 7
Class 1
Class 4
Number
225,000
50,000
50,000
100,000
2,450,000
In prior
periods
75,000
In current
period
75,000
-
-
50,000
950,000
-
-
-
700,000
rights
cancelled
75,000
-
-
-
-
Total
Unvested
-
100%
100%
50%¹
33%
Class 7:
•
•
•
•
10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
10,000 upon market announcement on completion of FEED;
15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
During the year ended 31 December 2017, a total of 75,000 performance rights held by A Kiernan (Class 2) were forfeited
during the year.
g) Equity Instruments Held by Key Management Personnel
(i) Shares
No shares were granted as remuneration during the year ended 31 December 2017.
The number of shares in the Company held during the financial period by each director of Danakali Ltd and other key
management personnel of the Group, including their personally related parties, are set out in the following tables.
Financial Year to
31 December 2017
Balance at
31 December
2016
Granted as
compensatio
n
Shares
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
P M Donaldson
Other Key
Management
Personnel
D Goeman (e)
C P Els (f)
S Tarrant (g)
C Grant-Edwards(h)
M Chapman (h)
8,493,046
1,203,128
15,682,041
258,334
-
-
-
1,818,334
-
110,000
-
-
The performance rights on issue to key management personnel, as set out above, vest, subject to the following vesting
TOTAL
27,564,883
-
-
-
-
-
-
-
-
-
-
-
-
-
Received
on exercise of
remuneration
options
Received on
conversion of
performance
rights
On market
purchases/
(sales)
Other
Balance at
31 December
2017
1,300,000
-
5,138
-
9,798,184
-
75,000
1,000,000
-
-
-
-
-
-
-
-
-
200,000
700,000
-
-
-
-
-
-
-
(1,278,128)
(16,682,041)
-
-
-
-
-
-
-
258,334
-
-
-
2,718,334
-
500,000
-
-
-
-
-
-
-
(365,000)
-
-
(245,000)
218,434
-
-
218,434
-
-
-
3,000,000
775,000
(359,862)
(17,986,735)
12,993,286
conditions:
Class 1:
Class 2:
•
•
•
•
•
2017).
DANAKALI LIMITED
ABN 56 097 904 302
308,000 upon completion of a Feasibility Study for the Colluli Potash Project (vested November 2015); and
308,000 upon completion of securing finance for the development of the Colluli Potash Project
75,000 upon signing of the ENAMCO agreements for the Colluli Potash Project (vested November 2014);
75,000 upon granting of a Mining License for the Colluli Potash Project (vested February 2017); and
75,000 upon completion of securing finance for the development of the Colluli Potash Project (forfeited 6 February
Note:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Upon his resignation on 6 February 2017, Mr Kiernan held 1,278,128 shares
Upon his resignation on 17 November 2017, Mr L Cornelius held 16,682,041 shares
Appointed 6 February 2017
Appointed 2 October 2017
Appointed 21 December 2017
Upon his resignation on 7 July 2017, Mr C Els held 245,000 shares
Upon his appointment on 12 June 2017, Mr Tarrant held 218,434 shares
Appointed 7 July 2017
(ii) Options
DANAKALI LIMITED
ABN 56 097 904 302
24
Page 47
25
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
During the financial year to 31 December 2017, the Company issued 1,440,000 options over unissued ordinary shares in
the Company to Key Management Personnel.
The numbers of options over ordinary shares in the Company held during the financial period by each director of Danakali
Ltd and other Key Management Personnel of the Group, including their personally related parties, are set out in the following
tables.
Financial Year to
31 December
2017
Balance at
31 December
2016
Granted
Exercised
Expired /
Cancelled
Other
Balance at
31 December
2017
Vested
and
exercisable
Unvested
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
P M Donaldson (e)
Other
Management
Personnel
D Goeman (f)
C P Els (g)
S Tarrant (h)
C Grant-Edwards (i)
M Chapman (i)
TOTAL
Note:
2,675,000
1,750,000
1,900,000
1,225,000
-
-
-
300,000
(1,300,000)
-
190,000
250,000
100,000
500,000
-
-
(1,000,000)
-
-
-
-
1,550,000
100,000
(200,000)
-
-
-
-
-
-
-
-
-
1,675,000
1,675,000
(1,750,000)
(1,090,000)
-
-
-
-
-
-
-
-
(800,000)
1,475,000
100,000
1,475,000
100,000
500,000
-
650,000
500,000
-
650,000
-
-
-
-
-
-
-
-
-
1,300,000
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
900,000
100,000
j) Additional Information
(500,000)
(800,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,400,000 1,440,000
(3,000,000)
(800,000)
(2,640,000)
5,400,000
5,300,000
100,000
(a) Upon his resignation on 6 February 2017, Mr Kiernan held 1,750,000 options
(b) Upon his resignation on 17 November 2017, Mr L Cornelius held 1,090,000 options
(c) Appointed 6 February 2017
(d) Appointed 2 October 2017
(e) During the year, Mr Donaldson sold 800,000 unlisted options exercisable at $0.278 expiring 17 November 2017 via off market
transfers for $177,600 consideration
(f) Upon his appointment on 21 December 2017, Mr Goeman held 1,000,000 options
(g) Resigned 7 July 2017
(h) Appointed 12 June 2017
(i)
(j) Options granted refer to remuneration options issued to directors, as approved at the Annual General Meeting of the Company
Appointed 7 July 2017
held 19 May 2017. The unlisted options are exercisable at $0.94 each expiring 19 May 2020.
(iii) Performance Rights held by Key Management Personnel
A total of 100,000 performance rights were granted as remuneration to Key Management Personnel during the year ended
31 December 2017 (31 December 2016: nil).
Movements in Performance Rights held by Key Management Personnel are as set out in the following table:
Financial Year to
31 December 2017
Performance Rights
Balance
At 31
December
2016
Granted as
Remuneration
Vested
during the
period
Cancelled
Other
Balance
at 31
December
2017
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
P M Donaldson
DANAKALI LIMITED
Page 48
ABN 56 097 904 302
-
150,000
50,000
-
-
-
-
1,500,000
-
-
-
-
-
-
-
-
-
(75,000)
-
-
-
-
-
(700,000)
-
(75,000)
-
-
-
-
-
-
-
-
(50,000)
-
-
-
-
-
-
-
-
-
-
-
-
800,000
26
Directors’ Report
Other Key Management
Personnel
D Goeman (e)
C P Els (f)
S Tarrant (g)
C Grant-Edwards (h)
M Chapman (h)
TOTAL
Note:
(a) Resigned 6 February 2017
(c) Appointed 6 February 2017
(d) Appointed 2 October 2017
(e) Appointed 21 December 2017
(f) Resigned 7 July 2017
(g) Appointed 12 June 2017
-
-
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
-
-
1,700,000
100,000
(775,000)
(75,000)
900,000
(b) Upon his resignation on 17 November 2017, Mr L Cornelius held 50,000 performance rights
h) Loans to Key Management Personnel
There were no loans to key management personnel during the period.
i) Other Transactions with Key Management Personnel
There were no other transactions with key management personnel during the period.
The remuneration structure has been set up with the objective of attracting and retaining the highest calibre staff who
contribute to the success of the Company’s performance and individual rewards. The remuneration policies seek a balance
between the interests of stakeholders and competitive market remuneration levels. The overall level of key management
personnel compensation takes into account the performance of the Group over a number of years and the stage of activities
the Company is engaged in.
During the period, there was a high level of development activity, project permitting and generally progressing the Colluli
Potash Project. The remuneration paid during the period is commercially reasonable for an exploration and development
stage mining company. Company performance is measured against a comparable list of companies operating in the same
market segment. There was no increase in key management personnel compensation during the period.
The Group is still in the exploration and development stage and revenue streams only relate to interest earned on investing
surplus funds from capital raisings. The net losses after tax reflect the ongoing costs of the Group’s exploration programs
and development on the Colluli Potash Project. The table below shows the performance of the Group over the last 5
31 Dec 2017
31 Dec 2016
31 Dec 2015
31 Dec 2014 (a)
30 Jun 2014
(2.85)
$0.715
(2.35)
$0.48
(4.01)
$0.29
2.18
$0.19
0.16
$0.15
($6,839,936)
($4,925,558)
($6,792,685)
$2,999,972
$3,355,983
(a) 31 December 2014 was a six-month transitional period while adjusting to a December year end.
As at the date of this report, the Company is in the process of reviewing its remuneration framework to ensure it reflects
current business needs, shareholder views and contemporary market practice and remains appropriate to attract, motivate,
retain and reward employees.
- - END OF REMUNERATION REPORT - -
Signed in accordance with a resolution of the directors.
reporting periods:
Financial Year
Basic EPS (Cents)
Share Price
(Loss)/ Income for
the period
Note:
Seamus Cornelius
CHAIRMAN
Perth, 22 March 2018
DANAKALI LIMITED
ABN 56 097 904 302
27
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Report
Directors’ Report
1,300,000
(500,000)
(800,000)
During the financial year to 31 December 2017, the Company issued 1,440,000 options over unissued ordinary shares in
the Company to Key Management Personnel.
The numbers of options over ordinary shares in the Company held during the financial period by each director of Danakali
Ltd and other Key Management Personnel of the Group, including their personally related parties, are set out in the following
tables.
31 December
31 December
2017
2016
Financial Year to
Balance at
Granted
Exercised
Other
Balance at
Vested
Unvested
Expired /
Cancelled
31 December
and
2017
exercisable
300,000
(1,300,000)
-
1,675,000
1,675,000
2,675,000
1,750,000
1,900,000
1,225,000
190,000
(1,000,000)
250,000
100,000
500,000
(1,750,000)
(1,090,000)
1,475,000
1,475,000
100,000
500,000
100,000
500,000
P M Donaldson (e)
1,550,000
100,000
(200,000)
(800,000)
650,000
650,000
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
Other
Management
Personnel
D Goeman (f)
C P Els (g)
S Tarrant (h)
C Grant-Edwards (i)
M Chapman (i)
TOTAL
Note:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,400,000 1,440,000
(3,000,000)
(800,000)
(2,640,000)
5,400,000
5,300,000
100,000
(a) Upon his resignation on 6 February 2017, Mr Kiernan held 1,750,000 options
(b) Upon his resignation on 17 November 2017, Mr L Cornelius held 1,090,000 options
(e) During the year, Mr Donaldson sold 800,000 unlisted options exercisable at $0.278 expiring 17 November 2017 via off market
transfers for $177,600 consideration
(f) Upon his appointment on 21 December 2017, Mr Goeman held 1,000,000 options
(c) Appointed 6 February 2017
(d) Appointed 2 October 2017
(g) Resigned 7 July 2017
(h) Appointed 12 June 2017
(i)
Appointed 7 July 2017
(j) Options granted refer to remuneration options issued to directors, as approved at the Annual General Meeting of the Company
held 19 May 2017. The unlisted options are exercisable at $0.94 each expiring 19 May 2020.
(iii) Performance Rights held by Key Management Personnel
A total of 100,000 performance rights were granted as remuneration to Key Management Personnel during the year ended
31 December 2017 (31 December 2016: nil).
Movements in Performance Rights held by Key Management Personnel are as set out in the following table:
Financial Year to
31 December 2017
Performance Rights
Balance
At 31
December
2016
Granted as
Vested
Remuneration
during the
period
Cancelled
Other
Balance
at 31
December
2017
150,000
50,000
-
-
-
-
-
(75,000)
(75,000)
(50,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
(700,000)
800,000
Directors
S I Cornelius
A W Kiernan (a)
L R Cornelius (b)
J D Fitzgerald
J Zhang
R Connochie (c)
A Liebenberg (d)
P M Donaldson
DANAKALI LIMITED
ABN 56 097 904 302
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Key Management
Personnel
D Goeman (e)
C P Els (f)
S Tarrant (g)
C Grant-Edwards (h)
M Chapman (h)
TOTAL
Note:
-
-
-
-
-
1,700,000
-
-
100,000
-
-
100,000
-
-
-
-
-
(775,000)
-
-
-
-
-
(75,000)
-
-
-
-
-
-
-
-
100,000
-
-
900,000
(a) Resigned 6 February 2017
(b) Upon his resignation on 17 November 2017, Mr L Cornelius held 50,000 performance rights
(c) Appointed 6 February 2017
(d) Appointed 2 October 2017
(e) Appointed 21 December 2017
(f) Resigned 7 July 2017
(g) Appointed 12 June 2017
h) Loans to Key Management Personnel
There were no loans to key management personnel during the period.
i) Other Transactions with Key Management Personnel
There were no other transactions with key management personnel during the period.
1,000,000
1,000,000
900,000
100,000
j) Additional Information
The remuneration structure has been set up with the objective of attracting and retaining the highest calibre staff who
contribute to the success of the Company’s performance and individual rewards. The remuneration policies seek a balance
between the interests of stakeholders and competitive market remuneration levels. The overall level of key management
personnel compensation takes into account the performance of the Group over a number of years and the stage of activities
the Company is engaged in.
During the period, there was a high level of development activity, project permitting and generally progressing the Colluli
Potash Project. The remuneration paid during the period is commercially reasonable for an exploration and development
stage mining company. Company performance is measured against a comparable list of companies operating in the same
market segment. There was no increase in key management personnel compensation during the period.
The Group is still in the exploration and development stage and revenue streams only relate to interest earned on investing
surplus funds from capital raisings. The net losses after tax reflect the ongoing costs of the Group’s exploration programs
and development on the Colluli Potash Project. The table below shows the performance of the Group over the last 5
reporting periods:
Financial Year
Basic EPS (Cents)
31 Dec 2017
(2.85)
31 Dec 2016
(2.35)
31 Dec 2015
(4.01)
31 Dec 2014 (a)
2.18
Share Price
$0.715
$0.48
$0.29
$0.19
30 Jun 2014
0.16
$0.15
(Loss)/ Income for
the period
($6,839,936)
($4,925,558)
($6,792,685)
$2,999,972
$3,355,983
Note:
(a) 31 December 2014 was a six-month transitional period while adjusting to a December year end.
As at the date of this report, the Company is in the process of reviewing its remuneration framework to ensure it reflects
current business needs, shareholder views and contemporary market practice and remains appropriate to attract, motivate,
retain and reward employees.
- - END OF REMUNERATION REPORT - -
Signed in accordance with a resolution of the directors.
Seamus Cornelius
CHAIRMAN
Perth, 22 March 2018
26
DANAKALI LIMITED
ABN 56 097 904 302
Page 49
27
Danakali Annual Report 2017DANAKALI LIMITED
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor's Independence Declaration to the Directors of Danakali Limited
As lead auditor for the audit of Danakali Limited for the financial year ended 31 December 2017, I declare
to the best of my knowledge and belief, there have been:
Auditor's Independence Declaration to the Directors of Danakali Limited
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
a)
As lead auditor for the audit of Danakali Limited for the financial year ended 31 December 2017, I declare
relation to the audit; and
to the best of my knowledge and belief, there have been:
b)
a)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
22 March 2018
Gavin Buckingham
Partner
22 March 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 50
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DNK:031
GB:EH:DNK:031
Danakali Annual Report 2017DANAKALI LIMITED
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor's Independence Declaration to the Directors of Danakali Limited
As lead auditor for the audit of Danakali Limited for the financial year ended 31 December 2017, I declare
to the best of my knowledge and belief, there have been:
Auditor's Independence Declaration to the Directors of Danakali Limited
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
As lead auditor for the audit of Danakali Limited for the financial year ended 31 December 2017, I declare
relation to the audit; and
to the best of my knowledge and belief, there have been:
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
no contraventions of any applicable code of professional conduct in relation to the audit.
