2018
ANNUAL
REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
DANAKALI LIMITED
ABN 56 097 904 302
Executive
summary
Danakali is developing the Colluli Potash Project (Colluli, or the Project), an advanced and economically
attractive Sulphate of Potash (SOP) development project. Colluli is ‘shovel ready’; all material permits
are in place, binding take-or-pay offtake has been achieved and Front End Engineering Design (FEED)
Fundamentals
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 SOP equivalent1.
The Danakil Depression is the only known potash basin
in the world with the most favourable combination of
potassium salts for low cost, high yield production of SOP
using simple commercially proven processing techniques.
Shallow mineralisation
Colluli is the shallowest known evaporite deposit in the
world with mineralisation starting at just 16m allowing
simple, safe, low cost, open-cut mining.
Salts extracted in solid form
Colluli is the only known 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.
Extracting the salts in solid form allows the salts to be
between mining and revenue generation, and it reduces
the evaporation pond footprint which contributes to a
lower overall capital intensity.
Close proximity to coast and established
infrastructure
Colluli is the closest known SOP deposit to a coastline
anywhere in the world, only 75km from the Red Sea.
An existing coastal road to the established port of
Massawa runs proximate to Colluli. The port of Massawa
is equipped with bulk and container loading facilities.
Continued emergence of Eritrea amid rapid
diplomatic progress in the Horn of Africa
Restoration of diplomatic relations among Horn of Africa
countries including Eritrea, Ethiopia, Djibouti and Somalia
has signalled an end to tensions in the region. Rapid
diplomatic progress has enabled the opening of borders
established trade between Eritrea and Ethiopia, and the
lifting of UN sanctions on Eritrea.
Eritrea was the only sub-Saharan African country to meet
its Millenium Development Goals by 20152.
1
2
DNK announcement, 19 February 2018.
World Health Organisation.
Page 2
Execution
Outcomes
FEED study provides stakeholders with
Attractive returns to shareholders
economically attractive project relative to other SOP
FEED articulates a modular development approach
underpinning a highly scalable, long life project:
quartile operating costs facilitate a project post tax NPV
of US$902M and post-tax IRR of 29.9%3, with a post
31.3% attributable to Danakali3. Such returns set Danakali
apart from SOP development peers.
• Module I is expected to produce 472ktpa of premium
High return expansion potential
• Module II will increase total SOP production to
SOP or other potash type modules, and multi-commodity
SOP product; and
944ktpa3.
Binding offtake agreement with
EuroChem
EuroChem will take, pay, market and distribute up to
100% (minimum 87% at CMSC’s option) of Colluli
Module I SOP production for at least 10 years.
a take-or-pay offtake agreement; instrumental in providing
Execution of US$200M senior debt
mandate and term sheet with esteemed
African DFIs
CMSC has successfully executed a US$200M senior
debt mandate and term sheet, which will provide a large
proportion of the funding required for construction and
development of the Project. The funding is supported
(DFIs): the African Export-Import Bank (Afreximbank) and
the Africa Finance Corporation (AFC), who are acting as
Mandated Lead Arrangers.
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.
opportunities. Appreciable amounts of Rock Salt (mined as
overburden), Gypsum, Kieserite and Magnesium Chloride
are present and could enhance project economics.
Sulphate of Potash Magnesia (SOP-M) and Rock Salt
There is a potential site for port development only 87km
(by road) away from Colluli.
An outstanding economic, social and
community dividend
Danakali is committed to improving the lives of the local
communities in which it operates and Colluli will play a
FEED, the Social & Environmental Impact Assessment (SEIA)
and Social & Environmental Management Plans (SEMPs)
job creation, taxes, royalties, and associated economic
development. Hundreds of direct permanent jobs for
Eritrean nationals will be created. Long term training for
trades and professionals will be developed.
UNDP report outlines potential for Colluli
to boost the Eritrean economy and
support the country's SDGs
The release of a report on Colluli commissioned by
the United Nations Development Programme (UNDP)
highlights the potential for Colluli to boost the Eritrean
economy and support the country’s UN Sustainable
Development Goals (SDGs)4.
3
4
Modules I & II, Module II is expected to commence in the 6th year of Module I production
The UNDP report was generated independently of the Company. Danakali and its Board take no responsibility for the
content of the UNDP report, nor does the Company or its Board endorse or warrant the accuracy of any content of the UNDP report.
DANAKALI LIMITEDDanakali Annual Report 2018
Executive
summary
Danakali is developing the Colluli Potash Project (Colluli, or the Project), an advanced and economically
attractive Sulphate of Potash (SOP) development project. Colluli is ‘shovel ready’; all material permits
are in place, binding take-or-pay offtake has been achieved and Front End Engineering Design (FEED)
Fundamentals
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 SOP equivalent1.
The Danakil Depression is the only known potash basin
in the world with the most favourable combination of
potassium salts for low cost, high yield production of SOP
using simple commercially proven processing techniques.
between mining and revenue generation, and it reduces
the evaporation pond footprint which contributes to a
lower overall capital intensity.
Close proximity to coast and established
infrastructure
Colluli is the closest known SOP deposit to a coastline
anywhere in the world, only 75km from the Red Sea.
An existing coastal road to the established port of
Massawa runs proximate to Colluli. The port of Massawa
is equipped with bulk and container loading facilities.
Shallow mineralisation
Colluli is the shallowest known evaporite deposit in the
Continued emergence of Eritrea amid rapid
diplomatic progress in the Horn of Africa
world with mineralisation starting at just 16m allowing
Restoration of diplomatic relations among Horn of Africa
simple, safe, low cost, open-cut mining.
Salts extracted in solid form
Colluli is the only known 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.
Extracting the salts in solid form allows the salts to be
countries including Eritrea, Ethiopia, Djibouti and Somalia
has signalled an end to tensions in the region. Rapid
diplomatic progress has enabled the opening of borders
established trade between Eritrea and Ethiopia, and the
lifting of UN sanctions on Eritrea.
Eritrea was the only sub-Saharan African country to meet
its Millenium Development Goals by 20152.
1
2
DNK announcement, 19 February 2018.
World Health Organisation.
Execution
Outcomes
FEED study provides stakeholders with
Attractive returns to shareholders
economically attractive project relative to other SOP
FEED articulates a modular development approach
underpinning a highly scalable, long life project:
quartile operating costs facilitate a project post tax NPV
of US$902M and post-tax IRR of 29.9%3, with a post
31.3% attributable to Danakali3. Such returns set Danakali
apart from SOP development peers.
• Module I is expected to produce 472ktpa of premium
High return expansion potential
SOP product; and
• Module II will increase total SOP production to
944ktpa3.
Binding offtake agreement with
EuroChem
EuroChem will take, pay, market and distribute up to
100% (minimum 87% at CMSC’s option) of Colluli
Module I SOP production for at least 10 years.
a take-or-pay offtake agreement; instrumental in providing
Execution of US$200M senior debt
mandate and term sheet with esteemed
African DFIs
CMSC has successfully executed a US$200M senior
debt mandate and term sheet, which will provide a large
proportion of the funding required for construction and
development of the Project. The funding is supported
(DFIs): the African Export-Import Bank (Afreximbank) and
the Africa Finance Corporation (AFC), who are acting as
Mandated Lead Arrangers.
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.
SOP or other potash type modules, and multi-commodity
opportunities. Appreciable amounts of Rock Salt (mined as
overburden), Gypsum, Kieserite and Magnesium Chloride
are present and could enhance project economics.
Sulphate of Potash Magnesia (SOP-M) and Rock Salt
There is a potential site for port development only 87km
(by road) away from Colluli.
An outstanding economic, social and
community dividend
Danakali is committed to improving the lives of the local
communities in which it operates and Colluli will play a
FEED, the Social & Environmental Impact Assessment (SEIA)
and Social & Environmental Management Plans (SEMPs)
job creation, taxes, royalties, and associated economic
development. Hundreds of direct permanent jobs for
Eritrean nationals will be created. Long term training for
trades and professionals will be developed.
UNDP report outlines potential for Colluli
to boost the Eritrean economy and
support the country's SDGs
The release of a report on Colluli commissioned by
the United Nations Development Programme (UNDP)
highlights the potential for Colluli to boost the Eritrean
economy and support the country’s UN Sustainable
Development Goals (SDGs)4.
3
4
Modules I & II, Module II is expected to commence in the 6th year of Module I production
The UNDP report was generated independently of the Company. Danakali and its Board take no responsibility for the
content of the UNDP report, nor does the Company or its Board endorse or warrant the accuracy of any content of the UNDP report.
Page 3
Danakali Annual Report 2018DANAKALI LIMITED
Corporate Directory
Directors
Seamus Cornelius
Paul Donaldson
John Fitzgerald
(Executive Chairman)
(Non-Executive Director)
(Independent Non-Executive Director)
Zhang Jing
Robert Connochie
Andre Liebenberg
(Non-Executive Director)
(Independent Non-Executive Director)
(Independent Non-Executive Director)
Executive Management
Niels Wage
Stuart Tarrant
(Chief Executive Officer)
(Chief Financial Officer)
Joint Company Secretary
Catherine Grant Edwards
Melissa Chapman
Registered Office and Principal Place of Business
Level 11, 125 St Georges Terrace
PERTH WA 6000
Telephone:
+61 (0)8 6189 8635
Bank
National Australia Bank
Level 12, 100 St Georges Terrace
PERTH WA 6000
Auditors
Ernst and Young
11 Mounts Bay Road
PERTH WA 6000
Share Register (Australia)
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
Share Register (United Kingdom)
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS13 8AE, United Kingdom
Telephone:
+44 (0) 370 702 0003
www.computershare.com
To facilitate trading of Danakali’s shares on the Standard Segment of the London Stock Exchange (LSE) Main Market,
Danakali has established a Depositary Interest (DI) facility, under which it has appointed Computershare Investor Services
Plc as the depositary. Securities of Australian issuers such as Danakali cannot be directly registered, transferred or
settled through CREST (which is the electronic settlement system in the UK). The DI facility overcomes this by creating
entitlements to Danakali’s shares (the DIs), which are deemed to be UK securities and therefore admissible to CREST. The
underlying shares are listed and traded on the Standard Segment of the LSE Main Market, while the DIs are transferred in
CREST to settle those trades.
Website
www.danakali.com
Stock Exchange Listing
Danakali Limited Shares are listed on the Australian Stock Exchange (ASX:DNK) and the London Stock Exchange (LSE:DNK).
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:
http://www.otcmarkets.com/stock/DNKLY/quote
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
LONDON
Mark Lewis
mark.lewis@bnymellon.com
Telephone +44 207 163 7407
NEW YORK
Rick Maehr
richard.maehr@bnymellon.com
Telephone +1 212 815 2275
Page 4
DANAKALI LIMITEDDanakali Annual Report 2018
Contents
Chairman’s Letter
CEO’s Letter
Investor update and highlights
Director’s Report
Auditor’s Independence Declaration
Financial Results
- 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 Auditor’s Report
ASX Additional Information
How to invest
Competent Persons Statements
Page
6
8
10
30
56
58
59
60
61
62
63
88
89
94
96
97
Page 5
Danakali Annual Report 2018DANAKALI LIMITED Chairman’s Letter
Dear fellow shareholders,
2018 saw significant progress for
Danakali as we continued to achieve
important project milestones towards
the full funding and development of
Colluli. We have demonstrated strong
operational momentum, solid progress
on funding and a London listing – all
supported by positive developments in
Eritrea.
Operational momentum
The FEED study results, released at the
start of the year, confirmed Colluli as
an advanced greenfield Sulphate of
Potash project able to deliver more
SOP, for longer and at a lower capital
intensity than any other known
greenfield deposit globally.
In June 2018, an offtake deal was
signed with EuroChem, an industry
leading fertiliser company, for up to
100% (minimum 87%) of Colluli’s
Module I SOP production. The offtake
agreement has paved the way for
project financing, and underscores
the confidence that EuroChem, a
partner with deep expertise in the
fertiliser sector, has in the project.
We are building a strong relationship
with EuroChem, and supply chain and
product development continues to
take shape.
In August, the Eritrean Ministry
of Land, Water and Environment
confirmed acceptance of the finalised
Colluli Social & Environmental
Management Plans (SEMPs) following
an extensive review period. The SEMPs
set out the detailed processes which
will underpin our approach to the
Project’s development and signifies
Page 6
an important step in our mission to
develop Colluli in a sustainable and
responsible way. The Project is fully
permitted for execution.
September saw another critical project
execution milestone achieved with the
confirmation of DRA as the preferred
EPCM contractor for Colluli. We look
forward to working closely with DRA,
a high quality multi-disciplinary global
Project Management and Engineering
group with strong African experience
and EPCM delivery capability.
Strong financial progress
Delivering on another of our strategic
goals for 2018, Danakali was listed on
the London Stock Exchange’s Standard
Segment in July. This secondary listing
is another move towards building
our profile, liquidity and breadth of
potential investors.
In December a US$200M debt
term sheet was signed with African
development finance institutions
Afreximbank and AFC acting as
the Mandated Lead Arrangers. We
are delighted to be partnering with
strong, experienced African financial
institutions to move forward with the
project financing process and build on
the binding offtake agreement with
EuroChem.
Positive developments in Eritrea
The year also saw exciting
developments in Eritrean-Ethiopian
relations as the signing of a peace
treaty created a platform of stability
for the region.
In November, United Nations sanctions
DANAKALI LIMITEDDanakali Annual Report 2018 on Eritrea, which had been in place
since 2009, were lifted, highlighting
the UN’s recognition of the rapid
diplomatic progress being made
within the Horn of Africa.
After the year end a report initiated
and funded by the United Nations
Development Programme (UNDP)
on the potential contributions
of the Colluli Project to Eritrea’s
Sustainable Development Goals
was published. Prepared by senior
economists on behalf of the UNDP,
the report illustrates the continued
positive sentiment towards Eritrea. It
reinforces the uniqueness of Colluli,
as well as the scale of the opportunity
and the responsibility that comes
with developing an asset of such
significance to millions in Eritrea.
With this in mind, as we look to 2019
and progress towards development,
we are giving increased focus to
implementing our SEMPs and the
policies set out in our CSR report.
Our commitment to developing
Colluli in the most responsible way
environmentally and in terms of
social and community engagement
is absolute, and will drive the whole
culture and values of our strategic
approach. Our partners ENAMCO
are equally committed to these
objectives and we continue to work
closely together to achieve our shared
objectives for Colluli.
The Danakali Board was also very
happy to have confirmed Mr. Niels
Wage as the Company’s new CEO
in March 2019. The confirmation
followed an extensive global search
for the right leader for the Company’s
current stage, upcoming milestones
and longer term strategy, and we
are very confident we have found
that with Niels. Niels starts as CEO
at a very exciting and critical time for
Danakali with project funding well
progressed and project execution set
to commence. I wish him the best of
luck and know he will be supported
ably by the rest of the Company’s
employees and the Danakali Board.
2019 promises to be a
transformational year for Danakali.
Despite the significant progress to
date, no one should underestimate
the challenges ahead. Fortunately,
we have an outstanding asset and
ENAMCO is an excellent partner with
whom to face these challenges. Our
determination is unwavering and
matched only by our resilience. I am
grateful for your ongoing support.
Seamus Cornelius
Executive Chairman
Page 7
Danakali Annual Report 2018DANAKALI LIMITED CEO’s Letter
Dear Shareholders,
As Danakali’s new CEO, I would like
to begin my first letter to Shareholders
by expressing my enthusiasm and
excitement about the prospects
for the Company as we move
into the final stage of funding for
Colluli. Completion of our financing
plans will provide the platform for
launching the full-scale development
programme with production expected
to commence within approximately
two years of development
commencement.
2018 was very important for
Danakali, with a mix of significant
financial, operational and geopolitical
developments that supported the
progress of our plans.
First of all, we supplemented our
ASX listing with a dual listing on the
London Stock Exchange which opens
up the UK and international investor
community to Danakali and the Colluli
project. The London market has a
good understanding of the African
mining and agricultural environment
and will provide us with broader and
deeper access to equity and debt
capital markets.
Secondly, in June we signed a take-
or-pay offtake agreement with global
fertiliser producer EuroChem for up
Page 8
to 100% of our SOP production of
Module 1, which provides us with
cash flow certainty to unlock project
funding. The market fundamentals for
SOP continue to look healthy with a
growing world population, increased
demand for food and changing
dietary habits. I believe that our SOP
production will help provide farmers
around the world with more balanced
and better nutrition for their quality
crops.
The landmark peace accord between
Eritrea and Ethiopia in July last year is
a significant turning point in Eritrea’s
economic development. The lifting
of decade-old UN sanctions against
Eritrea, which followed in November,
sets the stage for unlocking the
country’s potential for foreign
investment, and provides a supportive
backdrop to Colluli becoming a major
contribution to Eritrean GDP, exports
and employment.
In January this year, we saw the UNDP
publish an independent report about
the potential contribution of Colluli
to Eritrea’s Sustainable Development
Goals. The authors endorsed the
contribution that Colluli can make to
the Eritrean economy and outlined its
potential to boost the country’s and
region’s development. This supports
my confidence that Colluli can
become a template for other African
DANAKALI LIMITEDDanakali Annual Report 2018 countries seeking to use natural
resources to transform economies
in a sustainable manner through
formation of a vibrant domestic
fertiliser industry, infrastructure
development, and by helping explore
nutrient applications to grow crop
production and address the growing
food demand.
Finally, in December, we signed a
term sheet with leading African
development finance institutions, AFC
and Afreximbank, to provide debt
finance facilities of US$200M to fund
the construction and development of
the project. This is a critical milestone
for our project funding and brings us
yet another step closer to production.
Our immediate priority for 2019 will
be the completion of the funding
process, which will allow us to be in
the position to proceed with moving
into development later this year.
I believe that 2018 and 2019 will
prove to be transformative for the
Company. We have established a
clear strategy to further develop the
Project and unlock shareholder value
over the coming years. It is exciting to
be taking up the CEO role at such an
important point in time, and to be on
the verge of moving into development
and build the organisation in
collaboration with our JV partner
ENAMCO, as we are getting ready to
deliver on the significant potential that
Colluli presents.
Chief Executive Officer
Niels Wage
Page 9
Danakali Annual Report 2018DANAKALI LIMITED FORWARD LOOKING STATEMENTS AND DISCLAIMER
“Danakali presents an attractive investment opportunity, providing exposure
to one of the world’s most advanced and economically attractive SOP
projects with a post-tax valuation of US$902M and IRR of 29.9% for
leading capital intensity, and an almost 200-year mine life. The
Colluli deposit is unrivalled in the SOP industry.
We, and our partner ENAMCO, are excited to be progressing the development of this
world-class project, and delivering a long-term and stable supply of premium fertiliser
for years to come.
First we will ensure the successful development of Modules I and II, before looking
resource.
As recognised by the UNDP, Colluli promises to be a major contributor to
Eritrean economic development and positive social outcomes through
exports, the emergence of adjacent industries, training and employment.
We look forward to bringing Colluli into production and building value
for all shareholders and stakeholders.”
Forward looking statements and disclaimer
The information in this document is published to inform you about Danakali and its activities. Danakali has endeavoured to ensure
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
There can be no assurance that the development of Colluli 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 Compa-
ny 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.
assumptions detailed in the Company’s ASX announcements dated 25 February 2015, 23 September 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.
No representation or warranty, express or implied, is or will be made by or on behalf of the Company, and no responsibility or liability is or will be accepted by
announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. The Company and each of its
have in respect of this announcement or any such statement.
The distribution of this announcement outside the United Kingdom may be restricted by law and therefore any persons outside the United Kingdom into
whose possession this announcement comes should inform themselves about and observe any such restrictions in connection with the distribution of this
announcement. Any failure to comply with such restrictions may constitute a violation of the securities laws of any jurisdiction outside the United Kingdom.
Page 10
DANAKALI LIMITEDDanakali Annual Report 2018
“Danakali presents an attractive investment opportunity, providing exposure
to one of the world’s most advanced and economically attractive SOP
projects with a post-tax valuation of US$902M and IRR of 29.9% for
leading capital intensity, and an almost 200-year mine life. The
Colluli deposit is unrivalled in the SOP industry.
We, and our partner ENAMCO, are excited to be progressing the development of this
world-class project, and delivering a long-term and stable supply of premium fertiliser
for years to come.
First we will ensure the successful development of Modules I and II, before looking
resource.
As recognised by the UNDP, Colluli promises to be a major contributor to
Eritrean economic development and positive social outcomes through
exports, the emergence of adjacent industries, training and employment.
We look forward to bringing Colluli into production and building value
for all shareholders and stakeholders.”
Forward looking statements and disclaimer
The information in this document is published to inform you about Danakali and its activities. Danakali has endeavoured to ensure
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
There can be no assurance that the development of Colluli 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 Compa-
ny 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.
assumptions detailed in the Company’s ASX announcements dated 25 February 2015, 23 September 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.
No representation or warranty, express or implied, is or will be made by or on behalf of the Company, and no responsibility or liability is or will be accepted by
announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. The Company and each of its
have in respect of this announcement or any such statement.
The distribution of this announcement outside the United Kingdom may be restricted by law and therefore any persons outside the United Kingdom into
whose possession this announcement comes should inform themselves about and observe any such restrictions in connection with the distribution of this
announcement. Any failure to comply with such restrictions may constitute a violation of the securities laws of any jurisdiction outside the United Kingdom.
Investment highlights
World class
Reserve
Simple mining
and processing
Closest known SOP
deposit to coast
1.1Bt @ 10.5% K2O1
203Mt contained SOP1
Open-cut mining
Commercially-proven processing
Only 75km from
Red Sea coast
Stable, supportive
mining jurisdiction
'Shovel ready’
SOP project
Binding offtake
agreement
Strong Eritrean
government relationship
FEED complete, fully
permitted, EPCM selected
Up to 100% of
Module I production
1
3
2
4
US$200M
senior debt
Industry leading
capital intensity
First quartile
operating costs
Mandate and term sheet
executed
US$534/t
US$242/t2
Exceptional
returns
Potential for
growth
Community and
social dividends
Project NPV US$902M
Project IRR 29.9%
multi-commodity potential
>650 operational jobs
Strong community engagement
Note
1
2
All results over Module I and II unless stated
DNK announcement, 19 February 2019
FOB Port of Massawa
Page 11
Danakali Annual Report 2018DANAKALI LIMITED
FEED results
FEED establishes Colluli as an advanced and
project
Enhanced project economics with considerably higher level of
accuracy
•
•
costs
•
Project level NPV of US$902M with IRR of 29.9% for Modules I and II
• Danakali share of NPV of US$439M with IRR of 31.3%
• Operating and capital cost accuracy level of ±10%
•
and debt funding (term sheet and mandate executed) processes
Page 12
DANAKALI LIMITEDDanakali Annual Report 2018
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
6
Post tax NPV (10% real)
Post tax IRR
Module 1 payback period8
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
Mine gate production costs for global SOP producers in 20181
Colluli FEED results included to demonstrate illustrative comparison
6
US$43M
US$85M
If operating in 2018, Danakali would have been one of the lowest cost SOP producers
Mine gate production costs for global SOP producers in 20189
US$242M
US$439M
29.7%
31.3%
500
400
300
200
100
t
/
$
S
U
Americas primary production
Colluli
Module
I & II
Chinese primary production
Large distances to ports, majority of
production consumed within China10
Mannheim Process
production
High energy, high cost and
environmental issues10
2,000
4,000
6,000
8,000
SOP production capacity (kt)
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
and third-party debt
Including contingency, excluding sustaining and working capital
5
Includes mine gate cash costs, product logistics, and royalties
6
7
8
9 Greenmarkets and Danakali analysis; Colluli FEED results
included to demonstrate illustrative comparison
10 Integer Research
Page 13
FEED results
FEED establishes Colluli as an advanced and
•
Enhanced project economics with considerably higher level of
project
accuracy
•
costs
•
Project level NPV of US$902M with IRR of 29.9% for Modules I and II
• Danakali share of NPV of US$439M with IRR of 31.3%
• Operating and capital cost accuracy level of ±10%
•
and debt funding (term sheet and mandate executed) processes
Danakali Annual Report 2018DANAKALI LIMITED
SOP market overview
and increasingly undersupplied
SOP is generated by either primary or secondary
production processes. Primary production occurs directly
from suitable economically exploitable resources, such
as solid salts or brines. These resources are geologically
outside of China. The supply 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
production costs. SOP commands a price premium over
MOP because of its suitability for application on higher-
value chloride sensitive crops, lack of primary supply and a
need for secondary production at higher production costs
(MOP price + sulphur price + energy costs + waste costs).
The SOP price premium over MOP has maintained a
premium of more than US$205/t for more than 5 years
(and above US$250/t for the majority of that period).
There has been limited SOP supply growth outside of
China. Expandability of existing operations outside
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
Page 14
DANAKALI LIMITEDDanakali Annual Report 2018
There is also a limit in the extent to which existing secondary
producers can increase output to service growing demand.
Due to environmental issues and waste management
secondary producers can only produce as much SOP as the
by-product hydrochloric acid (HCl) they can dispose of. For
every 1t of SOP produced via the Mannheim Process, 1.2t
of HCl is produced.
key drivers:
1. Global population growth
2. Reduction in arable land per capita
3. Changing dietary preferences
4. Under-application in developing countries
5. Water availability
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.
Integer Research forecasts global demand to grow from
7.3Mt in 2017 to 9.1Mt in 2040. While demand in China is
predicted to slow down, Integer Research expects growth
around the rest of the globe to gain momentum, growing
by an average 2.9% p.a. between 2016 and 2040.
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
in the USA and Chinese markets.
The expected demand and supply dynamics provide
foundation for the assertion that the SOP industry will
tighten throughout the next 10 years, supporting a
robust pricing environment.
SOP is currently underapplied in the areas expecting the highest rate of population
growth, the majority of which are proximate to Colluli
High/appropriate SOP use
Low SOP use / SOP underapplied
Russia
7kg/ha
USA
57kg/ha
Europe
43kg/ha
Middle East
26kg/ha
India
2kg/ha
Africa
4kg/ha
China
71kg/ha
Southeast Asia
1kg/ha
Latin
America
10kg/ha
Forecast population
growth in Latin
America
0
5
0
.
2
4
0
.
2015 2050
Population in billions
5
5
2
.
9
1
1
.
2015 2050
Forecast
population
growth in
Africa
6
6
1 1
3
1
.
.
2015 2050
Forecast
population
growth in
India
Forecast population
growth in Asia
(ex China and India)
3
2
1 2
7
1
.
.
2015 2050
Note
The content on this page was generated utilising industry insights from Integer Research and CRU, the data in the infographic is sourced from Integer
Research and United Nations world population prospects
Page 15
Danakali Annual Report 2018DANAKALI LIMITED
Project overview and logistics
3 K M
1 1
Asmara
Eritrea
Massawa Port
Marsa
Fatuma
230K
M
87KM
Proposed
water pipeline and
potential road
7
9
0
K
M
+
Strategic location
The north-eastern and eastern parts of Eritrea have
an extensive coastline along the Red Sea, a strategic
location along the Maritime Silk Road. Colluli is located
approximately 75km from the Red Sea coast (87km by
Djibouti
Tadjoura Port
providing unrivalled future logistics potential and making
it the closest known SOP deposit to a coastline.
