Offtake MOUs Signed for the supply of 200,000 tonnes per annum

ASMARA (HAN) July 20.2016. Public Diplomacy & Regional Security News. Danakali Limited (“Danakali” or the “Company”) is pleased to announce that it has signed non- binding MOUs for the supply of 200,000 tonnes per annum of potassium magnesium sulphate (sulphate of potash or SOP-M). SOP-M represents the second premium, chloride free, multi-nutrient potash type from the Colluli resource, which is one of the closest potash deposits to a coastline globally, and is the shallowest known evaporite deposit in the world.

Danakali Managing Director, Paul Donaldson commented:

“We are pleased with the high level of interest for the suite of premium, chloride free, multi-nutrient fertiliser products we have generated from the potassium salt suite within the Colluli resource. The signed MoUs and negotiations underway with potential offtakers highlight that soluble, chloride free, multi-nutrient potash types are in high global demand. This is particularly relevant as the focus on fertiliser and water efficiency improvements continues.

Being able to supply product samples generated using the process design and Colluli salts has been extremely advantageous in market engagement activities.

SOP- M is quite simple to produce utilising the processing design developed for the Colluli DFS.”

Highlights

• MOUs signed for 200kt per annum of sulphate of potash magnesia (SOP-M) offtake
• Offtake discussions progressing towards binding agreements
• This is in addition to the recently announced MOU’s signed for 800ktpa of the company’s primary product stream, sulphate of potash (SOP)
• Current capacity for the first production module of the Colluli development is 425ktpa SOP
• SOP-M is the second in a growing pipeline of premium products that can be produced from the
  globally unique evaporative deposit at Colluli
• Colluli SOP-M is a highly soluble, chloride free, multi-nutrient potash product with growing
  demand as an excellent source of nutrients for use in greenhouses, liquid fertilisers and chloride
  intolerant crops
• SOP-M has the potential to add significant value to the Colluli project as a second revenue source, and currently trades in excess of US$450 per tonne
• SOP-M demand is increasing but it has limited production centres globally and is supply
  constrained
• Clear demonstration of the unique product diversification potential offered by the Colluli resource

Colluli Sulphate of Potash (SOP-M)

SOP-M represents a unique and exciting opportunity for Danakali and the Colluli Mining Share Company (CMSC). SOP-M achieves a significant price premium over the more common potash type, potassium chloride, and currently trades at over USD$450 per tonne.

The price premium over potassium chloride (MOP) is due to its unique properties. It is chloride free, contains three key macro-nutrients; potassium, magnesium and sulphur, and is highly soluble. Such properties make SOP-M highly suitable for magnesium deficient soils, which are commonly found in regions proximate to Colluli such as India, the Middle East and South-East Asia.

SOP-M has limited production centres globally, and as such, is currently not readily available to a large portion of the global market. Danakali high grade product aims to directly feed into this growing, but supply constrained market.

Memorandums of Understanding (MoUs)

Danakali has signed non-binding memoranda of understanding (MoU) for the offtake of 200ktpa of Colluli SOP-M as part of its ongoing market engagement. Samples were provided to potential offtakers from pilot tests completed by the Saskatchewan Research Council (SRC) using potassium salts from the Colluli resource. The samples provided were produced in standard, granular and soluble forms.

Pleasingly, all forms of the Colluli SOP-M product have been positively received. The soluble form has generated the highest level of interest from potential offtakers due to its suitability for use in greenhouses and fertigation (the injection of fertilisers and other water soluble products into an irrigation system).

Global use of fertigation is growing rapidly due to its efficiency in water and nutrient delivery. The ability to minimise water use is one of the world’s biggest challenges and is a strong driver of growth in demand for SOP-M going forward.

Progress at Colluli

Danakali and CMSC continue to make positive progress on the Colluli Potash project. The definitive feasibility study (DFS) was completed and released on 30 November 2015. The DFS highlights industry leading capital intensity, bottom quartile operating costs, low incremental growth capital and unrivalled product diversification potential. These outcomes are underpinned by a massive 1.1bt ore reserve which delivers an estimated mine life of over 200 years based on DFS production volumes. The project is currently awaiting Mining License approval.

In June 2016, representatives from the relevant government ministries assigned to the license approvals process visited the Colluli site to commence evaluation of the social, environmental impact assessments and associated management plans for the project. The site was also visited by the Minister of Energy and Mines and a team of senior officials.

Project funding discussions are underway and the Company has previously signed non-binding MoUs for 800ktpa of sulphate of potash (SOP), as announced in April 2016.