b)
a)
b)
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
22 March 2018
Gavin Buckingham
Partner
22 March 2018
DANAKALI LTD
FINANCIAL
RESULTS
FOR THE YEAR ENDED
31 DECEMBER 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DNK:031
GB:EH:DNK:031
Page 51
Danakali Annual Report 2017DANAKALI LIMITED
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2017
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2017
Notes
2017
$
2016
$
REVENUE
Interest income
Accretion relating to the unwinding of discount on joint venture loan
4
10
221,189
1,362,780
109,537
1,554,925
OTHER INCOME
Foreign exchange (loss)/gain
Sundry
EXPENSES
Depreciation expense
Administration expenses
Loss on disposal of fixed asset
Share based payment expense
Loss on re-measurement of loan to joint venture carried at amortised cost
Share of net loss of joint venture
LOSS BEFORE INCOME TAX
Income tax expense
LOSS FOR THE YEAR
(423,601)
4,218
224,230
-
(3,588)
(1,684,367)
-
(988,573)
(216,909)
(5,111,085)
(6,839,936)
(10,131)
(1,999,782)
(1,483)
(1,290,347)
(2,812,064)
(700,443)
(4,925,558)
-
-
(6,839,936)
(4,925,558)
5
22
10
10
7
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss in subsequent periods
Share of foreign currency translation reserve relating to equity accounted
investment
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
10,14
(933,753)
(933,753)
269,925
269,925
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(7,773,689)
(4,655,633)
Earnings per share for loss attributable to the ordinary equity holders
of the Company:
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
17
17
(2.85)
(2.85)
(2.35)
(2.35)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
CURRENT ASSETS
Cash
Trade and other receivables
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Investment in joint venture
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
2017
$
2016
$
6
8
8
10
9
11
12
12
13
14
15
15,559,980
10,904,760
174,321
50,094
93,985
25,101
15,784,395
11,023,846
12,216,952
13,811,946
15,110
26,044,008
9,519,503
13,502,312
7,920
23,029,735
41,828,403
34,053,581
1,097,087
166,219
1,263,306
210,742
134,701
345,443
27,811
27,811
42,450
42,450
1,291,117
387,893
40,537,286
33,665,688
75,415,034
12,521,599
(47,399,347)
40,537,286
61,758,320
12,466,779
(40,559,411)
33,665,688
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes
DANAKALI LIMITED
Page 52
ABN 56 097 904 302
31
DANAKALI LIMITED
ABN 56 097 904 302
32
Danakali Annual Report 2017DANAKALI LIMITED
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes
2017
$
2016
$
REVENUE
Interest income
Accretion relating to the unwinding of discount on joint venture loan
4
10
221,189
1,362,780
109,537
1,554,925
OTHER INCOME
Foreign exchange (loss)/gain
Sundry
EXPENSES
Depreciation expense
Administration expenses
Loss on disposal of fixed asset
Share based payment expense
Share of net loss of joint venture
LOSS BEFORE INCOME TAX
Income tax expense
LOSS FOR THE YEAR
Loss on re-measurement of loan to joint venture carried at amortised cost
(423,601)
4,218
224,230
-
(3,588)
(10,131)
(1,684,367)
(1,999,782)
(988,573)
(216,909)
(5,111,085)
(6,839,936)
-
-
(1,483)
(1,290,347)
(2,812,064)
(700,443)
(4,925,558)
-
(6,839,936)
(4,925,558)
5
22
10
10
7
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to profit or loss in subsequent periods
Share of foreign currency translation reserve relating to equity accounted
investment
OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
10,14
(933,753)
(933,753)
269,925
269,925
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(7,773,689)
(4,655,633)
Earnings per share for loss attributable to the ordinary equity holders
of the Company:
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
17
17
(2.85)
(2.85)
(2.35)
(2.35)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2017
CURRENT ASSETS
Cash
Trade and other receivables
Prepayments
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Investment in joint venture
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Notes
2017
$
2016
$
6
8
8
10
9
11
12
12
13
14
15
15,559,980
174,321
50,094
15,784,395
12,216,952
13,811,946
15,110
26,044,008
10,904,760
93,985
25,101
11,023,846
9,519,503
13,502,312
7,920
23,029,735
41,828,403
34,053,581
1,097,087
166,219
1,263,306
210,742
134,701
345,443
27,811
27,811
42,450
42,450
1,291,117
387,893
40,537,286
33,665,688
75,415,034
12,521,599
(47,399,347)
40,537,286
61,758,320
12,466,779
(40,559,411)
33,665,688
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes
DANAKALI LIMITED
ABN 56 097 904 302
31
DANAKALI LIMITED
ABN 56 097 904 302
Page 53
32
Danakali Annual Report 2017DANAKALI LIMITED
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Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Realised foreign exchange gain
Payments to suppliers and employees
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
16
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of joint venture
Payments for plant and equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares
Costs of capital raised
NET CASH INFLOW FROM FINANCING ACTIVITIES
NET INCREASE / (DECREASE) IN CASH
Cash at the beginning of the financial year
CASH AT THE END OF THE YEAR
Notes
2017
$
2016
$
231,693
71,924
(1,583,296)
(1,279,679)
104,964
169,987
(1,945,485)
(1,670,534)
(7,711,037)
(10,778)
(7,721,815)
(2,952,332)
(3,122)
(2,955,454)
14,328,083
(671,369)
13,656,714
4,655,220
10,904,760
15,559,980
13,360,664
(586,257)
12,774,407
8,148,419
2,756,341
10,904,760
6
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
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Page 54
DANAKALI LIMITED
ABN 56 097 904 302
34
Danakali Annual Report 2017DANAKALI LIMITED
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes
2017
$
2016
$
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Realised foreign exchange gain
Payments to suppliers and employees
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
16
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of joint venture
Payments for plant and equipment
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares
Costs of capital raised
NET CASH INFLOW FROM FINANCING ACTIVITIES
NET INCREASE / (DECREASE) IN CASH
Cash at the beginning of the financial year
CASH AT THE END OF THE YEAR
231,693
71,924
(1,583,296)
(1,279,679)
104,964
169,987
(1,945,485)
(1,670,534)
(7,711,037)
(10,778)
(7,721,815)
(2,952,332)
(3,122)
(2,955,454)
14,328,083
(671,369)
13,656,714
4,655,220
10,904,760
15,559,980
13,360,664
(586,257)
12,774,407
8,148,419
2,756,341
10,904,760
6
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
DANAKALI LIMITED
ABN 56 097 904 302
Page 55
34
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
1. GENERAL INFORMATION
Danakali Ltd (‘Danakali or the ‘Company’) is a for profit company limited by shares, incorporated and domiciled in Australia,
and whose shares are publicly traded on the Australian Securities Exchange (ASX). The consolidated financial Report of
the Group as at, and for the year ended 31 December 2017 comprises the Company and its subsidiaries (together referred
to as the ‘Group’). The address of the registered office is Level 1, Churchill Court, 234 Churchill Avenue, Subiaco, WA,
6008.
The financial statements are presented in the Australian currency.
The financial report of Danakali for the year ended 31 December 2017 was authorised for issue by the Directors on 21
March 2018. The directors have the power to amend and reissue the financial statements.
The nature of the operations and principal activities of the consolidated entity are described in the Directors’ Report.
2. BASIS OF PREPARATION
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations
and the Corporations Act 2001.
The consolidated financial statements of the Danakali Ltd Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
These financial statements have been prepared under the historical cost convention.
(a) Principles of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. Intercompany
transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the full Board of Directors.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Danakali's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
(iii) Foreign operations
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
•
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the
date of that statement of financial position;
income and expenses for each statement of comprehensive income are translated at average exchange rates
(unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of
such exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable.
DANAKALI LIMITED
Page 56
ABN 56 097 904 302
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial
(d) Revenue recognition
assets.
(e)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply
when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(f) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the
leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net
of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired
under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease.
(g)
Impairment of assets
not be recoverable.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are consolidated at the lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
For Consolidated Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes
Receivables are recognised and carried at original invoice amount less an allowance for any uncollectible debts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as
(h) Cash and cash equivalents
in value, and bank overdrafts.
(i) Trade and other receivables
incurred.
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
1. GENERAL INFORMATION
(d) Revenue recognition
Danakali Ltd (‘Danakali or the ‘Company’) is a for profit company limited by shares, incorporated and domiciled in Australia,
and whose shares are publicly traded on the Australian Securities Exchange (ASX). The consolidated financial Report of
the Group as at, and for the year ended 31 December 2017 comprises the Company and its subsidiaries (together referred
to as the ‘Group’). The address of the registered office is Level 1, Churchill Court, 234 Churchill Avenue, Subiaco, WA,
6008.
The financial statements are presented in the Australian currency.
The financial report of Danakali for the year ended 31 December 2017 was authorised for issue by the Directors on 21
March 2018. The directors have the power to amend and reissue the financial statements.
The nature of the operations and principal activities of the consolidated entity are described in the Directors’ Report.
2. BASIS OF PREPARATION
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the periods presented, unless otherwise stated.
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations
and the Corporations Act 2001.
The consolidated financial statements of the Danakali Ltd Group also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
These financial statements have been prepared under the historical cost convention.
(a) Principles of consolidation
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. Intercompany
transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the full Board of Directors.
(c) Foreign currency translation
(i) Functional and presentation currency
(ii) Transactions and balances
recognised in profit or loss.
(iii) Foreign operations
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Danakali's functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
•
•
•
assets and liabilities for each statement of financial position presented are translated at the closing rate at the
date of that statement of financial position;
income and expenses for each statement of comprehensive income are translated at average exchange rates
(unless that is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of
such exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable.
Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial
assets.
(e)
Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply
when the related deferred income tax asset is realised, or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are
offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or
directly in equity, respectively.
(f) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the
leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net
of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the
liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired
under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease.
(g)
Impairment of assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are consolidated at the lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets (cash-generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(h) Cash and cash equivalents
For Consolidated Statement of Cash Flows presentation purposes, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes
in value, and bank overdrafts.
(i) Trade and other receivables
Receivables are recognised and carried at original invoice amount less an allowance for any uncollectible debts. An
estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as
incurred.
DANAKALI LIMITED
ABN 56 097 904 302
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
(j)
Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the
purpose for which the investments were acquired. Management determines the classification of its investments at initial
recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after the
reporting date which are classified as non-current assets. Loans and receivables are measured at amortised cost and are
included in trade and other receivables in the statement of financial position.
(k)
Investment in joint venture
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Group’s investment in a joint venture is accounted for using the equity method.
Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition
date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor
individually tested for impairment.
The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. Any change in
other comprehensive income of those investees is presented as part of the Group’s other comprehensive income. In
addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its
share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from
transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint
venture.
The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on
its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that
the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of the joint venture and its carrying value, then recognises the loss as
‘Share of profit of the equity accounted investment’ in profit or loss.
Upon loss of joint control over a joint venture, the Group measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
(l) Plant and equipment
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
Depreciation of plant and equipment is calculated using the straight-line basis so as to write off the net cost or other
revalued amount of each asset over its expected useful life to its estimated residual value.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
ordinary shares.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 2(g)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit
or loss. When revalued assets are sold, it is Group’s policy to transfer the amounts included in other reserves in respect of
those assets to retained earnings.
DANAKALI LIMITED
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Acquired exploration and evaluation costs are capitalised. Ongoing exploration and evaluation costs are expensed in the
(m) Exploration and evaluation costs
period they are incurred.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period
which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(o) Employee benefits
(i) Wages and salaries, annual leave and long service leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date.
(ii) Share-based payments
transactions’) refer to note 22.
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for options or rights over shares (‘equity-settled
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which
they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing
model. The fair value of performance rights determined by consideration of the Company’s share price at the grant date.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the
extent to which the vesting period has expired and (ii) the number of options or rights that, in the opinion of the directors of
the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No
adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
were a modification of the original award.
(p)
Issued capital
(q) Earnings per share
(i) Basic earnings per share
(ii) Diluted earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to owners of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial period, adjusted for bonus elements in ordinary shares issued during the period.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
(r) Critical accounting judgements, estimates and assumptions
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements are:
DANAKALI LIMITED
ABN 56 097 904 302
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
(j)
Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the
purpose for which the investments were acquired. Management determines the classification of its investments at initial
recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after the
reporting date which are classified as non-current assets. Loans and receivables are measured at amortised cost and are
included in trade and other receivables in the statement of financial position.
(k)
Investment in joint venture
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Group’s investment in a joint venture is accounted for using the equity method.
Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition
date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor
individually tested for impairment.
The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. Any change in
other comprehensive income of those investees is presented as part of the Group’s other comprehensive income. In
addition, when there has been a change recognised directly in the equity of the joint venture, the Group recognises its
share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from
transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint
venture.
The financial statements of the joint venture are prepared for the same reporting period as the Group. When necessary,
adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on
its investment in its joint venture. At each reporting date, the Group determines whether there is objective evidence that
the investment in the joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of the joint venture and its carrying value, then recognises the loss as
‘Share of profit of the equity accounted investment’ in profit or loss.
Upon loss of joint control over a joint venture, the Group measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
(l) Plant and equipment
attributable to the acquisition of the items.
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised
when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they
are incurred.
Depreciation of plant and equipment is calculated using the straight-line basis so as to write off the net cost or other
revalued amount of each asset over its expected useful life to its estimated residual value.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
(m) Exploration and evaluation costs
Acquired exploration and evaluation costs are capitalised. Ongoing exploration and evaluation costs are expensed in the
period they are incurred.
(n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period
which are unpaid. The amounts are unsecured, non-interest bearing and are paid on normal commercial terms.
(o) Employee benefits
(i) Wages and salaries, annual leave and long service leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date
and are measured at the amounts expected to be paid when the liabilities are settled.
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date.
(ii) Share-based payments
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for options or rights over shares (‘equity-settled
transactions’) refer to note 22.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which
they are granted. The fair value of options is determined by an internal valuation using a Black-Scholes option pricing
model. The fair value of performance rights determined by consideration of the Company’s share price at the grant date.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the
extent to which the vesting period has expired and (ii) the number of options or rights that, in the opinion of the directors of
the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No
adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they
were a modification of the original award.
(p)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
(q) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to owners of the Company, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial period, adjusted for bonus elements in ordinary shares issued during the period.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
(r) Critical accounting judgements, estimates and assumptions
than its estimated recoverable amount (note 2(g)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit
or loss. When revalued assets are sold, it is Group’s policy to transfer the amounts included in other reserves in respect of
those assets to retained earnings.
The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements are:
DANAKALI LIMITED
ABN 56 097 904 302
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
(i) Impairment
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to
the particular asset that may lead to impairment. The major assets are tested for impairment when there is objective
evidence of impairment. As at 31 December 2017 the Group assessed that, no indicator of impairment existed (31
December 2016: Nil).
(ii) Interest in Joint Arrangement and measurement of loan receivable
The Group accounts for its 50% interest in CMSC as a joint venture using the equity method.
Danakali holds 3 of 5 CMSC Board seats, however in reference to certain material decisions which are reserved for Majority
Shareholder approval it has been determined that the interest in CMSC is more appropriately classified as an interest in a
joint venture and has been accounted for using the equity method. These shareholder voting rights are considered to be
substantive rights particularly in the early stages of the project development.
The assumptions applied in accounting for the loan to the joint venture includes determining the timing of cash receipts
and the discount rate applied. At 31 December 2017 a discount rate of 25% was applied, which is consistent with previous
years. The timing of cash receipts has been adjusted according to management’s best estimate and it is currently estimated
that receipts commence in the December 2020 quarter.
Further context is detailed in note 10.
(iii) Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value of options is determined by an internal valuation using a
Black-Scholes option pricing model, using the assumptions detailed in note 22.
The fair value of performance rights is determined by the share price at the date of valuation and consideration of the
probability of the vesting condition being met.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated
Statement of Financial Position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(t) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates
to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
(u) Application of new accounting standards
All new accounting standards or amendments applicable to the Group and effective at 1 January 2017 have been adopted.
The adoption of these new and amended standards and interpretations did not result in any significant changes to the
Group’s accounting policies.
The following relevant standards and interpretations have been applied for the first time for the year ended 31 December
2017:
Reference
Title
Summary
AASB 2016-1
AASB 2016-2
Amendments to Australian
Accounting Standards –
Recognition of Deferred
Tax Assets for Unrealised
Losses
Amendments to Australian
Accounting Standards –
Disclosure Initiative:
Amendments to AASB 107
This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income
Taxes (August 2015) to clarify the requirements on recognition of deferred tax assets for
unrealised losses on debt instruments measured at fair value.
This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require
entities preparing financial statements in accordance with Tier 1 reporting requirements
to provide disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both changes arising from cash flows
and non-cash changes.
Reference
Title
Summary
Annual
Annual Improvements to
This amending standard addresses the following:
Improvements
IFRS Standards 2014–
2016 Cycle
to IFRS
Standards
2014–2016
Cycle
•
•
•
IFRS 12 Disclosure of Interests in Other Entities Clarification of the scope of the
Standard (effective date 1 January 2017)
IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion
of short-term exemptions for first-time adopters (effective date 1 January 2018)
IAS 28 Investments in Associates and Joint Ventures - Measuring an associate or
joint venture at fair value. (effective date 1 January 2018)
(v) New accounting standards and interpretations not yet effective
Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not been
adopted by the Group for the annual reporting year ended 31 December 2017 are outlined in the table below. The potential
effect of these Standards is yet to be fully determined.
Reference
Title
Summary
Application date
of standard*
for Group
AASB 9
Financial Instruments
AASB 9 (December 2014) is a new standard which
1 January 2018
1 January 2018
replaces AASB 139. This new version supersedes
AASB 9 issued in December 2009 (as amended)
and AASB 9 (issued in December 2010) and
includes a model for classification and
measurement, a single, forward-looking ‘expected
loss’ impairment model and a substantially-
reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning
on or after 1 January 2018. However, the Standard
is available for early adoption. The own credit
changes can be early adopted in isolation without
otherwise changing the accounting for financial
instruments.
Classification and measurement
AASB 9 includes requirements for a simpler
approach for classification and measurement of
financial assets compared with the requirements of
AASB 139. There are also some changes made in
relation to financial liabilities.
The main changes are described below.
Financial assets
a) Financial assets that are debt instruments will
be classified based on (1) the objective of the
entity's business model for managing the
financial assets; (2) the characteristics of the
contractual cash flows give rise to cash flows
that are solely payments of principle and
interest (“SPPI test”).
b) Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are not
held for trading in other comprehensive
income. Dividends in respect of these
investments that are a return on investment
can be recognised in profit or loss and there is
no impairment or recycling on disposal of the
instrument.
c) Financial assets can be designated and
measured at fair value through profit or loss at
initial recognition if doing so eliminates or
significantly reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising
the gains and losses on them, on different
bases.
Financial liabilities
Changes introduced by AASB 9 in respect of
financial liabilities are limited to the measurement
DANAKALI LIMITED
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
(i) Impairment
December 2016: Nil).
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and to
the particular asset that may lead to impairment. The major assets are tested for impairment when there is objective
evidence of impairment. As at 31 December 2017 the Group assessed that, no indicator of impairment existed (31
(ii) Interest in Joint Arrangement and measurement of loan receivable
The Group accounts for its 50% interest in CMSC as a joint venture using the equity method.
Danakali holds 3 of 5 CMSC Board seats, however in reference to certain material decisions which are reserved for Majority
Shareholder approval it has been determined that the interest in CMSC is more appropriately classified as an interest in a
joint venture and has been accounted for using the equity method. These shareholder voting rights are considered to be
substantive rights particularly in the early stages of the project development.
The assumptions applied in accounting for the loan to the joint venture includes determining the timing of cash receipts
and the discount rate applied. At 31 December 2017 a discount rate of 25% was applied, which is consistent with previous
years. The timing of cash receipts has been adjusted according to management’s best estimate and it is currently estimated
that receipts commence in the December 2020 quarter.
Further context is detailed in note 10.
(iii) Share based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value of options is determined by an internal valuation using a
Black-Scholes option pricing model, using the assumptions detailed in note 22.
The fair value of performance rights is determined by the share price at the date of valuation and consideration of the
probability of the vesting condition being met.