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, one of
the busiest trade routes in the world, with direct access to
the key markets of India, Southeast Asia, the Middle East,
Europe and the rest of Africa. Colluli has been assigned a
lay down area at the Port of Massawa.
will be subject to further review and has the potential
low cost export of additional volumes resulting from (i)
additional modules, and (ii) the expansion of the product
suite (including non-potash materials).
Road
Port terminal
Potential port terminal
Colluli Potash Project
Potash development project
Water pipeline
Danakil (Circum)
Yara Dallol (Yara)
Ethiopia
DANAKIL
DEPRESSION
Standout ‘shovel ready’ development
opportunity
Danakali is focused on the development of the world
class Colluli Potash 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 boasts the shallowest known evaporite
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 low 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 ‘shovel ready’.
Page 16
Red SeaDANAKALI LIMITEDDanakali Annual Report 2018
Project overview and logistics
Mining
3 K M
1 1
Asmara
Eritrea
Massawa Port
Marsa
Fatuma
230K
M
Road
Port terminal
Potential port terminal
Colluli Potash Project
Potash development project
Water pipeline
Danakil (Circum)
Yara Dallol (Yara)
Ethiopia
87KM
Proposed
water pipeline and
potential road
DANAKIL
DEPRESSION
7
9
0
K
M
+
Standout ‘shovel ready’ development
Strategic location
Djibouti
The north-eastern and eastern parts of Eritrea have
an extensive coastline along the Red Sea, a strategic
Tadjoura Port
location along the Maritime Silk Road. Colluli is located
approximately 75km from the Red Sea coast (87km by
opportunity
Danakali is focused on the development of the world
class Colluli Potash 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 boasts the shallowest known evaporite
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 low 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 ‘shovel ready’.
providing unrivalled future logistics potential and making
it the closest known SOP deposit to a coastline.
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, one of
the busiest trade routes in the world, with direct access to
the key markets of India, Southeast Asia, the Middle East,
Europe and the rest of Africa. Colluli has been assigned a
lay down area at the Port of Massawa.
will be subject to further review and has the potential
low cost export of additional volumes resulting from (i)
additional modules, and (ii) the expansion of the product
suite (including non-potash materials).
Simple, low cost, open-cut mining
The mine will consist of a single open-cut pit, 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 Rock Salt, which is extracted
at a rate of more than 1.8Mtpa. Commercialisation
of the Rock Salt has the potential to offset a portion
of the mining costs in the future. This has not been
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 known resources
globally comprising these salts in an ideal ratio to combine
produce SOP at ambient temperature.
Ambient temperature processing has a positive impact
requirements and allows 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.
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
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.
Page 17
Red SeaDanakali Annual Report 2018DANAKALI LIMITED
SOP development
peer comparison
Colluli’s proximity to established port infrastructure gives unrivalled access to the
global export market
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
1
AUSTRALIAN PROJECTS ETHIOPIAN PROJECTS
87km
Colluli (potential)
Port
Port
230km
Colluli
Massawa
790km+
Circum (Danakil)
Circum
Tadjoura, Djibouti
790km
Yara Dallol
Yara
Tadjoura, Djibouti
Australian projects range from 700km to 1,500km
away from the nearest established ports
Beyondie
Kalium Lakes
Geraldton, WA
Lake Disappointment
Reward
Port Hedland, WA
Lake Wells
Salt Lake Potash
Esperance, WA
Mackay
Agrimin
Darwin, NT, or
Wyndham, WA
Karinga
Lakes
Verdant
Darwin, NT
1 Peer company announcements, Google Maps
Page 18
DANAKALI LIMITEDDanakali Annual Report 2018
SOP development
peer comparison
Colluli’s proximity to established port infrastructure gives unrivalled access to the
DISTANCE TO PORT FOR COLLULI AND GREENFIELD
global export market
POTASH DEVELOPMENTS IN AUSTRALIA AND ETHIOPIA
AUSTRALIAN PROJECTS ETHIOPIAN PROJECTS
87km
Colluli (potential)
Port
Port
230km
Colluli
Massawa
790km+
Circum (Danakil)
Circum
Tadjoura, Djibouti
790km
Yara Dallol
Yara
Tadjoura, Djibouti
Australian projects range from 700km to 1,500km
away from the nearest established ports
Beyondie
Kalium Lakes
Geraldton, WA
Lake Disappointment
Reward
Port Hedland, WA
Lake Wells
Salt Lake Potash
Esperance, WA
Mackay
Agrimin
Darwin, NT, or
Wyndham, WA
Karinga
Lakes
Verdant
Darwin, NT
1 Peer company announcements, Google Maps
Colluli has scale, capital intensity and returns advantages over peers1,2
Colluli3
Danakali
Sevier Lakes
Crystal Peak
Beyondie4
Kalium Lakes
Yara Dallol
Yara
Mackay
Agrimin
Lake Wells5
Salt Lake Potash
SOLID SALTS
PLAYA BRINE
BRINE
SOLID SALTS
BRINE
BRINE
1
Open-cut
Trench & well
Trench & bore
Solution
Trench
Trench & bore
S T U DY STAGE COMPLETED
FEED
BFS
FEED
DFS
PFS
SCOPING
STUDY
CON TAI NE D SOP EQ UI VA LENT RE S ERVE
203Mt
7.7Mt
5.1Mt
No disclosed
reserve
No reserve
No reserve
PR O DU CTI ON
944
ktpa
CAP I TAL IN TE N SI TY
338
ktpa
180
ktpa
600
ktpa
460
ktpa
400
ktpa
US$534/t
US$1,221/t
US$1,365/t5
US$1,233/t
US$960/t
US$482/t5
POST-TAX IRR
29.9%
20.8%
No disclosed
post-tax IRR
No disclosed
IRR
20%
No disclosed
IRR
MULTI-CO MMO DIT Y
- SOP-M
- MOP
- ROCK SALT
- KIESERITE
- GYPSUM
- MG PRODUCTS
- SALT CAKE
- HALITE
- MG PRODUCTS
- LITHIUM
- BORON
- MG PRODUCTS
NOT DISCLOSED
NOT DISCLOSED
- SOP-M
- MOP
- MG PRODUCTS
- SALT
1
2
3
Peer company announcements
SOP development projects covered are a representative but
non-exhaustive selection of SOP greeneld development projects
Colluli metrics shown for Modules I & II
4
5
6
Beyondie metrics shown for 180ktpa SOP production scenario
(also have 90ktpa scenario)
Lake Wells metrics shown for 400ktpa SOP production scenario
(also have a 200ktpa scenario)
Converted to US$ using exchange rate of US$0.72/A$
DANAKALI LIMITED
The Colluli Potash Project: 2019 Investor Pack
Page 19
Page 15
Danakali Annual Report 2018DANAKALI LIMITED
Project execution and partnerships
Completion of FEED has transitioned Danakali and Colluli into project execution phase
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:
project execution and fundability, culminating in a
binding take-or-pay offtake agreement being executed
The completion of FEED unlocks Danakali’s ability to
• Module I is expected to produce 472ktpa of premium
SOP product; and
a level of certainty that further de-risks the investment
• Module II, commencing production in year 6 of the
provides the platform for detailed engineering
Project, will increase total SOP production to 944ktpa.
Expected mine life is almost 200 years at FEED
production rates.
development phase of Colluli.
Binding offtake agreement with EuroChem
EuroChem has noted that they are excited about
participating in the Project with CMSC, as part of their
growing global presence. EuroChem believes Colluli has
the potential to be an industry leading fertiliser asset. The
project’s proximity to the coast and solid salt processing
and revenue generation.
Danakali executives visited EuroChem's Antwerp, Belhium fertiliser
production facility in August 2018
Danakali has signed a binding take-or-pay offtake
agreement with EuroChem, who will take, pay, market
and distribute up to 100% of Colluli Module I SOP
production. CMSC has the option to retain and sell up to
13% through alternative sales channels. The agreement
is a critical milestone for project funding processes and
reinforces Colluli’s position as an advanced and economically
of the offtake agreement is 10 years from the date of
commissioning of the Colluli SOP processing plant, with
an option to extend for a further 3 years if agreed by
EuroChem and CMSC.
EuroChem is an outstanding partner with global reach and
extensive fertiliser expertise and experience. EuroChem will
provide technical support to the Project.
step towards reaching our goal of production at Colluli.
Together with FEED, which provides outstanding technical
and economic outcomes, the Agreement is a key enabler
for CMSC and Danakali to achieve the required project
funding. CMSC would like to welcome EuroChem as a
new partner to the project. We look forward to the shared
prosperity that the Agreement and Project will provide for
all shareholders.“
Seamus Cornelius, CMSC Director and Danakali Executive Chairman
Page 20
DANAKALI LIMITEDDanakali Annual Report 2018
Project execution and partnerships
US$200M senior debt term sheet and
mandate successfully executed
CMSC has executed a mandate to receive fully
to fund the construction development of Colluli. African
Import Bank (Afreximbank) and Africa Finance Corporation
(AFC) are acting as the Mandated Lead Arrangers on the
signed US$200M non-binding indicative term sheet1.
Finalisation of the debt funding is a critical project
AFC are highly reputable African DFIs with extensive
strength of their investor reach.
In 2017 Afreximbank was lead / co-lead arranger on 11
syndicated debt transactions totalling over US$3Bn. In
the same period AFC was mandated on over US$1Bn of
transactions.
milestone for the Colluli project funding. We are very
pleased to be partnering with strong, experienced African
projects across the continent, and were chosen due to
Stuart Tarrant, CFO
The Project’s execution phase will incorporate
engineering design, procurement, construction,
management and commissioning of facilities. Preferred
EPCM provider DRA Global 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 workstream will include provision of
all engineering, drafting, procurement, contracting,
construction and project services to complete the
project scope.
DRA will also be responsible for awarding major
contracts such as early works, earthworks, structural,
mechanical, piping, electrical and instrumentation
works, laboratory and permanent camp (including life
support, freight and logistics).
Overview of the Colluli EPCM phases
Completion of FEED has transitioned Danakali and Colluli into project execution phase
Colluli will be developed to its full potential by adopting
The completion of FEED unlocks Danakali’s ability to
the principles of risk management, resource utilisation
and modularity. CMSC will develop the resource
through a de-risked modular development approach,
project execution and fundability, culminating in a
initially focussing on SOP production:
binding take-or-pay offtake agreement being executed
• Module I is expected to produce 472ktpa of premium
SOP product; and
a level of certainty that further de-risks the investment
• Module II, commencing production in year 6 of the
provides the platform for detailed engineering
Project, will increase total SOP production to 944ktpa.
Expected mine life is almost 200 years at FEED
production rates.
development phase of Colluli.
Binding offtake agreement with EuroChem
Danakali has signed a binding take-or-pay offtake
EuroChem has noted that they are excited about
agreement with EuroChem, who will take, pay, market
participating in the Project with CMSC, as part of their
and distribute up to 100% of Colluli Module I SOP
growing global presence. EuroChem believes Colluli has
production. CMSC has the option to retain and sell up to
the potential to be an industry leading fertiliser asset. The
13% through alternative sales channels. The agreement
project’s proximity to the coast and solid salt processing
is a critical milestone for project funding processes and
reinforces Colluli’s position as an advanced and economically
and revenue generation.
Danakali executives visited EuroChem's Antwerp, Belhium fertiliser
production facility in August 2018
of the offtake agreement is 10 years from the date of
commissioning of the Colluli SOP processing plant, with
an option to extend for a further 3 years if agreed by
EuroChem and CMSC.
EuroChem is an outstanding partner with global reach and
extensive fertiliser expertise and experience. EuroChem will
provide technical support to the Project.
step towards reaching our goal of production at Colluli.
Together with FEED, which provides outstanding technical
and economic outcomes, the Agreement is a key enabler
for CMSC and Danakali to achieve the required project
funding. CMSC would like to welcome EuroChem as a
new partner to the project. We look forward to the shared
prosperity that the Agreement and Project will provide for
all shareholders.“
Seamus Cornelius, CMSC Director and Danakali Executive Chairman
Complete updates to scope of work
Mine road upgrade
Complete procurement
Investigate optimisation
opportunities
Engineering design, development
and drafting completed
Commence and complete
construction
Develop optimal execution strategy
Review and agree on capital
estimate and schedule
Develop vendor packages and
purchase vendor data
Commissioning and ramp-up
Mobilise EPCM
Owner’s Team
Critical review of FEED in
context of EPCM
methodology
Finalise geotechnical
test work
Purchase critical
equipment including
reverse osmosis plant
PHASE 1 FEED review
PHASE 2
Capital estimate
and schedule
1
of site contracts
PHASE 3
Detailed
engineering
PHASES 4-6
Procurement,
construction and
project management
Page 21
Danakali Annual Report 2018DANAKALI LIMITED
Eritrea
Danakali has been operating in Eritrea since 2009 and has found the country to be
safe, stable and development focused
Eritrea has a stable government that promotes principles of
self-reliance. Key economic drivers include mineral exports,
agricultural output and infrastructure development.
The Eritrean government is focused on developing
food security and agricultural production; infrastructure
development; and human resources. Great emphasis is
placed on community as well as
social outcomes, such as access
to education, health, food and
equitable access to services.
“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 research note, July 2016
Rapid diplomatic progress has
been achieved in the Horn of
Africa in 2018 and 2019.
Eritrea was the only sub-Saharan
African country to meet its
Millennium Development Goals by
20151, achieving large reductions in
malaria, maternal mortality and HIV/
AIDs prevalence, while improving
access to potable water and almost
doubling adult literacy rates.
1
World Health Organisation
Recent progress in Eritrea4
Eritrea and Ethiopia acted quickly to re-establish ties, with
2018
JAN
Lundin Mining approached Nevsun, a base
and precious metals miner operating in
Eritrea, with 2 takeover proposals
An Eritrean government delegation arrived
in Addis Ababa, Ethiopia, to hold peace talks
addressing the countries’ long-running border
nations’ progress towards improving relations
FEB
MAR
APR
MAY
JUN
JUL
Ethiopian Prime Minister
Abiy Ahmed elected
Ethiopian Prime Minister Abiy Ahmed
talked of repairing relations with
Eritrea. Eritrea showed support for
potential peace talks and welcomed
the political changes in Ethiopia.
The landmark talks were unprecedented and showed a commitment from
both countries to restore ties. Eritrean Foreign Minister, Osman Saleh,
stated: "We have opened the door of peace”. The talks set out to make up
for lost opportunities and create new and better opportunities.
4
5
BBC Eritrea feed, Reuters, Bloomberg, Nevsun disclosure
The UNDP report was generated independently of the Company. Danakali and its Board take no responsibility for the content of the UNDP
report, nor does the Company or its Board endorse or warrant the accuracy of any content of the UNDP report
Page 22
DANAKALI LIMITEDDanakali Annual Report 2018
Eritrea
Danakali has been operating in Eritrea since 2009 and has found the country to be
safe, stable and development focused
Eritrea has a stable government that promotes principles of
The Eritrean government is focused on developing
self-reliance. Key economic drivers include mineral exports,
food security and agricultural production; infrastructure
agricultural output and infrastructure development.
development; and human resources. Great emphasis is
Eritrea was the only sub-Saharan
African country to meet its
Millennium Development Goals by
20151, achieving large reductions in
malaria, maternal mortality and HIV/
AIDs prevalence, while improving
access to potable water and almost
doubling adult literacy rates.
1
World Health Organisation
“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 research note, July 2016
placed on community as well as
social outcomes, such as access
to education, health, food and
equitable access to services.
Rapid diplomatic progress has
been achieved in the Horn of
Africa in 2018 and 2019.
Mining and investment in Eritrea
Eritrea has supportive laws for mining investment
including low import duties on capital development,
accelerated tax depreciation and 10 year carrying
forward of losses. Progression of the mining industry
has seen Eritrea experience some of the highest
economic growth rates in Africa2, 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
2
3
World Bank, the Economist
Nevsun disclosure
stages of development and Colluli is set to be the
fourth major mining project to be executed.
Prominent global institutional investors have made
major investments in Nevsun (NSU.TSE)3 and Danakali.
Eritrea has recently experienced increased investment
interest with the removal of UN sanctions and the
opening of neighbouring borders. Nevsun was
acquired by Chinese miner Zijin, for US$1.4Bn in 2018.
The UNDP Report on Colluli concludes that the Project
economy and meaningfully advance the Sustainable
Development Agenda of Eritrea, in particular on 13
Recent progress in Eritrea4
Eritrean Government
Nevsun takeover
Colluli
Eritrea and Ethiopia acted quickly to re-establish ties, with
Eritrean President, Isaias Afwerki, visited Ethiopia to
“cement the joint march for peace and cooperation"
Bus services between Eritrea and Ethiopia resumed
Lundin Mining commenced an all cash offer to acquire Nevsun
Nevsun’s Board of Directors rejected Lundin Mining’s hostile bid offer
Release of UNDP report concludes that Colluli
Eritrean economy and meaningfully advance the
Sustainable Development Agenda of Eritrea, in
5
Eritrea is considering building a port proximate to Colluli
The Eritrean President
visited Somalia to
encourage regional talks
Lundin Mining approached Nevsun, a base
and precious metals miner operating in
Eritrea, with 2 takeover proposals
An Eritrean government delegation arrived
in Addis Ababa, Ethiopia, to hold peace talks
addressing the countries’ long-running border
nations’ progress towards improving relations
2018
JAN
Ethiopian Prime Minister
Abiy Ahmed elected
Ethiopian Prime Minister Abiy Ahmed
talked of repairing relations with
Eritrea. Eritrea showed support for
potential peace talks and welcomed
the political changes in Ethiopia.
The landmark talks were unprecedented and showed a commitment from
both countries to restore ties. Eritrean Foreign Minister, Osman Saleh,
stated: "We have opened the door of peace”. The talks set out to make up
for lost opportunities and create new and better opportunities.
4
5
BBC Eritrea feed, Reuters, Bloomberg, Nevsun disclosure
The UNDP report was generated independently of the Company. Danakali and its Board take no responsibility for the content of the UNDP
report, nor does the Company or its Board endorse or warrant the accuracy of any content of the UNDP report
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Lundin Mining withdrew their takeover bid for Nevsun as
Chinese state-backed company Zijin Mining offered US$1.4Bn
for the company
Somali President, Mohamed
Abdullahi Farmajo, visited
Eritrea, showing a positive
shift in diplomatic relations
in the Horn of Africa
The border between Ethiopia
and Eritrea was opened, with
celebrations along the border
from citizens of both countries.
in an Eritrean port (Massawa)
The President of Djibouti, Ismaïl
Omar Guelleh, met with the
in a decade, with both leaders
communicating cooperation.
The UN hailed the move, and
commented on the greater stability
in the Horn of Africa
UN sanctions on Eritrea were lifted
The US Assistant Secretary for Africa, Tibor Nagy,
decrease in tensions in the region
Zijin Mining
acquiring Nevsun
2019
JAN
FEB
The EU sought to
renew cooperation
with Eritrea, with a
the nation for talks
with the President
The EU announced
it will invest €20M
on roads in Eritrea;
linking Eritrea and
Ethiopia
Page 23
Danakali Annual Report 2018DANAKALI LIMITED
be achieved by any other known potash deposit region in the
world.
Colluli is one of the highest grade primary SOP resources in
the world, with the JORC-2012 compliant Mineral Resource
for Colluli estimated at 1.289Bt @ 11% K2O for 260Mt of
contained SOP equivalent1. The JORC-2012 compliant Ore
Reserve estimate for Colluli is estimated at 1,100Mt @ 10.5%
K2O for 203Mt of contained SOP equivalent1. The Measured
and Indicated Mineral Resources are inclusive of those Mineral
including the option to produce additional products such as
Kieserite (MgSO4), Gypsum (CaSO4), Magnesium Chloride
(MgCl2) and Rock Salt (NaCl). Colluli contains a JORC-
2012 compliant rock salt Mineral Resource of 347Mt @
96.9% NaCl, and a JORC-2012 compliant Kieserite Mineral
Resource of 87Mt @ 7% MgSO4.
to underpin further expansions and support decades of
growth beyond Modules I and II.
Resource and Reserve
Massive 1.1Bt Ore Reserve1
The Danakil Depression is located in the Southern region
of Eritrea and extends over 300km into Eastern Ethiopia.
It hosts the youngest known evaporite deposit and the
largest known unexploited potash basin in the world. Over
6Bt of potassium bearing salts suitable for production of
2.
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, other potash
evaporite deposits typically sit hundreds of metres below the
earth’s surface, sometimes at depths of up to 1km. Resource
access costs of deep, underground potash deposits result in 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,
Products
While SOP will be the initial focus, Colluli
Production at Colluli will initially focus on Standard and
Colluli products including Soluble SOP; Standard, Granular
and Soluble SOP-M; and Rock Salt as the Project progresses.
at: danakali.com.au/products
Colluli samples have properties which place the products at
the high end of the quality spectrum.
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
suitable for deicing across the varying cut-off grades modelled.
1
2
DNK announcement, 19 February 2019
Includes Danakali resource and peers holding Ethiopian
projects (the latter taken from peer announcements)
Page 24
DANAKALI LIMITEDDanakali Annual Report 2018
Potential product suite
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.
SOP Module I will be utilised as a platform for growth.
presenting major additional value upside. Colluli can
deliver greater and more diverse production through
higher SOP production rates, by-products, and alternate
products from within the resource and surrounding
land on the Colluli tenement. The potassium salt
composition in the resource provides the option to
diversify the potash product suite as the project grows.
Potash products including SOP, MOP3 and SOP-M3
provide Colluli with unrivalled potash product versatility.
The production of other agri-commodity and salt
products including Rock Salt4, Kieserite4, Gypsum5 and
Magnesium Chloride4, is also possible, particularly with
COLLULI:
POTENTIAL
PRODUCT
SUITE
CaSO4stockpile
MOP/SOP-M plant
Gypsum
SOP-M
MOP
l
a
i
t
n
e
t
o
P
s
t
c
u
d
o
r
p
NaCl stockpile
Coarse tails
MgSO4 plant
Rock Salt
Kieserite
Mag Chloride
MgCl plant
s
t
c
u
d
o
r
p
-
y
B
Gypsum CaSO4
2
1
3+
SOP plant
Clastics
Upper Rock Salt NaCl
Sylvinite KCI
Carnallitite KMgCl3
Kainitite KMg(S04)Cl
SOP
Main product
3
4
5
Stockpiling volumes of potential by-products have been derived from FEED mass balance modeling and mine scheduling and are based on the
Rock Salt Mineral Resource (DNK announcement, 23-Sep-15) and the SOP Ore Reserve (DNK announcement, 19-Feb-18). The disclosure of
stockpiled volumes should not be considered as a Production Target.
Gypsum core samples have been analysed
Page 25
Danakali Annual Report 2018DANAKALI LIMITED
Product export terminal
Initially, and as considered in FEED, SOP from Modules
I & II, totalling 944ktpa, will be shipped via Massawa
Port. The logistics costs from mine gate onto the ship
amount to nearly US$73/t. By installing a product
There has been disclosure from the Eritrean Government
CMSC (or Danakali) capital1.
In addition to FOB
could unlock larger volumes of SOP as well as the lower
value product potential. Rock Salt will be extracted as a
by-product at an average rate of approximately 1.8Mtpa
in SOP Modules I & II. Given minimal expected capital
expenditure or mine gate operating costs required, with
second seaborne Colluli product.
Magnesium Chloride and Kieserite are other products
that could potentally be produced as by-products of SOP
processing (with simple further processing required for each).
Additional SOP
The Colluli SOP Reserve contains 203Mt of SOP which
equates to 178Mt of recoverable SOP2. Current FEED
economic modelling (60 years) only places value on a little
over 54Mt which leaves 70% (or ~124Mt3) of the Reserve
unaccounted for.
Potential by-products of SOP production
The production of SOP naturally generates Rock Salt
direct shipping ore, and Magnesium Chloride and
4.
Rock Salt is used for de-icing. Magnesium Chloride
has industrial, specialized de-icing and agricultural
uses. Kieserite is a fertiliser that provides Magnesium
and Sulphur.
1
2
3
4
See https://www.bloomberg.com/news/articles/2018-08-23/eritrea-mulls-new-port-as-ethiopia-rapprochement-spurs-investors for an example
January 2018 Ore Reserve Statement: “These three mineral species can be processed in the Colluli plant to produce 178 million tonnes of
recovered sulphate of potash (K2SO4), at 97.2% purity.”
178Mt (total recoverable SOP Reserve) subtract 54Mt (SOP production modelled in FEED)
Stockpiling volumes of potential by-products have been derived from FEED mass balance modeling and mine scheduling and are based on the
Rock Salt Mineral Resource (DNK announcement, 23-Sep-15) and the SOP Ore Reserve (DNK announcement, 19-Feb-18). The disclosure of
stockpiled volumes should not be considered as a Production Target.
Page 26
Table 4: FEED by-product stockpiling rates5
By-product
Stockpiled as
Average stockpiling rate per module
Supplier quoted FOB prices6
Rock Salt
Direct shipping ore
~0.9Mtpa
Mag Chloride
Unprocessed feed material ~0.6Mtpa
Kieserite
Unprocessed feed material ~0.3Mtpa
US$20/t
US$100/t
US$110/t
Other potential products
SOP-M7
The proposed processing plant generates a SOP-M
intermediate salt before mixing with Potassium Chloride
to form SOP. SOP-M can be produced by the conversion of
Gypsum8
Kainite (KMg(SO4)Cl.3H2O).
There is expected to be extensive Kainitite material
available within the Colluli resource for the potential
production of SOP-M.
MOP7
The Colluli Ore Reserve contains 250Mt of Sylvinite at
13% K2O, sitting as the top layer of the Resource. The
Potassium Chloride (effectively MOP) as an intermediate
salt in ore stream 1. Should the market present favourable
conditions, a MOP plant module, similar to ore stream 1
of the SOP plant module, could potentially be deployed to
capitalise upon these conditions.
Vast quantities of surface expressing Gypsum (CaSO4.2H2O)
exist around the Colluli resource. Gypsum as a source of
calcium and sulphur is complementary to the agri-chemical
suite of products available at Colluli, and also has various
construction material applications.
"Colluli SOP FEED has strong economics on its own. It also
has the potential of expanding its operations into other
products, beginning with by-products and moving into
alternative products complementary to the resource. Over
time, the supply chain may be further optimised through
cost savings in overland transport, bulk port solutions and
optimised power and fuel arrangements"
5
Stockpiling rates for Rock Salt, Magnesium Chloride and Kieserite are for by-product direct shipping ore (Rock Salt) or unprocessed feed material
(Mag Chloride and Kieserite) only and do not consider any required processing and associated recoveries . Stockpiling volumes of potential
by-products have been derived from FEED mass balance modeling and mine scheduling and are based on the Rock Salt Mineral Resource (DNK
announcement, 23-Sep-15) and the SOP Ore Reserve (DNK announcement, 19-Feb-18). The disclosure of stockpiled volumes should not be
6
7
8
considered as a Production Target.
Danakali research
Gypsum core samples have been analysed
DANAKALI LIMITEDDanakali Annual Report 2018
Product export terminal
Initially, and as considered in FEED, SOP from Modules
I & II, totalling 944ktpa, will be shipped via Massawa
Port. The logistics costs from mine gate onto the ship
amount to nearly US$73/t. By installing a product
Additional SOP
Magnesium Chloride and Kieserite are other products
that could potentally be produced as by-products of SOP
processing (with simple further processing required for each).
There has been disclosure from the Eritrean Government
CMSC (or Danakali) capital1.
In addition to FOB
could unlock larger volumes of SOP as well as the lower
value product potential. Rock Salt will be extracted as a
by-product at an average rate of approximately 1.8Mtpa
in SOP Modules I & II. Given minimal expected capital
expenditure or mine gate operating costs required, with
second seaborne Colluli product.
The Colluli SOP Reserve contains 203Mt of SOP which
equates to 178Mt of recoverable SOP2. Current FEED
economic modelling (60 years) only places value on a little
over 54Mt which leaves 70% (or ~124Mt3) of the Reserve
unaccounted for.
Potential by-products of SOP production
The production of SOP naturally generates Rock Salt
direct shipping ore, and Magnesium Chloride and
4.
Rock Salt is used for de-icing. Magnesium Chloride
has industrial, specialized de-icing and agricultural
uses. Kieserite is a fertiliser that provides Magnesium
and Sulphur.
1
2
3
4
See https://www.bloomberg.com/news/articles/2018-08-23/eritrea-mulls-new-port-as-ethiopia-rapprochement-spurs-investors for an example
January 2018 Ore Reserve Statement: “These three mineral species can be processed in the Colluli plant to produce 178 million tonnes of
recovered sulphate of potash (K2SO4), at 97.2% purity.”
178Mt (total recoverable SOP Reserve) subtract 54Mt (SOP production modelled in FEED)
Stockpiling volumes of potential by-products have been derived from FEED mass balance modeling and mine scheduling and are based on the
Rock Salt Mineral Resource (DNK announcement, 23-Sep-15) and the SOP Ore Reserve (DNK announcement, 19-Feb-18). The disclosure of
stockpiled volumes should not be considered as a Production Target.
Table 4: FEED by-product stockpiling rates5
By-product
Stockpiled as
Average stockpiling rate per module
Supplier quoted FOB prices6
Rock Salt
Direct shipping ore
~0.9Mtpa
Mag Chloride
Unprocessed feed material ~0.6Mtpa
Kieserite
Unprocessed feed material ~0.3Mtpa
US$20/t
US$100/t
US$110/t
Other potential products
SOP-M7
The proposed processing plant generates a SOP-M
intermediate salt before mixing with Potassium Chloride
to form SOP. SOP-M can be produced by the conversion of
Kainite (KMg(SO4)Cl.3H2O).
There is expected to be extensive Kainitite material
available within the Colluli resource for the potential
production of SOP-M.
MOP7
The Colluli Ore Reserve contains 250Mt of Sylvinite at
13% K2O, sitting as the top layer of the Resource. The
Potassium Chloride (effectively MOP) as an intermediate
salt in ore stream 1. Should the market present favourable
conditions, a MOP plant module, similar to ore stream 1
of the SOP plant module, could potentially be deployed to
capitalise upon these conditions.
Gypsum8
Vast quantities of surface expressing Gypsum (CaSO4.2H2O)
exist around the Colluli resource. Gypsum as a source of
calcium and sulphur is complementary to the agri-chemical
suite of products available at Colluli, and also has various
construction material applications.
"Colluli SOP FEED has strong economics on its own. It also
has the potential of expanding its operations into other
products, beginning with by-products and moving into
alternative products complementary to the resource. Over
time, the supply chain may be further optimised through
cost savings in overland transport, bulk port solutions and
optimised power and fuel arrangements"
5
6
7
8
Stockpiling rates for Rock Salt, Magnesium Chloride and Kieserite are for by-product direct shipping ore (Rock Salt) or unprocessed feed material
(Mag Chloride and Kieserite) only and do not consider any required processing and associated recoveries . Stockpiling volumes of potential
by-products have been derived from FEED mass balance modeling and mine scheduling and are based on the Rock Salt Mineral Resource (DNK
announcement, 23-Sep-15) and the SOP Ore Reserve (DNK announcement, 19-Feb-18). The disclosure of stockpiled volumes should not be
considered as a Production Target.
Danakali research
Gypsum core samples have been analysed
Page 27
Danakali Annual Report 2018DANAKALI LIMITED
Danakali Board
Danakali senior management
An experienced, multi-disciplinary and international board
Niels Wage
Stuart Tarrant
Seamus Cornelius
Executive Chairman
Technical background
Corporate Lawyer (LLB, LLM)
Relevant experience
John Fitzgerald
Non-Executive Director
Technical background
Chartered Accountant, Fellow of FINSIA
Relevant experience
Corporate lawyer with over 20 years’ experience in the resource
sector, including in complex cross-border commercial negotiations
the resource sector
Currently the Non-Executive Chairman of Buxton Resources,
Element 25, and Duketon Mining
Robert Connochie
Non-Executive Director
Technical background
Civil Engineering (B.A. Sc.), MBA
Relevant experience
Potash and mining specialist with over 40 years of industry
experience
Previously held senior positions at NM Rothschild and Sons,
Investec Bank Australia, Commonwealth Bank, HSBC Precious
Metals and Optimum Capital
Non-Executive Director of Northern Star Resources and Non-
Executive Chairman of Novo Litio
Paul Donaldson
Non-Executive Director
Technical background
Master’s Degree – Mining Engineering, Master’s Degree
– Business and Technology, BEng Chemical (Honours,
University Medal), Assoc Dip. Applied Science (Metallurgy)
Extensive senior line management experience in the potash
industry, including corporate development, evaluations,
Relevant experience
Previously held positions as Chairman of Canpotex (a world
leading potash exporter for over 40 years) and Chairman of
Behre Dolbear Capital
Chairman and CEO of Potash Company of America, CEO Asia
Phosphate and Potash Institute, Director of the Fertiliser Institute,
and Director of the Saskatchewan Potash Producers Association
Andre Liebenberg
Non-Executive Director
Technical background
MBA, BSc (Elec) Eng.
Relevant experience
Mining industry professional with extensive investor, market,
Over 25 years in private equity and investment banking, and
senior roles at BHP Billiton and QKR Corporation
Senior executive roles within BHP included Head of Group
Investor Relations, and CFO roles for the Energy Coal and
Diamonds divisions
Extensive operational, technical marketing and supply chain
management experience from senior management positions in
almost 25 years at BHP
the product and development path and process for the Project,
overseeing PFS, DFS and FEED
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
Yellow Cake
Page 28
•
Previously Vice President of Freight, Potash and
Extensive exposure in the mining industry
Diamonds at BHP
• Responsible for marketing, sales and supply chain for
procurement, budgeting, and cost analysis and
the Jansen Potash Project
optimisation experience and expertise
•
Sat on the Board for International Plant Nutrition
Institute (IPNI), a recognised fertiliser industry body
• Currently a Director on the Board of Bahia Mineração,
Accountants (ACCA)
•
•
•
•
project
Tony Harrington
Project Manager
William Sandover
Head of Corporate Development & External Affairs
• Over 30 years’ experience across a range of mining
•
Extensive investment banking and corporate advisory
projects in various African countries, China, Europe, UK
experience at UBS, Macquarie and Vesparum
and Australia
•
Project Manager for US$0.3Bn Kwale Minerals Sands
equity and hybrid capital for listed companies
• Has been involved in raising more than A$10Bn in
Project in Kenya and US$0.3Bn Chimimiwango
expansion at the Lumwana Copper Mine in Zambia
Danakali values
operating environment and will not be compromised
People
Planet
Our employees, customers, local communities,
We respect our operating environment at local, national
business partners, shareholders and other stakeholders
and international levels and are focussed on continually
are vital to our business success and future growth.
reducing the environmental footprint of our business.
Integrity
Performance
We conduct ourselves with uncompromising integrity
We are a performance driven organisation, and
and honesty as individuals and as a company.
continually strive for improvement in the things that
matter most to our business.
Simplicity
simple as possible.
We embrace the principle that everything should be as
DANAKALI LIMITEDDanakali Annual Report 2018
Danakali Board
Danakali senior management
An experienced, multi-disciplinary and international board
Niels Wage
Stuart Tarrant
•
Previously Vice President of Freight, Potash and
Diamonds at BHP
• Responsible for marketing, sales and supply chain for
the Jansen Potash Project
•
Sat on the Board for International Plant Nutrition
Institute (IPNI), a recognised fertiliser industry body
•
•
•
•
Extensive exposure in the mining industry
procurement, budgeting, and cost analysis and
optimisation experience and expertise
• Currently a Director on the Board of Bahia Mineração,
Accountants (ACCA)
project
Tony Harrington
Project Manager
William Sandover
Head of Corporate Development & External Affairs
• Over 30 years’ experience across a range of mining
•
projects in various African countries, China, Europe, UK
and Australia
•
Project Manager for US$0.3Bn Kwale Minerals Sands
Project in Kenya and US$0.3Bn Chimimiwango
expansion at the Lumwana Copper Mine in Zambia
Extensive investment banking and corporate advisory
experience at UBS, Macquarie and Vesparum
• Has been involved in raising more than A$10Bn in
equity and hybrid capital for listed companies
Danakali values
operating environment and will not be compromised
People
Planet
Our employees, customers, local communities,
business partners, shareholders and other stakeholders
are vital to our business success and future growth.
We respect our operating environment at local, national
and international levels and are focussed on continually
reducing the environmental footprint of our business.
Master’s Degree in International Consultancy
Integrity
Performance
We conduct ourselves with uncompromising integrity
and honesty as individuals and as a company.
We are a performance driven organisation, and
continually strive for improvement in the things that
matter most to our business.
Simplicity
We embrace the principle that everything should be as
simple as possible.
Page 29
Seamus Cornelius
Executive Chairman
Technical background
Corporate Lawyer (LLB, LLM)
Relevant experience
John Fitzgerald
Non-Executive Director
Technical background
Chartered Accountant, Fellow of FINSIA
Relevant experience
Corporate lawyer with over 20 years’ experience in the resource
sector, including in complex cross-border commercial negotiations
the resource sector
Currently the Non-Executive Chairman of Buxton Resources,
Element 25, and Duketon Mining
Previously held senior positions at NM Rothschild and Sons,
Investec Bank Australia, Commonwealth Bank, HSBC Precious
Metals and Optimum Capital
Non-Executive Director of Northern Star Resources and Non-
Executive Chairman of Novo Litio
Robert Connochie
Non-Executive Director
Technical background
Civil Engineering (B.A. Sc.), MBA
Relevant experience
Paul Donaldson
Non-Executive Director
Technical background
Potash and mining specialist with over 40 years of industry
experience
Master’s Degree – Mining Engineering, Master’s Degree
– Business and Technology, BEng Chemical (Honours,
University Medal), Assoc Dip. Applied Science (Metallurgy)
Extensive senior line management experience in the potash
industry, including corporate development, evaluations,
Relevant experience
Previously held positions as Chairman of Canpotex (a world
leading potash exporter for over 40 years) and Chairman of
almost 25 years at BHP
Behre Dolbear Capital
Chairman and CEO of Potash Company of America, CEO Asia
the product and development path and process for the Project,
overseeing PFS, DFS and FEED
Extensive operational, technical marketing and supply chain
management experience from senior management positions in
Phosphate and Potash Institute, Director of the Fertiliser Institute,
and Director of the Saskatchewan Potash Producers Association
Andre Liebenberg
Non-Executive Director
Technical background
MBA, BSc (Elec) Eng.
Relevant experience
Over 25 years in private equity and investment banking, and
senior roles at BHP Billiton and QKR Corporation
Senior executive roles within BHP included Head of Group
Investor Relations, and CFO roles for the Energy Coal and
Diamonds divisions
Yellow Cake
Zhang Jing
Non-Executive Director
Technical background
and Accounting
Relevant experience
experience in China
companies in China
Mining industry professional with extensive investor, market,
Extensive international trading and business development
Investment and project management roles held in public listed
Danakali Annual Report 2018DANAKALI LIMITED
DIRECTORS’
REPORT
FOR THE YEAR ENDED
31 DECEMBER 2018
Page 30
DANAKALI LIMITEDDanakali Annual Report 2018 Directors’ Report
The directors present their report together with the financial statements of the consolidated entity being, Danakali Limited
(Danakali or the Company) and its controlled entities (the Group) for the financial year ended 31 December 2018.
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
Executive Chairman, LLB, LLM, initially appointed Non-Executive Chairman 15 July 2013, transitioned to Executive
Chairman 14 June 2018
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), Element
25 Limited (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
Non-Executive Director, 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 has over 25 years of experience in senior management roles at BHP Billiton. At BHP Billiton 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, in his previous role as
the Company’s CEO and Managing Director, redefined the product and development path and process for the Project,
overseeing the pre-feasibility, definitive feasibility and FEED study phases. In December 2017, he transitioned to his role
as Non-Executive Director. Mr Donaldson is also currently Chief Transformation Officer at Pacific National, Australia’s
largest rail operator.
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 Exore Resources 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 Carbine Resources Limited (13 April 2016 to 23 March 2018).
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.
DANAKALI LIMITED ABN 56 097 904 302
Page 31
4
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
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 on issue by Danakali
Limited were:
Director
S Cornelius
P Donaldson
J Fitzgerald
Z Jing
R Connochie
A Liebenberg
Ordinary
Shares
Options over Ordinary
Shares
Performance
Rights
10,328,965
2,957,751
526,453
-
-
-
300,000
100,000
250,000
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 2018.
CORPORATE STRUCTURE
Danakali Limited is a company limited by shares that is incorporated and domiciled in Australia.
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 of 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 addition to the CFO role at QKR Corporation, Mr. Liebenberg occupied senior executive roles within BHP 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.
Mr Liebenberg is currently the Executive Director and Chief Executive Officer of Yellow Cake Plc.
Special Responsibilities:
Mr Liebenberg is Chairman of the Remuneration and Nomination Committee and a member of the Audit 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 companies. 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.
DANAKALI LIMITED ABN 56 097 904 302
Page 32
5
DANAKALI LIMITED ABN 56 097 904 302
6
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
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 on issue by Danakali
Limited were:
Director
S Cornelius
P Donaldson
J Fitzgerald
Z Jing
R Connochie
A Liebenberg
PRINCIPAL ACTIVITIES
Ordinary
Shares
Options over Ordinary
Shares
Performance
Rights
10,328,965
2,957,751
526,453
-
-
-
300,000
100,000
250,000
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 2018.
CORPORATE STRUCTURE
Danakali Limited is a company limited by shares that is incorporated and domiciled in Australia.
DANAKALI LIMITED ABN 56 097 904 302
Page 33
6
Danakali Annual Report 2018DANAKALI LIMITED
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 Front-End Engineering Design (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.
A FEED for Colluli was undertaken to provide offtakers and funders with a high level of study detail and accuracy and is
the final study stage before project execution. FEED firmly establishes Colluli as the most progressed, economically
attractive, and fundable SOP greenfield development project globally (ASX announcement 29 January 2018). 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
The Project is fully permitted and ready to advance into engineering and construction upon securing funding.
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 (ASX
announcement 1 February 2017).
DANAKALI LIMITED ABN 56 097 904 302
Page 34
7
DANAKALI LIMITEDDanakali Annual Report 2018
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 Front-End Engineering Design (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.
A FEED for Colluli was undertaken to provide offtakers and funders with a high level of study detail and accuracy and is
the final study stage before project execution. FEED firmly establishes Colluli as the most progressed, economically
attractive, and fundable SOP greenfield development project globally (ASX announcement 29 January 2018). 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
The Project is fully permitted and ready to advance into engineering and construction upon securing funding.
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 (ASX
announcement 1 February 2017).
DANAKALI LIMITED ABN 56 097 904 302
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.
A Social and Environmental Impact Assessment (SEIA) and associated Social and Environmental Management Plans
(SEMPs) 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. Following a period of
consultation and further works, between the Eritrean Ministry of Land, Water & Environment and CMSC, the SEMPs
finalised by CMSC have were signed off in August 2018 following an extensive review process. The SEMPs are a
cornerstone of the environmental, social and safety management system being developed by CMSC and provide the
foundation for compliance.
MARKETING AND PROJECT FINANCE UPDATE
Off-take
A binding take-or-pay offtake agreement has been reached with EuroChem Trading GmbH (EuroChem) for up to 100% of
Module I SOP production from the Colluli Potash Project. EuroChem will take, pay, market and distribute up to 100%
(minimum 87%) of Colluli Module I SOP production. The term of the agreement is 10 years from the date of commissioning
of the Colluli SOP processing plant, with an option to extend for a further 3 years if agreed by EuroChem and CMSC.
EuroChem is an outstanding partner with global reach and extensive fertiliser expertise and experience, and the agreement
is instrumental in unlocking project funding.
Project Financing
Danakali successfully executed a mandate to provide fully underwritten debt finance facilities of US$200M to fund the
construction and development of the Colluli Potash Project. African development financial institutions African Export-Import
Bank (Afreximbank) and Africa Finance Corporation (AFC) are acting as Mandated Lead Arrangers. The execution of the
mandate is a critical project financing and execution milestone.
Following the execution of the US$200M debt mandate, remaining key debt funding milestones include the finalisation of
key operational contracts and final credit approval from debt financiers. The Project is “shovel ready” and Danakali
continues to evaluate strategies to raise final funding required to commence construction at Colluli.
Key Operational Contracts
The following operational contracts are defined as project documents, and are necessary to advance the completion of
debt due diligence referred to above.
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.
The technical and commercial compliance was evaluated and confirmed by AMC Consultants.
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 with commercial terms materially
agreed.
EPCM – Evaluations underway, preliminary negotiations expected in March 2019 Quarter
CMSC has confirmed DRA Global as the preferred Engineering, Procurement and Construction Management (EPCM)
contractor for Colluli. DRA is a high quality multi-disciplinary global Project Management and Engineering group with strong
African experience and EPCM delivery capability. The commercial and legal position is materially agreed.
CORPORATE
LSE Main Market Listing
The Company’s ordinary shares were admitted to the Standard Segment of the Official List of the Financial Conduct
Authority and to trading on the LSE Main Market at 8.00am BST on 24 July 2018 (LSE:DNK).
7
DANAKALI LIMITED ABN 56 097 904 302
Page 35
8
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
Board Changes
Mr Seamus Cornelius was appointed as Executive Chairman on 14 June 2018. Mr Cornelius has served as Non-Executive
Chairman of Danakali since July 2013. He has a high degree of expertise in cross-border transactions, particularly in the
resources and finance sectors.
Mr Cornelius is a member of the Company’s Audit Committee, and Technical and Risk Committee, and is the Chairman of
the CMSC (the 50:50 joint venture between Danakali and ENAMCO and 100% owner of the Colluli Potash Project. Mr
Cornelius has to this point been an integral part of the Company’s progression from Scoping Study through to Front End
Engineering Design, signing of a Mining Agreement, awarding of Mining Licences, and, as announced on Tuesday, 12 June
2018, the achievement of a binding take-or-pay offtake agreement with EuroChem.
Management Changes
Mr Danny Goeman resigned as Chief Executive Officer (CEO) of the company with effect from 3 August 2018. The
Company is well advanced in the recruitment of a new CEO.
Shares
During the year, the Company issued the following fully paid ordinary shares:
▪
▪
▪
▪
▪
▪
▪
▪
10,381,821 shares on exercise of unlisted options at $0.35 each
400,000 shares on exercise of unlisted options at $0.405 each
200,000 shares on exercise of unlisted options at $0.450 each
738,346 shares on cashless exercise of 1,949,000 unlisted options at $0.405 each
116,586 shares on cashless exercise of 750,000 unlisted options at $0.527 each
458,338 shares on cashless exercise of 2,350,000 unlisted options at $0.550 each
65,000 shares on vesting of performance rights (Class 6: 10,000; Class 7: 20,000; Class 8: 35,000)
364,620 shares issued in lieu of fees to corporate advisors
At 31 December 2018, there were a total of 264,422,398 fully paid ordinary shares on issue.
Options
There were no unlisted options issued during the year.
The following unlisted options were exercised and converted to shares during the year:
▪
▪
▪
▪
▪
▪
10,381,821 unlisted options exercised at $0.35 each raising $3,633,637
400,000 unlisted options exercised at $0.405 each raising $162,000
200,000 unlisted options exercised at $0.450 each raising $90,000
1,949,000 unlisted options with an exercise price of $0.405 were cashless exercised
750,000 unlisted options with an exercise price of $0.527 were cashless exercised
2,350,000 unlisted options with an exercise price of $0.550 were cashless exercised
The following unlisted options expired or lapsed during the year:
▪
▪
75,000 unlisted options at $0.350 each expired on 29 May 2018
100,000 unlisted options at $0.558 each lapsed on 3 August 2018
At 31 December 2018, there were a total of 2,990,000 unlisted options on issue at various exercise prices and expiry dates.
Performance Rights
There were no performance rights issued during the year.
The following performance rights vested and were converted to shares during the year:
▪
▪
▪
10,000 Class 6 performance rights
20,000 Class 7 performance rights
35,000 Class 8 performance rights
The following performance rights lapsed during the year:
▪
28,000 Class 1 performance rights
At 31 December 2018, there were a total of 1,315,000 performance rights on issue in the following classes:
▪
▪
▪
▪
▪
▪
280,000 Class 1 performance rights
800,000 Class 4 performance rights
100,000 Class 5 performance rights
40,000 Class 6 performance rights
30,000 Class 7 performance rights
65,000 Class 8 performance rights
Annual General Meeting
The Company’s annual general meeting was held on 11 May 2018 (AGM). For more information, refer to the Notice of
AGM and Results available via the Company’s website.
DANAKALI LIMITED ABN 56 097 904 302
Page 36
9
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
Board Changes
resources and finance sectors.
Mr Cornelius is a member of the Company’s Audit Committee, and Technical and Risk Committee, and is the Chairman of
the CMSC (the 50:50 joint venture between Danakali and ENAMCO and 100% owner of the Colluli Potash Project. Mr
Cornelius has to this point been an integral part of the Company’s progression from Scoping Study through to Front End
Engineering Design, signing of a Mining Agreement, awarding of Mining Licences, and, as announced on Tuesday, 12 June
2018, the achievement of a binding take-or-pay offtake agreement with EuroChem.
Mr Danny Goeman resigned as Chief Executive Officer (CEO) of the company with effect from 3 August 2018. The
Company is well advanced in the recruitment of a new CEO.
Management Changes
Shares
During the year, the Company issued the following fully paid ordinary shares:
10,381,821 shares on exercise of unlisted options at $0.35 each
400,000 shares on exercise of unlisted options at $0.405 each
200,000 shares on exercise of unlisted options at $0.450 each
738,346 shares on cashless exercise of 1,949,000 unlisted options at $0.405 each
116,586 shares on cashless exercise of 750,000 unlisted options at $0.527 each
458,338 shares on cashless exercise of 2,350,000 unlisted options at $0.550 each
65,000 shares on vesting of performance rights (Class 6: 10,000; Class 7: 20,000; Class 8: 35,000)
364,620 shares issued in lieu of fees to corporate advisors
At 31 December 2018, there were a total of 264,422,398 fully paid ordinary shares on issue.
Options
There were no unlisted options issued during the year.
The following unlisted options were exercised and converted to shares during the year:
10,381,821 unlisted options exercised at $0.35 each raising $3,633,637
400,000 unlisted options exercised at $0.405 each raising $162,000
200,000 unlisted options exercised at $0.450 each raising $90,000
1,949,000 unlisted options with an exercise price of $0.405 were cashless exercised
750,000 unlisted options with an exercise price of $0.527 were cashless exercised
2,350,000 unlisted options with an exercise price of $0.550 were cashless exercised
The following unlisted options expired or lapsed during the year:
75,000 unlisted options at $0.350 each expired on 29 May 2018
100,000 unlisted options at $0.558 each lapsed on 3 August 2018
At 31 December 2018, there were a total of 2,990,000 unlisted options on issue at various exercise prices and expiry dates.
Performance Rights
There were no performance rights issued during the year.
The following performance rights vested and were converted to shares during the year:
10,000 Class 6 performance rights
20,000 Class 7 performance rights
35,000 Class 8 performance rights
The following performance rights lapsed during the year:
28,000 Class 1 performance rights
280,000 Class 1 performance rights
800,000 Class 4 performance rights
100,000 Class 5 performance rights
40,000 Class 6 performance rights
30,000 Class 7 performance rights
65,000 Class 8 performance rights
Annual General Meeting
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Mr Seamus Cornelius was appointed as Executive Chairman on 14 June 2018. Mr Cornelius has served as Non-Executive
Chairman of Danakali since July 2013. He has a high degree of expertise in cross-border transactions, particularly in the
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.
Directors’ Report
Sustainable Development Framework
The company has 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 has committed to release a CSR report. This report details the policies and frameworks in place to ensure that
Danakali continues to operate in a sustainable manner.
Danakali framework and policies are 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 1 as at 31 December 2018. Apart
from the inclusion of Kieserite (announced 15 August 2016), 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 2018 is as follows:
Table 1: Colluli Mineral Resource Estimate announced on 25 February 2015 with Kieserite added(announced on 15 August 2016)
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 285 million tonnes
of Proved and 815 million tonnes of Probable Ore Reserve and is shown below in Table 2. 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 31 December 2018 is as follows:
Table 2: JORC-2012 Colluli Potassium Sulphate Ore Reserve announced on 29 January 2018 and 19 February 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
13.0%
7.6%
11.8%
11.3%
363
815
11.2%
494
11.4%
10.3%
1,100
10.5%
18.5
203
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 3. There have been no changes to the Mineral Resource estimate since 23 September 2015.
As at 31 December 2018, the JORC-2012 compliant Rock Salt Mineral Resource is as follows:
At 31 December 2018, there were a total of 1,315,000 performance rights on issue in the following classes:
Table 3: JORC 2012 Colluli Rock Salt Mineral Resource announced on 23 September 2015
Classification
Tonnes (Mt)
Measured
Indicated
Inferred
Total
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%
The Company’s annual general meeting was held on 11 May 2018 (AGM). For more information, refer to the Notice of
AGM and Results available via the Company’s website.
DANAKALI LIMITED ABN 56 097 904 302
9
DANAKALI LIMITED ABN 56 097 904 302
Page 37
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Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
SAFETY
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.
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
No 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 2019
The following key activities are scheduled over the coming year:
Finalise credit approval from debt financiers
Finalise contract with preferred EPCM contractor DRA Global
• Appointment of new Company CEO
•
•
• Determine preferred mining services contractor and finalise negotiations
•
•
•
Finalise contract with preferred power provider Inglett & Stubbs International
Finalise arrangements with commercial lenders
Finalise funding to advance Colluli to construction
FINANCE REVIEW
The Group recorded a net loss after tax of $6,944,413 for the financial year to 31 December 2018 compared to a loss of
$6,839,936 for the financial year to 31 December 2017. 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.
Total consolidated cash on hand at the end of the financial year was $9,550,585 (31 December 2017: $15,559,980).