(s) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated
Statement of Financial Position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(t) Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates
to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
(u) Application of new accounting standards
All new accounting standards or amendments applicable to the Group and effective at 1 January 2017 have been adopted.
The adoption of these new and amended standards and interpretations did not result in any significant changes to the
The following relevant standards and interpretations have been applied for the first time for the year ended 31 December
Group’s accounting policies.
2017:
Reference
Title
Summary
AASB 2016-1
Amendments to Australian
This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income
Taxes (August 2015) to clarify the requirements on recognition of deferred tax assets for
unrealised losses on debt instruments measured at fair value.
Accounting Standards –
Recognition of Deferred
Tax Assets for Unrealised
Losses
AASB 2016-2
Amendments to Australian
This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require
Accounting Standards –
entities preparing financial statements in accordance with Tier 1 reporting requirements
Disclosure Initiative:
to provide disclosures that enable users of financial statements to evaluate changes in
Amendments to AASB 107
liabilities arising from financing activities, including both changes arising from cash flows
and non-cash changes.
Reference
Title
Summary
Annual
Improvements
to IFRS
Standards
2014–2016
Cycle
Annual Improvements to
IFRS Standards 2014–
2016 Cycle
This amending standard addresses the following:
•
IFRS 12 Disclosure of Interests in Other Entities Clarification of the scope of the
Standard (effective date 1 January 2017)
•
•
IFRS 1 First-time Adoption of International Financial Reporting Standards - Deletion
of short-term exemptions for first-time adopters (effective date 1 January 2018)
IAS 28 Investments in Associates and Joint Ventures - Measuring an associate or
joint venture at fair value. (effective date 1 January 2018)
(v) New accounting standards and interpretations not yet effective
Australian Accounting Standards that have recently been issued or amended but are not yet effective and have not been
adopted by the Group for the annual reporting year ended 31 December 2017 are outlined in the table below. The potential
effect of these Standards is yet to be fully determined.
Application date
of standard*
for Group
1 January 2018
1 January 2018
Reference
Title
Summary
AASB 9
Financial Instruments
AASB 9 (December 2014) is a new standard which
replaces AASB 139. This new version supersedes
AASB 9 issued in December 2009 (as amended)
and AASB 9 (issued in December 2010) and
includes a model for classification and
measurement, a single, forward-looking ‘expected
loss’ impairment model and a substantially-
reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning
on or after 1 January 2018. However, the Standard
is available for early adoption. The own credit
changes can be early adopted in isolation without
otherwise changing the accounting for financial
instruments.
Classification and measurement
AASB 9 includes requirements for a simpler
approach for classification and measurement of
financial assets compared with the requirements of
AASB 139. There are also some changes made in
relation to financial liabilities.
The main changes are described below.
Financial assets
a) Financial assets that are debt instruments will
be classified based on (1) the objective of the
entity's business model for managing the
financial assets; (2) the characteristics of the
contractual cash flows give rise to cash flows
that are solely payments of principle and
interest (“SPPI test”).
b) Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are not
held for trading in other comprehensive
income. Dividends in respect of these
investments that are a return on investment
can be recognised in profit or loss and there is
no impairment or recycling on disposal of the
instrument.
c) Financial assets can be designated and
measured at fair value through profit or loss at
initial recognition if doing so eliminates or
significantly reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising
the gains and losses on them, on different
bases.
Financial liabilities
Changes introduced by AASB 9 in respect of
financial liabilities are limited to the measurement
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Reference
Title
Summary
Application date
of standard*
for Group
Reference
Title
Summary
Application date
of standard*
for Group
of liabilities designated at fair value through profit
or loss (FVPL) using the fair value option.
Where the fair value option is used for financial
liabilities, the change in fair value is to be
accounted for as follows:
• The change attributable to changes in credit
risk are presented in other comprehensive
income (OCI)
• The remaining change is presented in profit or
loss
AASB 9 also removes the volatility in profit or loss
that was caused by changes in the credit risk of
liabilities elected to be measured at fair value. This
change in accounting means that gains or losses
attributable to changes in the entity’s own credit
risk would be recognised in OCI. These amounts
recognised in OCI are not recycled to profit or loss
if the liability is ever repurchased at a discount.
Impairment
The final version of AASB 9 introduces a new
expected-loss impairment model that will require
more timely recognition of expected credit losses.
Specifically, the new Standard requires entities to
account for expected credit losses from when
financial instruments are first recognised and to
recognise full lifetime expected losses on a more
timely basis.
Hedge accounting
Amendments to AASB 9 (December 2009 and
2010 editions and AASB 2013-9) issued in
December 2013 included the new hedge
accounting requirements, including changes to
hedge effectiveness testing, treatment of hedging
costs, risk components that can be hedged and
disclosures.
Consequential amendments were also made to
other standards as a result of AASB 9.
Danakali assessment
In assessing the classification and measurement
of the Loan to Colluli Mining Share Company (see
note 8) under AASB 9, management is in the
process of determining whether the current policy
of carrying the loan at amortised cost will be
appropriate. Should the loan fail the SSPI test due
to the non-recourse nature of the loan, it will be
classified as a financial asset at fair value through
profit and loss.
AASB 15 Revenue from Contracts with Customers
replaces the existing revenue recognition
standards AASB 111 Construction Contracts,
AASB 118 Revenue and related Interpretations
(Interpretation 13 Customer Loyalty Programmes,
Interpretation 15 Agreements for the Construction
of Real Estate, Interpretation 18 Transfers of
Assets from Customers, Interpretation 131
Revenue—Barter Transactions Involving
Advertising Services and Interpretation 1042
Subscriber Acquisition Costs in the
Telecommunications Industry). AASB 15
incorporates the requirements of IFRS 15
Revenue from Contracts with Customers issued by
the International Accounting Standards Board
(IASB) and developed jointly with the US Financial
Accounting Standards Board (FASB).
AASB 15 specifies the accounting treatment for
revenue arising from contracts with customers
(except for contracts within the scope of other
accounting standards such as leases or financial
AASB 15
Revenue from Contracts
with Customers
AASB 2014-10
Amendments to Australian
The amendments clarify that a full gain or loss is
1 January 2022
1 January 2022
Accounting Standards –
Sale or Contribution of
Assets between an
recognised when a transfer to an associate or joint
venture involves a business as defined in AASB 3
Business Combinations. Any gain or loss resulting
Investor and its Associate
from the sale or contribution of assets that does
or Joint Venture
1 January 2018
1 January 2018
AASB 16
Leases
The key features of AASB 16 are as follows:
1 January 2019
1 January 2019
instruments). The core principle of AASB 15 is that
an entity recognises revenue to depict the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange for those
goods or services. An entity recognises revenue in
accordance with that core principle by applying the
following steps:
a) Step 1: Identify the contract(s) with a customer
b) Step 2: Identify the performance obligations in
the contract
c) Step 3: Determine the transaction price
d) Step 4: Allocate the transaction price to the
performance obligations in the contract
e) Step 5: Recognise revenue when (or as) the
entity satisfies a performance obligation
AASB 2015-8 amended the AASB 15 effective
date so it is now effective for annual reporting
periods commencing on or after 1 January 2018.
Early application is permitted. AASB 2014-5
incorporates the consequential amendments to a
number Australian Accounting Standards
(including Interpretations) arising from the
issuance of AASB 15. AASB 2016-3 Amendments
to Australian Accounting Standards – Clarifications
to AASB 15 amends AASB 15 to clarify the
requirements on identifying performance
obligations, principal versus agent considerations
and the timing of recognising revenue from
granting a licence and provides further practical
expedients on transition to AASB 15.
not constitute a business, however, is recognised
only to the extent of unrelated investors’ interests
in the associate or joint venture.
AASB 2015-10 deferred the mandatory effective
date (application date) of AASB 2014-10 so that
the amendments were required to be applied for
annual reporting periods beginning on or after 1
January 2018 instead of 1 January 2016. AASB
2017-5 further defers the effective date of the
amendments made in AASB 2014-10 to periods
beginning on or after 1 January 2022.
Lessee accounting
• Lessees are required to recognise assets and
liabilities for all leases with a term of more than
12 months, unless the underlying asset is of
low value.
• Assets and liabilities arising from a lease are
initially measured on a present value basis.
The measurement includes non-cancellable
lease payments (including inflation-linked
payments), and also includes payments to be
made in optional periods if the lessee is
reasonably certain to exercise an option to
extend the lease, or not to exercise an option
to terminate the lease.
• AASB 16 contains disclosure requirements for
lessees.
Lessor accounting
• AASB 16 substantially carries forward the
lessor accounting requirements in AASB 117.
DANAKALI LIMITED
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Reference
Title
Summary
Reference
Title
Summary
Application date
of standard*
for Group
Application date
of standard*
for Group
of liabilities designated at fair value through profit
or loss (FVPL) using the fair value option.
Where the fair value option is used for financial
liabilities, the change in fair value is to be
accounted for as follows:
• The change attributable to changes in credit
risk are presented in other comprehensive
• The remaining change is presented in profit or
income (OCI)
loss
AASB 9 also removes the volatility in profit or loss
that was caused by changes in the credit risk of
liabilities elected to be measured at fair value. This
change in accounting means that gains or losses
attributable to changes in the entity’s own credit
risk would be recognised in OCI. These amounts
recognised in OCI are not recycled to profit or loss
if the liability is ever repurchased at a discount.
Impairment
The final version of AASB 9 introduces a new
expected-loss impairment model that will require
more timely recognition of expected credit losses.
Specifically, the new Standard requires entities to
account for expected credit losses from when
financial instruments are first recognised and to
recognise full lifetime expected losses on a more
timely basis.
Hedge accounting
Amendments to AASB 9 (December 2009 and
2010 editions and AASB 2013-9) issued in
December 2013 included the new hedge
accounting requirements, including changes to
hedge effectiveness testing, treatment of hedging
costs, risk components that can be hedged and
disclosures.
Consequential amendments were also made to
other standards as a result of AASB 9.
Danakali assessment
In assessing the classification and measurement
of the Loan to Colluli Mining Share Company (see
note 8) under AASB 9, management is in the
process of determining whether the current policy
of carrying the loan at amortised cost will be
appropriate. Should the loan fail the SSPI test due
to the non-recourse nature of the loan, it will be
classified as a financial asset at fair value through
profit and loss.
replaces the existing revenue recognition
standards AASB 111 Construction Contracts,
AASB 118 Revenue and related Interpretations
(Interpretation 13 Customer Loyalty Programmes,
Interpretation 15 Agreements for the Construction
of Real Estate, Interpretation 18 Transfers of
Assets from Customers, Interpretation 131
Revenue—Barter Transactions Involving
Advertising Services and Interpretation 1042
Subscriber Acquisition Costs in the
Telecommunications Industry). AASB 15
incorporates the requirements of IFRS 15
Revenue from Contracts with Customers issued by
the International Accounting Standards Board
(IASB) and developed jointly with the US Financial
Accounting Standards Board (FASB).
AASB 15 specifies the accounting treatment for
revenue arising from contracts with customers
(except for contracts within the scope of other
accounting standards such as leases or financial
instruments). The core principle of AASB 15 is that
an entity recognises revenue to depict the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which the
entity expects to be entitled in exchange for those
goods or services. An entity recognises revenue in
accordance with that core principle by applying the
following steps:
a) Step 1: Identify the contract(s) with a customer
b) Step 2: Identify the performance obligations in
the contract
c) Step 3: Determine the transaction price
d) Step 4: Allocate the transaction price to the
performance obligations in the contract
e) Step 5: Recognise revenue when (or as) the
entity satisfies a performance obligation
AASB 2015-8 amended the AASB 15 effective
date so it is now effective for annual reporting
periods commencing on or after 1 January 2018.
Early application is permitted. AASB 2014-5
incorporates the consequential amendments to a
number Australian Accounting Standards
(including Interpretations) arising from the
issuance of AASB 15. AASB 2016-3 Amendments
to Australian Accounting Standards – Clarifications
to AASB 15 amends AASB 15 to clarify the
requirements on identifying performance
obligations, principal versus agent considerations
and the timing of recognising revenue from
granting a licence and provides further practical
expedients on transition to AASB 15.
The amendments clarify that a full gain or loss is
recognised when a transfer to an associate or joint
venture involves a business as defined in AASB 3
Business Combinations. Any gain or loss resulting
from the sale or contribution of assets that does
not constitute a business, however, is recognised
only to the extent of unrelated investors’ interests
in the associate or joint venture.
AASB 2015-10 deferred the mandatory effective
date (application date) of AASB 2014-10 so that
the amendments were required to be applied for
annual reporting periods beginning on or after 1
January 2018 instead of 1 January 2016. AASB
2017-5 further defers the effective date of the
amendments made in AASB 2014-10 to periods
beginning on or after 1 January 2022.
1 January 2022
1 January 2022
AASB 2014-10
Amendments to Australian
Accounting Standards –
Sale or Contribution of
Assets between an
Investor and its Associate
or Joint Venture
AASB 16
Leases
The key features of AASB 16 are as follows:
1 January 2019
1 January 2019
Lessee accounting
• Lessees are required to recognise assets and
liabilities for all leases with a term of more than
12 months, unless the underlying asset is of
low value.
• Assets and liabilities arising from a lease are
initially measured on a present value basis.
The measurement includes non-cancellable
lease payments (including inflation-linked
payments), and also includes payments to be
made in optional periods if the lessee is
reasonably certain to exercise an option to
extend the lease, or not to exercise an option
to terminate the lease.
• AASB 16 contains disclosure requirements for
lessees.
Lessor accounting
• AASB 16 substantially carries forward the
lessor accounting requirements in AASB 117.
AASB 15
Revenue from Contracts
with Customers
AASB 15 Revenue from Contracts with Customers
1 January 2018
1 January 2018
DANAKALI LIMITED
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Reference
Title
Summary
Application date
of standard*
for Group
Reference
Title
Summary
Application date
of standard*
for Group
Accordingly, a lessor continues to classify its
leases as operating leases or finance leases,
and to account for those two types of leases
differently.
• AASB 16 also requires enhanced disclosures
to be provided by lessors that will improve
information disclosed about a lessor’s risk
exposure, particularly to residual value risk.
AASB 16 supersedes:
a) AASB 117 Leases
b) Interpretation 4 Determining whether an
Arrangement contains a Lease
c) SIC-15 Operating Leases—Incentives
d) SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of a
Lease
The new standard will be effective for annual
periods beginning on or after 1 January 2019.
Early application is permitted, provided the new
revenue standard, AASB 15 Revenue from
Contracts with Customers, has been applied, or is
applied at the same date as AASB 16.
This standard amends AASB 2 Share-based
Payment, clarifying how to account for certain
types of share-based payment transactions. The
amendments provide requirements on the
accounting for:
• The effects of vesting and non-vesting
conditions on the measurement of cash-settled
share-based payments
• Share-based payment transactions with a net
settlement feature for withholding tax
obligations
• A modification to the terms and conditions of a
share-based payment that changes the
classification of the transaction from cash-
settled to equity-settled
The Interpretation clarifies that in determining the
spot exchange rate to use on initial recognition of
the related asset, expense or income (or part of it)
on the derecognition of a non-monetary asset or
non-monetary liability relating to advance
consideration, the date of the transaction is the
date on which an entity initially recognises the
non-monetary asset or non-monetary liability
arising from the advance consideration. If there are
multiple payments or receipts in advance, then the
entity must determine a date of the transaction for
each payment or receipt of advance consideration.
The Interpretation clarifies the application of the
recognition and measurement criteria in AASB 112
Income Taxes when there is uncertainty over
income tax treatments. The Interpretation
specifically addresses the following:
• Whether an entity considers uncertain tax
treatments separately
• The assumptions an entity makes about the
examination of tax treatments by taxation
authorities
• How an entity determines taxable profit (tax
loss), tax bases, unused tax losses, unused
tax credits and tax rates
• How an entity considers changes in facts and
circumstances.
1 January 2018
1 January 2018
1 January 2018 1 January 2018
1 January 2019
1 January 2019
AASB 2016-5
Amendments to Australian
Accounting Standards –
Classification and
Measurement of Share-
based Payment
Transactions
AASB
Interpretation
22
Foreign Currency
Transactions and Advance
Consideration
Uncertainty over Income
Tax Treatments
AASB
Interpretation
23, and
relevant
amending
standards
AASB 2017-7 Amendments to Australian
This Standard amends AASB 128 Investments in
1 January 2019 1 January 2019
Accounting Standards –
Associates and Joint Ventures to clarify that an
Long-term Interests in
Associates and Joint
Ventures
Not yet issued
Annual Improvements to
The amendments clarify certain requirements in:
1 January 2019 1 January 2019
by the AASB
IFRS Standards 2015-
2017 Cycle
entity is required to account for long-term interests
in an associate or joint venture, which in substance
form part of the net investment in the associate or
joint venture but to which the equity method is not
applied, using AASB 9 Financial Instruments
before applying the loss allocation and impairment
requirements in AASB 128.
•
IFRS 3 Business Combinations and IFRS 11
Joint Arrangements - previously held interest in
a joint operation
•
IAS 12 Income Taxes - income tax
consequences of payments on financial
instruments classified as equity
•
IAS 23 Borrowing Costs - borrowing costs
eligible for capitalisation.
3. SEGMENT INFORMATION
The Group operates in the mining industry in Eritrea. For management purposes, the Group is organised into one main
operating segment which involves the exploration of minerals in Eritrea. All of the Group’s activities are interrelated and
discrete financial information is reported to the Board (Chief Operating Decision Maker) as a single segment.
Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the Group as a whole.
The Group’s non-current assets are geographically located in Eritrea.