Operating activities utilised $3,430,463 (31 December 2017: $1,279,679 utilised) of net cash flows. Net cash outflow from
investing activities of $6,464,570 (31 December 2017: $7,721,815) was primarily in relation to expenditure made to advance
the Colluli Project in relation to:
•
•
•
•
Completion of the FEED
Completion of off-take agreement negotiations
Advancing financing negotiations
Advancing key operational contracts
Net cash inflow from financing activities of $3,885,638 in the financial year to 31 December 2018 was attributable to
consideration received upon exercise of options (31 December 2017: $13,656,714 funds received in respect of a placement
of shares and the exercise of options).
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 LIMITED ABN 56 097 904 302
Page 38
11
DANAKALI LIMITEDDanakali Annual Report 2018
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 arise.
DIVIDENDS
No dividends were paid or declared during the financial year to 31 December 2018. 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 2018 and
the number of meetings attended by each Director were:
Board of Directors
Audit Committee
Remuneration and
Nomination Committee
Technical and Risk
Committee
Total
meetings
held /
eligible to
attend
13
13
13
13
13
13
Director
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
Total
attended
Total
meetings
held / eligible
to attend
Total
attended
Total
meetings
held / eligible
to attend
Total
attended
Total
meetings
held / eligible
to attend
Total
attended
13
13
12
8
12
10
2
-
2
-
-
2
2
-
2
-
-
2
-
6
6
-
-
6
-
5
6
-
-
6
1
1
-
-
1
-
1
1
-
-
1
-
DANAKALI LIMITED ABN 56 097 904 302
Page 39
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Danakali Annual Report 2018DANAKALI LIMITED
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 2018:
Exercised, exercisable at $0.405, expiry date 13 May 2018
Exercised, exercisable at $0.350, expiry date 30 March 2018
Exercised, exercisable at $0.350, expiry date 13 May 2018
Exercised, exercisable at $0.527, expiry date 29 May 2018
Exercised, exercisable at $0.550, expiry date 31 May 2018
Exercised, exercisable at $0.450, expiry date 23 June 2018
Exercised, exercisable at $0.550, expiry date 4 November 2018
Exercised, exercisable at $0.550, expiry date 31 December 2018
Cancelled, exercisable at $0.350, expiry date 13 May 2018
Cancelled, exercisable at $0.558, expiry date 8 August 2019
Share options outstanding at 31 December 2018
Movements since the financial year ended 31 December 2018:
Issued, exercisable at $1.031, expiry date 24 January 2022
Total number of share options outstanding as at the date of this report
Expiry date
8 August 2019
7 October 2019
19 May 2020
20 June 2019
24 January 2022
Exercise price
$0.558
$0.543
$0.940
$0.960
$1.031
Total number of share options outstanding at the date of this report
Number of options
19,195,821
(2,349,000)
(9,656,821)
(725,000)
(750,000)
(600,000)
(200,000)
(750,000)
(1,000,000)
(75,000)
(100,000)
2,990,000
1,724,015
4.714.015
Number of options
900,000
250,000
1,440,000
400,000
1,724,015
4,714,015
No option holder has any right under the option to participate in any share issue of the Company or any other entity.
The following remuneration options were granted (or agreed to be granted subject to receipt of shareholder approval in
the case of director options) to key management personnel of the Company since the end of the financial year and up to
the date of this report:
▪
▪
301,040 unlisted options at $1.031 each expiring 24 January 2022 to director Seamus Cornelius or his nominee
583,000 unlisted options at $1.108 each expiring 13 March 2022 to nominee of Stuart Tarrant
No other 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 financial year ended 31 December 2018:
Issued
Vested and Exercised (a)
Forfeited (b)
Performance rights outstanding at 31 December 2018
Movements since the financial year ended 31 December 2018:
None
Total number of performance rights as at the date of this report
Note:
Number of rights
1,408,000
-
(65,000)
(28,000)
1,315,000
-
1,315,000
(a) Performance rights vested upon announcement of binding a offtake agreement (10,000 rights), associated with completion of
FEED (20,000 rights), LSE listing (30,000 rights), and in respect of investor roadshows (5,000 rights).
(b) Performance rights forfeited in respect of former employees.
No performance rights holder has any right to participate in any other share issue of the company or any other entity.
DANAKALI LIMITED ABN 56 097 904 302
Page 40
13
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
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
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 $56,384
(2017: $35,625) 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.
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
• Assistance with preparation of employee share scheme reporting
• General tax advice
• Corporate advisory services
•
LSE listing
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young – LSE listing
Ernst and Young – Other
CORPORATE GOVERNANCE
2018
$
2017
$
44,837
44,837
123,332
55,973
179,305
41,391
41,391
-
6,000
6,000
The Company’s corporate governance statement can be found at the following URL: http://www.danakali.com.au/our-
business/corporate-governance.
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
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.
DANAKALI LIMITED ABN 56 097 904 302
Page 41
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Danakali Annual Report 2018DANAKALI LIMITED
Directors’ 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 key
management personnel of the Group.
The Key Management Personnel of Danakali Ltd and the Group during the financial year to 31 December 2018 were:
Directors
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
Executive Chairman (Transitioned from Non-Executive Chairman to Executive Chairman 14 June
2018
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Named Key Management Personnel
D Goeman
S Tarrant
C Grant-Edwards
M Chapman
Chief Executive Officer (Appointed 21 December 2017) (Resigned 3 August 2018)
Chief Financial Officer
Joint Company Secretary
Joint Company Secretary
All of the above persons were key management personnel during the financial year to 31 December 2018 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 Remuneration Strategy
The remuneration strategy for Danakali Ltd is designed to provide rewards that achieve the following:
•
•
•
•
•
•
Attract, retain, motivate and reward KMP;
Reward KMP 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.
A summary of the key elements of the current remuneration arrangement is as follows:
Remuneration
Component
Fixed Remuneration
Item
Purpose
• Base salary
• Superannuation
contributions
• Other benefits
competitive
Provide
remuneration with reference to
the role and responsibilities,
market and experience,
to
attract high calibre people.
Performance Based
Short Term Incentive (STI)
• Cash bonus
Performance Based:
Long Term Incentive (LTI)
• Shares
• Options
• Performance Rights
Provide reward to KMP for the
achievement of individual and
targets
Group performance
linked
the Company’s
to
strategic objectives.
Provide reward to KMP for their
their
continued service and
contribution
achieving
to
corporate objectives set by the
Board to ensure the long-term
growth of the Company.
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.
Award of LTI linked directly to
strategic
achievement
Company objectives.
of
DANAKALI LIMITED ABN 56 097 904 302
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DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
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 KMP;
the terms and conditions of long term incentives and short-term incentives for the Chief Executive Officer and other
KMP;
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 KMP 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.
Remuneration of Non-Executive Directors
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 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 Directors who serve on the board sub-committees;
Under the current remuneration structure and subject to shareholder approval, a grant of Options may be made;
Any options granted and approved will be struck at significant premium to VWAP; 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.
Fees for the non-executive directors are determined within an aggregate directors’ fee pool limit of $400,000 as approved
by shareholders on 17 November 2014.
DANAKALI LIMITED ABN 56 097 904 302
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Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
Remuneration of Chairman
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.
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.
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.
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 deems that LTI’s are the most appropriate incentive
measure to align KMP performance with company objectives. No KPI’s were set and no STI’s granted in the current
period.
iii)
Variable Remuneration – Long Term Incentives (LTI)
At the 11 May 2019 AGM, the Company failed to obtain shareholder approval of its proposed Long Term Incentive
Plan (LTIP). There were no long term incentives provided to directors and employees during the current period
under the LTIP or otherwise.
In previous financial years, long term incentives were provided to directors and employees through the issue of
options and performance rights. The Company previously issued performance rights to its employees (including
KMP) under the Performance Rights Plan (PRP). The PRP was re-approved by shareholders at the general meeting
held 17 November 2014. The PRP provided 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 was designed to increase the range of potential incentives available to Directors and employees and to
recognise their contribution to the Company’s success.
DANAKALI LIMITED ABN 56 097 904 302
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DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
Under the PRP, performance rights were granted over ordinary shares in the Company on an annual basis, up until
17 November 2017 (three years from re-approval date of PRP). The vesting conditions in respect of performance
rights issued to KMP under the PRP that are outstanding at 31 December 2018 are as follows:
Class 4:
• 800,000 upon commencement of construction of the production facility.
Class 6:
• 15,000 upon Endeavour Financial being paid its first milestone success fee which is linked to the granting of
Credit Approval for the Colluli project finance; and
• 25,000 upon execution of Colluli project finance facility documents.
Class 7:
• 15,000 upon completion of a strategic investment on satisfactory terms; and
• 15,000 upon execution of Colluli project finance facility documents.
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 to the financial statements.
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 99% of votes in favour of its Remuneration Report for the financial year ending 31
December 2017 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. The disclosed directors’ fees are inclusive of committee fees.
Directors’ Report
Remuneration of Chairman
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.
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.
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.
The Board has the discretion to reduce or suspend any bonus payments where Company circumstances render it
Given the current phase of Danakali’s life cycle, the Board deems that LTI’s are the most appropriate incentive
measure to align KMP performance with company objectives. No KPI’s were set and no STI’s granted in the current
appropriate.
period.
iii)
Variable Remuneration – Long Term Incentives (LTI)
At the 11 May 2019 AGM, the Company failed to obtain shareholder approval of its proposed Long Term Incentive
Plan (LTIP). There were no long term incentives provided to directors and employees during the current period
under the LTIP or otherwise.
In previous financial years, long term incentives were provided to directors and employees through the issue of
options and performance rights. The Company previously issued performance rights to its employees (including
KMP) under the Performance Rights Plan (PRP). The PRP was re-approved by shareholders at the general meeting
held 17 November 2014. The PRP provided 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 was designed to increase the range of potential incentives available to Directors and employees and to
recognise their contribution to the Company’s success.
DANAKALI LIMITED ABN 56 097 904 302
17
DANAKALI LIMITED ABN 56 097 904 302
Page 45
18
Danakali Annual Report 2018DANAKALI LIMITED
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Page 46
DANAKALI LIMITEDDanakali Annual Report 2018
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A
D
DANAKALI LIMITEDDanakali Annual Report 2018
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
Executive Directors
S Cornelius
Other Key Management Personnel
D Goeman
S Tarrant
C Grant-Edwards
M Chapman
e) Service Agreements
Financial Year to 31 December 2018
Fixed Remuneration
At risk – STI
At risk - LTI
100%
98%
100%
100%
100%
79%
100%
100%
99%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
2%
-
-
-
21%
-
-
1%
-
-
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.
S Cornelius, Executive Chairman (Transitioned from Non-Executive to Executive Chairman 14 June 2018):
• Under an executive services agreement for the provision of executive duties, the term of which will be three months
after the appointment of a new CEO, Mr Cornelius received:
o For the period 14 June 2018 to 31 October 2018: $40,875
o For the period 1 November 2018 to 31 December 2018: $23,667
In addition, Mr Cornelius remains entitled to receive his pre-existing director fees (approximately $89,000 per
annum)
•
S Tarrant, Chief Financial Officer
• Appointed 12 June 2017
• Original agreement was for a fixed term expiring 31 August 2018. Effective 1 June 2018, Mr Tarrant was engaged
•
•
as a permanent full-time employee under a revised employment agreement.
For the period 1 January 2018 to 31 May 2018: Base salary of $240,000 per annum plus statutory superannuation
For the period 1 June 2018 to 31 December 2018: Remuneration of $300,000 per annum inclusive of statutory
superannuation
• Notice period of three months, required to be given by either party for termination
D Goeman, Chief Executive Officer:
• Appointed 21 December 2017 (Resigned 3 August 2018)
• 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
f) Details of Share Based Compensation
(i) Options
On 19 October 2018, the Directors agreed to issue 500,000 unlisted options with no vesting conditions to Mr Andre
Liebenberg at an exercise price of $0.912 each and an expiry date of 11 May 2020, subject to receipt of shareholder
approval (Director Options).
Shareholder approval for the issue of the Director Options will be sought at an upcoming general meeting of the Company.
The grant date is therefore after the period in which services have begun to be rendered. Therefore, the grant date fair
value presented in the 31 December 2018 financial statements is provisional, estimated by reference to the period end
share price. Once the date of the grant is known, this provisional estimate of the grant date fair value will be revised.
There were no new options granted to key management personnel during the year, other than the 500,000 options granted
to a director, subject to receipt of shareholder approval (the Director Options).
DANAKALI LIMITED ABN 56 097 904 302
Page 49
22
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
The terms and conditions of each grant of options constituting key management personnel remuneration that remain on
issue to current key management personnel at 31 December 2018 are set out in the following table. The Director Options
have been included in this table:
Grant date
19 May 2017
Vesting and first
exercise date
19 May 2017 (a)
Expiry date
19 May 2020
19 October 2018 On or before 31 May
11 May 2020
2019
Total Options
Number of
Options
1,250,000
500,000 (b)
1,750,000
Exercise
price
$0.940
Value per
option at
grant date
$0.202
Vested and
exercisable
%
100%
$0.912
$0.105
-
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.
(b) Options will be issued following receipt of shareholder approval. The options are to be issued in recognition of skill and expertise
brought to the Company and therefore, there will be 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.
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
2019
Year of
grant
2017
2017
2017
2017
2017
2018
Number of
options
granted
300,000
100,000
250,000
100,000
500,000
500,000
1,750,000
Value of
options at
grant date
$60,734
$20,245
$50,612
$20,245
$101,224
$52,476
Number of
options
vested during
the period
300,000
100,000
250,000
100,000
500,000
-
1,250,000
Vested
and
exercisable
100%
100%
100%
100%
100%
-
Name
S Cornelius
P Donaldson
J Fitzgerald
Z Jing
R Connochie
A Liebenberg
Total Options
Number of
options
forfeited
during the
period
-
-
-
-
-
-
-
A total of 2,900,000 remuneration options were cashless exercised by key management personnel during the year, as
follows:
Name
Cashless Exercise
Number of
options
exercised
1,250,000
500,000
1,150,000
2,900,000
Amount
paid
-
-
-
-
Number of
shares
acquired
405,781
189,417
268,119
863,317
Fair value of
shares
acquired
$290,750
$123,500
$171,550
$585,800
S Cornelius
P Donaldson
J Fitzgerald
Total Options
(ii) Performance Rights
There were no new performance rights granted to key management personnel during the year.
The terms and conditions of each grant of performance rights constituting key management personnel remuneration that
remain on issue at 31 December 2018 are as set out in the following table:
Performance rights
granted
Number of performance
rights vested
Name
P M Donaldson
S Tarrant
S Tarrant
Year of
grant
2014
2017
2017
Class
Class 4
Class 6
Class 7
Number
2,450,000
50,000
50,000
In prior
periods
1,650,000
-
-
In current
period
-
10,000
20,000
Performance
rights
cancelled
-
-
-
DANAKALI LIMITED ABN 56 097 904 302
Page 50
Total
Unvested
33%
80%
60%
23
DANAKALI LIMITEDDanakali Annual Report 2018
Grant date
19 May 2017
Vesting and first
exercise date
19 May 2017 (a)
Expiry date
Number of
Exercise
Options
price
19 May 2020
1,250,000
$0.940
19 October 2018 On or before 31 May
11 May 2020
500,000 (b)
$0.912
2019
1,750,000
Value per
option at
grant date
$0.202
$0.105
Vested and
exercisable
100%
%
-
Directors’ Report
have been included in this table:
Total Options
Note:
to the options.
out in the following table.
22.
Name
S Cornelius
P Donaldson
J Fitzgerald
Z Jing
R Connochie
A Liebenberg
Total Options
follows:
Name
S Cornelius
P Donaldson
J Fitzgerald
Total Options
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.
When exercisable, each option is convertible into one ordinary share. Further information on the options is set out in note
Number of
options
vested during
the period
exercisable
Number of
options
forfeited
during the
period
Year in
which
options
vest
2017
2017
2017
2017
2017
2019
Year of
grant
2017
2017
2017
2017
2017
2018
Number of
Value of
options
granted
300,000
100,000
250,000
100,000
500,000
500,000
options at
grant date
$60,734
$20,245
$50,612
$20,245
$101,224
$52,476
300,000
100,000
250,000
100,000
500,000
-
1,750,000
1,250,000
Vested
and
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
A total of 2,900,000 remuneration options were cashless exercised by key management personnel during the year, as
Number of
options
exercised
1,250,000
500,000
1,150,000
2,900,000
Cashless Exercise
Amount
paid
Number of
Fair value of
shares
acquired
405,781
189,417
268,119
863,317
shares
acquired
$290,750
$123,500
$171,550
$585,800
-
-
-
-
(ii) Performance Rights
There were no new performance rights granted to key management personnel during the year.
The terms and conditions of each grant of performance rights constituting key management personnel remuneration that
remain on issue at 31 December 2018 are as set out in the following table:
Performance rights
Number of performance
Performance
granted
rights vested
Name
P M Donaldson
S Tarrant
S Tarrant
Year of
grant
2014
2017
2017
Class
Class 4
Class 6
Class 7
Number
50,000
50,000
In prior
periods
In current
period
-
-
10,000
20,000
2,450,000
1,650,000
-
rights
cancelled
-
-
-
Total
Unvested
33%
80%
60%
The terms and conditions of each grant of options constituting key management personnel remuneration that remain on
issue to current key management personnel at 31 December 2018 are set out in the following table. The Director Options
The performance rights on issue to key management personnel, as set out above, vest, subject to the following vesting
conditions:
Directors’ Report
Class 4:
•
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.
•
•
•
(a) The options were issued in recognition of skill and expertise brought to the Company and therefore, there were no conditions attached
(b) Options will be issued following receipt of shareholder approval. The options are to be issued in recognition of skill and expertise
brought to the Company and therefore, there will be no conditions attached to the options.
•
•
Class 6:
•
10,000 upon successful completion of a dual listing of the Company on the London stock exchange (vested during
2018 and shares issued July 2018);
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.
Details of options over ordinary shares in the Company, provided as remuneration to key management personnel are set
Class 7:
•
•
•
•
10,000 upon market announcement of a binding offtake agreement to support debt funding of the project (vested
during 2018 and shares issued June 2018);
10,000 upon market announcement on completion of FEED (vested during 2018 and shares issued March 2018);
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.
No performance rights held by key management personnel 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 2018.
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 2018
Balance at
31 December
2017
Granted as
compensation
Received
on exercise of
remuneration
options (b)
Received on
conversion of
performance
rights
On market
purchases/
(sales)
Other (c)
Balance at
31 December
2018
Shares
Directors
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
Other Key
Management
Personnel
D Goeman (a)
S Tarrant
C Grant-Edwards
M Chapman
TOTAL
9,798,184
2,718,334
258,334
-
-
-
-
200,874
-
-
12,975,726
-
-
-
-
-
-
-
-
-
-
-
405,781
189,417
268,119
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
-
-
(41,017)
-
-
125,000
10,328,965
50,000
-
2,957,751
526,453
-
-
-
-
-
-
-
-
-
-
-
189,857
-
-
863,317
30,000
(41,017)
175,000
14,003,026
Note:
(a)
(b)
(c)
Upon his resignation on 3 August 2018, Mr Goeman held nil shares
Via cashless exercise
Shares issued upon traditional exercise of non-remuneration unlisted options at $0.35 expiry date 13 May 2018
DANAKALI LIMITED ABN 56 097 904 302
23
DANAKALI LIMITED ABN 56 097 904 302
Page 51
24
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
(ii) Options
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
2018
Balance at
31 December
2017
Granted
Exercised
Expired /
Cancelled
Other
Balance at
31 December
2018
Vested
and
exercisable
Unvested
Options
Directors
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg (a)
Other Key
Management
Personnel
D Goeman (b)
S Tarrant
C Grant-Edwards
M Chapman
TOTAL
Note:
1,675,000
650,000
1,475,000
100,000
500,000
-
1,000,000
-
-
-
-
-
-
-
(1,375,000)
(550,000)
(1,150,000)
-
-
500,000
-
-
-
-
-
-
-
-
-
-
-
-
(75,000)
-
-
-
-
-
-
-
-
-
300,000
100,000
250,000
100,000
500,000
500,000
300,000
100,000
250,000
100,000
500,000
-
-
-
-
-
-
500,000
(100,000)
(900,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,400,000
500,000
(3,075,000)
(175,000)
(900,000)
1,750,000 1,250,000
500,000
(a) Refers to 500,000 unlisted options with no vesting conditions granted to director at an exercise price of $0.912 each and an expiry
date of 11 May 2020, subject to receipt of shareholder approval (the Director Options).
(b) Upon his resignation on 3 August 2018, Mr Goeman held 900,000 vested options.
(iii) Performance Rights held by Key Management Personnel
Movements in Performance Rights held by Key Management Personnel are as set out in the following table:
Financial Year to
31 December 2018
Performance Rights
Balance
At 31
December
2017
Granted as
Remuneration
Vested
Cancelled
Other
Unvested
Balance
at 31
December
2018
Directors
S Cornelius
P Donaldson
J Fitzgerald
J Zhang
R Connochie
A Liebenberg
Other Key
Management Personnel
D Goeman (a)
S Tarrant
C Grant-Edwards
M Chapman
TOTAL
Note:
-
800,000
-
-
-
-
-
100,000
-
-
900,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,000)
-
-
(30,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a) Upon his resignation on 3 August 2018, Mr Goeman held nil 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.
DANAKALI LIMITED ABN 56 097 904 302
Page 52
-
800,000
-
-
-
-
-
70,000
-
-
870,000
25
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
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 corporate and project development activity to progress 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.
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 (loss)/income
EPS (Cents)
Share Price
(Loss)/income for
the period
31 Dec 2018
31 Dec 2017
31 Dec 2016
31 Dec 2015
31 Dec 2014 (a)
(2.66)
$0.740
(2.85)
$0.715
(2.35)
$0.48
(4.01)
$0.29
2.18
$0.19
($6,944,413)
($6,839,936)
($4,925,558)
($6,792,685)
$2,999,972
Note:
(a) 31 December 2014 was a six-month transitional period while adjusting to a December year end.
The Company continues to review 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
EXECUTIVE CHAIRMAN
Perth, 20 March 2019
DANAKALI LIMITED ABN 56 097 904 302
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26
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Report
Competent Persons and Responsibility Statements
Competent Persons Statement (Sulphate of Potash and Kieserite Mineral Resource)
Colluli has a JORC-2012 compliant Measured, Indicated and Inferred Mineral Resource estimate of 1,289Mt @11% K20 Equiv. and 7%
Kieserite. The Mineral Resource contains 303Mt @ 11% K20 Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K20 Equiv.
and 7% Kieserite of Indicated Resource and 35Mt @ 10% K20 Equiv. and 9% Kieserite of Inferred Resource.
The information relating to the 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 the report entitled “In excess of 85 million tonnes of Kieserite defined
within Colluli Project Resource adds to multi agri-commodity potential” disclosed on 15 August 2016, which are 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)
Colluli Proved and Probable Ore Reserve is reported according to the JORC Code and estimated at 1,100Mt @ 10.5% K2O Equiv. The
Ore Reserve is classified as 285Mt @ 11.3% K2O Equiv. Proved and 815Mt @ 10.3% K2O Equiv. Probable. The Colluli SOP Mineral
Resource includes those Mineral Resources modified to produce the Colluli SOP Ore Reserves.
The information relating to the January 2018 Colluli Ore Reserve is extracted from the report entitled “Colluli Ore Reserve update”
disclosed on 19 February 2018 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 (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.
AMC Consultants Pty Ltd (AMC) independence
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.
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
2-, H2O) and X-ray diffraction (XRD) analysis of the same samples as for
potash salt rocks chemical analysis (K+, Na+, Mg2+, Ca2+, Cl-, SO4
chemical analysis to determine a qualitative mineral composition, which combined with the chemical analysis gives a quantitative mineral
composition.
Forward looking statements and disclaimer
The information in this document is published to inform you about 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
DANAKALI LIMITED ABN 56 097 904 302
Page 54
27
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Report
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 Colluli 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, production target, forecast financial information and financial assumptions made in this announcement
are consistent with assumptions detailed in the Company’s ASX announcements dated 25 February 2015, 23 September 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.
No representation or warranty, express or implied, is or will be made by or on behalf of the Company, and no responsibility or liability is
or will be accepted by the Company or its affiliates, as to the accuracy, completeness or verification of the information set out in this
announcement, and nothing contained in this announcement is, or shall be relied upon as, a promise or representation in this respect,
whether as to the past or the future. The Company and each of its affiliates accordingly disclaims, to the fullest extent permitted by law,
all and any liability whether arising in tort, contract or otherwise which it might otherwise have in respect of this announcement or any
such statement.
The distribution of this announcement outside the United Kingdom may be restricted by law and therefore any persons outside the
United Kingdom into whose possession this announcement comes should inform themselves about and observe any such restrictions in
connection with the distribution of this announcement. Any failure to comply with such restrictions may constitute a violation of the
securities laws of any jurisdiction outside the United Kingdom.
DANAKALI LIMITED ABN 56 097 904 302
Page 55
28
Danakali Annual Report 2018DANAKALI 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 the financial report of Danakali Limited for the financial year ended 31
Auditor's Independence Declaration to the Directors of Danakali Limited.
December 2018, I declare to the best of my knowledge and belief, there have been:
As lead auditor for the audit of the financial report of Danakali Limited for the financial year ended 31
a)
December 2018, I declare to the best of my knowledge and belief, there have been:
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
a)
b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
no contraventions of any applicable code of professional conduct in relation to the audit.
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)
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
20 March 2019
Gavin Buckingham
Partner
20 March 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Page 56
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DNK:041
GB:EH:DNK:041
DANAKALI LIMITEDDanakali Annual Report 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
Auditor's Independence Declaration to the Directors of Danakali Limited.
As lead auditor for the audit of the financial report of Danakali Limited for the financial year ended 31
Auditor's Independence Declaration to the Directors of Danakali Limited.
December 2018, I declare to the best of my knowledge and belief, there have been:
As lead auditor for the audit of the financial report of Danakali Limited for the financial year ended 31
December 2018, I declare to the best of my knowledge and belief, there have been:
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
a)
relation to the audit; and
a)
b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
no contraventions of any applicable code of professional conduct in relation to the audit.