4. REVENUE
Interest
5. EXPENSES
Depreciation
Employee Benefits
6. CASH
Cash at bank and in hand
Profit /(loss) before income tax includes the following specific expenses:
Lease payments relating to operating leases
Share based payment expense
221,189
109,537
2017
$
2017
$
2016
$
2016
$
144,152
988,573
3,588
1,535,460
116,691
1,290,347
10,131
1,181,957
2017
$
2016
$
15,559,980
10,904,760
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
DANAKALI LIMITED
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Reference
Title
Summary
Reference
Title
Summary
Application date
of standard*
for Group
AASB 2017-7 Amendments to Australian
Accounting Standards –
Long-term Interests in
Associates and Joint
Ventures
This Standard amends AASB 128 Investments in
Associates and Joint Ventures to clarify that an
entity is required to account for long-term interests
in an associate or joint venture, which in substance
form part of the net investment in the associate or
joint venture but to which the equity method is not
applied, using AASB 9 Financial Instruments
before applying the loss allocation and impairment
requirements in AASB 128.
Application date
of standard*
for Group
1 January 2019 1 January 2019
Not yet issued
by the AASB
Annual Improvements to
IFRS Standards 2015-
2017 Cycle
The amendments clarify certain requirements in:
1 January 2019 1 January 2019
•
•
•
IFRS 3 Business Combinations and IFRS 11
Joint Arrangements - previously held interest in
a joint operation
IAS 12 Income Taxes - income tax
consequences of payments on financial
instruments classified as equity
IAS 23 Borrowing Costs - borrowing costs
eligible for capitalisation.
3. SEGMENT INFORMATION
The Group operates in the mining industry in Eritrea. For management purposes, the Group is organised into one main
operating segment which involves the exploration of minerals in Eritrea. All of the Group’s activities are interrelated and
discrete financial information is reported to the Board (Chief Operating Decision Maker) as a single segment.
Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements of the Group as a whole.
The Group’s non-current assets are geographically located in Eritrea.
4. REVENUE
Interest
5. EXPENSES
Profit /(loss) before income tax includes the following specific expenses:
Lease payments relating to operating leases
Share based payment expense
Depreciation
Employee Benefits
6. CASH
Cash at bank and in hand
2017
$
2016
$
221,189
109,537
2017
$
2016
$
144,152
988,573
3,588
1,535,460
116,691
1,290,347
10,131
1,181,957
2017
$
2016
$
15,559,980
10,904,760
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
Accordingly, a lessor continues to classify its
leases as operating leases or finance leases,
and to account for those two types of leases
differently.
• AASB 16 also requires enhanced disclosures
to be provided by lessors that will improve
information disclosed about a lessor’s risk
exposure, particularly to residual value risk.
AASB 16 supersedes:
a) AASB 117 Leases
b) Interpretation 4 Determining whether an
Arrangement contains a Lease
c) SIC-15 Operating Leases—Incentives
d) SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of a
Lease
The new standard will be effective for annual
periods beginning on or after 1 January 2019.
Early application is permitted, provided the new
revenue standard, AASB 15 Revenue from
Contracts with Customers, has been applied, or is
applied at the same date as AASB 16.
• The effects of vesting and non-vesting
conditions on the measurement of cash-settled
share-based payments
• Share-based payment transactions with a net
settlement feature for withholding tax
obligations
• A modification to the terms and conditions of a
share-based payment that changes the
classification of the transaction from cash-
settled to equity-settled
the related asset, expense or income (or part of it)
on the derecognition of a non-monetary asset or
non-monetary liability relating to advance
consideration, the date of the transaction is the
date on which an entity initially recognises the
non-monetary asset or non-monetary liability
arising from the advance consideration. If there are
multiple payments or receipts in advance, then the
entity must determine a date of the transaction for
each payment or receipt of advance consideration.
Income Taxes when there is uncertainty over
income tax treatments. The Interpretation
specifically addresses the following:
• Whether an entity considers uncertain tax
treatments separately
• The assumptions an entity makes about the
examination of tax treatments by taxation
authorities
• How an entity determines taxable profit (tax
loss), tax bases, unused tax losses, unused
tax credits and tax rates
• How an entity considers changes in facts and
circumstances.
AASB 2016-5
Amendments to Australian
This standard amends AASB 2 Share-based
1 January 2018
1 January 2018
Accounting Standards –
Payment, clarifying how to account for certain
Classification and
types of share-based payment transactions. The
Measurement of Share-
amendments provide requirements on the
based Payment
Transactions
accounting for:
AASB
Foreign Currency
The Interpretation clarifies that in determining the
1 January 2018 1 January 2018
Interpretation
Transactions and Advance
spot exchange rate to use on initial recognition of
22
Consideration
AASB
Uncertainty over Income
The Interpretation clarifies the application of the
1 January 2019
1 January 2019
Interpretation
Tax Treatments
recognition and measurement criteria in AASB 112
23, and
relevant
amending
standards
DANAKALI LIMITED
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
7.
INCOME TAX
(a) Income tax recognised in profit or loss
Current tax
Deferred tax
Total tax benefit/(expense)
2017
$
2016
$
-
-
-
-
-
-
(b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
(6,839,936)
(4,925,558)
Prima facie tax benefit at the Australian tax rate of 27.5% (2016: 30%)
(1,880,982)
(1,477,667)
9. PLANT AND EQUIPMENT
from third party secured lenders, under which CMSC may enter into in order to fund the Project Development Capital. For
accounting purposes, the value of the loan has been discounted by applying an effective interest rate of 25%.
During the year ended 31 December 2017, the repayment profile of the receivable was updated to consider the results
generated by the completion of the Front-End Engineering Design (“FEED”) on 29 January 2018 and timing of the
completion of construction. This resulted in a loss on the re-measurement of the loan amounting to $216,909 (see note
10).
During the year ended 31 December 2016 the repayment profile of the receivable was updated to consider the results
generated by the completion of the definitive feasibility study on 30 November 2015 and timing of the completion of
construction. This resulted in a loss on the re-measurement of the loan amounting to $2,812,064 (see note 10).
The undiscounted underlying loan balance at 31 December 2017 is $27,176,517 (31 December 2016: $24,993,066).
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Share-based payments
Share of net loss of equity accounted associate
Accretion relating to the unwinding of discount on joint venture loan
Movements in unrecognised temporary differences and tax effect of current
year tax losses:
Income tax expense/(benefit)
271,858
1,405,548
(315,115)
518,691
-
387,104
210,133
(466,478)
1,346,908
-
(c) Deferred Income Tax
Deferred income tax at 31 December relates to the following:
Deferred Tax Liabilities:
Interest receivable
Deferred Tax Assets:
Provision for employee entitlements
Accrued expenditure
s.40-880 expenditure
Revenue tax losses
Deferred tax assets not brought to
account as realisation is not probable
Statement of
Financial Position
2017
$
2016
$
Statement of
Comprehensive Income
2016
2017
$
$
-
(3,151)
3,151
(1,372)
53,358
12,309
270,029
4,248,669
53,145
6,600
182,609
4,660,393
(4,584,365)
-
(4,899,596)
-
213
5,709
87,420
(411,724)
315,231
-
18,805
600
182,286
699,581
(899,900)
-
8. TRADE AND OTHER RECEIVABLES
Current
Net GST receivable
Accrued interest
Other receivables
Other receivables
Security bonds
Non-Current
Loan to Colluli Mining Share Company
2017
$
2016
$
112,705
-
75
2,291
59,250
174,321
28,546
10,504
652
2,283
52,000
93,985
12,216,952
12,216,952
9,519,503
9,519,503
Danakali’s wholly owned subsidiary, STB Eritrea Pty Ltd, is presently funding the Colluli Mining Share Company (‘CMSC’)
for the development of the Colluli Potash Project and 50% of the funding is represented in the form of a shareholder loan.
Repayment of this loan, as defined in the CMSC Shareholders Agreement, will be made preferentially from future operating
cash flows. The shareholder loan is denominated in USD, non-interest bearing, unsecured and subordinate to any loans
Plant and equipment
Gross carrying value – at cost
Accumulated depreciation
Net book amount
Plant and equipment
Opening net book amount 1 January
Additions
Disposals
Depreciation charge
Closing net book amount 31 December
2017
$
2016
$
58,437
(43,327)
15,110
7,920
10,778
-
(3,588)
15,110
47,659
(39,739)
7,920
16,412
3,122
(1,483)
(10,131)
7,920
10. INVESTMENT IN JOINT VENTURE
The Group has an interest in the following joint arrangement:
Project
Activities
Equity Interest
Carrying Value
2017
%
2016
%
2017
$
2016
$
Colluli Potash Mineral Exploration
50
50
13,811,946
13,502,312
The group acquired an interest in Colluli Mining Share Company (“CMSC”) at the date of its incorporation on 5 March 2014.
This acquisition was in accordance with the Shareholders Agreement entered into with the Eritrean National Mining
Corporation (“ENAMCO”) and executed in November 2013. CMSC was incorporated in Eritrea, in accordance with the
Shareholders Agreement, to hold the Colluli project with Danakali and ENAMCO holding 50% of the equity each.
Under the terms of the Shareholders Agreement, at the date of incorporation of CMSC, consideration for the acquisition of
shares in CMSC equated to half of the allowable historical exploration costs transferred to CMSC by STB Eritrea Pty Ltd,
a wholly owned subsidiary of Danakali Limited. The balance of the allowable historic exploration costs transferred to CMSC
are recoverable via a shareholder loan account (see note 8).
The Group’s 50% interest in CMSC is accounted for as a joint venture using the equity method. The following tables
summarise the financial information of the Group’s investment in CMSC at 31 December 2017.
Reconciliation of movement in investments accounted for using the
equity method:
Opening carrying amount at 1 January
Additional investment during the year
Share of net losses for the year
Other comprehensive income for the year
Closing carrying amount at 31 December
2017
$
2016
$
13,502,312
6,354,472
(5,111,085)
(933,753)
13,811,946
12,064,742
1,868,088
(700,443)
269,925
13,502,312
DANAKALI LIMITED
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ABN 56 097 904 302
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DANAKALI LIMITED
ABN 56 097 904 302
46
Danakali Annual Report 2017DANAKALI LIMITED
7.
INCOME TAX
(a) Income tax recognised in profit or loss
Current tax
Deferred tax
Total tax benefit/(expense)
2017
$
2016
$
-
-
-
-
-
-
(b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
(6,839,936)
(4,925,558)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Share-based payments
Share of net loss of equity accounted associate
Accretion relating to the unwinding of discount on joint venture loan
Movements in unrecognised temporary differences and tax effect of current
year tax losses:
Income tax expense/(benefit)
271,858
1,405,548
(315,115)
518,691
-
387,104
210,133
(466,478)
1,346,908
-
Statement of
Financial Position
2017
$
2016
$
Statement of
Comprehensive Income
2017
$
2016
$
-
(3,151)
3,151
(1,372)
(c) Deferred Income Tax
Deferred income tax at 31 December relates to the following:
Deferred Tax Liabilities:
Interest receivable
Deferred Tax Assets:
Accrued expenditure
s.40-880 expenditure
Revenue tax losses
Provision for employee entitlements
Deferred tax assets not brought to
account as realisation is not probable
53,358
12,309
270,029
4,248,669
53,145
6,600
182,609
4,660,393
(4,584,365)
(4,899,596)
-
-
8. TRADE AND OTHER RECEIVABLES
Current
Net GST receivable
Accrued interest
Other receivables
Other receivables
Security bonds
Non-Current
Loan to Colluli Mining Share Company
213
5,709
87,420
(411,724)
315,231
-
112,705
-
75
2,291
59,250
174,321
18,805
600
182,286
699,581
(899,900)
-
28,546
10,504
652
2,283
52,000
93,985
2017
$
2016
$
12,216,952
12,216,952
9,519,503
9,519,503
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Prima facie tax benefit at the Australian tax rate of 27.5% (2016: 30%)
(1,880,982)
(1,477,667)
9. PLANT AND EQUIPMENT
from third party secured lenders, under which CMSC may enter into in order to fund the Project Development Capital. For
accounting purposes, the value of the loan has been discounted by applying an effective interest rate of 25%.
During the year ended 31 December 2017, the repayment profile of the receivable was updated to consider the results
generated by the completion of the Front-End Engineering Design (“FEED”) on 29 January 2018 and timing of the
completion of construction. This resulted in a loss on the re-measurement of the loan amounting to $216,909 (see note
10).
During the year ended 31 December 2016 the repayment profile of the receivable was updated to consider the results
generated by the completion of the definitive feasibility study on 30 November 2015 and timing of the completion of
construction. This resulted in a loss on the re-measurement of the loan amounting to $2,812,064 (see note 10).
The undiscounted underlying loan balance at 31 December 2017 is $27,176,517 (31 December 2016: $24,993,066).
Plant and equipment
Gross carrying value – at cost
Accumulated depreciation
Net book amount
Plant and equipment
Opening net book amount 1 January
Additions
Disposals
Depreciation charge
Closing net book amount 31 December
2017
$
2016
$
58,437
(43,327)
15,110
7,920
10,778
-
(3,588)
15,110
47,659
(39,739)
7,920
16,412
3,122
(1,483)
(10,131)
7,920
10. INVESTMENT IN JOINT VENTURE
The Group has an interest in the following joint arrangement:
Project
Activities
Equity Interest
Carrying Value
2017
%
2016
%
2017
$
2016
$
Colluli Potash Mineral Exploration
50
50
13,811,946
13,502,312
The group acquired an interest in Colluli Mining Share Company (“CMSC”) at the date of its incorporation on 5 March 2014.
This acquisition was in accordance with the Shareholders Agreement entered into with the Eritrean National Mining
Corporation (“ENAMCO”) and executed in November 2013. CMSC was incorporated in Eritrea, in accordance with the
Shareholders Agreement, to hold the Colluli project with Danakali and ENAMCO holding 50% of the equity each.
Under the terms of the Shareholders Agreement, at the date of incorporation of CMSC, consideration for the acquisition of
shares in CMSC equated to half of the allowable historical exploration costs transferred to CMSC by STB Eritrea Pty Ltd,
a wholly owned subsidiary of Danakali Limited. The balance of the allowable historic exploration costs transferred to CMSC
are recoverable via a shareholder loan account (see note 8).
The Group’s 50% interest in CMSC is accounted for as a joint venture using the equity method. The following tables
summarise the financial information of the Group’s investment in CMSC at 31 December 2017.
Reconciliation of movement in investments accounted for using the
equity method:
Opening carrying amount at 1 January
Additional investment during the year
Share of net losses for the year
Other comprehensive income for the year
Closing carrying amount at 31 December
2017
$
2016
$
13,502,312
6,354,472
(5,111,085)
(933,753)
13,811,946
12,064,742
1,868,088
(700,443)
269,925
13,502,312
Danakali’s wholly owned subsidiary, STB Eritrea Pty Ltd, is presently funding the Colluli Mining Share Company (‘CMSC’)
for the development of the Colluli Potash Project and 50% of the funding is represented in the form of a shareholder loan.
Repayment of this loan, as defined in the CMSC Shareholders Agreement, will be made preferentially from future operating
cash flows. The shareholder loan is denominated in USD, non-interest bearing, unsecured and subordinate to any loans
DANAKALI LIMITED
ABN 56 097 904 302
45
DANAKALI LIMITED
ABN 56 097 904 302
Page 67
46
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
INVESTMENT IN JOINT VENTURE (Cont’d)
10.
Summarised financial information of joint venture:
Financial position (Aligned to Danakali accounting policies)
Current Assets:
Cash
Other current assets
Non-current assets
Fixed Assets
Mineral Property
Current liabilities
Trade & other payables and provisions
Non-current liabilities
Loan from Danakali Ltd
NET ASSETS
Group’s share of net assets
Reconciliation of Equity Investment:
Group’s share of net assets
Share of initial contribution on establishment of the Joint Venture
not recognised by Danakali
Outside shareholder interest in equity contributions by Danakali
Carrying amount at the end of the period
Financial performance
Interest expense relating to the unwinding of discount
Gain on re-measurement of loan
Exploration and evaluation expenditure
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
2017
$
2016
$
43,901
83,582
127,483
108,727
27,610,315
27,719,042
(250,832)
(250,832)
26,653
90,123
116,776
99,346
30,500,729
30,600,075
(151,648)
(151,648)
(12,216,952)
(12,216,952)
(9,519,503)
(9,519,503)
15,378,741
21,045,700
7,689,371
10,522,850
7,689,371
10,522,850
(4,305,107)
(4,305,107)
10,427,682
13,811,946
7,284,569
13,502,312
2017
$
2016
$
(1,362,780)
216,909
(9,076,298)
(10,222,169)
(1,554,925)
2,812,064
(2,658,024)
(1,400,885)
Group’s share of total loss for the year
(5,111,085)
(700,443)
During the year ended 31 December 2017 no dividends were paid or declared (2016: Nil).
There were no material commitments or contingencies within Colluli Mining Share Company for the financial periods above.
During the year ended 31 December 2017, the repayment profile of the receivable was updated to consider the results
generated by the completion of the Front-End Engineering Design (“FEED”) on 29 January 2018 and timing of the
completion of construction. This resulted in a gain on the re-measurement of the loan amounting to $216,909.
During the year ended 31 December 2016, the repayment profile of the loan was changed to consider the results generated
by the completion of the definitive feasibility study on 30 November 2015 and timing of the completion of construction. This
resulted in a gain on the re-measurement of the loan amounting to $2,812,064.
DANAKALI LIMITED
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ABN 56 097 904 302
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DANAKALI LIMITED
ABN 56 097 904 302
11. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
12. PROVISIONS
Current
Employee entitlements
Non-Current
Employee entitlements
2017
$
925,470
103,453
68,164
1,097,087
2016
$
132,827
42,125
35,790
210,742
2017
$
2016
$
166,219
134,701
27,811
194,030
42,450
177,151
Employee entitlements relate to the balance of annual leave and long service leave accrued by the Group’s employees.
Recognition and measurement criteria have been disclosed in note 2.