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)
This declaration is in respect of Danakali Limited and the entities it controlled during the financial year.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
20 March 2019
Gavin Buckingham
Partner
20 March 2019
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
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:041
GB:EH:DNK:041
Page 57
Danakali Annual Report 2018DANAKALI LIMITED
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2018
Interest revenue calculated using the effective interest rate method
Accretion relating to the unwinding of discount on joint venture loan
REVENUE
Sundry
Loss on re-measurement of loan to joint venture carried at amortised cost
Net loss on financial assets at fair value through profit or loss
EXPENSES
Depreciation expense
Administration expenses
Share based payment expense
Share of net loss of joint venture
Foreign exchange gain/(loss)
LOSS BEFORE INCOME TAX
Income tax expense
LOSS FOR THE YEAR
Notes
2018
$
2017
$
4
8
5
22
8
8
10
7
172,252
-
1,959
221,189
1,362,780
4,218
(8,282)
(3,588)
(2,747,713)
(1,684,367)
(91,257)
(4,862,775)
(988,573)
(216,909)
(389,239)
(5,111,085)
980,642
(423,601)
(6,944,413)
(6,839,936)
-
-
-
-
(6,944,413)
(6,839,936)
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
873,940
873,940
(933,753)
(933,753)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(6,070,473)
(7,773,689)
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
(2.66)
(2.66)
(2.85)
(2.85)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
FINANCIAL
RESULTS
FOR THE YEAR ENDED
31 DECEMBER 2018
Page 58
DANAKALI LIMITED ABN 56 097 904 302
30
DANAKALI LIMITEDDanakali Annual Report 2018
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2018
REVENUE
Interest revenue calculated using the effective interest rate method
Accretion relating to the unwinding of discount on joint venture loan
Sundry
EXPENSES
Depreciation expense
Administration expenses
Share based payment expense
Loss on re-measurement of loan to joint venture carried at amortised cost
Net loss on financial assets at fair value through profit or loss
Share of net loss of joint venture
Foreign exchange gain/(loss)
LOSS BEFORE INCOME TAX
Income tax expense
LOSS FOR THE YEAR
Notes
2018
$
2017
$
4
8
5
22
8
8
10
7
172,252
-
1,959
221,189
1,362,780
4,218
(8,282)
(2,747,713)
(91,257)
-
(4,862,775)
(389,239)
980,642
(3,588)
(1,684,367)
(988,573)
(216,909)
-
(5,111,085)
(423,601)
(6,944,413)
(6,839,936)
-
-
(6,944,413)
(6,839,936)
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
873,940
873,940
(933,753)
(933,753)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(6,070,473)
(7,773,689)
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
(2.66)
(2.66)
(2.85)
(2.85)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
DANAKALI LIMITED ABN 56 097 904 302
Page 59
30
Danakali Annual Report 2018DANAKALI LIMITED
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2018
CURRENT ASSETS
Cash and cash equivalents
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
2018
$
2017
$
6
8
8
10
9
11
12
12
13
14
15
9,550,585
108,477
17,474
9,676,536
9,283,670
19,829,489
22,952
29,136,111
15,559,980
174,321
50,094
15,784,395
12,216,952
13,811,946
15,110
26,044,008
38,812,647
41,828,403
223,854
86,180
310,034
1,097,087
166,219
1,263,306
58,903
58,903
27,811
27,811
368,937
1,291,117
38,443,710
40,537,286
79,576,117
13,211,353
(54,343,760)
75,415,034
12,521,599
(47,399,347)
38,443,710
40,537,286
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes
DANAKALI LIMITED ABN 56 097 904 302
Page 60
31
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DANAKALI LIMITEDDanakali Annual Report 2018
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2018
CURRENT ASSETS
Cash and cash equivalents
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
2018
$
2017
$
6
8
8
10
9
11
12
12
13
14
15
9,550,585
15,559,980
108,477
17,474
174,321
50,094
9,676,536
15,784,395
9,283,670
19,829,489
22,952
12,216,952
13,811,946
15,110
29,136,111
26,044,008
38,812,647
41,828,403
223,854
86,180
310,034
1,097,087
166,219
1,263,306
58,903
58,903
27,811
27,811
368,937
1,291,117
38,443,710
40,537,286
79,576,117
13,211,353
75,415,034
12,521,599
(54,343,760)
(47,399,347)
38,443,710
40,537,286
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The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes
DANAKALI LIMITED ABN 56 097 904 302
31
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Page 61
Danakali Annual Report 2018DANAKALI LIMITED
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes
2018
$
2017
$
1. GENERAL INFORMATION
171,783
38,504
(3,640,750)
(3,430,463)
231,693
71,924
(1,583,296)
(1,279,679)
(6,448,446)
(16,124)
(6,464,570)
(7,711,037)
(10,778)
(7,721,815)
3,885,638
-
3,885,638
(6,009,395)
15,559,980
9,550,585
14,328,083
(671,369)
13,656,714
4,655,220
10,904,760
15,559,980
6
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Realised foreign exchange gain
Payments to suppliers and employees
NET CASH OUTFLOW USED IN OPERATING ACTIVITIES
16
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of joint venture
Payments for plant and equipment
NET CASH OUTFLOW USED IN 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
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) and the London Stock Exchange (LSE).
The consolidated financial report of the group as at, and for the year ended 31 December 2018 comprises the Company
and its subsidiaries (together referred to as the Group). The address of the registered office is Level 11, 125 St George’s
Terrace, Perth, WA, 6000.
The financial statements are presented in the Australian currency.
The financial report of Danakali for the year ended 31 December 2018 was authorised for issue by the Directors on 20
March 2019. 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 consolidated 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, except for the loan to the joint venture
that has been measured at fair value.
(a) New standards, interpretations and amendments adopted by the Group
The Group applied all new and amended Accounting Standards and Interpretations that were effective as at 1 January
2018, including:
AASB 9 Financial Instruments (AASB 9)
The Group has adopted AASB 9 retrospectively with the date of initial application being 1 January 2018. In accordance
with the transitional provisions in AASB 9, comparative figures have not been restated which continues to be reported
under AASB 139 Financial Instruments: Recognition and Measurement (“AASB 39”). AASB 9 replaces parts of AASB 139,
bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment;
and hedge accounting. The accounting policies have been updated to reflect the application of AASB 9 for the period from
1 January 2018 (see note 2(l) for details of the new accounting policy for receivables).
Classification and Measurement
Under AASB 9, debt instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or
fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s business
model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal
and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The SPPI test is applied to the entire financial asset,
even if it contains an embedded derivative. Consequently, a derivative embedded in a debt instrument is not accounted
for separately.
At the date of initial application, existing financial assets and liabilities of the Group were assessed in terms of the
requirements of AASB 9. The assessment was conducted on instruments that had not been derecognised as at 1 January
2018. In this regard, the Group has determined that the adoption of AASB 9 has impacted the classification of financial
instruments at 1 January 2018 as follows:
Class of financial instrument
presented in the statement of
financial position
2018)
Original measurement category
New measurement category under
under AASB139 (prior to 1 January
AASB 9 (from 1 January 2018)
Cash and cash equivalents
Loans and receivables
Financial assets at amortised cost
Trade and other receivables
Loans and receivables
Financial assets at amortised cost
Loan receivable
Loans and receivables
Financial assets at Fair Value
Through Profit and Loss
Trade and other payables
Financial liability at amortised cost
Financial liabilities at amortised cost
The change in classification of financial instruments has not resulted in any re-measurement adjustments at 1 January
2018 and has had no impact on the measurement of carrying value of the amount disclosed.
The loan to Colluli Mining Share Company (see note 8) failed the SPPI test due to the limited recourse nature of the loan.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
DANAKALI LIMITED ABN 56 097 904 302
Page 62
33
DANAKALI LIMITED ABN 56 097 904 302
34
DANAKALI LIMITEDDanakali Annual Report 2018
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Realised foreign exchange gain
Payments to suppliers and employees
NET CASH OUTFLOW USED IN OPERATING ACTIVITIES
16
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of joint venture
Payments for plant and equipment
NET CASH OUTFLOW USED IN 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
2018
$
2017
$
171,783
38,504
(3,640,750)
(3,430,463)
231,693
71,924
(1,583,296)
(1,279,679)
(6,448,446)
(7,711,037)
(16,124)
(10,778)
(6,464,570)
(7,721,815)
3,885,638
-
3,885,638
(6,009,395)
15,559,980
9,550,585
14,328,083
(671,369)
13,656,714
4,655,220
10,904,760
15,559,980
6
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
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) and the London Stock Exchange (LSE).
The consolidated financial report of the group as at, and for the year ended 31 December 2018 comprises the Company
and its subsidiaries (together referred to as the Group). The address of the registered office is Level 11, 125 St George’s
Terrace, Perth, WA, 6000.
The financial statements are presented in the Australian currency.
The financial report of Danakali for the year ended 31 December 2018 was authorised for issue by the Directors on 20
March 2019. 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 consolidated 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, except for the loan to the joint venture
that has been measured at fair value.
(a) New standards, interpretations and amendments adopted by the Group
The Group applied all new and amended Accounting Standards and Interpretations that were effective as at 1 January
2018, including:
AASB 9 Financial Instruments (AASB 9)
The Group has adopted AASB 9 retrospectively with the date of initial application being 1 January 2018. In accordance
with the transitional provisions in AASB 9, comparative figures have not been restated which continues to be reported
under AASB 139 Financial Instruments: Recognition and Measurement (“AASB 39”). AASB 9 replaces parts of AASB 139,
bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment;
and hedge accounting. The accounting policies have been updated to reflect the application of AASB 9 for the period from
1 January 2018 (see note 2(l) for details of the new accounting policy for receivables).
Classification and Measurement
Under AASB 9, debt instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or
fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group’s business
model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal
and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The SPPI test is applied to the entire financial asset,
even if it contains an embedded derivative. Consequently, a derivative embedded in a debt instrument is not accounted
for separately.
At the date of initial application, existing financial assets and liabilities of the Group were assessed in terms of the
requirements of AASB 9. The assessment was conducted on instruments that had not been derecognised as at 1 January
2018. In this regard, the Group has determined that the adoption of AASB 9 has impacted the classification of financial
instruments at 1 January 2018 as follows:
Class of financial instrument
presented in the statement of
financial position
Original measurement category
under AASB139 (prior to 1 January
2018)
New measurement category under
AASB 9 (from 1 January 2018)
Cash and cash equivalents
Loans and receivables
Financial assets at amortised cost
Trade and other receivables
Loans and receivables
Financial assets at amortised cost
Loan receivable
Loans and receivables
Financial assets at Fair Value
Through Profit and Loss
Trade and other payables
Financial liability at amortised cost
Financial liabilities at amortised cost
The change in classification of financial instruments has not resulted in any re-measurement adjustments at 1 January
2018 and has had no impact on the measurement of carrying value of the amount disclosed.
The loan to Colluli Mining Share Company (see note 8) failed the SPPI test due to the limited recourse nature of the loan.
DANAKALI LIMITED ABN 56 097 904 302
33
DANAKALI LIMITED ABN 56 097 904 302
Page 63
34
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Accordingly, on adoption of AASB 9, the loan has been classified as a financial asset at FVPL.
entity must determine a date of the transaction for each payment or receipt of advance consideration.
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied
as opposed to an incurred credit loss model under AASB 39. The expected credit loss model requires the Group to account
for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit
risk since initial recognition of the financial asset. In particular, AASB 9 requires the Group to measure the loss allowance
at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased significantly
since initial recognition. On the other hand, if the credit risk on the financial instrument has not increased significantly since
initial recognition, the Group is required to measure the loss allowance for that financial instrument at an amount equal to
the ECL within the next 12 months.
As at 1 January 2018, the directors of the Company reviewed and assessed the Group’s existing financial assets for
impairment using reasonable and supportable information. The result of the assessment is as follows:
Items existing as at 1 January
2018 that are subject to the
impairment provisions of
AASB 9
Cash and cash equivalents
and deposits
Security Bond
Credit risk attributes
All bank balances are assessed to have low credit risk
as they are held with a reputable financial institution
with a Moody’s Credit Rating of AA3.
The security is assessed to have low credit risk as they
are held with a reputable institution.
Receivables at amortised cost As these receivables have short term maturities, the
Group has concluded that the lifetime ECL for these
assets would be negligible and therefore no loss
allowance was required at 1 January 2018.
Cumulative additional
loss allowance
recognised on
1 January 2018
$’000:
-
-
-
Hedge accounting
The Group has not applied hedge accounting.
AASB 15 Revenue from Contracts with Customers (AASB 15)
The Group has adopted AASB 15 with the date of initial application being 1 January 2018.
AASB 15 supersedes AASB 118 Revenue, AASB 111 Construction Contracts and related Interpretations and it applies to
all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new
standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15,
revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange
for transferring goods or services to a customer.
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of AASB 15 had no impact on the Group as
the entity does not generate revenue.
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based
Payment Transactions
The Group has adopted AASB 2016-5 with the date of initial application being 1 January 2018.
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
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of AASB 2016-5 had no impact on the Group
as the Group had no share-based payment transactions with features described in the amendment.
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
The Group has adopted Interpretation 22 with the date of initial application being 1 January 2018.
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
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of Interpretation 22 had no impact on the
Group.
(b) 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 2018 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 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
AASB 16
Leases
The key features of AASB 16 are as follows:
1 January 2019
1 January 2019
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 right-of-use
assets and lease 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.
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. The
Group has not yet performed its detailed
assessment on the impact of this new standard on
DANAKALI LIMITED ABN 56 097 904 302
Page 64
35
DANAKALI LIMITED ABN 56 097 904 302
36
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Accordingly, on adoption of AASB 9, the loan has been classified as a financial asset at FVPL.
entity must determine a date of the transaction for each payment or receipt of advance consideration.
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of Interpretation 22 had no impact on the
Group.
(b) 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 2018 are outlined in the table below. The potential
effect of these Standards is yet to be fully determined.
As at 1 January 2018, the directors of the Company reviewed and assessed the Group’s existing financial assets for
impairment using reasonable and supportable information. The result of the assessment is as follows:
AASB 2014-10
Amendments to Australian
Accounting Standards –
Sale or Contribution of
Assets between an
Investor and its Associate
or Joint Venture
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.
Reference
Title
Summary
Application date
of standard*
for Group
1 January 2022
1 January 2022
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 right-of-use
assets and lease 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.
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. The
Group has not yet performed its detailed
assessment on the impact of this new standard on
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied
as opposed to an incurred credit loss model under AASB 39. The expected credit loss model requires the Group to account
for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit
risk since initial recognition of the financial asset. In particular, AASB 9 requires the Group to measure the loss allowance
at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased significantly
since initial recognition. On the other hand, if the credit risk on the financial instrument has not increased significantly since
initial recognition, the Group is required to measure the loss allowance for that financial instrument at an amount equal to
the ECL within the next 12 months.
Credit risk attributes
Items existing as at 1 January
2018 that are subject to the
impairment provisions of
AASB 9
Cash and cash equivalents
and deposits
Security Bond
Receivables at amortised cost As these receivables have short term maturities, the
All bank balances are assessed to have low credit risk
as they are held with a reputable financial institution
with a Moody’s Credit Rating of AA3.
The security is assessed to have low credit risk as they
are held with a reputable institution.
Group has concluded that the lifetime ECL for these
assets would be negligible and therefore no loss
allowance was required at 1 January 2018.
-
-
-
Cumulative additional
loss allowance
recognised on
1 January 2018
$’000:
Hedge accounting
The Group has not applied hedge accounting.
AASB 15 Revenue from Contracts with Customers (AASB 15)
The Group has adopted AASB 15 with the date of initial application being 1 January 2018.
AASB 15 supersedes AASB 118 Revenue, AASB 111 Construction Contracts and related Interpretations and it applies to
all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new
standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15,
revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange
for transferring goods or services to a customer.
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of AASB 15 had no impact on the Group as
the entity does not generate revenue.
AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based
Payment Transactions
The Group has adopted AASB 2016-5 with the date of initial application being 1 January 2018.
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
At 1 January 2017 and at 1 January 2018 it was determined that the adoption of AASB 2016-5 had no impact on the Group
as the Group had no share-based payment transactions with features described in the amendment.
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
The Group has adopted Interpretation 22 with the date of initial application being 1 January 2018.
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
DANAKALI LIMITED ABN 56 097 904 302
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Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Reference
Title
Summary
Uncertainty over Income
Tax Treatments
AASB
Interpretation
23, and
relevant
amending
standards
AASB 2017-7 Amendments to Australian
Accounting Standards –
Long-term Interests in
Associates and Joint
Ventures
AASB 2018-1 Australian Amendments to
Australian Accounting
Standards – Annual
Improvements 2015-2017
Cycle
Not yet issued
by the AASB
Conceptual Framework for
Financial Reporting and
relevant amending
standards
the basis that it is not material to the financial
statements.
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.
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.
The amendments clarify certain requirements in:
• AASB 3 Business Combinations and AASB 11
Joint Arrangements - previously held interest in
a joint operation
• AASB 112 Income Taxes - income tax
consequences of payments on financial
instruments classified as equity
• AASB 123 Borrowing Costs - borrowing costs
eligible for capitalisation.
The revised Conceptual Framework includes some
new concepts, provides updated definitions and
recognition criteria for assets and liabilities and
clarifies some important concepts. It is arranged in
eight chapters, as follows:
• Chapter 1 – The objective of financial reporting
• Chapter 2 – Qualitative characteristics of
useful financial information
• Chapter 3 – Financial statements and the
reporting entity
• Chapter 4 – The elements of financial
statements
• Chapter 5 – Recognition and derecognition
• Chapter 6 – Measurement
• Chapter 7 – Presentation and disclosure
• Chapter 8 – Concepts of capital and capital
maintenance
Amendments to References to the Conceptual
Framework in IFRS Standards has also been
issued, which sets out the amendments to affected
standards in order to update references to the
revised Conceptual Framework. The changes to
the Conceptual Framework may affect the
application of IFRS in situations where no standard
applies to a particular transaction or event. In
addition, relief has been provided in applying IFRS
3 and developing accounting policies for regulatory
account balances using IAS 8, such that entities
must continue to apply the definitions of an asset
and a liability (and supporting concepts) in the
Application date
of standard*
for Group
1 January 2019
1 January 2019
Reference
Title
Summary
AASB 2018-7 Definition of Material
(Amendments to AASB
101 and AASB 108)
Application date
of standard*
for Group
1 January 2020 1 January 2020
2010 Conceptual Framework, and not the
definitions in the revised Conceptual Framework.
This Standard amends AASB 101 Presentation of
Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and
Errors to align the definition of ‘material’ across the
standards and to clarify certain aspects of the
definition. The amendments clarify that materiality
will depend on the nature or magnitude of
information. An entity will need to assess whether
the information, either individually or in
combination with other information, is material in
the context of the financial statements. A
misstatement of information is material if it could
reasonably be expected to influence decisions
made by the primary users.
1 January 2019 1 January 2019
1 January 2019 1 January 2019
1 January 2020 1 January 2020
(c) Going concern
The financial statements have been prepared on a going concern basis which contemplates the continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
At balance date, the Group had cash and cash equivalents of $9,550,585 (31 December 2017: $15,559,980) and a net
working capital surplus of $9,366,502 (31 December 2017: $14,521,089). Whilst the existing cash reserves are sufficient
to cover the working capital requirements of the Group for the next 12 months, it is anticipated that the Group will commence
execution of the project development during this period and as such, additional funding will be necessary to carry out these
planned activities.
Under the mining agreement entered into between the Government of the State of Eritrea and Colluli Mining Share
Company (CMSC) dated 31 January 2017 (Mining Agreement), CMSC is obliged to spend US$200 million on
infrastructure and mine development within the area of the Colluli project mining licences in the 36 months following the
provision of formal notice to the Ministry of Energy and Mines that development has commenced. The notice, not a primary
obligation under the mining agreement, was scheduled to be submitted by 30 October 2018 and then 31 December 2018.
CMSC will now submit the notice once sufficient funding has been raised to allow the advancement of infrastructure and
mine development.
At the date of this report, the directors are satisfied there are reasonable grounds to believe that the Group will be able to
continue its planned activities and the Group will be able to meet its obligations as and when they fall due. The directors
are confident that the Group will be able to obtain the additional funding requirement via equity raising and the securing of
debt. If it appeared that such financing was likely to be delayed, the directors would seek to defer its planned capital
expenditure on the project and, if necessary, seek an extension of the deadline to meet its expenditure obligations pursuant
to the Colluli Mining Agreement.
Should the Group not achieve the matters set out above, there is uncertainty whether the Group would continue as a going
concern and therefore whether it would realise its assets and extinguish its liabilities in the normal course of business and
at the amounts stated in the financial report. The financial statements do not include any adjustment relating to the
recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be
necessary should the Group not be able to continue as a going concern.
(d) 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.
(e) 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.
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38
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Reference
Title
Summary
Reference
Title
Summary
Application date
of standard*
for Group
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
AASB 2018-7 Definition of Material
(Amendments to AASB
101 and AASB 108)
23, and
relevant
amending
standards
2010 Conceptual Framework, and not the
definitions in the revised Conceptual Framework.
This Standard amends AASB 101 Presentation of
Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and
Errors to align the definition of ‘material’ across the
standards and to clarify certain aspects of the
definition. The amendments clarify that materiality
will depend on the nature or magnitude of
information. An entity will need to assess whether
the information, either individually or in
combination with other information, is material in
the context of the financial statements. A
misstatement of information is material if it could
reasonably be expected to influence decisions
made by the primary users.
Application date
of standard*
for Group
1 January 2020 1 January 2020
(c) Going concern
The financial statements have been prepared on a going concern basis which contemplates the continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
At balance date, the Group had cash and cash equivalents of $9,550,585 (31 December 2017: $15,559,980) and a net
working capital surplus of $9,366,502 (31 December 2017: $14,521,089). Whilst the existing cash reserves are sufficient
to cover the working capital requirements of the Group for the next 12 months, it is anticipated that the Group will commence
execution of the project development during this period and as such, additional funding will be necessary to carry out these
planned activities.
Under the mining agreement entered into between the Government of the State of Eritrea and Colluli Mining Share
Company (CMSC) dated 31 January 2017 (Mining Agreement), CMSC is obliged to spend US$200 million on
infrastructure and mine development within the area of the Colluli project mining licences in the 36 months following the
provision of formal notice to the Ministry of Energy and Mines that development has commenced. The notice, not a primary
obligation under the mining agreement, was scheduled to be submitted by 30 October 2018 and then 31 December 2018.
CMSC will now submit the notice once sufficient funding has been raised to allow the advancement of infrastructure and
mine development.
At the date of this report, the directors are satisfied there are reasonable grounds to believe that the Group will be able to
continue its planned activities and the Group will be able to meet its obligations as and when they fall due. The directors
are confident that the Group will be able to obtain the additional funding requirement via equity raising and the securing of
debt. If it appeared that such financing was likely to be delayed, the directors would seek to defer its planned capital
expenditure on the project and, if necessary, seek an extension of the deadline to meet its expenditure obligations pursuant
to the Colluli Mining Agreement.
Should the Group not achieve the matters set out above, there is uncertainty whether the Group would continue as a going
concern and therefore whether it would realise its assets and extinguish its liabilities in the normal course of business and
at the amounts stated in the financial report. The financial statements do not include any adjustment relating to the
recoverability or classification of recorded asset amounts or to the amounts or classification of liabilities that might be
necessary should the Group not be able to continue as a going concern.
(d) 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.
(e) 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.
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
AASB 2018-1 Australian Amendments to
The amendments clarify certain requirements in:
1 January 2019 1 January 2019
Long-term Interests in
Associates and Joint
Ventures
Australian Accounting
Standards – Annual
Improvements 2015-2017
Cycle
Not yet issued
Conceptual Framework for
by the AASB
Financial Reporting and
relevant amending
standards
1 January 2020 1 January 2020
the basis that it is not material to the financial
statements.
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.
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.
• AASB 3 Business Combinations and AASB 11
Joint Arrangements - previously held interest in
a joint operation
• AASB 112 Income Taxes - income tax
consequences of payments on financial
instruments classified as equity
• AASB 123 Borrowing Costs - borrowing costs
eligible for capitalisation.
The revised Conceptual Framework includes some
new concepts, provides updated definitions and
recognition criteria for assets and liabilities and
clarifies some important concepts. It is arranged in
eight chapters, as follows:
• Chapter 1 – The objective of financial reporting
• Chapter 2 – Qualitative characteristics of
useful financial information
• Chapter 3 – Financial statements and the
• Chapter 4 – The elements of financial
reporting entity
statements
• Chapter 5 – Recognition and derecognition
• Chapter 6 – Measurement
• Chapter 7 – Presentation and disclosure
• Chapter 8 – Concepts of capital and capital
maintenance
Amendments to References to the Conceptual
Framework in IFRS Standards has also been
issued, which sets out the amendments to affected
standards in order to update references to the
revised Conceptual Framework. The changes to
the Conceptual Framework may affect the
application of IFRS in situations where no standard
applies to a particular transaction or event. In
addition, relief has been provided in applying IFRS
3 and developing accounting policies for regulatory
account balances using IAS 8, such that entities
must continue to apply the definitions of an asset
and a liability (and supporting concepts) in the
DANAKALI LIMITED ABN 56 097 904 302
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Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
(f) Foreign currency translation
(i) Functional and presentation currency
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.
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.
(j)
Impairment of assets
amount may not be recoverable.
Assets are reviewed for impairment annually to determine if events or changes in circumstances indicate that the carrying
(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.
(g)
Interest revenue
Interest revenue is recognised using the effective interest rate method.
(h)
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 at the reporting date. 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.
(i) 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
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.
(k) 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 and, 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.
(i) Initial recognition
(l) Receivables (new policy applied from 1 January 2018 due to adoption of AASB 9)
Receivables are initially recognised and measured at fair value. Receivables that are held to collect contractual cash flows
and are expected to give rise to cash flows representing solely payments of principal and interest are classified and
subsequently measured at amortised cost. Receivables that do not meet the criteria for amortised cost are measured at
fair value through profit or loss. This latter category includes the loan to Colluli Mining Share Company.
(ii) Subsequent measurement
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject
to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net
changes in fair value recognised in the statement of profit or loss.
(iii) Impairment
The group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument. The expected credit losses on financial assets are estimated
based on the Group’s historic credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as forecast conditions at the reporting date.
In relation to all other receivables measured at amortised cost, the Group applies the credit loss model. The expected
credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at
each reporting date to reflect changes in credit risk since initial recognition of the financial asset. In particular, the Group
measures the loss allowance at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument
has increased significantly since initial recognition. On the other hand, if the credit risk on the financial instrument has not
increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an
amount equal to the ECL within the next 12 months.
The Group considers an event of default has occurred when a financial asset is more than 90 days past due or external
sources indicate that the debtor is unlikely to pay its creditors, including the Group. A financial asset is credit impaired
when there is evidence that the counterparty is in significant financial difficulty or a breach of contract, such as a default or
past due event has occurred. The Group writes off a financial asset when there is information indicating the counterparty
is in severe financial difficulty and there is no realistic prospect of recovering the contractual cash flow.
(m) Receivables (old policy applied to 31 December 2017)
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 receivables in the statement of financial position.
(n)
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
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DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
(f) 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 using the effective interest rate method.
(g)
Interest revenue
(h)
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 at the reporting date. 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.
(i) 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.
(j)
Impairment of assets
Assets are reviewed for impairment annually to determine if 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.
(k) 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 and, 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.
(l) Receivables (new policy applied from 1 January 2018 due to adoption of AASB 9)
(i) Initial recognition
Receivables are initially recognised and measured at fair value. Receivables that are held to collect contractual cash flows
and are expected to give rise to cash flows representing solely payments of principal and interest are classified and
subsequently measured at amortised cost. Receivables that do not meet the criteria for amortised cost are measured at
fair value through profit or loss. This latter category includes the loan to Colluli Mining Share Company.
(ii) Subsequent measurement
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject
to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net
changes in fair value recognised in the statement of profit or loss.
(iii) Impairment
The group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument. The expected credit losses on financial assets are estimated
based on the Group’s historic credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as forecast conditions at the reporting date.
In relation to all other receivables measured at amortised cost, the Group applies the credit loss model. The expected
credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at
each reporting date to reflect changes in credit risk since initial recognition of the financial asset. In particular, the Group
measures the loss allowance at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument
has increased significantly since initial recognition. On the other hand, if the credit risk on the financial instrument has not
increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an
amount equal to the ECL within the next 12 months.
The Group considers an event of default has occurred when a financial asset is more than 90 days past due or external
sources indicate that the debtor is unlikely to pay its creditors, including the Group. A financial asset is credit impaired
when there is evidence that the counterparty is in significant financial difficulty or a breach of contract, such as a default or
past due event has occurred. The Group writes off a financial asset when there is information indicating the counterparty
is in severe financial difficulty and there is no realistic prospect of recovering the contractual cash flow.
(m) Receivables (old policy applied to 31 December 2017)
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 receivables in the statement of financial position.
(n)
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
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Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
(o) 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.
ordinary shares.
The assets’ residual values and useful lives are reviewed, and adjusted prospectively if appropriate, at each reporting date.
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.
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.
(p) Exploration and evaluation costs
Acquired exploration and evaluation costs are capitalised. Ongoing exploration and evaluation costs are expensed in the
period they are incurred.
December 2017: Nil).
(q) 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.
(r) Employee benefits
(i) Wages and salaries, annual leave and long service leave
Liabilities for wages and salaries, including non-monetary benefits, and other short terms benefits 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 and service 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 or awards with non-vesting conditions.
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.
(s)
Issued capital
(t) 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
(u) 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:
(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 2018 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 determining the fair value of the loan to the joint venture includes determining the timing of
cash receipts and the discount rate applied. The fair value of the loan has been measured using valuation techniques
under a discounted cash flow (DCF) model, as fair value cannot be measured on quoted prices in active markets. The
inputs to a DCF are taken from observable markets where possible, but where this is not feasible, a degree of judgment is
required in establishing fair value. Judgements include consideration of inputs including foreign exchange risk, interest
rate risk, and credit risk. At 31 December 2018 a discount rate of 25% was applied, based on management’s judgement
of the underlying risks. 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 2023 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
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42
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither amortised nor
model. The fair value of performance rights determined by consideration of the Company’s share price at the grant date.
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.
(o) 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 prospectively if appropriate, at each reporting date.
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.
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
Acquired exploration and evaluation costs are capitalised. Ongoing exploration and evaluation costs are expensed in the
those assets to retained earnings.
(p) Exploration and evaluation costs
period they are incurred.
(q) 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.
(r) Employee benefits
(i) Wages and salaries, annual leave and long service leave
Liabilities for wages and salaries, including non-monetary benefits, and other short terms benefits 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 equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in
which the performance and service 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 or awards with non-vesting conditions.
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.
(s)
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.
(t) 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.
(u) 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:
(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 2018 the Group assessed that, no indicator of impairment existed (31
December 2017: 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 determining the fair value of the loan to the joint venture includes determining the timing of
cash receipts and the discount rate applied. The fair value of the loan has been measured using valuation techniques
under a discounted cash flow (DCF) model, as fair value cannot be measured on quoted prices in active markets. The
inputs to a DCF are taken from observable markets where possible, but where this is not feasible, a degree of judgment is
required in establishing fair value. Judgements include consideration of inputs including foreign exchange risk, interest
rate risk, and credit risk. At 31 December 2018 a discount rate of 25% was applied, based on management’s judgement
of the underlying risks. 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 2023 quarter.
Further context is detailed in note 10.
(iii) Share based payment transactions
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
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
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Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
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 grant and consideration of the probability
of the vesting condition being met.
(iv) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be
measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the
discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations
of inputs such as discount rate, exchange rate, repayment terms etc. Changes in assumptions relating to these factors
could affect the reported fair value of financial instruments. See note 8 for further disclosures.
(v) Provision for Expected Credit Loss (ECL)
The accounting estimates and judgments related to the impairment of receivables is a critical accounting estimate because
the underlying assumptions used for assessed impairment can change from period to period and may significantly affect
the Group’s results of operations.
In assessing assets for impairments, management judgment is required, particularly in relation to economic and financial
conditions, the timing of the completion of construction, timing of project financing and alignment to the indicative debt
financing terms and changes to expected cash flows can occur.
The determination for a provision for expected credit loss is determined using the credit loss model. THe use of this model
incorporates numerous estimates and judgements. The group performs a regular review of the models and underlying
data and assumptions.
(v) 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.
(w) 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.
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.
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4. REVENUE
Interest
5. EXPENSES
Employee benefits (net of recharges)
Director fees
Compliance and regulatory expenses (a)
Lease payments relating to operating leases
Other administration expenses
(a) Expenditure in the areas of legal, consultants and other compliance and regulatory expenses increased during the year
as a result of the LSE listing and corporate transactions.
6. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
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.
2018
$
2017
$
9,550,585
15,559,980
7.
INCOME TAX
(a) Income tax recognised in profit or loss
Current tax
Deferred tax
Total tax benefit/(expense)
(b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
(6,944,413)
(6,839,936)
Prima facie tax benefit at the Australian tax rate of 27.5% (2017: 27.5%)
(1,880,982)
Adjustment of under-provision of deferred tax in prior year
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
Net loss on financial assets at fair value through profit or loss
Movements in unrecognised temporary differences and tax effect of current
year tax losses:
Income tax expense/(benefit)
172,252
221,189
2018
$
2018
$
309,176
439,612
1,386,915
91,893
520,117
2,747,713
2017
$
2017
$
267,256
295,631
392,626
144,152
584,702
1,684,367
2018
$
2017
$
-
-
-
-
-
(1,909,712)
(433,978)
25,096
107,041
1,337,263
874,290
271,858
1,405,548
(315,115)
518,691
-
-
-
-
-
-
44
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
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 grant and consideration of the probability
of the vesting condition being met.
(iv) Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot be
measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the
discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations
of inputs such as discount rate, exchange rate, repayment terms etc. Changes in assumptions relating to these factors
could affect the reported fair value of financial instruments. See note 8 for further disclosures.
(v) Provision for Expected Credit Loss (ECL)
The accounting estimates and judgments related to the impairment of receivables is a critical accounting estimate because
the underlying assumptions used for assessed impairment can change from period to period and may significantly affect
the Group’s results of operations.
In assessing assets for impairments, management judgment is required, particularly in relation to economic and financial
conditions, the timing of the completion of construction, timing of project financing and alignment to the indicative debt
financing terms and changes to expected cash flows can occur.
The determination for a provision for expected credit loss is determined using the credit loss model. THe use of this model
incorporates numerous estimates and judgements. The group performs a regular review of the models and underlying
data and assumptions.
(v) 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.
(w) 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.
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
Employee benefits (net of recharges)
Director fees
Compliance and regulatory expenses (a)
Lease payments relating to operating leases
Other administration expenses
2018
$
2017
$
172,252
221,189
2018
$
309,176
439,612
1,386,915
91,893
520,117
2,747,713
2017
$
267,256
295,631
392,626
144,152
584,702
1,684,367
(a) Expenditure in the areas of legal, consultants and other compliance and regulatory expenses increased during the year
as a result of the LSE listing and corporate transactions.
6. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash at bank earns interest at floating rates based on daily bank deposit rates.
2018
$
9,550,585
2017
$
15,559,980
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.
7.
INCOME TAX
(a) Income tax recognised in profit or loss
Current tax
Deferred tax
Total tax benefit/(expense)
(b) Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
Prima facie tax benefit at the Australian tax rate of 27.5% (2017: 27.5%)
Adjustment of under-provision of deferred tax in prior year
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
Net loss on financial assets at fair value through profit or loss
Movements in unrecognised temporary differences and tax effect of current
year tax losses:
Income tax expense/(benefit)
2018
$
2017
$
-
-
-
-
-
-
(6,944,413)
(6,839,936)
(1,909,712)
(433,978)
(1,880,982)
-
25,096
107,041
-
1,337,263
874,290
271,858
1,405,548
(315,115)
-
518,691
-
-
DANAKALI LIMITED ABN 56 097 904 302
43
DANAKALI LIMITED ABN 56 097 904 302
Page 73
44
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
(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
8. RECEIVABLES
Current
Net GST receivable
Accrued interest
Other receivables
Security bonds
Non-Current
Loan to Colluli Mining Share Company – at fair value
Loan to Colluli Mining Share Company – at amortised cost
Carrying value of loans
Impairment of receivables
Statement of
Financial Position
2018
$
2017
$
Statement of
Comprehensive Income
2017
2018
$
$
(129)
-
(129)
3,151
39,898
1,973
188,041
5,228,743
53,358
12,309
270,029
4,248,669
(5,458,526)
-
(4,584,365)
-
(13,460)
(10,336)
(81,988)
980,074
(874,161)
-
213
5,709
87,420
(411,724)
315,231
-
2018
$
2017
$
31,863
469
1,895
74,250
108,477
9,283,670
-
9,283,670
-
9,283,670
112,705
-
2,366
59,250
174,321
-
12,216,952
12,216,952
-
12,216,952
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
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 a market effective interest rate of 25% (2017:
effective interest rate of 25%).
During the year ended 31 December 2018, the repayment profile of the receivable was updated to consider the timing of
the completion of construction, timing of project financing and alignment to the indicative debt financing terms. This resulted
in a loss on financial assets at fair value through profit or loss of $4,862,775 (see note 10).
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).
The undiscounted underlying loan balance at 31 December 2018 is $33,571,559 (USD 23,676,610) (31 December 2017:
$27,176,517) (USD 21,216,239).
DANAKALI LIMITED ABN 56 097 904 302
Page 74
45
DANAKALI LIMITED ABN 56 097 904 302
46
Reconciliation of movement in loan to Colluli Mining Share Company
Opening carrying amount at beginning of the year
Additional loans during the year
Foreign exchange gain/(loss)
Loss on re-measurement of loan to joint venture carried at amortised cost
Accretion relating to the unwinding of discount on joint venture loan
Net loss on financial assets at fair value through profit or loss
Closing carrying amount at end of the year
9. PLANT AND EQUIPMENT
Plant and equipment
Gross carrying value – at cost
Accumulated depreciation
Net book amount
Plant and equipment
Opening net book amount at beginning of the year
Additions
Disposals
Depreciation charge
Closing net book amount at end of the year
10. INVESTMENT IN JOINT VENTURE
The Group has an interest in the following joint arrangement:
2018
$
2017
$
12,216,952
987,356
942,137
9,519,503
1,881,697
(330,121)
-
-
(216,909)
1,362,780
(4,862,775)
9,283,670
-
12,216,952
2018
$
2017
$
74,561
(51,609)
22,952
15,110
16,124
-
(8,282)
22,952
58,437
(43,327)
15,110
7,920
10,778
-
(3,588)
15,110
Project
Activities
Equity Interest
Carrying Value
2018
%
2017
%
2018
$
2017
$
Colluli Potash Mineral Exploration
50
50
19,829,489
13,811,946
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 2018.
Reconciliation of movement in investments accounted for using the
equity method:
Opening carrying amount at beginning of the year
Additional investment during the year
Share of net (loss)/profit for the year
Other comprehensive income for the year
Closing carrying amount at end of the year
2018
$
2017
$
13,811,946
5,532,842
(389,239)
873,940
19,829,489
13,502,312
6,354,472
(5,111,085)
(933,753)
13,811,946
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
(c) Deferred Income Tax
Deferred income tax at 31 December relates to the following:
Statement of
Financial Position
2018
$
2017
$
Statement of
Comprehensive Income
2018
$
2017
$
(129)
3,151
Deferred Tax Liabilities:
Interest receivable
Deferred Tax Assets:
Accrued expenditure
s.40-880 expenditure
Revenue tax losses
Provision for employee entitlements
(129)
39,898
1,973
188,041
5,228,743
-
53,358
12,309
270,029
4,248,669
-
-
Deferred tax assets not brought to
account as realisation is not probable
(5,458,526)
(4,584,365)
(874,161)
8. RECEIVABLES
Current
Net GST receivable
Accrued interest
Other receivables
Security bonds
Non-Current
Loan to Colluli Mining Share Company – at fair value
Loan to Colluli Mining Share Company – at amortised cost
Carrying value of loans
Impairment of receivables
9,283,670
12,216,952
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
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 a market effective interest rate of 25% (2017:
effective interest rate of 25%).
During the year ended 31 December 2018, the repayment profile of the receivable was updated to consider the timing of
the completion of construction, timing of project financing and alignment to the indicative debt financing terms. This resulted
in a loss on financial assets at fair value through profit or loss of $4,862,775 (see note 10).
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).
The undiscounted underlying loan balance at 31 December 2018 is $33,571,559 (USD 23,676,610) (31 December 2017:
$27,176,517) (USD 21,216,239).
2018
$
2017
$
(13,460)
(10,336)
(81,988)
980,074
-
31,863
469
1,895
74,250
108,477
9,283,670
9,283,670
-
-
213
5,709
87,420
(411,724)
315,231
-
112,705
2,366
59,250
174,321
-
-
-
12,216,952
12,216,952
Reconciliation of movement in loan to Colluli Mining Share Company
Opening carrying amount at beginning of the year
Additional loans during the year
Foreign exchange gain/(loss)
Loss on re-measurement of loan to joint venture carried at amortised cost
Accretion relating to the unwinding of discount on joint venture loan
Net loss on financial assets at fair value through profit or loss
Closing carrying amount at end of the year
9. PLANT AND EQUIPMENT
Plant and equipment
Gross carrying value – at cost
Accumulated depreciation
Net book amount
Plant and equipment
Opening net book amount at beginning of the year
Additions
Disposals
Depreciation charge
Closing net book amount at end of the year
10. INVESTMENT IN JOINT VENTURE
The Group has an interest in the following joint arrangement:
2018
$
2017
$
12,216,952
987,356
942,137
-
-
(4,862,775)
9,283,670
9,519,503
1,881,697
(330,121)
(216,909)
1,362,780
-
12,216,952
2018
$
2017
$
74,561
(51,609)
22,952
15,110
16,124
-
(8,282)
22,952
58,437
(43,327)
15,110
7,920
10,778
-
(3,588)
15,110
Project
Activities
Equity Interest
Carrying Value
2018
%
2017
%
2018
$
2017
$
Colluli Potash Mineral Exploration
50
50
19,829,489
13,811,946
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 2018.
Reconciliation of movement in investments accounted for using the
equity method:
Opening carrying amount at beginning of the year
Additional investment during the year
Share of net (loss)/profit for the year
Other comprehensive income for the year
Closing carrying amount at end of the year
2018
$
2017
$
13,811,946
5,532,842
(389,239)
873,940
19,829,489
13,502,312
6,354,472
(5,111,085)
(933,753)
13,811,946
DANAKALI LIMITED ABN 56 097 904 302
45
DANAKALI LIMITED ABN 56 097 904 302
Page 75
46
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Summarised financial information of joint venture:
11. TRADE AND OTHER PAYABLES
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 – at amortised cost
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 on joint venture loan
Gain on re-measurement of loan to joint venture carried at amortised cost
Exploration and evaluation expenditure
2018
$
2017
$
110,666
104,928
215,594
135,013
31,125,894
31,260,907
43,901
83,582
127,483
108,727
27,610,315
27,719,042
(311,850)
(311,850)
(250,832)
(250,832)
(9,283,670)
(9,283,670)
(12,216,952)
(12,216,952)
21,880,981
15,378,741
10,940,491
7,689,371
10,940,491
7,689,371
(4,305,107)
13,194,105
19,829,489
(4,305,107)
10,427,682
13,811,946
2018
$
2017
$
(3,859,850)
8,722,625
(5,641,253)
(1,362,780)
216,909
(9,076,298)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(778,478)
(10,222,169)
Group’s share of total loss for the year
(389,239)
(5,111,085)
During the year ended 31 December 2018 no dividends were paid or declared (2017: Nil).
Colluli Mining Share Company has the following commitments or contingencies at 31 December 2018:
Government
Under the mining agreement entered into between the Government of the State of Eritrea and Colluli Mining Share
Company (CMSC) dated 31 January 2017, CMSC is obliged to spend US$200 million on infrastructure and mine
development within the area of the Colluli project mining licences in the 36 months following the provision of formal notice
to the Ministry of Energy and Mines that development has commenced.
Funding
CMSC successfully executed a mandate to provide fully underwritten debt finance facilities of US$200M to fund the
construction and development of the Project. African development financial institutions African Export-Import Bank
(Afreximbank) and Africa Finance Corporation (AFC) are acting as Mandated Lead Arrangers (MLAs).
Under the terms of the mandate, CMSC is responsible to pay all reasonable costs and expenses related to external
technical, financial, insurance, tax and legal consultants required by the MLAs to assist in the due diligence. The mandate
letter includes various fees, payable by CMSC to the MLAs, based on various future outcomes, including termination by
CMSC.
DANAKALI LIMITED ABN 56 097 904 302
Page 76
47
DANAKALI LIMITED ABN 56 097 904 302
Trade payables
Accrued expenses
Other payables
12. PROVISIONS
Current
Employee entitlements
Non-Current
Employee entitlements
2018
$
122,362
65,868
35,624
223,854
2017
$
925,470
103,453
68,164
1,097,087
2018
$
2017
$
86,180
166,219
58,903
145,083
27,811
194,030
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
2018
2017
Number
of shares
$
Number
of shares
$
264,422,398
79,576,117
251,697,687
75,415,034
264,422,398
79,576,117
251,697,687
75,415,034
Balance at the beginning of the year
251,697,687
75,415,034
224,494,677
61,758,320
Issued during the year:
− Issued at $0.278 per share on option exercise
− Issued at $0.350 per share on option exercise
10,381,821
3,633,640
1,356,365
− Issued at $0.405 per share on option exercise
400,000
162,000
− Issued at $0.408 per share on option exercise
− Issued at $0.450 per share on option exercise
200,000
90,000
4,600,000
1,278,800
351,000
200,000
474,728
142,155
81,600
− Issued at $0.652 per share via cashless exercise of
1,949,000 options with an exercise price of $0.405
738,346
− Issued at $0.624 per share via cashless exercise of
750,000 options with an exercise price of $0.527
116,586
− Issued at $0.648 per share via cashless exercise of
1,600,000 options with an exercise price of $0.550
241,974
− Issued at $0.773 per share via cashless exercise of
750,000 options with an exercise price of $0.550
− Issued on vesting of performance rights
− Issued at $0.755 per share in lieu of advisor fees
216,364
65,000
− Issued at $0.773 per share in lieu of advisor fees
(refer note 22(b))
(refer note 22(b))
− Issued at $0.620 per share pursuant to placement
356,049
268,817 (a)
8,571
6,626 (b)
− Costs of capital raised
Balance at the end of the year
264,422,398
79,576,117
251,697,687
75,415,034
19,920,645
12,350,800
-
(671,369)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
775,000
-
-
-
-
-
-
-
48
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Summarised financial information of joint venture:
11. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other payables
12. PROVISIONS
Current
Employee entitlements
Non-Current
Employee entitlements
2018
$
122,362
65,868
35,624
223,854
2017
$
925,470
103,453
68,164
1,097,087
2018
$
2017
$
86,180
166,219
58,903
145,083
27,811
194,030
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
2018
2017
Number
of shares
$
Number
of shares
$
264,422,398
79,576,117
251,697,687
75,415,034
264,422,398
79,576,117
251,697,687
75,415,034
Balance at the beginning of the year
251,697,687
75,415,034
224,494,677
61,758,320
Issued during the year:
− Issued at $0.278 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 $0.450 per share on option exercise
− Issued at $0.652 per share via cashless exercise of
1,949,000 options with an exercise price of $0.405
− Issued at $0.624 per share via cashless exercise of
750,000 options with an exercise price of $0.527
− Issued at $0.648 per share via cashless exercise of
1,600,000 options with an exercise price of $0.550
− Issued at $0.773 per share via cashless exercise of
750,000 options with an exercise price of $0.550
− Issued on vesting of performance rights
− Issued at $0.755 per share in lieu of advisor fees
-
-
4,600,000
1,278,800
10,381,821
3,633,640
1,356,365
400,000
162,000
-
-
200,000
90,000
738,346
116,586
241,974
216,364
65,000
-
-
-
-
-
351,000
200,000
-
-
-
-
-
775,000
474,728
142,155
81,600
-
-
-
-
-
-
-
(refer note 22(b))
356,049
268,817 (a)
-
DANAKALI LIMITED ABN 56 097 904 302
47
DANAKALI LIMITED ABN 56 097 904 302
Page 77
48
− Issued at $0.773 per share in lieu of advisor fees
(refer note 22(b))
− Issued at $0.620 per share pursuant to placement
− Costs of capital raised
8,571
-
-
6,626 (b)
-
-
19,920,645
12,350,800
-
(671,369)
Balance at the end of the year
264,422,398
79,576,117
251,697,687
75,415,034
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 – at amortised cost
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
2018
$
2017
$
110,666
104,928
215,594
135,013
31,125,894
31,260,907
43,901
83,582
127,483
108,727
27,610,315
27,719,042
(311,850)
(311,850)
(250,832)
(250,832)
(9,283,670)
(9,283,670)
(12,216,952)
(12,216,952)
21,880,981
15,378,741
10,940,491
7,689,371
10,940,491
7,689,371
(4,305,107)
13,194,105
19,829,489
(4,305,107)
10,427,682
13,811,946
2018
$
2017
$
Financial performance
Interest expense relating to the unwinding of discount on joint venture loan
Gain on re-measurement of loan to joint venture carried at amortised cost
Exploration and evaluation expenditure
(3,859,850)
8,722,625
(5,641,253)
(1,362,780)
216,909
(9,076,298)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(778,478)
(10,222,169)
Group’s share of total loss for the year
(389,239)
(5,111,085)
During the year ended 31 December 2018 no dividends were paid or declared (2017: Nil).
Colluli Mining Share Company has the following commitments or contingencies at 31 December 2018:
Government
Funding
CMSC.
Under the mining agreement entered into between the Government of the State of Eritrea and Colluli Mining Share
Company (CMSC) dated 31 January 2017, CMSC is obliged to spend US$200 million on infrastructure and mine
development within the area of the Colluli project mining licences in the 36 months following the provision of formal notice
to the Ministry of Energy and Mines that development has commenced.
CMSC successfully executed a mandate to provide fully underwritten debt finance facilities of US$200M to fund the
construction and development of the Project. African development financial institutions African Export-Import Bank
(Afreximbank) and Africa Finance Corporation (AFC) are acting as Mandated Lead Arrangers (MLAs).
Under the terms of the mandate, CMSC is responsible to pay all reasonable costs and expenses related to external
technical, financial, insurance, tax and legal consultants required by the MLAs to assist in the due diligence. The mandate
letter includes various fees, payable by CMSC to the MLAs, based on various future outcomes, including termination by
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Note:
(a)
(b)
The fair value for the consideration of these shares was calculated taking into accounts the Company’s valuation on
admission to the LSE, the Company’s share price and the USD/AUD exchange rate on the date of issue.
The fair value for the consideration of these shares was calculated taking into accounts the Company’s 10-day VWAP
share price and the GBP/AUD exchange rate on the date of issue.
The share-based payments reserve is used to recognise the fair value of share options and performance rights issued.
(c) Ordinary shares
The foreign currency translation reserve records the exchange differences arising on translation of a foreign joint
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.
(d) Movements in options on issue
Balance at beginning of the year
Issued during the year:
− 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:
− Exercised, exercisable at $0.278 on or before 17 November 2017
− 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 $0.405 on or before 13 May 2018
− Exercised, exercisable at $0.408 on or before 4 November 2018
− Exercised, exercisable at $0.450 on or before 23 June 2018
− Exercised, exercisable at $0.527 on or before 29 May 2018
− Exercised, exercisable at $0.550 on or before 31 May 2018
− Exercised, exercisable at $0.550 on or before 4 November 2018
− Exercised, exercisable at $0.550 on or before 31 December 2018
− Expired, exercisable at $0.350, on or before 13 May 2018
− Cancelled, exercisable at $0.558, on or before 8 August 2019
− 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
2018
Options
2017
Options
Balance at beginning of the year
Loss for the year
Balance at end of the year
19,195,821
25,213,186
16. STATEMENT OF CASH FLOWS
-
-
-
(9,656,821)
(725,000)
(2,349,000)
-
(200,000)
(750,000)
(600,000)
(750,000)
(1,000,000)
(75,000)
(100,000)
-
-
2,990,000
1,440,000
400,000
(4,600,000)
(1,356,365)
(351,000)
-
(200,000)
-
-
-
-
-
-
-
(800,000)
(550,000)
19,195,821
2018
$
2017
$
11,416,109
(184,186)
11,231,923
1,105,490
873,940
1,979,430
10,427,536
988,573
11,416,109
2,039,243
(933,753)
1,105,490
13,211,353
12,521,599
(b) Nature and purpose of reserves
Share-based payments reserve
Foreign currency translation reserve
arrangement.
15. ACCUMULATED LOSSES
2018
$
(47,399,347)
(6,944,413)
(54,343,760)
2017
$
(40,559,411)
(6,839,936)
(47,399,347)
2018
$
2017
$
(6,944,413)
(6,839,936)
8,282
91,257
389,239
(942,138)
-
-
-
17,602
(864,120)
(48,947)
3,588
-
988,573
(1,362,780)
5,111,085
495,525
216,909
-
(33,890)
124,368
16,879
(3,430,463)
(1,279,679)
(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
Share of net loss of associate
Foreign exchange loss/(gain)
Accretion relating to the unwinding of discount on joint venture loan
Loss on re-measurement of loan to joint venture carried at amortised cost
Net loss on financial assets at fair value through profit or loss
(4,862,775)
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
Cash contribution to joint venture operations during the period
(6,448,446)
(7,711,037)
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
(6,944,413)
(6,839,936)
(b) Weighted average number of shares used as the denominator
2018
$
2017
$
2018
2017
No. of Shares
No. of Shares
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
261,076,051
239,710,693
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 2,990,000 (2017: 19,195,821) share options and 1,315,000 (2017: 1,408,000)
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 ABN 56 097 904 302
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49
DANAKALI LIMITED ABN 56 097 904 302
50
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
(b) Nature and purpose of reserves
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.
15. ACCUMULATED LOSSES
Balance at beginning of the year
Loss for the year
Balance at end of the year
19,195,821
25,213,186
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
Net loss on financial assets at fair value through profit or loss
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
2018
$
(47,399,347)
(6,944,413)
(54,343,760)
2017
$
(40,559,411)
(6,839,936)
(47,399,347)
2018
$
2017
$
(6,944,413)
(6,839,936)
8,282
-
91,257
-
389,239
(942,138)
-
(4,862,775)
17,602
(864,120)
(48,947)
(3,430,463)
3,588
-
988,573
(1,362,780)
5,111,085
495,525
216,909
-
(33,890)
124,368
16,879
(1,279,679)
(b) Funding of joint venture operations
Cash contribution to joint venture operations during the period
(6,448,446)
(7,711,037)
17. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings per share (EPS)
2018
$
2017
$
Loss attributable to the owners of the Company used in calculating basic and
diluted loss per share
(6,944,413)
(6,839,936)
(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
261,076,051
239,710,693
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 2,990,000 (2017: 19,195,821) share options and 1,315,000 (2017: 1,408,000)
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.