13. ISSUED CAPITAL
Balance at the beginning of the year
224,494,677
61,758,320
175,772,167
48,983,913
Issued at $0.278 per share on option exercise
4,600,000
1,278,800
400,000
111,200
(a) Share capital
Ordinary shares fully paid
Total issued capital
(b) Movements in ordinary share capital
Issued during the year:
Issued at $0.220 per share
Issued at $0.330 per share
Issued at $0.340 per share on option exercise
Issued at $0.350 per share on option exercise
Issued at $0.405 per share on option exercise
Issued at $0.408 per share on option exercise
Issued at $0.620 per share
Costs of capital raised
2017
2016
Number
of shares
$
Number
of shares
$
251,697,687
75,415,034
224,494,677
61,758,320
251,697,687
75,415,034
224,494,677
61,758,320
-
-
-
24,870,464
5,471,548
20,200,000
6,666,000
2,630,000
622,046
894,200
217,716
1,356,365
351,000
200,000
474,728
142,155
81,600
19,920,645
12,350,800
-
-
-
-
-
-
-
-
-
Issued on vesting of performance rights
775,000
Balance at the end of the year
251,697,687
75,415,034
224,494,677
61,758,320
-
(671,369)
(586,257)
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
-
-
-
-
48
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
10.
INVESTMENT IN JOINT VENTURE (Cont’d)
Summarised financial information of joint venture:
Financial position (Aligned to Danakali accounting policies)
Current Assets:
Cash
Other current assets
Non-current assets
Fixed Assets
Mineral Property
Current liabilities
Non-current liabilities
Loan from Danakali Ltd
NET ASSETS
Group’s share of net assets
Trade & other payables and provisions
Reconciliation of Equity Investment:
Group’s share of net assets
Share of initial contribution on establishment of the Joint Venture
not recognised by Danakali
Outside shareholder interest in equity contributions by Danakali
Carrying amount at the end of the period
Financial performance
Interest expense relating to the unwinding of discount
Gain on re-measurement of loan
Exploration and evaluation expenditure
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
2017
$
2016
$
43,901
83,582
127,483
108,727
27,610,315
27,719,042
(250,832)
(250,832)
26,653
90,123
116,776
99,346
30,500,729
30,600,075
(151,648)
(151,648)
(12,216,952)
(12,216,952)
(9,519,503)
(9,519,503)
15,378,741
21,045,700
7,689,371
10,522,850
7,689,371
10,522,850
(4,305,107)
(4,305,107)
10,427,682
13,811,946
7,284,569
13,502,312
2017
$
2016
$
(1,362,780)
216,909
(9,076,298)
(10,222,169)
(1,554,925)
2,812,064
(2,658,024)
(1,400,885)
Group’s share of total loss for the year
(5,111,085)
(700,443)
During the year ended 31 December 2017 no dividends were paid or declared (2016: Nil).
There were no material commitments or contingencies within Colluli Mining Share Company for the financial periods above.
During the year ended 31 December 2017, the repayment profile of the receivable was updated to consider the results
generated by the completion of the Front-End Engineering Design (“FEED”) on 29 January 2018 and timing of the
completion of construction. This resulted in a gain on the re-measurement of the loan amounting to $216,909.
During the year ended 31 December 2016, the repayment profile of the loan was changed to consider the results generated
by the completion of the definitive feasibility study on 30 November 2015 and timing of the completion of construction. This
resulted in a gain on the re-measurement of the loan amounting to $2,812,064.
11. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
12. PROVISIONS
Current
Employee entitlements
Non-Current
Employee entitlements
2017
$
925,470
103,453
68,164
1,097,087
2016
$
132,827
42,125
35,790
210,742
2017
$
2016
$
166,219
134,701
27,811
194,030
42,450
177,151
Employee entitlements relate to the balance of annual leave and long service leave accrued by the Group’s employees.
Recognition and measurement criteria have been disclosed in note 2.
13. ISSUED CAPITAL
(a) Share capital
Ordinary shares fully paid
Total issued capital
(b) Movements in ordinary share capital
2017
2016
Number
of shares
$
Number
of shares
$
251,697,687
75,415,034
224,494,677
61,758,320
251,697,687
75,415,034
224,494,677
61,758,320
Balance at the beginning of the year
224,494,677
61,758,320
175,772,167
48,983,913
Issued during the year:
Issued at $0.220 per share
Issued at $0.278 per share on option exercise
Issued at $0.330 per share
Issued at $0.340 per share on option exercise
Issued at $0.350 per share on option exercise
Issued at $0.405 per share on option exercise
Issued at $0.408 per share on option exercise
Issued at $0.620 per share
Costs of capital raised
Issued on vesting of performance rights
-
-
24,870,464
5,471,548
4,600,000
1,278,800
400,000
111,200
-
-
1,356,365
351,000
200,000
-
-
474,728
142,155
81,600
19,920,645
12,350,800
-
(671,369)
775,000
-
20,200,000
6,666,000
2,630,000
622,046
894,200
217,716
-
-
-
-
-
-
-
-
(586,257)
-
Balance at the end of the year
251,697,687
75,415,034
224,494,677
61,758,320
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
DANAKALI LIMITED
ABN 56 097 904 302
47
DANAKALI LIMITED
ABN 56 097 904 302
Page 69
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
13. ISSUED CAPITAL (Cont’d)
15. ACCUMULATED LOSSES
(d) Movements in options on issue
Balance at beginning of the year
Issued during the year:
Exercisable at $0.350, on or before 30 March 2018
Exercisable at $0.350, on or before 13 May 2018
Exercisable at $0.405, on or before 13 May 2018
Exercisable at $0.450, on or before 23 June 2018
Exercisable at $0.550, on or before 4 November 2018
Exercisable at $0.550, on or before 31 December 2018
Exercisable at $0.558, on or before 8 August 2019
Exercisable at $0.543, on or before 7 October 2018
Exercisable at $0.940, on or before 19 May 2020
Exercisable at $0.960, on or before 20 June 2019
Exercised, cancelled or expired during the year:
Expired, exercisable at $0.599, on or before 31 January 2016
Expired, exercisable at $0.649, on or before 31 January 2016
Expired, exercisable at $0.949, on or before 31 January 2016
Exercised, exercisable at $0.278 on or before 17 November 2017
Exercised, exercisable at $0.340 on or before 29 November 2016
Expired, exercisable at $0.340, on or before 29 November 2016
Exercised, exercisable at $0.350 on or before 30 March 2018
Exercised, exercisable at $0.350 on or before 13 May 2018
Exercised, exercisable at $0.408 on or before 4 November 2018
Cancelled, exercisable at $0.408 on or before 4 November 2018
Cancelled, exercisable at $0.543 on or before 7 October 2019
Balance at end of the year
14. RESERVES
(a) Reserves
Share-based payments reserve
Balance at beginning of the year
Employee and contractor share options and performance rights (note 22)
Balance at end of the year
Foreign currency translation reserve
Balance at beginning of the year
Currency translation differences arising during the year/ period
Balance at end of the year
Total reserves
(b) Nature and purpose of reserves
2017
Options
2016
Options
25,213,186
16,350,000
-
-
-
-
-
-
-
-
1,440,000
400,000
-
-
-
(4,600,000)
-
-
(1,356,365)
(351,000)
(200,000)
(800,000)
(550,000)
19,195,821
11,635,232
800,000
2,700,000
200,000
750,000
1,000,000
1,000,000
800,000
-
-
(700,000)
(1,000,000)
(1,300,000)
(400,000)
(2,630,000)
(3,370,000)
(622,046)
-
-
-
-
25,213,186
2017
$
2016
$
10,427,536
988,573
11,416,109
2,039,243
(933,753)
1,105,490
9,137,189
1,290,347
10,427,536
1,769,318
269,925
2,039,243
12,521,599
12,466,779
Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of share options and performance rights issued.
Foreign currency translation reserve
The foreign currency translation reserve records the exchange differences arising on translation of a foreign joint
arrangement.
Balance at beginning of the year
Loss for the year
Balance at end of the year
16. STATEMENT OF CASH FLOWS
(a) Reconciliation of net loss after income tax to net cash outflow from
Accretion relating to the unwinding of discount on joint venture loan
Loss on re-measurement of loan to joint venture carried at amortised cost
operating activities
Net loss for the year
Non-Cash Items:
Depreciation of plant and equipment
Loss of disposal of plant and equipment
Share-based payment expense
Share of net loss of associate
Foreign exchange loss/(gain)
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in trade and other payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
(b) Funding of joint venture operations
2017
$
(40,559,411)
(6,839,936)
(47,399,347)
2016
$
(35,633,853)
(4,925,558)
(40,559,411)
2017
$
2016
$
(6,839,936)
(4,925,558)
3,588
-
988,573
(1,362,780)
5,111,085
495,525
216,909
(33,890)
124,368
16,879
10,131
1,483
1,290,347
(1,554,925)
700,443
(54,243)
2,812,064
71,163
(84,124)
62,685
(1,279,679)
(1,670,534)
Cash contribution to joint venture operations during the period
(7,711,037)
(2,952,332)
17. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings per share (EPS)
Loss attributable to the owners of the Company used in calculating basic and
diluted loss per share
(6,839,936)
(4,925,558)
(b) Weighted average number of shares used as the denominator
2017
$
2016
$
2017
2016
No. of Shares
No. of Shares
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
239,710,693
202,482,410
As the Group incurred a loss for the period, the options on issue have an anti-dilutive effect, therefore the diluted EPS is
equal to the basic EPS. A total of 19,195,821 (2016: 25,213,186) share options and 1,408,000 (2016: 1,958,000)
performance rights which could potentially dilute basic EPS in the future have been excluded from the diluted EPS
calculation because they are anti-dilutive for the current year presented.
DANAKALI LIMITED
Page 70
ABN 56 097 904 302
49
DANAKALI LIMITED
ABN 56 097 904 302
50
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
13. ISSUED CAPITAL (Cont’d)
15. ACCUMULATED LOSSES
2017
Options
2016
Options
25,213,186
16,350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
1,440,000
400,000
(1,356,365)
(351,000)
(200,000)
(800,000)
(550,000)
11,635,232
800,000
2,700,000
200,000
750,000
1,000,000
1,000,000
800,000
(700,000)
(1,000,000)
(1,300,000)
(400,000)
(2,630,000)
(3,370,000)
(622,046)
-
-
-
-
-
-
2017
$
2016
$
10,427,536
988,573
11,416,109
2,039,243
(933,753)
1,105,490
9,137,189
1,290,347
10,427,536
1,769,318
269,925
2,039,243
12,521,599
12,466,779
(d) Movements in options on issue
Balance at beginning of the year
Issued during the year:
Exercisable at $0.350, on or before 30 March 2018
Exercisable at $0.350, on or before 13 May 2018
Exercisable at $0.405, on or before 13 May 2018
Exercisable at $0.450, on or before 23 June 2018
Exercisable at $0.550, on or before 4 November 2018
Exercisable at $0.550, on or before 31 December 2018
Exercisable at $0.558, on or before 8 August 2019
Exercisable at $0.543, on or before 7 October 2018
Exercisable at $0.940, on or before 19 May 2020
Exercisable at $0.960, on or before 20 June 2019
Exercised, cancelled or expired during the year:
Expired, exercisable at $0.599, on or before 31 January 2016
Expired, exercisable at $0.649, on or before 31 January 2016
Expired, exercisable at $0.949, on or before 31 January 2016
Exercised, exercisable at $0.278 on or before 17 November 2017
(4,600,000)
Exercised, exercisable at $0.340 on or before 29 November 2016
Expired, exercisable at $0.340, on or before 29 November 2016
Exercised, exercisable at $0.350 on or before 30 March 2018
Exercised, exercisable at $0.350 on or before 13 May 2018
Exercised, exercisable at $0.408 on or before 4 November 2018
Cancelled, exercisable at $0.408 on or before 4 November 2018
Cancelled, exercisable at $0.543 on or before 7 October 2019
Employee and contractor share options and performance rights (note 22)
Currency translation differences arising during the year/ period
Balance at end of the year
14. RESERVES
(a) Reserves
Share-based payments reserve
Balance at beginning of the year
Balance at end of the year
Foreign currency translation reserve
Balance at beginning of the year
Balance at end of the year
Total reserves
(b) Nature and purpose of reserves
Share-based payments reserve
Foreign currency translation reserve
arrangement.
DANAKALI LIMITED
ABN 56 097 904 302
The share-based payments reserve is used to recognise the fair value of share options and performance rights issued.
The foreign currency translation reserve records the exchange differences arising on translation of a foreign joint
Balance at beginning of the year
Loss for the year
Balance at end of the year
16. STATEMENT OF CASH FLOWS
(a) Reconciliation of net loss after income tax to net cash outflow from
operating activities
Net loss for the year
Non-Cash Items:
Depreciation of plant and equipment
Loss of disposal of plant and equipment
Share-based payment expense
Accretion relating to the unwinding of discount on joint venture loan
Share of net loss of associate
Foreign exchange loss/(gain)
Loss on re-measurement of loan to joint venture carried at amortised cost
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in trade and other payables
Increase/(decrease) in provisions
Net cash outflow from operating activities
2017
$
(40,559,411)
(6,839,936)
(47,399,347)
2016
$
(35,633,853)
(4,925,558)
(40,559,411)
2017
$
2016
$
(6,839,936)
(4,925,558)
3,588
-
988,573
(1,362,780)
5,111,085
495,525
216,909
(33,890)
124,368
16,879
(1,279,679)
10,131
1,483
1,290,347
(1,554,925)
700,443
(54,243)
2,812,064
71,163
(84,124)
62,685
(1,670,534)
19,195,821
25,213,186
17. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings per share (EPS)
(b) Funding of joint venture operations
Cash contribution to joint venture operations during the period
(7,711,037)
(2,952,332)
2017
$
2016
$
Loss attributable to the owners of the Company used in calculating basic and
diluted loss per share
(6,839,936)
(4,925,558)
(b) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
239,710,693
202,482,410
As the Group incurred a loss for the period, the options on issue have an anti-dilutive effect, therefore the diluted EPS is
equal to the basic EPS. A total of 19,195,821 (2016: 25,213,186) share options and 1,408,000 (2016: 1,958,000)
performance rights which could potentially dilute basic EPS in the future have been excluded from the diluted EPS
calculation because they are anti-dilutive for the current year presented.
2017
No. of Shares
2016
No. of Shares
49
DANAKALI LIMITED
ABN 56 097 904 302
Page 71
50
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
18. FINANCIAL RISK MANAGEMENT
18. FINANCIAL RISK MANAGEMENT (Cont’d)
The Group’s activities expose it to market, liquidity and credit risks arising from its financial instruments.
Other than the loan to Colluli Mining Share Company, the Group does not presently have any material debtors. A formal
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to meet all of its financial
commitments and maintain the capacity to fund the Colluli project and ancillary exploration activities. The Board of
Directors has overall responsibility for the establishment and oversight of the risk management framework. Management
monitors and manages the financial risks relating to the operations of the Group through regular reviews of risks.
Market (including foreign exchange and interest rate risks), liquidity and credit risks arise in the normal course of business.
These risks are managed under Board approved treasury processes and transactions.
The principal financial instruments as at reporting date include cash, receivables and payables.
This note presents information about exposures to the above risks, the objectives, policies and processes for measuring
and managing risk, and the management of capital.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency and net investments in foreign operations. The Group has not formalised
a foreign currency risk management policy however, it monitors its foreign currency expenditure in light of exchange rate
movements. The international operations are at the start-up stage and there is limited exposure at the reporting date to
assets and liabilities denominated in foreign currencies. The loan of $12,216,952 (2016: $9,519,503) to Colluli Mining
Share Company is denominated in Eritrean Nakfa (Nakfa) which is pegged to the US Dollar.
The following table demonstrates the sensitivity to a reasonably possible change in Nakfa exchange rates, with all other
variables held constant. A strengthening of the Australian Dollar rate results in an increased loss before tax. The Group’s
exposure to foreign currency changes for all other currencies is not material.
Year to 31 December 2017
Year to 31 December 2016
(ii) Interest rate risk
Change in
Nakfa Rate
%
+5%
-5%
+5%
-5%
Effect on Loss
before tax
$
(610,848)
610,848
(475,975)
475,975
The Group is exposed to movements in market interest rates on cash. The Group’s policy is to monitor the interest rate
yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate
return. The entire balance of cash for the Group of $15,559,980 (31 December 2016: $10,904,760) is subject to interest
rate risk. The floating interest rates fluctuate during the period depending on current working capital requirements. The
weighted average interest rate received on cash by the Group was 1.51% (31 December 2016: 1.10%).
Sensitivity analysis
At 31 December 2017, if interest rates had changed by -/+ 80 basis points from the weighted average rate for the period
with all other variables held constant, post-tax loss for the Group would have been $117,048 higher/lower (31 December
2016: $87,238 higher/lower) as a result of lower/higher interest income from cash and cash equivalents.
(b) Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash
and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the
Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary
source of funding being equity raisings.
The Board of Directors constantly monitors the state of equity markets in conjunction with the Group’s current and future
funding requirements, with a view to initiating appropriate capital raisings as required.
(d) Fair values
December 2017:
Financial Assets:
Trade and other receivables
Total current
Other receivables
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
December 2016:
Financial Assets:
Trade and other receivables
Total current
Other receivables
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
instruments.
The financial liabilities of the Group are confined to trade and other payables as disclosed in the Consolidated Statement
of Financial Position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date.
measurement date.
(c) Credit risk
The Group’s significant concentration of credit risk is cash. The maximum exposure to credit risk at balance date is the
carrying amount of cash and trade and other receivables as disclosed in the Consolidated Statement of Financial Position
and Notes to the Consolidated Financial Statements.
credit risk management policy is not maintained in respect of debtors.