2018
No. of Shares
2017
No. of Shares
Note:
(a)
(b)
(c) Ordinary shares
The fair value for the consideration of these shares was calculated taking into accounts the Company’s valuation on
admission to the LSE, the Company’s share price and the USD/AUD exchange rate on the date of issue.
The fair value for the consideration of these shares was calculated taking into accounts the Company’s 10-day VWAP
share price and the GBP/AUD exchange rate on the date of issue.
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.
(d) Movements in options on issue
Balance at beginning of the year
Issued during the year:
− 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:
− Exercised, exercisable at $0.278 on or before 17 November 2017
− 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 $0.405 on or before 13 May 2018
− Exercised, exercisable at $0.408 on or before 4 November 2018
− Exercised, exercisable at $0.450 on or before 23 June 2018
− Exercised, exercisable at $0.527 on or before 29 May 2018
− Exercised, exercisable at $0.550 on or before 31 May 2018
− Exercised, exercisable at $0.550 on or before 4 November 2018
− Exercised, exercisable at $0.550 on or before 31 December 2018
− Expired, exercisable at $0.350, on or before 13 May 2018
− Cancelled, exercisable at $0.558, on or before 8 August 2019
− 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
Balance at end of the year
Foreign currency translation reserve
Balance at beginning of the year
Balance at end of the year
Total reserves
Employee and contractor share options and performance rights (note 22)
Currency translation differences arising during the year/ period
2018
Options
2017
Options
-
-
-
-
-
-
(9,656,821)
(725,000)
(2,349,000)
(200,000)
(750,000)
(600,000)
(750,000)
(1,000,000)
(75,000)
(100,000)
2,990,000
1,440,000
400,000
(4,600,000)
(1,356,365)
(351,000)
(200,000)
-
-
-
-
-
-
-
-
(800,000)
(550,000)
19,195,821
2018
$
2017
$
11,416,109
(184,186)
11,231,923
1,105,490
873,940
1,979,430
10,427,536
988,573
11,416,109
2,039,243
(933,753)
1,105,490
13,211,353
12,521,599
DANAKALI LIMITED ABN 56 097 904 302
49
DANAKALI LIMITED ABN 56 097 904 302
Page 79
50
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
18. FINANCIAL RISK MANAGEMENT
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 Group’s significant concentration of credit risk is cash, which is held with the major Australian bank with AA2 credit
rating, accordingly the credit risk exposure is minimal. The maximum exposure to credit risk at balance date is the carrying
amount of cash receivables as disclosed in the Consolidated Statement of Financial Position and Notes to the Consolidated
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.
The principal financial instruments as at reporting date include cash, receivables and payables.
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
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 $9,283,670 (2017: $12,216,952) to Colluli Mining Share Company is denominated in US Dollar.
The following table demonstrates the sensitivity to a reasonably possible change in US Dollar 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 2018
Year to 31 December 2017
(ii) Interest rate risk
Change in
USD Rate
%
+5%
-5%
+5%
-5%
Effect on Loss
before tax
$
(464,183)
464,183
(610,848)
610,848
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 $9,550,585 (2017: $15,559,980) 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 1.30% (2017: 1.51%).
The Group is also exposed to movements in market interest rates on the loan to Colluli Mining Share Company held at fair
value through profit or loss.
Sensitivity analysis
At 31 December 2018, 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 $105,766 higher/lower (2017: $117,048
higher/lower) as a result of lower/higher interest income from cash and cash equivalents. The fair value of the loan has
been determined using a discounted cash flow methodology. Due to the significant unobserved inputs the fair value is
categorised as level 3 in the fair value hierarchy. The fair value of the loan is sensitive to the discount rate applied. A
50bps movement in the discount rate would change the valuation by $209,105.
(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.
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.
DANAKALI LIMITED ABN 56 097 904 302
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51
DANAKALI LIMITED ABN 56 097 904 302
(c) Credit risk
Financial Statements.
(d) Fair values
December 2018:
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Set out below is a comparison of the carrying amount and fair values of financial instruments as at 31 December 2018:
Fair value
through profit and
comprehensive
through other
At amortised cost
$
loss
$
income
$
9,283,670
9,283,670
108,477
9,283,670
108,477
108,477
-
-
223,854
223,854
223,854
-
-
-
-
-
Carrying Value
Fair Value
$
$
108,477
108,477
108,477
108,477
9,283,670
9,283,670
9,283,670
9,283,670
9,392,147
9,392,147
223,854
223,854
223,854
223,854
223,854
223,854
-
-
-
-
-
-
-
-
52
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
18. FINANCIAL RISK MANAGEMENT
(c) Credit risk
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 $9,283,670 (2017: $12,216,952) to Colluli Mining Share Company is denominated in US Dollar.
The following table demonstrates the sensitivity to a reasonably possible change in US Dollar 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
USD Rate
Effect on Loss
before tax
%
+5%
-5%
+5%
-5%
$
(464,183)
464,183
(610,848)
610,848
Year to 31 December 2018
Year to 31 December 2017
(ii) Interest rate risk
value through profit or loss.
Sensitivity analysis
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 $9,550,585 (2017: $15,559,980) 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 1.30% (2017: 1.51%).
The Group is also exposed to movements in market interest rates on the loan to Colluli Mining Share Company held at fair
At 31 December 2018, 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 $105,766 higher/lower (2017: $117,048
higher/lower) as a result of lower/higher interest income from cash and cash equivalents. The fair value of the loan has
been determined using a discounted cash flow methodology. Due to the significant unobserved inputs the fair value is
categorised as level 3 in the fair value hierarchy. The fair value of the loan is sensitive to the discount rate applied. A
50bps movement in the discount rate would change the valuation by $209,105.
(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.
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.
The Group’s significant concentration of credit risk is cash, which is held with the major Australian bank with AA2 credit
rating, accordingly the credit risk exposure is minimal. The maximum exposure to credit risk at balance date is the carrying
amount of cash 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 2018:
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Fair value
through profit and
loss
$
through other
comprehensive
income
$
At amortised cost
$
108,477
108,477
-
-
-
-
9,283,670
9,283,670
108,477
9,283,670
223,854
223,854
223,854
-
-
-
-
-
-
-
-
-
-
-
Set out below is a comparison of the carrying amount and fair values of financial instruments as at 31 December 2018:
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Carrying Value
$
Fair Value
$
108,477
108,477
108,477
108,477
9,283,670
9,283,670
9,283,670
9,283,670
9,392,147
9,392,147
223,854
223,854
223,854
223,854
223,854
223,854
DANAKALI LIMITED ABN 56 097 904 302
51
DANAKALI LIMITED ABN 56 097 904 302
Page 81
52
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
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:
20. CONTINGENCIES
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
Fair value
through profit and
loss
$
through other
comprehensive
income
$
At amortised cost
$
174,321
174,321
12,216,952
12,216,952
12,391,273
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 2017:
Financial Assets:
Receivables
Total current
Receivable
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
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 was determined by discounting future cashflows using a current market interest
rate of 25% (2017 – effective interest rate of 25%). 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 2023 quarter. The
fair value measurement for 2018 (2017 - disclosure only) 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.
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 $37,427,542 (2017: $40,537,286). 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.
DANAKALI LIMITED ABN 56 097 904 302
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53
DANAKALI LIMITED ABN 56 097 904 302
2018
$
2017
$
11,667
-
11,667
70,000
11,667
81,667
11,667
81,667
2018
$
275,443
31,894
(216,080)
91,257
2017
$
-
591,446
397,127
988,573
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
recognised as liabilities
Total Commitments
Operating Leases:
of $70,000.
-
later than one year but not later than five years
Aggregate lease expenditure contracted for at reporting date but not
The minimum future payments above relate to non-cancellable operating leases for offices. On 18 January 2018, the
Company extended the Churchill avenue office lease by 12 months commencing on 1 March 2018 for a total annual cost
22. SHARE-BASED PAYMENTS
(a) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Options issued to directors, employees and contractors
Performance Rights issued to directors, employees and contractors
Shares
(b) Shares
(c) Options
During the year, the Company issued a total of 364,620 shares to advisors in consideration for services rendered (refer
note 13(b). The share-based payment expense recorded in respect of these shares was determined in reference to the
prevailing market value of the shares at time of issue.
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.
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 (being those the
subject of share-based payments).
2018
2017
Number of
Weighted average
Number of
Weighted average
options
exercise price
options
exercise price
Outstanding at the beginning of the year
Granted
Exercised
Expired
Outstanding at end of the year
Exercisable at end of the year
8,739,000
500,000
(5,649,000)
(100,000)
3,490,000
2,990,000
$0.591
$0.912
$0.483
$0.558
$0.811
$0.794
13,400,000
1,840,000
(5,151,000)
(1,350,000)
8,739,000
8,389,000
$0.414
$0.944
$0.292
$0.463
$0.591
$0.592
54
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
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:
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
Total Commitments
Operating Leases:
2018
$
2017
$
11,667
-
11,667
70,000
11,667
81,667
11,667
81,667
The minimum future payments above relate to non-cancellable operating leases for offices. On 18 January 2018, the
Company extended the Churchill avenue office lease by 12 months commencing on 1 March 2018 for a total annual cost
of $70,000.
22. SHARE-BASED PAYMENTS
(a) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Shares
Options issued to directors, employees and contractors
Performance Rights issued to directors, employees and contractors
2018
$
275,443
31,894
(216,080)
91,257
2017
$
-
591,446
397,127
988,573
(b) Shares
During the year, the Company issued a total of 364,620 shares to advisors in consideration for services rendered (refer
note 13(b). The share-based payment expense recorded in respect of these shares was determined in reference to the
prevailing market value of the shares at time of issue.
(c) Options
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.
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 (being those the
subject of share-based payments).
Outstanding at the beginning of the year
Granted
Exercised
Expired
Outstanding at end of the year
Exercisable at end of the year
2018
2017
Number of
options
8,739,000
500,000
(5,649,000)
(100,000)
3,490,000
2,990,000
Weighted average
exercise price
$0.591
$0.912
$0.483
$0.558
$0.811
$0.794
Number of
options
13,400,000
1,840,000
(5,151,000)
(1,350,000)
8,739,000
8,389,000
Weighted average
exercise price
$0.414
$0.944
$0.292
$0.463
$0.591
$0.592
Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the group as at 31
Fair value
through profit and
comprehensive
through other
At amortised cost
$
loss
$
income
$
174,321
174,321
12,216,952
12,216,952
12,391,273
1,097,087
1,097,087
1,097,087
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
December 2017:
Financial Assets:
Receivables
Total current
Receivable
Total non-current
Total Assets
Financial liabilities:
Trade and other payables
Total current
Total Liabilities
instruments.
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 was determined by discounting future cashflows using a current market interest
rate of 25% (2017 – effective interest rate of 25%). 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 2023 quarter. The
fair value measurement for 2018 (2017 - disclosure only) 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.
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 $37,427,542 (2017: $40,537,286). 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.
DANAKALI LIMITED ABN 56 097 904 302
53
DANAKALI LIMITED ABN 56 097 904 302
Page 83
54
Danakali Annual Report 2018DANAKALI LIMITED
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Movements within specific classes of unlisted options (being those the subject of share-based payments) during the year
is as follows:
Unlisted Options - Class
Opening
balance
31 Dec 2017
Granted
(subject to
shareholder
approval)
Exercised
(Traditional)
Exercise price $0.405 expiry date 13/05/2018
Exercise price $0.527 expiry date 29/05/2018
Exercise price $0.550 expiry date 31/05/2018
Exercise price $0.450 expiry date 23/06/2018
Exercise price $0.550 expiry date 04/11/2018
Exercise price $0.550 expiry date 31/12/2018
Exercise price $0.558 expiry date 08/08/2019
Exercise price $0.543 expiry date 07/10/2019
Exercise price $0.940 expiry date 19/05/2020
Exercise price $0.960 expiry date 20/06/2019
Exercise price $0.912 expiry date 11/05/2020
2,349,000
750,000
600,000
200,000
750,000
1,000,000
1,000,000
250,000
1,440,000
400,000
-
-
-
-
-
-
-
-
-
-
-
500,000
(400,000)
-
-
(200,000)
-
-
-
-
-
-
-
Exercised
(Cashless)
(i)
(1,949,000)
(750,000)
(600,000)
-
(750,000)
(1,000,000)
-
-
-
-
-
Lapsed /
Expired
Closing
balance
31 Dec 2018
-
-
-
-
-
-
-
-
-
-
-
-
900,000 (ii)
(100,000)
-
250,000 (ii)
- 1,440,000 (ii)
400,000 (ii)
-
500,000
-
8,739,000
500,000
(600,000)
(5,049,000)
(100,000) 3,490,000 (iii)
(i) During the year, 1,313,270 ordinary shares were issued on the cashless exercise of 5,049,000 unlisted options
previously granted as compensation to directors, employees and advisors. The number of shares issued was calculated
using the cashless exercise mechanism in accordance with the terms and conditions as amended and approved by
shareholders at the Company’s annual general meeting held 11 May 2018.
(ii) Vested options.
(iii) The number of unlisted options on issue at 31 December 2018 is 2,990,000 (as detailed at note 13(d)). This table
includes reference to an additional 500,000 unlisted options (being the Director Options as referred to below), the issue of
which remains subject to shareholder approval.
Remaining contractual life
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.97 years
(31 December 2017: 1.05 years), with exercise prices ranging from $0.543 to $0.96.
Options granted during the year
On 19 October 2018, the Directors agreed to issue 500,000 unlisted options with no vesting conditions to Mr Andre
Liebenberg at an exercise price of $0.912 each and an expiry date of 11 May 2020, subject to receipt of shareholder
approval (Director Options).
Shareholder approval for the issue of the Director Options will be sought at an upcoming general meeting of the Company.
The grant date is therefore after the period in which services have begun to be rendered. Therefore, the grant date fair
value presented in the 31 December 2018 financial statements is provisional, estimated by reference to the period end
share price. Once the date of the grant is known, this provisional estimate of the grant date fair value will be revised.
There were no new options granted to key management personnel during the year, other than the 500,000 options granted
to a director, subject to receipt of shareholder approval (the Director Options).
A summary of options granted during the year ended 31 December 2018 is included in the following table. The weighted
average fair value of the options granted during the year ended 31 December 2018 was $0.105. The value was calculated
by using the Black &Scholes Option Pricing Model applying the following inputs, to produce the fair value per option:
Number
of Options
500,000
Grant
Date
Expiry Date
19/10/2018¹ 11/05/2020
Fair Value
per Option
$0.105²
Exercise
Price
$0.912
Share Price
at
Grant Date
$0.740
Risk Free
Interest Rate
1.95%
Estimated
Volatility
45.17%
¹ Options will be issued following receipt of shareholder approval
² Fair value per option will be updated upon receipt of shareholder approval
A summary of options granted during the year ended 31 December 2017 is included in the following table. The weighted
average fair value of the options granted during the year ended 31 December 2017 was $0.20. The value was calculated
by using the Black &Scholes Option Pricing Model applying the following inputs, to produce the fair value per option:
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%
Price
$0.940
$0.960
Share Price
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.
(d) Performance Rights
The Company has a Performance Rights Plan which 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.
Movements in the number of performance rights on issue during the year is as follows:
Performance Rights - Class
Granted
Vested
Cancelled
Movements in the number of performance rights during the period year is as follows:
Performance Rights - Class
Granted
Vested
Cancelled
Opening
balance
31 Dec 2017
308,000
800,000
100,000
50,000
50,000
100,000
1,408,000
Opening
balance
31 Dec 2016
308,000
150,000
1,500,000
-
-
-
-
-
-
-
-
-
-
(28,000)
(10,000)
(20,000)
(35,000)
(65,000)
(28,000)
1,315,000
Closing
balance
31 Dec 2018
280,000
800,000
100,000
40,000
30,000
65,000
Closing
balance
31 Dec 2017
308,000
-
800,000
100,000
50,000
50,000
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(75,000)
(75,000)
(700,000)
-
-
-
-
100,000
50,000
50,000
100,000
Under the Performance Rights Plan, shares are issued in the future subject, to the performance-based vesting conditions
being met. The 1,315,000 Performance Rights on issue at 31 December 2018 are subject to the following performance
1,958,000
300,000
(775,000)
(75,000)
1,408,000
• 308,000 upon completion of securing finance for the development of the Colluli Potash Project.
• 800,000 upon commencement of construction of the production facility.
• 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).
Class 1
Class 4
Class 5
Class 6
Class 7
Class 8
Class 1
Class 2
Class 4
Class 5
Class 6
Class 7
Class 8
conditions:
Class 1:
Class 4:
Class 5:
DANAKALI LIMITED ABN 56 097 904 302
Page 84
55
DANAKALI LIMITED ABN 56 097 904 302
56
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
A summary of options granted during the year ended 31 December 2017 is included in the following table. The weighted
average fair value of the options granted during the year ended 31 December 2017 was $0.20. The value was calculated
by using the Black &Scholes Option Pricing Model applying the following inputs, to produce the fair value per option:
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%
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.
(d) Performance Rights
The Company has a Performance Rights Plan which 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.
Movements in the number of performance rights on issue during the year is as follows:
Performance Rights - Class
Class 1
Class 4
Class 5
Class 6
Class 7
Class 8
Opening
balance
31 Dec 2017
308,000
800,000
100,000
50,000
50,000
100,000
1,408,000
Granted
Vested
Cancelled
Closing
balance
31 Dec 2018
280,000
800,000
100,000
40,000
30,000
65,000
(28,000)
-
-
-
-
-
(28,000)
1,315,000
-
-
-
-
-
-
-
-
-
-
(10,000)
(20,000)
(35,000)
(65,000)
Movements in the number of performance rights during the period year is as follows:
Performance Rights - Class
Class 1
Class 2
Class 4
Class 5
Class 6
Class 7
Class 8
Opening
balance
31 Dec 2016
308,000
150,000
1,500,000
-
-
-
-
Granted
Vested
Cancelled
-
-
-
100,000
50,000
50,000
100,000
-
(75,000)
(700,000)
-
-
-
-
-
(75,000)
-
-
-
-
-
Closing
balance
31 Dec 2017
308,000
-
800,000
100,000
50,000
50,000
100,000
1,958,000
300,000
(775,000)
(75,000)
1,408,000
Under the Performance Rights Plan, shares are issued in the future subject, to the performance-based vesting conditions
being met. The 1,315,000 Performance Rights on issue at 31 December 2018 are subject to the following performance
conditions:
Class 1:
• 308,000 upon completion of securing finance for the development of the Colluli Potash Project.
Class 4:
• 800,000 upon commencement of construction of the production facility.
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).
DANAKALI LIMITED ABN 56 097 904 302
Page 85
56
Danakali Annual Report 2018DANAKALI LIMITED
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
2018
%
100
Equity Holding
2017
%
100
The proportion of ownership interest is equal to the proportion of voting power held.
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
Net Assets
Accumulated losses
Total equity
Loss for the year
27. DIVIDENDS
Issued capital
Share-based payments reserve
2018
$
9,676,536
29,136,115
38,812,651
310,034
58,903
368,937
38,443,714
2017
$
15,784,395
26,044,008
41,828,403
1,263,306
27,811
1,291,117
40,537,286
79,576,117
11,231,923
(52,364,326)
38,443,714
75,415,034
11,416,109
(46,293,857)
40,537,286
(6,070,468)
(6,070,468)
(7,773,689)
(7,773,689)
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Class 6:
• 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:
• 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:
• 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; and
• 10,000 on finalising broker mandates which support the equity capital market strategy.
Subject to achievement of either one of these performance conditions, one share will be issued for each Performance
Right that has vested.
26. PARENT ENTITY INFORMATION
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
Transactions with Colluli Mining Share Company are set out in note 8 and note 10 of this report.
(d) Key management personnel compensation
Short-term benefits
Post-employment and long-term benefits
Share-based payments
2018
$
1,113,484
52,702
24,581
1,190,767
2017
$
1,232,171
67,199
639,416
1,938,786
(e) Transactions with directors, director related entities and other related parties
Total Comprehensive loss for the year
There were no material related party transactions.
24. REMUNERATION OF AUDITORS
No dividends were paid during the financial period. No recommendation for payment of dividends has been made.
During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related
practices and non-related audit firms:
28. EVENTS OCCURRING AFTER THE BALANCE DATE
2018
$
2017
$
years.
No 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
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young – LSE listing
Ernst and Young – Other
44,837
44,837
123,332
55,973
179,305
41,391
41,391
-
6,000
6,000
DANAKALI LIMITED ABN 56 097 904 302
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57
DANAKALI LIMITED ABN 56 097 904 302
58
DANAKALI LIMITEDDanakali Annual Report 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes to the Consolidated Financial Statements
FOR THE YEAR ENDED 31 DECEMBER 2018
Class 6:
Class 7:
Class 8:
• 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.
• 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.
• 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; and
• 10,000 on finalising broker mandates which support the equity capital market strategy.
25. SUBSIDIARY
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
2018
%
100
2017
%
100
Equity Holding
The proportion of ownership interest is equal to the proportion of voting power held.
Subject to achievement of either one of these performance conditions, one share will be issued for each Performance
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
Net Assets
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Loss for the year
Total Comprehensive loss for the year
27. DIVIDENDS
2018
$
9,676,536
29,136,115
38,812,651
310,034
58,903
368,937
38,443,714
2017
$
15,784,395
26,044,008
41,828,403
1,263,306
27,811
1,291,117
40,537,286
79,576,117
11,231,923
(52,364,326)
38,443,714
75,415,034
11,416,109
(46,293,857)
40,537,286
(6,070,468)
(6,070,468)
(7,773,689)
(7,773,689)
During the year, the following fees were paid or payable for services provided by the auditor of the Company, its related
practices and non-related audit firms:
28. EVENTS OCCURRING AFTER THE BALANCE DATE
No dividends were paid during the financial period. No recommendation for payment of dividends has been made.
No 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.
Right that has vested.
23. RELATED PARTY TRANSACTIONS
The ultimate parent entity within the Group is Danakali Limited.
(a) Parent entity
(b) Subsidiary
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 note 8 and note 10 of this report.
(d) Key management personnel compensation
Short-term benefits
Post-employment and long-term benefits
Share-based payments
(e) Transactions with directors, director related entities and other related parties
There were no material related party transactions.
24. REMUNERATION OF AUDITORS
(a) Audit services
Ernst and Young
(b) Non-audit services
Ernst and Young – LSE listing
Ernst and Young – Other
2018
$
1,113,484
52,702
24,581
1,190,767
2017
$
1,232,171
67,199
639,416
1,938,786
2018
$
2017
$
44,837
44,837
123,332
55,973
179,305
41,391
41,391
-
6,000
6,000
DANAKALI LIMITED ABN 56 097 904 302
57
DANAKALI LIMITED ABN 56 097 904 302
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58
Danakali Annual Report 2018DANAKALI LIMITED
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes of Danakali Limited for the financial year ended 31 December 2018 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
INDEPENDENT AUDITOR’S REPORT
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
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance for
the year ended on that date;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 2;
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable subject to achieving the matters set out in note 2(c); and
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
EXECUTIVE CHAIRMAN
Perth, 20 March 2019
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
Opinion
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 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
Group), which comprises the consolidated statement of financial position as at 31 December 2018, the
a summary of significant accounting policies and other explanatory information and the Directors’
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
Declaration.
a summary of significant accounting policies and other explanatory information and the Directors’
In our opinion:
Declaration.
In our opinion:
including:
including:
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2018
(i)
and of its consolidated financial performance for the year ended on that date; and
(i)
(ii)
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2018
complying with Australian Accounting Standards and the Corporations Regulations 2001.
and of its consolidated financial performance for the year ended on that date; and
Basis for opinion
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
Report section of our report. We are independent of the Group in accordance with the Corporations Act
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
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
Code.
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Code.
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Material Uncertainty Related to Going Concern
our opinion.
We draw attention to Note 2(c) in the financial report. The matters as set forth in Note 2(c) indicate that a
Material Uncertainty Related to Going Concern
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
We draw attention to Note 2(c) in the financial report. The matters as set forth in Note 2(c) indicate that a
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
Key audit matters
concern. Our opinion is not modified in respect of this matter.
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
Key audit matters are those matters that, in our professional judgment, were of most significance in our
separate opinion on these matters. For the matter below, our description of how our audit addressed the
audit of the financial report of the current year. These matters were addressed in the context of our
matter is provided in that context.
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
DANAKALI LIMITED ABN 56 097 904 302
Page 88
matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
59
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DANAKALI:030
GB:EH:DANAKALI:030
DANAKALI LIMITEDDanakali Annual Report 2018
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes of Danakali Limited for the financial year ended 31 December 2018 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
the year ended on that date;
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its performance for
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 2;
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable subject to achieving the matters set out in note 2(c); and
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
EXECUTIVE CHAIRMAN
Perth, 20 March 2019
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 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
We have audited the financial report of Danakali Limited (the Company), including its subsidiaries (the
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising
Group), which comprises the consolidated statement of financial position as at 31 December 2018, the
a summary of significant accounting policies and other explanatory information and the Directors’
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of
Declaration.
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’
In our opinion:
Declaration.
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
In our opinion:
including:
the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
(i)
including:
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2018
and of its consolidated financial performance for the year ended on that date; and
(i)
(ii)
giving a true and fair view of the Group’s consolidated financial position as at 31 December 2018
complying with Australian Accounting Standards and the Corporations Regulations 2001.
and of its consolidated financial performance for the year ended on that date; and
Basis for opinion
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
APES110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
Report section of our report. We are independent of the Group in accordance with the Corporations Act
financial report in Australia; and we have fulfilled our other ethical responsibilities in accordance with the
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
Code.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Code.
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Material Uncertainty Related to Going Concern
our opinion.
We draw attention to Note 2(c) in the financial report. The matters as set forth in Note 2(c) indicate that a
Material Uncertainty Related to Going Concern
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
We draw attention to Note 2(c) in the financial report. The matters as set forth in Note 2(c) indicate that a
material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going
Key audit matters
concern. Our opinion is not modified in respect of this matter.
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
Key audit matters are those matters that, in our professional judgment, were of most significance in our
separate opinion on these matters. For the matter below, our description of how our audit addressed the
audit of the financial report of the current year. These matters were addressed in the context of our
matter is provided in that context.
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
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
59
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Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DANAKALI:030
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Danakali Annual Report 2018DANAKALI LIMITED
Why significant
How our audit addressed the key audit matter
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
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 this matter. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the risks of material
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
misstatement of the financial statements. The results of our audit procedures, including the procedures
Financial Report section of our report, including in relation to this matter. Accordingly, our audit included
performed to address the matter below, provide the basis for our audit opinion on the accompanying
the performance of procedures designed to respond to our assessment of the risks of material
financial report.
misstatement of the financial statements. The results of our audit procedures, including the procedures
performed to address the matter below, provide the basis for our audit opinion on the accompanying
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
financial report.
Information other than the financial statements and auditor’s report
The directors are responsible for the other information. The other information comprises the information
Information other than the financial statements and auditor’s report
included in the Group’s 2018 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
The directors are responsible for the other information. The other information comprises the information
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
included in the Group’s 2018 Annual Report other than the financial report and our auditor’s report
date of this auditor’s report.
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
Our opinion on the financial report does not cover the other information and we do not and will not
date of this auditor’s report.