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
Carrying Value
Fair Value
$
$
174,321
174,321
174,321
174,321
12,216,952
12,216,952
12,216,952
12,216,952
12,391,273
12,391,273
1,097,087
1,097,087
1,097,087
1,097,087
1,097,087
1,097,087
Carrying Value
Fair Value
$
$
93,985
93,985
93,985
93,985
9,519,503
9,519,503
9,519,503
9,519,503
9,613,488
9,613,488
210,742
210,742
210,742
210,742
210,742
210,742
The current receivables and payables carrying values approximates fair values due to the short-term maturities of these
The fair value of the long-term receivable is determined by discounting future cashflows using an effective interest rate
of 25%. The fair value disclosure is categorised as Level 3 in the fair value hierarchy as the estimated market interest
rate is an unobserved input in the valuation. An unobserved input is used to the extent that relevant observable inputs
are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at
DANAKALI LIMITED
Page 72
ABN 56 097 904 302
51
DANAKALI LIMITED
ABN 56 097 904 302
52
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
18. FINANCIAL RISK MANAGEMENT
18. FINANCIAL RISK MANAGEMENT (Cont’d)
The Group’s activities expose it to market, liquidity and credit risks arising from its financial instruments.
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to meet all of its financial
commitments and maintain the capacity to fund the Colluli project and ancillary exploration activities. The Board of
Directors has overall responsibility for the establishment and oversight of the risk management framework. Management
monitors and manages the financial risks relating to the operations of the Group through regular reviews of risks.
Market (including foreign exchange and interest rate risks), liquidity and credit risks arise in the normal course of business.
These risks are managed under Board approved treasury processes and transactions.
The principal financial instruments as at reporting date include cash, receivables and payables.
This note presents information about exposures to the above risks, the objectives, policies and processes for measuring
and managing risk, and the management of capital.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency and net investments in foreign operations. The Group has not formalised
a foreign currency risk management policy however, it monitors its foreign currency expenditure in light of exchange rate
movements. The international operations are at the start-up stage and there is limited exposure at the reporting date to
assets and liabilities denominated in foreign currencies. The loan of $12,216,952 (2016: $9,519,503) to Colluli Mining
Share Company is denominated in Eritrean Nakfa (Nakfa) which is pegged to the US Dollar.
The following table demonstrates the sensitivity to a reasonably possible change in Nakfa exchange rates, with all other
variables held constant. A strengthening of the Australian Dollar rate results in an increased loss before tax. The Group’s
exposure to foreign currency changes for all other currencies is not material.
Change in
Nakfa Rate
Effect on Loss
before tax
%
+5%
-5%
+5%
-5%
$
(610,848)
610,848
(475,975)
475,975
Year to 31 December 2017
Year to 31 December 2016
(ii) Interest rate risk
Sensitivity analysis
(b) Liquidity risk
The Group is exposed to movements in market interest rates on cash. The Group’s policy is to monitor the interest rate
yield curve out to six months to ensure a balance is maintained between the liquidity of cash assets and the interest rate
return. The entire balance of cash for the Group of $15,559,980 (31 December 2016: $10,904,760) is subject to interest
rate risk. The floating interest rates fluctuate during the period depending on current working capital requirements. The
weighted average interest rate received on cash by the Group was 1.51% (31 December 2016: 1.10%).
At 31 December 2017, if interest rates had changed by -/+ 80 basis points from the weighted average rate for the period
with all other variables held constant, post-tax loss for the Group would have been $117,048 higher/lower (31 December
2016: $87,238 higher/lower) as a result of lower/higher interest income from cash and cash equivalents.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring sufficient cash
and marketable securities are available to meet the current and future commitments of the Group. Due to the nature of the
Group’s activities, being mineral exploration, the Group does not have ready access to credit facilities, with the primary
source of funding being equity raisings.
The Board of Directors constantly monitors the state of equity markets in conjunction with the Group’s current and future
funding requirements, with a view to initiating appropriate capital raisings as required.
The financial liabilities of the Group are confined to trade and other payables as disclosed in the Consolidated Statement
of Financial Position. All trade and other payables are non-interest bearing and due within 12 months of the reporting date.
(c) Credit risk
The Group’s significant concentration of credit risk is cash. The maximum exposure to credit risk at balance date is the
carrying amount of cash and trade and other receivables as disclosed in the Consolidated Statement of Financial Position
and Notes to the Consolidated Financial Statements.
Other than the loan to Colluli Mining Share Company, the Group does not presently have any material debtors. A formal
credit risk management policy is not maintained in respect of debtors.
(d) Fair values
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
December 2017:
Financial Assets:
Trade and other receivables
Total current
Other receivables
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Carrying Value
$
Fair Value
$
174,321
174,321
174,321
174,321
12,216,952
12,216,952
12,216,952
12,216,952
12,391,273
12,391,273
1,097,087
1,097,087
1,097,087
1,097,087
1,097,087
1,097,087
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
December 2016:
Financial Assets:
Trade and other receivables
Total current
Other receivables
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Carrying Value
$
Fair Value
$
93,985
93,985
93,985
93,985
9,519,503
9,519,503
9,519,503
9,519,503
9,613,488
9,613,488
210,742
210,742
210,742
210,742
210,742
210,742
The current receivables and payables carrying values approximates fair values due to the short-term maturities of these
instruments.
The fair value of the long-term receivable is determined by discounting future cashflows using an effective interest rate
of 25%. The fair value disclosure is categorised as Level 3 in the fair value hierarchy as the estimated market interest
rate is an unobserved input in the valuation. An unobserved input is used to the extent that relevant observable inputs
are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at
measurement date.
DANAKALI LIMITED
ABN 56 097 904 302
51
DANAKALI LIMITED
ABN 56 097 904 302
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Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
19. CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it may
continue to provide returns for shareholders and benefits for other stakeholders.
Capital managed by the Board includes Shareholder equity, which was $40,537,286 (2016: $33,665,688). The focus of
the Group’s capital risk management is the current working capital position against the requirements of the Group to meet
exploration and project development programmes plus corporate overheads. The Group’s strategy is to ensure appropriate
liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as
required.
20. CONTINGENCIES
There are no material contingent liabilities or contingent assets of the Group at balance date.
21. COMMITMENTS
Lease commitments: Group as lessee
Operating leases (non-cancellable):
Minimum lease payments
- within one year
-
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities
later than one year but not later than five years
Technical services commitment:
Minimum payment
- within one year
-
later than one year but not later than five years
Total Commitments
Operating Leases:
2017
$
2016
$
70,000
11,667
81,667
47,885
-
47,885
-
-
-
1,214,793
-
1,214,793
81,667
1,262,678
The minimum future payments above relate to non-cancellable operating leases for offices. On 18 January 2018, the
Company extended the office lease by 12 months commencing on 1 March 2018 for a total annual cost of $70,000.
Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is
indicative of future trends, which may not eventuate. The life of the options is based on historical exercise patterns, which
Technical Services Commitment:
The payments above related to a contract for technical services to be provided in relation to the Colluli Project.
22. SHARE-BASED PAYMENTS
(a) Option Plans
The Group provides benefits to employees (including directors), contractors and consultants of the Group in the form of
share-based payment transactions, whereby employees, contractors and consultants render services in exchange for
options to acquire ordinary shares. All options issued have exercise prices ranging from $0.35 each to $0.96 each and
expiry dates ranging from 30 March 2018 to 19 May 2020.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share
of the Company with full dividend and voting rights. Set out below is a summary of the options granted.
2017
2016
Number of
options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
Outstanding at the beginning of the year
Granted
Exercised
Expired
Outstanding at end of the year
Exercisable at end of the year
25,213,186
1,840,000(a) (b)
(6,507,365)
(1,350,000)
19,195,821
18,845,821
$0.384
$0.944
$0.304
$0.463
$0.459
$0.547
16,350,000
18,885,232
(3,652,046)
(6,370,000)
25,213,186
22,613,186
Note:
DANAKALI LIMITED
Page 74
ABN 56 097 904 302
$0.420
$0.397
$0.335
$0.547
$0.384
$0.370
53
22.
SHARE-BASED PAYMENTS (Cont’d)
(a) Options granted during the year to 31 December 2016 include:
1,000,000 options granted to Arlington Group Asset Management Ltd in consideration for services provided.
200,000 options granted to Mr C Wirth in consideration for services provided.
(b) Options granted during the year to 31 December 2017 include:
1,440,000 options granted to Directors of the Company in recognition of serviced provided.
400,000 options granted to advisors in consideration for services provided.
-
-
-
-
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.945 years
(31 December 2016: 1.38 years), with exercise prices ranging from $0.35 to $0.96.
The weighted average fair value of the options granted during the period was $0.20 (31 December 2016: $0.091). The
price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs, to produce
the fair value per option:
Options Granted during the period to 31 December 2017:
Number
Fair Value
Exercise
at
Risk Free
Estimated
of Options
Grant Date Expiry Date
per Option
Grant Date
Interest Rate
Volatility
1,440,000
19/05/2017 19/05/2019
400,000
20/06/2017 20/06/2019
$0.202
$0.193
$0.690
$0.785
1.780%
1.660%
56%
55%
Share Price
Options Granted during the period to 31 December 2016:
Number
Fair Value
Exercise
at
Risk Free
Estimated
of Options
Grant Date Expiry Date
per Option
Grant Date
Interest Rate
Volatility
Share Price
11,635,232
31/03/2016 31/03/2018
800,000
13/05/2016 13/05/2018
2,700,000
13//05/2016 13/05/2018
200,000
750,000
23/06/2016 23/06/2018
04/11/2016 04/11/2018
1,000,000
08/08/2016 31/12/2018
1,000,000
08/08/2016 08/08/2019
800,000
07/10/2016 07/10/2019
$0.071
$0.123
$0.106
$0.145
$0.146
$0.149
$0.169
$0.173
$0.225
$0.300
$0.300
$0.375
$0.410
$0.390
$0.390
$0.390
1.890%
1.590%
1.590%
1.720%
1.645%
1.490%
1.450%
1.650%
80%
80%
80%
80%
80%
80%
80%
80%
Price
$0.940
$0.960
Price
$0.350
$0.350
$0.405
$0.450
$0.550
$0.550
$0.558
$0.543
may not eventuate in the future.
(c) Performance Rights Plan
The Performance Rights Plan was re-approved at the annual general meeting of the Company held 17 November 2014.
The purpose of the Plan is to provide recognition to employees and advisors of the Company and its subsidiaries for their
continued and ongoing support of the Company.
Under the Performance Rights Plan, shares are issued in the future subject, to the performance-based vesting conditions
being met. 1,408,000 performance rights on issue at 31 December 2017 (31 December 2016: 1,958,000) had the
following vesting conditions.
• 308,000 upon completion of securing finance for the development of the Colluli Potash Project.
• 75,000 upon granting of a Mining License for the Colluli Potash Project (vested February 2017); and
• 75,000 upon completion of securing finance for the development of the Colluli Potash Project (forfeited 6 February
Class 1:
Class 2:
2017).
Class 4:
• 700,000 upon awarding of the Colluli mining licence (vested February 2017); and
• 800,000 upon commencement of construction of the production facility.
DANAKALI LIMITED
ABN 56 097 904 302
54
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
19. CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it may
continue to provide returns for shareholders and benefits for other stakeholders.
Capital managed by the Board includes Shareholder equity, which was $40,537,286 (2016: $33,665,688). The focus of
the Group’s capital risk management is the current working capital position against the requirements of the Group to meet
exploration and project development programmes plus corporate overheads. The Group’s strategy is to ensure appropriate
liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as
required.
20. CONTINGENCIES
21. COMMITMENTS
There are no material contingent liabilities or contingent assets of the Group at balance date.
Lease commitments: Group as lessee
Operating leases (non-cancellable):
Minimum lease payments
- within one year
-
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities
Technical services commitment:
Minimum payment
- within one year
-
later than one year but not later than five years
2017
$
2016
$
70,000
11,667
81,667
47,885
-
47,885
-
-
-
1,214,793
-
1,214,793
81,667
1,262,678
The minimum future payments above relate to non-cancellable operating leases for offices. On 18 January 2018, the
Company extended the office lease by 12 months commencing on 1 March 2018 for a total annual cost of $70,000.
The payments above related to a contract for technical services to be provided in relation to the Colluli Project.
Total Commitments
Operating Leases:
Technical Services Commitment:
22. SHARE-BASED PAYMENTS
(a) Option Plans
The Group provides benefits to employees (including directors), contractors and consultants of the Group in the form of
share-based payment transactions, whereby employees, contractors and consultants render services in exchange for
options to acquire ordinary shares. All options issued have exercise prices ranging from $0.35 each to $0.96 each and
expiry dates ranging from 30 March 2018 to 19 May 2020.
Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share
of the Company with full dividend and voting rights. Set out below is a summary of the options granted.
Outstanding at the beginning of the year
Granted
Exercised
Expired
Outstanding at end of the year
Exercisable at end of the year
Note:
DANAKALI LIMITED
ABN 56 097 904 302
2017
2016
Number of
Weighted average
Number of
Weighted average
options
exercise price
options
exercise price
25,213,186
1,840,000(a) (b)
(6,507,365)
(1,350,000)
19,195,821
18,845,821
$0.384
$0.944
$0.304
$0.463
$0.459
$0.547
16,350,000
18,885,232
(3,652,046)
(6,370,000)
25,213,186
22,613,186
$0.420
$0.397
$0.335
$0.547
$0.384
$0.370
53
22.
SHARE-BASED PAYMENTS (Cont’d)
(a) Options granted during the year to 31 December 2016 include:
-
-
1,000,000 options granted to Arlington Group Asset Management Ltd in consideration for services provided.
200,000 options granted to Mr C Wirth in consideration for services provided.
(b) Options granted during the year to 31 December 2017 include:
-
-
1,440,000 options granted to Directors of the Company in recognition of serviced provided.
400,000 options granted to advisors in consideration for services provided.
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.945 years
(31 December 2016: 1.38 years), with exercise prices ranging from $0.35 to $0.96.
The weighted average fair value of the options granted during the period was $0.20 (31 December 2016: $0.091). The
price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs, to produce
the fair value per option:
Options Granted during the period to 31 December 2017:
Number
of Options
1,440,000
400,000
Grant Date Expiry Date
19/05/2017 19/05/2019
20/06/2017 20/06/2019
Fair Value
per Option
$0.202
$0.193
Exercise
Price
$0.940
$0.960
Share Price
at
Grant Date
$0.690
$0.785
Risk Free
Interest Rate
1.780%
1.660%
Estimated
Volatility
56%
55%
Options Granted during the period to 31 December 2016:
Number
of Options
11,635,232
800,000
2,700,000
200,000
750,000
1,000,000
1,000,000
800,000
Grant Date Expiry Date
31/03/2016 31/03/2018
13/05/2016 13/05/2018
13//05/2016 13/05/2018
23/06/2016 23/06/2018
04/11/2016 04/11/2018
08/08/2016 31/12/2018
08/08/2016 08/08/2019
07/10/2016 07/10/2019
Fair Value
per Option
$0.071
$0.123
$0.106
$0.145
$0.146
$0.149
$0.169
$0.173
Exercise
Price
$0.350
$0.350
$0.405
$0.450
$0.550
$0.550
$0.558
$0.543
Share Price
at
Grant Date
$0.225
$0.300
$0.300
$0.375
$0.410
$0.390
$0.390
$0.390
Risk Free
Interest Rate
1.890%
1.590%
1.590%
1.720%
1.645%
1.490%
1.450%
1.650%
Estimated
Volatility
80%
80%
80%
80%
80%
80%
80%
80%
Historical volatility has been used as the basis for determining expected share price volatility as it assumed that this is
indicative of future trends, which may not eventuate. The life of the options is based on historical exercise patterns, which
may not eventuate in the future.
(c) Performance Rights Plan
The Performance Rights Plan was re-approved at the annual general meeting of the Company held 17 November 2014.
The purpose of the Plan is to provide recognition to employees and advisors of the Company and its subsidiaries for their
continued and ongoing support of the Company.
Under the Performance Rights Plan, shares are issued in the future subject, to the performance-based vesting conditions
being met. 1,408,000 performance rights on issue at 31 December 2017 (31 December 2016: 1,958,000) had the
following vesting conditions.
Class 1:
• 308,000 upon completion of securing finance for the development of the Colluli Potash Project.
Class 2:
• 75,000 upon granting of a Mining License for the Colluli Potash Project (vested February 2017); and
• 75,000 upon completion of securing finance for the development of the Colluli Potash Project (forfeited 6 February
2017).
Class 4:
• 700,000 upon awarding of the Colluli mining licence (vested February 2017); and
• 800,000 upon commencement of construction of the production facility.
DANAKALI LIMITED
ABN 56 097 904 302
Page 75
54
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
22.
SHARE-BASED PAYMENTS (Cont’d)
Class 5:
• 20,000 upon commencement of the first development work on the ground at the Colluli site within 1 week of the
scheduled development time;
• 60,000 upon 6-month construction mark if safety, costs and schedule are all on target; and
• 20,000 upon completion of commissioning and completion of performance testing (performance testing to meet
contractual requirements).
Class 6:
• 10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
• 15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of finance
support from a lending institution; and
• 25,000 upon term sheets being signed for the project financing of the Colluli project.
Class 7:
• 10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
• 10,000 upon market announcement on completion of FEED;
• 15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
• 15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
Class 8:
• 20,000 on completion of a London stock exchange listing;
• 5,000 on completion of an approval and issued CSR report befitting an ASX200 company prior to the London listing;
• 50,000 on securing a strategic equity partner;
• 5,000 on completion of executing of two high quality investor roadshows;
• 10,000 on finalising broker mandates which support the equity capital market strategy; and
• 10,000 upon execution of a high-quality FEED communication strategy.
Subject to achievement of either one of these performance conditions, one share will be issued for each Performance
Right that has vested.
The fair value of performance rights is initially determined by consideration of the Company’s share price at the grant
date.
There were 300,000 performance rights issued during the year to 31 December 2017 (31 December 2016: Nil). Details
of performance rights on issue are set out in the following tables.