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our
related assurance opinion.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our
In connection with our audit of the financial report, our responsibility is to read the other information and,
related assurance 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.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
If, based on the work we have performed on the other information obtained prior to the date of this
our knowledge obtained in the audit or otherwise appears to be materially misstated.
auditor’s report, we 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.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
Directors’ responsibilities for the financial report
required to report that fact. We have nothing to report in this regard.
error.
error.
The Directors of the Company are responsible for the preparation of the financial report that gives a true
Directors’ responsibilities for the financial report
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the Directors determine is necessary to enable the preparation of the financial
The Directors of the Company are responsible for the preparation of the financial report that gives a true
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
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
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
operations, or have no realistic alternative but to do so.
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
Auditor’s responsibilities for the audit of the financial report
operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
Auditor’s responsibilities for the audit of the financial report
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
on the basis of this financial report.
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of this financial report.
The group acquired an interest in Colluli Mining Share
Why significant
Company (“CMSC”) at the date of CMSC’s incorporation
on 5 March 2014. This acquisition was in accordance
The group acquired an interest in Colluli Mining Share
with the Shareholders Agreement entered into with the
Company (“CMSC”) at the date of CMSC’s incorporation
Eritrean National Mining Corporation (“ENAMCO”)
on 5 March 2014. This acquisition was in accordance
which was executed in November 2013. CMSC was
with the Shareholders Agreement entered into with the
incorporated in Eritrea, in accordance with the
Eritrean National Mining Corporation (“ENAMCO”)
Shareholders’ Agreement, to hold the Colluli project,
which was executed in November 2013. CMSC was
with Danakali and ENAMCO each holding 50% of the
incorporated in Eritrea, in accordance with the
equity.
Shareholders’ Agreement, to hold the Colluli project,
The group’s interest in CMSC is accounted for as a joint
with Danakali and ENAMCO each holding 50% of the
venture using the equity method and as a shareholder
equity.
loan receivable.
The group’s interest in CMSC is accounted for as a joint
The accounting for the results of and investment in
venture using the equity method and as a shareholder
CMSC is significant to our audit due to the complexity
loan receivable.
involved in measuring both the investment as well as
The accounting for the results of and investment in
the shareholder loan receivable. Specifically, key
CMSC is significant to our audit due to the complexity
assumptions underpinning the measurement of these
involved in measuring both the investment as well as
balances relate to the timing as to when the group
the shareholder loan receivable. Specifically, key
considers CMSC will have generated free cashflows
assumptions underpinning the measurement of these
from the project to enable repayment of monies loaned
balances relate to the timing as to when the group
to them and an appropriate discount rate to reflect the
considers CMSC will have generated free cashflows
risk applicable to the timing and repayment of the
from the project to enable repayment of monies loaned
shareholder loan as well as the underlying credit risk.
to them and an appropriate discount rate to reflect the
Refer to note (2)(u)(ii) and notes 8 and 10 to the
risk applicable to the timing and repayment of the
financial report for further detail explaining the key
shareholder loan as well as the underlying credit risk.
judgements underpinning the accounting discussed in
Refer to note (2)(u)(ii) and notes 8 and 10 to the
the two preceding paragraphs.
financial report for further detail explaining the key
At 31 December 2018, the Investment in CMSC
judgements underpinning the accounting discussed in
amounted to $19.8 million (refer to Note 10 in the
the two preceding paragraphs.
financial statements) and the shareholder loan
At 31 December 2018, the Investment in CMSC
receivable from CMSC amounted to $9.3 million (refer
amounted to $19.8 million (refer to Note 10 in the
to Note 8 in the financial statements).
financial statements) and the shareholder loan
receivable from CMSC amounted to $9.3 million (refer
to Note 8 in the financial statements).
Our procedures included the following:
How our audit addressed the key audit matter
► We reviewed the applicable Shareholders’
Our procedures included the following:
► We reviewed the applicable Shareholders’
► We assessed the group’s shareholder loan
Agreement and the group’s position paper which
concluded that it is appropriate for Danakali’s
investment in CMSC to be equity accounted.
Agreement and the group’s position paper which
► We assessed the group’s calculations supporting
concluded that it is appropriate for Danakali’s
the measurement of the investment and the
investment in CMSC to be equity accounted.
shareholder loan. This calculation included the
► We assessed the group’s calculations supporting
discounting of the shareholder loan balance based
the measurement of the investment and the
on the group’s current best estimate of when the
shareholder loan. This calculation included the
shareholder loan will be repaid.
discounting of the shareholder loan balance based
► We involved our valuation specialists to assess the
on the group’s current best estimate of when the
assumed discount rate having regard to factors
shareholder loan will be repaid.
such as the project risk, credit risk and country
► We involved our valuation specialists to assess the
risk.
assumed discount rate having regard to factors
such as the project risk, credit risk and country
repayment assumptions having regard to the
risk.
current status of the project and the group’s best
estimates of the timeline to finance, develop,
repayment assumptions having regard to the
commission and produce free cashflow from the
current status of the project and the group’s best
project to repay the shareholder loan.
estimates of the timeline to finance, develop,
► We assessed the arithmetical accuracy of the
commission and produce free cashflow from the
group’s calculations, including where applicable
project to repay the shareholder loan.
any foreign currency translations embedded in the
measurement process.
group’s calculations, including where applicable
► We performed appropriate audit procedures over
any foreign currency translations embedded in the
the results of CMSC and confirmed that Danakali’s
measurement process.
50% interest in these results were accounted for on
► We performed appropriate audit procedures over
an equity basis in the financial statements of the
the results of CMSC and confirmed that Danakali’s
group.
50% interest in these results were accounted for on
► We considered whether there was any objective
an equity basis in the financial statements of the
evidence to suggest that Danakali’s investment in
group.
CMSC is impaired at the balance date.
► We assessed the arithmetical accuracy of the
► We assessed the group’s shareholder loan
► We considered whether there was any objective
► We assessed the adequacy of the group’s
► We assessed the adequacy of the group’s
evidence to suggest that Danakali’s investment in
disclosures in the financial report relating to the
CMSC is impaired at the balance date.
measurement and accounting for its investment in
and loan to CMSC.
disclosures in the financial report relating to the
measurement and accounting for its investment in
and loan to CMSC.
A member firm of Ernst & Young Global Limited
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A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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GB:EH:DANAKALI:030
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
GB:EH:DANAKALI:030
DANAKALI LIMITEDDanakali Annual Report 2018
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 this matter. Accordingly, our audit included
the performance of procedures designed to respond to our assessment of the risks of material
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
misstatement of the financial statements. The results of our audit procedures, including the procedures
Financial Report section of our report, including in relation to this matter. Accordingly, our audit included
performed to address the matter below, provide the basis for our audit opinion on the accompanying
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
financial report.
performed to address the matter below, provide the basis for our audit opinion on the accompanying
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
financial report.
Accounting for the Group’s interest in Colluli Mining Share Company (“CMSC”)
How our audit addressed the key audit matter
Why significant
The group acquired an interest in Colluli Mining Share
Why significant
Company (“CMSC”) at the date of CMSC’s incorporation
on 5 March 2014. This acquisition was in accordance
The group acquired an interest in Colluli Mining Share
with the Shareholders Agreement entered into with the
Company (“CMSC”) at the date of CMSC’s incorporation
Eritrean National Mining Corporation (“ENAMCO”)
on 5 March 2014. This acquisition was in accordance
which was executed in November 2013. CMSC was
with the Shareholders Agreement entered into with the
incorporated in Eritrea, in accordance with the
Eritrean National Mining Corporation (“ENAMCO”)
Shareholders’ Agreement, to hold the Colluli project,
which was executed in November 2013. CMSC was
with Danakali and ENAMCO each holding 50% of the
incorporated in Eritrea, in accordance with the
Shareholders’ Agreement, to hold the Colluli project,
The group’s interest in CMSC is accounted for as a joint
with Danakali and ENAMCO each holding 50% of the
venture using the equity method and as a shareholder
equity.
equity.
loan receivable.
The group’s interest in CMSC is accounted for as a joint
The accounting for the results of and investment in
venture using the equity method and as a shareholder
CMSC is significant to our audit due to the complexity
loan receivable.
involved in measuring both the investment as well as
The accounting for the results of and investment in
the shareholder loan receivable. Specifically, key
CMSC is significant to our audit due to the complexity
assumptions underpinning the measurement of these
involved in measuring both the investment as well as
balances relate to the timing as to when the group
the shareholder loan receivable. Specifically, key
considers CMSC will have generated free cashflows
assumptions underpinning the measurement of these
from the project to enable repayment of monies loaned
balances relate to the timing as to when the group
to them and an appropriate discount rate to reflect the
considers CMSC will have generated free cashflows
risk applicable to the timing and repayment of the
from the project to enable repayment of monies loaned
shareholder loan as well as the underlying credit risk.
to them and an appropriate discount rate to reflect the
Refer to note (2)(u)(ii) and notes 8 and 10 to the
risk applicable to the timing and repayment of the
financial report for further detail explaining the key
shareholder loan as well as the underlying credit risk.
judgements underpinning the accounting discussed in
Refer to note (2)(u)(ii) and notes 8 and 10 to the
the two preceding paragraphs.
financial report for further detail explaining the key
At 31 December 2018, the Investment in CMSC
judgements underpinning the accounting discussed in
amounted to $19.8 million (refer to Note 10 in the
the two preceding paragraphs.
financial statements) and the shareholder loan
At 31 December 2018, the Investment in CMSC
receivable from CMSC amounted to $9.3 million (refer
amounted to $19.8 million (refer to Note 10 in the
to Note 8 in the financial statements).
financial statements) and the shareholder loan
receivable from CMSC amounted to $9.3 million (refer
to Note 8 in the financial statements).
Our procedures included the following:
How our audit addressed the key audit matter
► We reviewed the applicable Shareholders’
Agreement and the group’s position paper which
Our procedures included the following:
concluded that it is appropriate for Danakali’s
► We reviewed the applicable Shareholders’
investment in CMSC to be equity accounted.
Agreement and the group’s position paper which
► We assessed the group’s calculations supporting
concluded that it is appropriate for Danakali’s
the measurement of the investment and the
investment in CMSC to be equity accounted.
shareholder loan. This calculation included the
► We assessed the group’s calculations supporting
discounting of the shareholder loan balance based
the measurement of the investment and the
on the group’s current best estimate of when the
shareholder loan. This calculation included the
shareholder loan will be repaid.
discounting of the shareholder loan balance based
► We involved our valuation specialists to assess the
on the group’s current best estimate of when the
assumed discount rate having regard to factors
shareholder loan will be repaid.
such as the project risk, credit risk and country
► We involved our valuation specialists to assess the
assumed discount rate having regard to factors
► We assessed the group’s shareholder loan
such as the project risk, credit risk and country
repayment assumptions having regard to the
risk.
risk.
current status of the project and the group’s best
► We assessed the group’s shareholder loan
estimates of the timeline to finance, develop,
repayment assumptions having regard to the
commission and produce free cashflow from the
current status of the project and the group’s best
project to repay the shareholder loan.
estimates of the timeline to finance, develop,
► We assessed the arithmetical accuracy of the
commission and produce free cashflow from the
group’s calculations, including where applicable
project to repay the shareholder loan.
any foreign currency translations embedded in the
► We assessed the arithmetical accuracy of the
measurement process.
group’s calculations, including where applicable
► We performed appropriate audit procedures over
any foreign currency translations embedded in the
the results of CMSC and confirmed that Danakali’s
measurement process.
50% interest in these results were accounted for on
► We performed appropriate audit procedures over
an equity basis in the financial statements of the
the results of CMSC and confirmed that Danakali’s
50% interest in these results were accounted for on
► We considered whether there was any objective
an equity basis in the financial statements of the
evidence to suggest that Danakali’s investment in
group.
group.
CMSC is impaired at the balance date.
► We considered whether there was any objective
► We assessed the adequacy of the group’s
evidence to suggest that Danakali’s investment in
disclosures in the financial report relating to the
CMSC is impaired at the balance date.
measurement and accounting for its investment in
► We assessed the adequacy of the group’s
and loan to CMSC.
disclosures in the financial report relating to the
measurement and accounting for its investment in
and loan to CMSC.
Information other than the financial statements and auditor’s report
The directors are responsible for the other information. The other information comprises the information
Information other than the financial statements and auditor’s report
included in the Group’s 2018 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
The directors are responsible for the other information. The other information comprises the information
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
included in the Group’s 2018 Annual Report other than the financial report and our auditor’s report
date of this auditor’s report.
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
Our opinion on the financial report does not cover the other information and we do not and will not
date of this auditor’s report.
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our
related assurance opinion.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our
In connection with our audit of the financial report, our responsibility is to read the other information and,
related assurance 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.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
If, based on the work we have performed on the other information obtained prior to the date of this
our knowledge obtained in the audit or otherwise appears to be materially misstated.
auditor’s report, we 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.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
Directors’ responsibilities for the financial report
required to report that fact. We have nothing to report in this regard.
The Directors of the Company are responsible for the preparation of the financial report that gives a true
Directors’ responsibilities for the financial report
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the Directors determine is necessary to enable the preparation of the financial
The Directors of the Company are responsible for the preparation of the financial report that gives a true
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
error.
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
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
error.
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to
operations, or have no realistic alternative but to do so.
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate the Group or cease
Auditor’s responsibilities for the audit of the financial report
operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
Auditor’s responsibilities for the audit of the financial report
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
on the basis of this financial report.
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of this financial report.
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
GB:EH:DANAKALI:030
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 91
GB:EH:DANAKALI:030
Danakali Annual Report 2018DANAKALI LIMITED
Report on the Remuneration Report
Opinion on the Remuneration Report
Report on the Remuneration Report
We have audited the Remuneration Report included in the Directors' Report for the year ended 31
Opinion on the Remuneration Report
December 2018.
We have audited the Remuneration Report included in the Directors' Report for the year ended 31
In our opinion, the Remuneration Report of Danakali Limited for the year ended 31 December 2018,
December 2018.
complies with section 300A of the Corporations Act 2001.
In our opinion, the Remuneration Report of Danakali Limited for the year ended 31 December 2018,
Responsibilities
complies with section 300A of the Corporations Act 2001.
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
Responsibilities
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 Directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
Auditing Standards.
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
Perth
Gavin Buckingham
20 March 2019
Partner
Perth
20 March 2019
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
►
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
►
and maintain professional scepticism throughout the audit. We also:
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
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
internal control.
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
Obtain an understanding of internal control relevant to the audit in order to design audit
internal control.
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
opinion on the effectiveness of the entity’s internal control.
estimates and related disclosures made by the Directors.
►
►
►
►
►
►
►
►
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
estimates and related disclosures made by the Directors.
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
whether a material uncertainty exists related to events and conditions that may cast significant
financial report about the material uncertainty or, if such disclosures are inadequate, to modify the
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
opinion on the financial report. However, future events or conditions may cause an entity to cease
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
to continue as a going concern.
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
Evaluate the overall presentation, structure and content of the financial report, including the
to continue as a going concern.
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
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 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
We also provide the Directors with a statement that we have complied with relevant ethical requirements
identify during our audit.
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.
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
From the matters communicated to the Directors, we determine those matters that were of most
reasonably be thought to bear on our independence, and where applicable, related safeguards.
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
From the matters communicated to the Directors, we determine those matters that were of most
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
significance in the audit of the financial report of the current year and are therefore the key audit
not be communicated in our report because the adverse consequences of doing so would reasonably be
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
expected to outweigh the public interest benefits of such communication.
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
Liability limited by a scheme approved under Professional Standards Legislation
Page 92
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GB:EH:DANAKALI:030
GB:EH:DANAKALI:030
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
GB:EH:DANAKALI:030
DANAKALI LIMITEDDanakali Annual Report 2018
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
►
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
and maintain professional scepticism throughout the audit. We also:
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
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
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
internal control.
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
Obtain an understanding of internal control relevant to the audit in order to design audit
internal control.
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
opinion on the effectiveness of the entity’s internal control.
estimates and related disclosures made by the Directors.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
estimates and related disclosures made by the Directors.
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
whether a material uncertainty exists related to events and conditions that may cast significant
financial report about the material uncertainty or, if such disclosures are inadequate, to modify the
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
opinion on the financial report. However, future events or conditions may cause an entity to cease
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
to continue as a going concern.
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
Evaluate the overall presentation, structure and content of the financial report, including the
to continue as a going concern.
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the consolidated financial statements represent the underlying
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
transactions and events in a manner that achieves fair presentation.
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
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
We also provide the Directors with a statement that we have complied with relevant ethical requirements
identify during our audit.
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.
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
From the matters communicated to the Directors, we determine those matters that were of most
reasonably be thought to bear on our independence, and where applicable, related safeguards.
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
From the matters communicated to the Directors, we determine those matters that were of most
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
significance in the audit of the financial report of the current year and are therefore the key audit
not be communicated in our report because the adverse consequences of doing so would reasonably be
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
expected to outweigh the public interest benefits of such communication.
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
Report on the Remuneration Report
We have audited the Remuneration Report included in the Directors' Report for the year ended 31
Opinion on the Remuneration Report
December 2018.
We have audited the Remuneration Report included in the Directors' Report for the year ended 31
In our opinion, the Remuneration Report of Danakali Limited for the year ended 31 December 2018,
December 2018.
complies with section 300A of the Corporations Act 2001.
In our opinion, the Remuneration Report of Danakali Limited for the year ended 31 December 2018,
Responsibilities
complies with section 300A of the Corporations Act 2001.
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
Responsibilities
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 Directors of the Company are responsible for the preparation and presentation of the Remuneration
Auditing Standards.
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
Auditing Standards.
Ernst & Young
Ernst & Young
Gavin Buckingham
Partner
Perth
Gavin Buckingham
20 March 2019
Partner
Perth
20 March 2019
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
GB:EH:DANAKALI:030
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 93
GB:EH:DANAKALI:030
Danakali Annual Report 2018DANAKALI 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 2019.
(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
562
802
353
624
165
236,386
2,066,893
2,681,629
20,593,083
238,844,407
%
0.09%
0.78%
1.01%
7.79%
90.33%
2,506
264,422,398
100.00%
The number of shareholders holding less than a marketable parcel was 402.
(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
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Liam Cornelius
Element 25 Limited
Computershare Clearing Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd
Well Efficient Ltd
BNP Paribas Noms Pty Ltd
Seamus Cornelius
Kongming Investments Ltd
Alpha Boxer Limited
Ranguta Ltd
Paul Donaldson
BNP Paribas Nominees Pty Ltd
John Joseph Wallace
Duketon Consolidated Pty Ltd
Dongarra Ltd
Anthony Maslin + Marite Norris
National Nominees Ltd
(c) Substantial shareholders
Listed ordinary shares
Number of shares
52,705,900
38,974,793
24,757,993
14,479,997
8,400,097
5,907,545
5,449,266
5,000,000
4,480,660
4,425,883
4,178,992
4,025,000
3,295,685
2,957,751
2,674,976
2,498,983
2,456,500
2,313,398
2,095,000
2,007,152
Percentage of
ordinary shares
19.93
14.74
9.36
5.48
3.18
2.23
2.06
1.89
1.69
1.67
1.58
1.52
1.25
1.12
1.01
0.95
0.93
0.87
0.79
0.76
193,085,571
73.01
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
35,000,000
20,200,000
15,011,458
14,479,997
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 ABN 56 097 904 302
Page 94
65
DANAKALI LIMITEDDanakali Annual Report 2018
ASX Additional Information
ASX Additional Information
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
(e) Unquoted securities
At 28 February 2019 the Company has on issue 4,714,015 unlisted options over ordinary shares and 1,315,000
performance rights.
The names of security holders holding more than 20% of an unlisted class of security are listed below.
Holder
Mr Seamus Cornelius
Mr Danny Goeman
Mr James Durrant
Mr Robert Connochie
Mr Hanns Huster
Mr Cedric Middleton
Toni-Louise Gianatti
Redgate Beach
Investments Pty Ltd
Holders individually less
than 20%
Unlisted Options
$0.558
8/8/2019
$0.543
7/10/2019
-
900,000
-
-
-
-
-
-
-
-
-
250,000
-
-
-
-
-
-
$0.94
19/5/2020
300,000
-
-
500,000
-
-
-
-
640,000
$0.96
20/6/2019
$1.031
24/01/2022
-
-
-
-
200,000
200,000
-
-
-
-
-
-
-
-
-
455,800
823,772
444,443
Total
900,000
250,000
1,440,000
400,000
1,724,015
Holder
Mr Zeray Lake
Mascots International Ltd
Mr Paul Donaldson
Mr Tony Harrington
Mr Stuart Tarrant
Redgate Beach
Investments Pty Ltd
Class 1
Class 4
Class 5
Class 6
Class 7
Class 8
Performance Rights
75,000
85,000
-
-
-
-
-
-
800,000
-
-
-
-
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
40,000
30,000
-
-
-
-
-
-
-
-
-
65,000
-
Holders individually less
than 20%
120,000
Total
280,000
800,000
100,000
40,000
30,000
65,000
(f) Schedule of Interests in Mining Tenements
Tenement:
Colluli, Eritrea
License Type:
Exploration License
Nature of Interest:
Owned
Current Equity:
50%
All ordinary shares (whether fully paid or not) carry one vote per share without restriction. Holders of unlisted options and
65
DANAKALI LIMITED ABN 56 097 904 302
Page 95
66
The information is current as at 28 February 2019.
(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
562
802
353
624
165
236,386
2,066,893
2,681,629
20,593,083
%
0.09%
0.78%
1.01%
7.79%
238,844,407
90.33%
2,506
264,422,398
100.00%
The number of shareholders holding less than a marketable parcel was 402.
(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
Citicorp Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Liam Cornelius
Element 25 Limited
Computershare Clearing Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd
Well Efficient Ltd
BNP Paribas Noms Pty Ltd
Seamus Cornelius
Kongming Investments Ltd
Alpha Boxer Limited
Ranguta Ltd
Paul Donaldson
BNP Paribas Nominees Pty Ltd
John Joseph Wallace
Duketon Consolidated Pty Ltd
Dongarra Ltd
Anthony Maslin + Marite Norris
National Nominees 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
52,705,900
38,974,793
24,757,993
14,479,997
8,400,097
5,907,545
5,449,266
5,000,000
4,480,660
4,425,883
4,178,992
4,025,000
3,295,685
2,957,751
2,674,976
2,498,983
2,456,500
2,313,398
2,095,000
2,007,152
19.93
14.74
9.36
5.48
3.18
2.23
2.06
1.89
1.69
1.67
1.58
1.52
1.25
1.12
1.01
0.95
0.93
0.87
0.79
0.76
193,085,571
73.01
Number of Shares
35,000,000
20,200,000
15,011,458
14,479,997
The names of substantial shareholders who have notified the Company in accordance with section 671B of the
Danakali Annual Report 2018DANAKALI LIMITED
How to invest
In general, you should contact a broker who will be
able to let you know the most appropriate method for
investment in Danakali.
ASX
Danakali is listed on the Australian Stock Exchange
(ASX) (ASX: DNK). Shares can be bought and sold
on market. You can buy as little as A$500 worth of
shares.
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
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: www.danakali.com. ADR Holders
seeking information on their shareholding should
contact: shrrelations@bnymellon.com
LSE
OTC
Danakali has been admitted to the Standard Segment
of the Official List of the Financial Conduct Authority
and to trading on the London Stock Exchange (LSE)
Main Market with the ticker DNK. The Ordinary Shares
trade through a Depositary Interest structure on the LSE.
For more information please see the LSE listing section
of our website: http://www.danakali.com.au/investor-
relations/lse-listing-documents
Over-the-counter (OTC) trading in Danakali is available
on various stock exchanges, including:
Frankfurt: SO3-FRA, further information can be found
here: http://en.boerse-frankfurt.de/stock/Danakali-share
Berlin: SO3-BER, further information can be found
here: https://www.boerse-berlin.com/index.php/
Shares?isin=AU000000DNK9
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.
As with any investment, shares carry risks and
investors need to inform themselves of these.
Page 96
Page 26
DANAKALI LIMITED
The Colluli Potash Project: 2019 Investor Pack
DANAKALI LIMITEDDanakali Annual Report 2018 How to invest
In general, you should contact a broker who will be
US OTC Market information is available here: http://
able to let you know the most appropriate method for
www.otcmarkets.com/stock/DNKLY/quote
investment in Danakali.
Danakali is listed on the Australian Stock Exchange
(ASX) (ASX: DNK). Shares can be bought and sold
on market. You can buy as little as A$500 worth of
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
Mark Lewis
NEW YORK
Rick Maehr
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
+44 207 163 7407
+1 212 815 2275
mark.lewis@bnymellon.com
richard.maehr@bnymellon.com
Further information may be obtained from the
company website: www.danakali.com. ADR Holders
seeking information on their shareholding should
contact: shrrelations@bnymellon.com
OTC
Danakali has been admitted to the Standard Segment
of the Official List of the Financial Conduct Authority
and to trading on the London Stock Exchange (LSE)
Main Market with the ticker DNK. The Ordinary Shares
trade through a Depositary Interest structure on the LSE.
For more information please see the LSE listing section
of our website: http://www.danakali.com.au/investor-
relations/lse-listing-documents
Over-the-counter (OTC) trading in Danakali is available
on various stock exchanges, including:
Frankfurt: SO3-FRA, further information can be found
here: http://en.boerse-frankfurt.de/stock/Danakali-share
Berlin: SO3-BER, further information can be found
here: https://www.boerse-berlin.com/index.php/
Shares?isin=AU000000DNK9
As with any investment, shares carry risks and
investors need to inform themselves of these.
ASX
shares.
LSE
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.
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 Equiv. and 7% Kieserite. The
Mineral Resource contains 303Mt @ 11% K20 Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K20 Equiv. and 7% Kieserite of Indicated
Resource and 35Mt @ 10% K20 Equiv. and 9% Kieserite of Inferred Resource.
The information relating to the Colluli Mineral Resource estimate is extracted from the report entitled “Colluli Review Delivers Mineral Resource Estimate
to multi agri-commodity potential” disclosed on 15 August 2016, which are available to view at www.danakali.com.au.
Competent Persons Statement (Sulphate of Potash Ore Reserve)
Colluli Proved and Probable Ore Reserve is reported according to the JORC Code and estimated at 1,100Mt @ 10.5% K2O Equiv. The Ore Reserve is
2O Equiv. Proved and 815Mt @ 10.3% K2O Equiv. Probable. The Colluli SOP Mineral Resource includes those Mineral
entitled “Colluli Ore Reserve update” disclosed on 19 February 2018 and is available to view at www.danakali.com.au.
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
etent Person’s
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
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
etent Person’s
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
laboratory.
Halite blanks and duplicate samples are submitted with each hole. Chemical analyses were conducted by Kali-Umwelttechnik GmBH, Sondershausen,
(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.
AMC Consultants Pty Ltd (AMC) independence
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
Page 26
DANAKALI LIMITED
The Colluli Potash Project: 2019 Investor Pack
Page 97
Danakali Annual Report 2018DANAKALI LIMITED
Danakali Limited, Level 11, 125 St George’s Terrace Perth Australia 6000
T +61 8 6189 8635 E info@danakali.com ABN 56 097 904 302
www.danakali.com