2017
Grant Date
25 January 2012 (Class 1)
15 May 2012 (Class 1)
12 December 2012 (Class 2)
9 December 2014 (Class 4)
20 June 2017 (Class 5)
20 June 2017 (Class 6)
15 November 2017 (Class 7)
15 November 2017 (Class 8)
TOTAL
2016
Grant Date
Balance at 1
January 2017
Issued during the
period
50,000
258,000
150,000
1,500,000
-
-
-
-
1,958,000
-
-
-
-
100,000
50,000
50,000
100,000
300,000
Balance at 1
January 2016
Issued during the
period
25 January 2012 (Class 1)
15 May 2012 (Class 1)
12 December 2012 (Class 2)
9 December 2014 (Class 4)
TOTAL
50,000
258,000
150,000
1,500,000
1,958,000
-
-
-
-
-
Vested and
converted to
shares
-
-
(75,000)
(700,000)
-
-
-
-
(775,000)
Vested and
converted to
shares
-
-
-
-
-
Cancelled upon
termination
Balance 31
December 2017
-
-
(75,000)
-
-
-
-
50,000
258,000
-
800,000
100,000
50,000
50,000
100,000
(75,000)
1,408,000
Cancelled upon
termination
Balance 31
December 2016
-
-
-
-
-
50,000
258,000
150,000
1,500,000
1,958,000
22.
SHARE-BASED PAYMENTS (Cont’d)
(d) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
2017
$
-
988,573
988,573
2016
$
-
1,290,347
1,290,347
Options and Performance Rights issued to directors, employees and
Shares
contractors
(a) Parent entity
(b) Subsidiary
23. RELATED PARTY TRANSACTIONS
The ultimate parent entity within the Group is Danakali Limited.
Interests in the subsidiary is set out in note 25.
(c) Investment in Joint Venture
Transactions with Colluli Mining Share Company are set out in notes 8 and 10 of this report.
(d) Key management personnel compensation
Short-term benefits
Post-employment benefits
Share-based payments
There were no material related party transactions.
(d) Key management personnel placement participation
2017
$
1,232,171
67,199
768,027
2,067,397
2016
$
986,020
86,232
830,623
1,902,875
In the previous financial year, on 13 May 2016, subsequent to shareholder approval, related parties participated in a
placement of ordinary shares at an issue price of $0.22 per share to raise $352,000. In addition, one free attaching unlisted
option was issued for every two shares purchased under the placement. The unlisted options are exercisable at $0.35 on
or before 13 May 2018.
Participation by related parties in the transaction detailed above, is set out in the following table.
Related Party
Position
Seamus Ian Cornelius
Non-Executive Chairman
Paul Michael Donaldson
Managing Director
Anthony William Kiernan
Non-Executive Director
Liam Raymond Cornelius
Non-Executive Director
John Daniel Fitzgerald
Non-Executive Director
Placement
Shares
250,000
100,000
100,000
1,000,000
150,000
1,600,000
Free Attaching
Unlisted Options
125,000
50,000
50,000
500,000
75,000
800,000
DANAKALI LIMITED
Page 76
ABN 56 097 904 302
55
DANAKALI LIMITED
ABN 56 097 904 302
56
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
22.
SHARE-BASED PAYMENTS (Cont’d)
(d) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
2017
$
-
988,573
988,573
2016
$
-
1,290,347
1,290,347
Shares
Options and Performance Rights issued to directors, employees and
contractors
23. RELATED PARTY TRANSACTIONS
(a) Parent entity
The ultimate parent entity within the Group is Danakali Limited.
(b) Subsidiary
Interests in the subsidiary is set out in note 25.
(c) Investment in Joint Venture
• 5,000 on completion of an approval and issued CSR report befitting an ASX200 company prior to the London listing;
Transactions with Colluli Mining Share Company are set out in notes 8 and 10 of this report.
(d) Key management personnel compensation
Short-term benefits
Post-employment benefits
Share-based payments
There were no material related party transactions.
(d) Key management personnel placement participation
2017
$
1,232,171
67,199
768,027
2,067,397
2016
$
986,020
86,232
830,623
1,902,875
In the previous financial year, on 13 May 2016, subsequent to shareholder approval, related parties participated in a
placement of ordinary shares at an issue price of $0.22 per share to raise $352,000. In addition, one free attaching unlisted
option was issued for every two shares purchased under the placement. The unlisted options are exercisable at $0.35 on
or before 13 May 2018.
Participation by related parties in the transaction detailed above, is set out in the following table.
Related Party
Seamus Ian Cornelius
Paul Michael Donaldson
Anthony William Kiernan
Liam Raymond Cornelius
John Daniel Fitzgerald
Position
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Placement
Shares
250,000
100,000
100,000
1,000,000
150,000
1,600,000
Free Attaching
Unlisted Options
125,000
50,000
50,000
500,000
75,000
800,000
22.
SHARE-BASED PAYMENTS (Cont’d)
• 20,000 upon commencement of the first development work on the ground at the Colluli site within 1 week of the
• 60,000 upon 6-month construction mark if safety, costs and schedule are all on target; and
• 20,000 upon completion of commissioning and completion of performance testing (performance testing to meet
scheduled development time;
contractual requirements).
• 10,000 upon successful completion of a dual listing of the Company on the London stock exchange;
• 15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to a letter of finance
support from a lending institution; and
• 25,000 upon term sheets being signed for the project financing of the Colluli project.
• 10,000 upon market announcement of a binding offtake agreement to support debt funding of the project;
• 10,000 upon market announcement on completion of FEED;
• 15,000 upon completion of a strategic investment at greater than 30-day VWAP plus 10%; and
• 15,000 on signing a debt terms sheet for project financing or debt is secured form a strategic investor.
• 20,000 on completion of a London stock exchange listing;
• 50,000 on securing a strategic equity partner;
• 5,000 on completion of executing of two high quality investor roadshows;
• 10,000 on finalising broker mandates which support the equity capital market strategy; and
• 10,000 upon execution of a high-quality FEED communication strategy.
Subject to achievement of either one of these performance conditions, one share will be issued for each Performance
Right that has vested.
The fair value of performance rights is initially determined by consideration of the Company’s share price at the grant
There were 300,000 performance rights issued during the year to 31 December 2017 (31 December 2016: Nil). Details
of performance rights on issue are set out in the following tables.
Balance at 1
January 2017
Issued during the
period
Cancelled upon
Balance 31
termination
December 2017
Vested and
converted to
shares
25 January 2012 (Class 1)
15 May 2012 (Class 1)
12 December 2012 (Class 2)
50,000
258,000
150,000
9 December 2014 (Class 4)
1,500,000
20 June 2017 (Class 5)
20 June 2017 (Class 6)
15 November 2017 (Class 7)
15 November 2017 (Class 8)
-
-
-
-
100,000
50,000
50,000
100,000
300,000
(75,000)
(700,000)
(75,000)
Class 5:
Class 6:
Class 7:
Class 8:
date.
2017
Grant Date
TOTAL
2016
Grant Date
1,958,000
(775,000)
(75,000)
1,408,000
Balance at 1
January 2016
Issued during the
period
Cancelled upon
Balance 31
termination
December 2016
Vested and
converted to
shares
-
-
-
-
-
-
-
-
-
-
-
50,000
258,000
-
800,000
100,000
50,000
50,000
100,000
50,000
258,000
150,000
1,500,000
1,958,000
25 January 2012 (Class 1)
15 May 2012 (Class 1)
12 December 2012 (Class 2)
9 December 2014 (Class 4)
TOTAL
50,000
258,000
150,000
1,500,000
1,958,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
DANAKALI LIMITED
ABN 56 097 904 302
55
DANAKALI LIMITED
ABN 56 097 904 302
Page 77
56
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
24. REMUNERATION OF AUDITORS
28. EVENTS OCCURRING AFTER THE BALANCE DATE
During the period, the following fees were paid or payable for services provided by the auditor of the Company, its related
practices and non-related audit firms:
On 29 January 2018, the Company announced the results of the front-end engineering design (FEED) phase for the Colluli
Potash Project. On 31 January 2018 the Company released a presentation detailing the FEED results.
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young – since appointment as auditor
25. SUBSIDIARY
2017
$
2016
$
On 19 February 2018, the Company released an updated JORC-2012 Colluli Potassium Sulphate Ore Reserve.
Subsequent to balance date up to the reporting date, the Company issued the following fully paid ordinary shares:
41,391
41,391
6,000
6,000
33,621
33,621
33,013
33,103
▪
▪
400,000 shares on exercise of unlisted options at $0.405 each
775,000 shares on exercise of unlisted options at $0.35 each
Subsequent to balance date up to the reporting date, the Company issued 25,000 shares on the vesting of performance
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
rights.
financial years.
Interest in subsidiary
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance
with the accounting policy:
Name
STB Eritrea Pty Ltd
Principal Activities
Investment in
Potash Exploration
Country of
Incorporation
Class of
Shares
Australia
Ordinary
2017
%
100
2016
%
100
Equity Holding
The proportion of ownership interest is equal to the proportion of voting power held.
26. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Danakali Limited. The information presented here has been prepared
using accounting policies consistent with those presented in note 2.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Loss for the year
Total Comprehensive loss for the year
27. DIVIDENDS
2017
$
15,784,395
26,044,008
41,828,403
1,263,306
27,811
1,291,117
75,415,034
11,416,109
(46,293,858)
40,537,286
2016
$
11,023,845
23,029,735
34,053,580
345,443
42,450
387,893
61,758,320
10,427,536
(38,520,169)
33,665,687
(7,773,689)
(7,773,689)
(4,655,632)
(4,655,632)
No dividends were paid during the financial period. No recommendation for payment of dividends has been made.
DANAKALI LIMITED
Page 78
ABN 56 097 904 302
57
DANAKALI LIMITED
ABN 56 097 904 302
58
Danakali Annual Report 2017DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2017
24. REMUNERATION OF AUDITORS
practices and non-related audit firms:
During the period, the following fees were paid or payable for services provided by the auditor of the Company, its related
28. EVENTS OCCURRING AFTER THE BALANCE DATE
On 29 January 2018, the Company announced the results of the front-end engineering design (FEED) phase for the Colluli
Potash Project. On 31 January 2018 the Company released a presentation detailing the FEED results.
2017
$
2016
$
On 19 February 2018, the Company released an updated JORC-2012 Colluli Potassium Sulphate Ore Reserve.
Subsequent to balance date up to the reporting date, the Company issued the following fully paid ordinary shares:
41,391
41,391
6,000
6,000
33,621
33,621
33,013
33,103
▪
▪
400,000 shares on exercise of unlisted options at $0.405 each
775,000 shares on exercise of unlisted options at $0.35 each
Subsequent to balance date up to the reporting date, the Company issued 25,000 shares on the vesting of performance
rights.
No other matters or circumstances have arisen since the end of the financial year which significantly affected or may
significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial years.
Ernst and Young – since appointment as auditor
(a) Audit services
Ernst and Young
(b) Non-audit services
25. SUBSIDIARY
Interest in subsidiary
with the accounting policy:
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance
Name
Principal Activities
Incorporation
Country of
Class of
Shares
STB Eritrea Pty Ltd
Australia
Ordinary
Investment in
Potash Exploration
2017
%
100
Equity Holding
2016
%
100
The proportion of ownership interest is equal to the proportion of voting power held.
26. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Danakali Limited. The information presented here has been prepared
using accounting policies consistent with those presented in note 2.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Accumulated losses
Total equity
Loss for the year
27. DIVIDENDS
Issued capital
Share-based payments reserve
Total Comprehensive loss for the year
2017
$
15,784,395
26,044,008
41,828,403
1,263,306
27,811
1,291,117
75,415,034
11,416,109
(46,293,858)
40,537,286
2016
$
11,023,845
23,029,735
34,053,580
345,443
42,450
387,893
61,758,320
10,427,536
(38,520,169)
33,665,687
(7,773,689)
(7,773,689)
(4,655,632)
(4,655,632)
No dividends were paid during the financial period. No recommendation for payment of dividends has been made.
DANAKALI LIMITED
ABN 56 097 904 302
57
DANAKALI LIMITED
ABN 56 097 904 302
Page 79
58
Danakali Annual Report 2017DANAKALI LIMITED
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 52 to 79 are in accordance with the Corporations Act 2001,
including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for
the financial period ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable; and
(b)
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Seamus Cornelius
CHAIRMAN
Perth, 22 March 2018
DANAKALI LIMITED
Page 80
ABN 56 097 904 302
59
Danakali Annual Report 2017DANAKALI LIMITED Directors’ Declaration
In the Directors’ opinion:
including:
reporting requirements; and
the financial period ended on that date;
due and payable; and
(a)
the financial statements and notes set out on pages 52 to 79 are in accordance with the Corporations Act 2001,
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Seamus Cornelius
CHAIRMAN
Perth, 22 March 2018
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Danakali Limited
INDEPENDENT AUDITOR’S REPORT
Report on the audit of the financial report
To the Shareholders of Danakali Limited
Opinion
Report on the audit of the financial report
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
Opinion
Group), which comprises the consolidated statement of financial position as at 31 December 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
a summary of significant accounting policies and other explanatory information and the Directors’
Group), which comprises the consolidated statement of financial position as at 31 December 2017, the
Declaration.
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
In our opinion:
a summary of significant accounting policies and other explanatory information and the Directors’
Declaration.
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
In our opinion:
(i)
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2017
and of its consolidated financial performance for the year ended on that date; and
(ii)
(i)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2017
and of its consolidated financial performance for the year ended on that date; and
Basis for opinion
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(ii)
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
Basis for opinion
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
Report section of our report. We are independent of the Group in accordance with the Corporations Act
Code.
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
our opinion.
Code.
Key audit matters
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our
Key audit matters
audit of the financial report of the current year. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a
separate opinion on these matters. For the matter below, our description of how our audit addressed the
Key audit matters are those matters that, in our professional judgment, were of most significance in our
matter is provided in that context.
audit of the financial report of the current year. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a
separate opinion on these matters. For the matter below, our description of how our audit addressed the
matter is provided in that context.
DANAKALI LIMITED
ABN 56 097 904 302
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Liability limited by a scheme approved under Professional Standards Legislation
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Danakali Annual Report 2017DANAKALI LIMITED
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures, including the procedures
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
performed to address the matter below, provide the basis for our audit opinion on the accompanying
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
financial report.
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures, including the procedures
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
performed to address the matter below, provide the basis for our audit opinion on the accompanying
financial report.
Why significant
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
How our audit addressed the key audit matter
The group acquired an interest in Colluli Mining Share
Company (“CMSC”) at the date of CMSC’s incorporation
Why significant
on 5 March 2014. This acquisition was in accordance
with the Shareholders Agreement entered into with the
The group acquired an interest in Colluli Mining Share
Eritrean National Mining Corporation (“ENAMCO”)
Company (“CMSC”) at the date of CMSC’s incorporation
which was executed in November 2013. CMSC was
on 5 March 2014. This acquisition was in accordance
incorporated in Eritrea, in accordance with the
with the Shareholders Agreement entered into with the
Shareholders’ Agreement, to hold the Colluli project,
Eritrean National Mining Corporation (“ENAMCO”)
with Danakali and ENAMCO each holding 50% of the
which was executed in November 2013. CMSC was
equity.
incorporated in Eritrea, in accordance with the
The group’s interest in CMSC is accounted for as a joint
Shareholders’ Agreement, to hold the Colluli project,
venture using the equity method and as a shareholder
with Danakali and ENAMCO each holding 50% of the
loan receivable.
equity.
The accounting for the results of and investment in
The group’s interest in CMSC is accounted for as a joint
CMSC is significant to our audit due to the complexity
venture using the equity method and as a shareholder
involved in measuring both the investment as well as
loan receivable.
the shareholder loan receivable. Specifically key
The accounting for the results of and investment in
assumptions underpinning the measurement of these
CMSC is significant to our audit due to the complexity
balances relate to the timing as to when the group
involved in measuring both the investment as well as
considers CMSC will have generated free cashflows
the shareholder loan receivable. Specifically key
from the project to enable repayment of monies loaned
assumptions underpinning the measurement of these
to them and an appropriate discount rate to reflect the
balances relate to the timing as to when the group
risk applicable to the timing and repayment of the
considers CMSC will have generated free cashflows
shareholder loan.
from the project to enable repayment of monies loaned
Refer to note (1)(r)(ii) and notes 8 and 10 to the
to them and an appropriate discount rate to reflect the
financial report for further detail explaining the key
risk applicable to the timing and repayment of the
judgements underpinning the accounting discussed in
shareholder loan.
the two preceding paragraphs.
Refer to note (1)(r)(ii) and notes 8 and 10 to the
At 31 December 2017, the Investment in CMSC
financial report for further detail explaining the key
amounted to $13.8 million (refer to Note 10 in the
judgements underpinning the accounting discussed in
financial statements) and the receivable from CMSC
the two preceding paragraphs.
amounted to $12.2 million (refer to Note 8 in the
At 31 December 2017, the Investment in CMSC
financial statements).
amounted to $13.8 million (refer to Note 10 in the
financial statements) and the receivable from CMSC
amounted to $12.2 million (refer to Note 8 in the
financial statements).
Our procedures included the following:
► We reviewed the applicable Shareholders’
How our audit addressed the key audit matter
Agreement and the group’s position paper which
concluded that it is appropriate for Danakali’s
investment in CMSC to be equity accounted.
Our procedures included the following:
► We reviewed the applicable Shareholders’
► We assessed the group’s calculations supporting
Agreement and the group’s position paper which
the measurement of the investment and the
concluded that it is appropriate for Danakali’s
shareholder loan. This calculation included the
investment in CMSC to be equity accounted.
discounting of the shareholder loan balance based
► We assessed the group’s calculations supporting
on the group’s current best estimate of when the
the measurement of the investment and the
shareholder loan will be repaid.
shareholder loan. This calculation included the
► We involved our valuation specialists to assess the
discounting of the shareholder loan balance based
assumed discount rate having regard to factors
on the group’s current best estimate of when the
such as the project and country risk.
shareholder loan will be repaid.
► We assessed the group’s shareholder loan
► We assessed the group’s shareholder loan
► We involved our valuation specialists to assess the
repayment assumptions having regard to the
assumed discount rate having regard to factors
current status of the project and the group’s best
such as the project and country risk.
estimates of the timeline to finance, develop,
commission and produce free cashflow from the
repayment assumptions having regard to the
project to repay the shareholder loan.
current status of the project and the group’s best
► We assessed the arithmetical accuracy of the
estimates of the timeline to finance, develop,
group’s calculations, including where applicable
commission and produce free cashflow from the
any foreign currency translations embedded in the
project to repay the shareholder loan.
measurement process.
► We assessed the arithmetical accuracy of the
► We performed appropriate audit procedures over
group’s calculations, including where applicable
the results of CMSC and confirmed that Danakali’s
any foreign currency translations embedded in the
50% interest in these results were accounted for on
measurement process.
an equity basis in the financial statements of the
► We performed appropriate audit procedures over
group.
the results of CMSC and confirmed that Danakali’s
► We considered whether there were any impairment
50% interest in these results were accounted for on
indicators to suggest that Danakali’s investment in
an equity basis in the financial statements of the
and shareholder loan to CMSC may be impaired at
group.
balance date.
► We considered whether there were any impairment
indicators to suggest that Danakali’s investment in
and shareholder loan to CMSC may be impaired at
balance date.
A member firm of Ernst & Young Global Limited
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A member firm of Ernst & Young Global Limited
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GB:EH:DANAKALI:030
GB:EH:DANAKALI:030
Danakali Annual Report 2017DANAKALI LIMITED
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Danakali Limited
Information other than the financial statements and auditor’s report
Report on the audit of the financial report
The Directors are responsible for the other information. The other information comprises the information
in the Group’s Annual Report for the year ended 31 December 2017, but does not include the financial
Opinion
report and the auditor’s report thereon. We obtained the Directors’ report prior to the date of our
auditor’s report. The commentary on the Potash Project Overview, Economic outcome of the FEED,
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
Development approach, Ownership and financing structure is expected to be made available to us after
Group), which comprises the consolidated statement of financial position as at 31 December 2017, the
the date of this auditor’s report.
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
Our opinion on the financial report does not cover the other information and we do not express any form
a summary of significant accounting policies and other explanatory information and the Directors’
of assurance conclusion thereon.
Declaration.
In connection with our audit of the financial report, our responsibility is to read the other information and,
In our opinion:
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based upon the
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
work we have performed on the other information obtained prior to the date of the auditor’s report, we
including:
conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
(i)
Directors’ responsibilities for the financial report
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2017
and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(ii)
The Directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
Basis for opinion
such internal control as the Directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
error.
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations Act
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
operations, or have no realistic alternative but to do so.
Code.
Auditor’s responsibilities for the audit of the financial report
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
Key audit matters
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in our
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
audit of the financial report of the current year. These matters were addressed in the context of our
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a
on the basis of this financial report.
separate opinion on these matters. For the matter below, our description of how our audit addressed the
matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DANAKALI:030
Page 83
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Danakali Annual Report 2017DANAKALI LIMITED
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
misstatement of the financial statements. The results of our audit procedures, including the procedures
and maintain professional scepticism throughout the audit. We also:
performed to address the matter below, provide the basis for our audit opinion on the accompanying
financial report.
►
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
How our audit addressed the key audit matter
Why significant
Our procedures included the following:
Obtain an understanding of internal control relevant to the audit in order to design audit
► We reviewed the applicable Shareholders’
Agreement and the group’s position paper which
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
concluded that it is appropriate for Danakali’s
opinion on the effectiveness of the entity’s internal control.
investment in CMSC to be equity accounted.
►
The group acquired an interest in Colluli Mining Share
Company (“CMSC”) at the date of CMSC’s incorporation
on 5 March 2014. This acquisition was in accordance
with the Shareholders Agreement entered into with the
Eritrean National Mining Corporation (“ENAMCO”)
which was executed in November 2013. CMSC was
incorporated in Eritrea, in accordance with the
Shareholders’ Agreement, to hold the Colluli project,
with Danakali and ENAMCO each holding 50% of the
equity.
►
►
►
► We assessed the group’s shareholder loan
► We assessed the group’s calculations supporting
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
the measurement of the investment and the
estimates and related disclosures made by the Directors.
shareholder loan. This calculation included the
discounting of the shareholder loan balance based
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
on the group’s current best estimate of when the
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
shareholder loan will be repaid.
whether a material uncertainty exists related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
financial report about the material uncertainty or, if such disclosures are inadequate, to modify the
opinion on the financial report. However, future events or conditions may cause an entity to cease
to continue as a going concern.
► We involved our valuation specialists to assess the
assumed discount rate having regard to factors
such as the project and country risk.
repayment assumptions having regard to the
current status of the project and the group’s best
estimates of the timeline to finance, develop,
Evaluate the overall presentation, structure and content of the financial report, including the
commission and produce free cashflow from the
project to repay the shareholder loan.
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
The group’s interest in CMSC is accounted for as a joint
venture using the equity method and as a shareholder
loan receivable.
The accounting for the results of and investment in
CMSC is significant to our audit due to the complexity
involved in measuring both the investment as well as
the shareholder loan receivable. Specifically key
assumptions underpinning the measurement of these
balances relate to the timing as to when the group
considers CMSC will have generated free cashflows
from the project to enable repayment of monies loaned
to them and an appropriate discount rate to reflect the
risk applicable to the timing and repayment of the
shareholder loan.
Refer to note (1)(r)(ii) and notes 8 and 10 to the
financial report for further detail explaining the key
judgements underpinning the accounting discussed in
the two preceding paragraphs.
group’s calculations, including where applicable
any foreign currency translations embedded in the
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
measurement process.
business activities within the Group to express an opinion on the financial report. We are
► We performed appropriate audit procedures over
responsible for the direction, supervision and performance of the Group audit. We remain solely
the results of CMSC and confirmed that Danakali’s
responsible for our audit opinion.
50% interest in these results were accounted for on
an equity basis in the financial statements of the
group.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
► We assessed the arithmetical accuracy of the
At 31 December 2017, the Investment in CMSC
amounted to $13.8 million (refer to Note 10 in the
financial statements) and the receivable from CMSC
amounted to $12.2 million (refer to Note 8 in the
financial statements).
► We considered whether there were any impairment
indicators to suggest that Danakali’s investment in
and shareholder loan to CMSC may be impaired at
balance date.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
►
From the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited
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GB:EH:DANAKALI:030
GB:EH:DANAKALI:030
Danakali Annual Report 2017DANAKALI LIMITED
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Danakali Limited
Report on the Remuneration Report
Report on the audit of the financial report
Opinion on the Remuneration Report
Opinion
We have audited the Remuneration Report included in pages 39 to 49 of the Directors' Report for the
year ended 31 December 2017.
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 31 December 2017, the
In our opinion, the Remuneration Report of Danakali Limited for the year ended 31 December 2017,
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
complies with section 300A of the Corporations Act 2001.
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
a summary of significant accounting policies and other explanatory information and the Directors’
Responsibilities
Declaration.
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
In our opinion:
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
Auditing Standards.
including:
(i)
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2017
and of its consolidated financial performance for the year ended on that date; and
Ernst & Young
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
Gavin Buckingham
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Partner
Report section of our report. We are independent of the Group in accordance with the Corporations Act
Perth
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
22 March 2018
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a
separate opinion on these matters. For the matter below, our description of how our audit addressed the
matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DANAKALI:030
Page 85
GB:EH:DANAKALI:030
Danakali Annual Report 2017DANAKALI LIMITED ASX Additional Information
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 28 February 2018.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
100,001
TOTAL
- 1,000
- 5,000
- 10,000
- 100,000
and over
Holders
Securities
577
841
352
680
169
250,940
2,160,111
2,673,943
22,104,461
225,683,232
%
0.10%
0.85%
1.06%
8.74%
89.25%
2,619
252,872,687
100.00%
The number of shareholders holding less than a marketable parcel was 421.
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Ltd
Pershing Australia Nominees Pty Ltd (Well Efficient Ltd)
HSBC Custody Nominees (Australia) Ltd
Liam Cornelius
Montezuma Mining Company Ltd
Citicorp Nominees Pty Ltd
Paul Hartley Watts
BNP Paribas Noms Pty Ltd
Seamus Cornelius
Alpha Boxer Limited
Merrill Lynch (Australia) Nominees Pty Ltd
Kongming Investments Ltd
Ranguta Ltd
Paul Donaldson
BNP Paribas Nominees Pty Ltd
John Joseph Wallace
Dongarra Ltd
Anthony Maslin + Marite Norris
National Nominees Ltd
Grandor Pty Ltd
Listed ordinary shares
Number of shares
51,110,446
30,000,000
24,871,646
14,422,041
7,271,925
6,960,435
5,000,000
4,693,206
4,300,883
4,245,000
4,182,304
4,178,992
3,395,685
2,718,334
2,541,905
2,470,983
2,234,398
2,010,000
1,997,989
1,964,917
Percentage of
ordinary shares
20.21
11.86
9.84
5.70
2.88
2.75
1.98
1.86
1.70
1.68
1.65
1.65
1.34
1.07
1.01
0.98
0.88
0.79
0.79
0.78
180,571,089
71.41
(c) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Corporations Act 2001 are:
Well Efficient Ltd
JP Morgan Asset Management (UK)
The Capital Group Companies, Inc.
Liam Cornelius
(d) Voting rights
Number of Shares
30,000,000
20,200,000
16,700,000
14,422,041
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. Holders of unlisted options and
performance rights do not have voting rights.
DANAKALI LIMITED
Page 86
ABN 56 097 904 302
65
Danakali Annual Report 2017DANAKALI LIMITED
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
ASX Additional Information
The information is current as at 28 February 2018.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
- 1,000
- 5,000
- 10,000
10,001
- 100,000
100,001
and over
TOTAL
Holders
Securities
577
841
352
680
169
250,940
2,160,111
2,673,943
22,104,461
%
0.10%
0.85%
1.06%
8.74%
225,683,232
89.25%
2,619
252,872,687
100.00%
The number of shareholders holding less than a marketable parcel was 421.
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary shares are:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Ltd
Pershing Australia Nominees Pty Ltd (Well Efficient Ltd)
HSBC Custody Nominees (Australia) Ltd
Liam Cornelius
Montezuma Mining Company Ltd
Citicorp Nominees Pty Ltd
Paul Hartley Watts
BNP Paribas Noms Pty Ltd
Seamus Cornelius
Alpha Boxer Limited
Merrill Lynch (Australia) Nominees Pty Ltd
Kongming Investments Ltd
Ranguta Ltd
Paul Donaldson
BNP Paribas Nominees Pty Ltd
John Joseph Wallace
Dongarra Ltd
Anthony Maslin + Marite Norris
National Nominees Ltd
Grandor Pty Ltd
(c) Substantial shareholders
Corporations Act 2001 are:
Well Efficient Ltd
JP Morgan Asset Management (UK)
The Capital Group Companies, Inc.
Liam Cornelius
(d) Voting rights
performance rights do not have voting rights.
DANAKALI LIMITED
ABN 56 097 904 302
Listed ordinary shares
Number of shares
Percentage of
ordinary shares
51,110,446
30,000,000
24,871,646
14,422,041
7,271,925
6,960,435
5,000,000
4,693,206
4,300,883
4,245,000
4,182,304
4,178,992
3,395,685
2,718,334
2,541,905
2,470,983
2,234,398
2,010,000
1,997,989
1,964,917
180,571,089
71.41
Number of Shares
30,000,000
20,200,000
16,700,000
14,422,041
20.21
11.86
9.84
5.70
2.88
2.75
1.98
1.86
1.70
1.68
1.65
1.65
1.34
1.07
1.01
0.98
0.88
0.79
0.79
0.78
65
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. Holders of unlisted options and
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Danakali Annual Report 2017DANAKALI LIMITED
How to Invest
ASX
Danakali is listed on the Australian Stock Exchange
(ASX) (ASX: DNK). Shares can be bought and sold on
the market. You can buy as little as A$500 worth of
shares. As with any investment, shares carry risk and
investors need to inform themselves of these.
By investing in Danakali shares on the ASX you are
buying part ownership of the company. You can buy
and sell shares by using a licensed broker on your
behalf. For more information on how to trade in ASX
shares please visit ASX’s online resources via
http://asx.com.au/education/shares-courses.htm
ADRs
Investors located in North America have access to the
American Depository Receipts (ADR) Program. The
Bank of New York Mellon sponsors Danakali’s Level 1
ADRs which are traded on the over-the-counter (OTC)
securities market in the US under the symbol: DNKLY
and CUSIP: 23585T101. One ADR represents one
ordinary share in Danakali.
US OTC Market information is available here:
http://www.otcmarkets.com/stock/DNKLY/quote
Danakali’s ADR information can also be viewed here:
https://www.adrbnymellon.com/?cusip=23585T101
ADR Holders seeking information on their shareholding
should contact:
LONDON
NEW YORK
Mark Lewis
+44 207 163 7407
mark.lewis@bnymellon.com
Rick Maehr
+1 212 815 2275
richard.maehr@bnymellon.com
Further information may be obtained from the company
website: http://www.danakali.com/investor-relations/
american-depository-receipts
Other OTC
OTC trading in Danakali is also available on the Frankfurt and
Berlin Stock Exchanges.
Frankfurt symbol: SO3-FRA, further information can be
found here:
http://en.boerse-frankfurt.de/stock/Danakali-share
Berlin symbol: SO3-BER, further information can be
found here:
http://en.boerse-frankfurt.de/stock/Danakali-share
Competent Persons Statement (Sulphate of Potash Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral
Resource estimate of 1,289Mt @11% K20. The resource contains 303Mt @
11% K20 of Measured Resource, 951Mt @ 11% K20 of Indicated Resource and
35Mt @ 10% K20 of Inferred Resource.
The information relating to the 2015 Colluli Mineral Resource estimate is
extracted from the report entitled “Colluli Review Delivers Mineral Resource
Estimate of 1.289Bt” disclosed on 25 February 2015 and is available to view
at www.danakali.com.au. The Company confirms that it is not aware of any
new information or data that materially affects the information included in
the original market announcement and, in the case of estimates of Mineral
Resources or Ore Reserves, that all material assumptions and technical
parameters underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed. The Company confirms that
the form and context in which the Competent Person’s findings are presented
have not been materially modified from the original market announcement.
Competent Persons Statement (Sulphate of Potash Ore Reserve)
The January 2018 Colluli Ore Reserve is reported according to the JORC Code
and estimated at 1,100Mt @ 10.5% K2O Equiv. The Ore Reserve is classed
as 285Mt @ 11.3% K2O Equiv. Proved and 815Mt @ 10.3% K2O Equiv.
Probable. The Competent Person for the estimate is Mr Mark Chesher, a
mining engineer with more than 30 years’ experience in the mining industry.
Mr Chesher is a Fellow of the Australasian Institute of Mining and Metallurgy,
a Chartered Professional, a full-time employee of AMC Consultants Pty Ltd
(AMC), and has sufficient open pit mining activity experience relevant to the
style of mineralisation and type of deposit under consideration to qualify as a
Competent Person as defined in the JORC Code. Mr Chesher consents to the
inclusion of information relating to the Ore Reserve in the form and context in
which it appears.
In reporting the Mineral Resources and Ore Reserves referred to in this public
release, AMC acted as an independent party, has no interest in the outcomes of
Colluli and has no business relationship with Danakali other than undertaking
those individual technical consulting assignments as engaged, and being paid
according to standard per diem rates with reimbursement for out-of-pocket
expenses. Therefore, AMC and the Competent Persons believe that there is no
conflict of interest in undertaking the assignments which are the subject of the
statements.
Competent Persons Statement (Rock Salt Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral
Resource estimate of 347Mt @ 96.9% NaCl. The Mineral Resource estimate
contains 28Mt @ 97.2% NaCl of Measured Resource, 180Mt @ 96.6% NaCl of
Indicated Resource and 139Mt @ 97.2% NaCl of Inferred Resource.
The information relating to the Colluli Rock Salt Mineral Resource estimate is
extracted from the report entitled “+300M Tonne Rock Salt Mineral Resource
Estimate Completed for Colluli” disclosed on 23 September 2015 and is
available to view at www.danakali.com.au. The Company confirms that it is not
aware of any new information or data that materially affects the information
included in the original market announcement and, in the case of estimates of
Mineral Resources or Ore Reserves, that all material assumptions and technical
parameters underpinning the estimates in the relevant market announcement
continue to apply and have not materially changed. The Company confirms that
the form and context in which the Competent Person’s findings are presented
have not been materially modified from the original market announcement.
Quality control and quality assurance
Danakali exploration programs follow standard operating and quality assurance
procedures to ensure that all sampling techniques and sample results meet
international reporting standards. Drill holes are located using GPS coordinates
using WGS84 Datum, all mineralisation intervals are downhole and are true width
intervals.
The samples are derived from HQ diamond drill core, which in the case of
carnallite ores, are sealed in heat-sealed plastic tubing immediately as it is drilled
to preserve the sample. Significant sample intervals are dry quarter cut using
a diamond saw and then resealed and double bagged for transport to the
laboratory.
Halite blanks and duplicate samples are submitted with each hole. Chemical
analyses were conducted by Kali-Umwelttechnik GmBH, Sondershausen,
Germany, utilising flame emission spectrometry, atomic absorption spectroscopy
and ion chromatography. Kali-Umwelttechnik (KUTEC) has extensive experience
in analysis of salt rock and brine samples and is certified according by DIN
EN ISO/IEC 17025 by the Deutsche Akkreditierungsstelle GmbH (DAR). The
laboratory follows standard procedures for the analysis of potash salt rocks
chemical analysis (K+, Na+, Mg2+, Ca2+, Cl-, SO42-, H2O) and X-ray diffraction
(XRD) analysis of the same samples as for chemical analysis to determine a
qualitative mineral composition, which combined with the chemical analysis
gives a quantitative mineral composition.
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Danakali Annual Report 2017DANAKALI LIMITED Danakali Limited, Level 1, 234 Churchill Avenue Churchill Court, Subiaco, Perth, WA 6008
T +61 8 6315 1444 E info@danakali.com ABN 56 097 904 302
www.danakali.com