This article is a sponsored feature from Mining.com.au partner Danakali. It is not financial advice. Talk to a registered financial expert before making investment decisions.
Danakali (NSX:DNK) is undergoing a major transformation, soon to emerge with a whole new set of projects in highly prospective mining jurisdictions.
Mining.com.au recently sat down with Executive Chairman Seamus Cornelius to hear his plans for “Danakali part II” and the company’s plans for the coming year.
Backing up a bit, it’s necessary to understand Danakali’s history to fully understand where the company plans to emerge next.
The company was initially established in 2001 as South Boulders Mines, concentrating on Western Australian projects, but reached a turning point as they narrowed that focus on the Colluli Potash Project in Eritrea, one of the ‘highest-grade’ potash deposits globally.
Danakali was able to advance Colluli through multiple stages of development, securing US$200 million ($280.8 million) in project funding from Africa Finance Corporation and African Export-Import Bank (Afreximbank) to advance the project in addition to securing an offtake agreement.
The company saw an opportunity to exit the project in 2023, providing them with the ability to return $164 million back to shareholders, while retaining $30 million in cash for new exploration and development projects.
Which brings us back to the present day and Danakali is set to enter its next phase as a company, with three broad focus areas including Eritrea, Saudi Arabia, and Western Australia.
Eritrea: Returning to a proven jurisdiction
Having had success in Eritrea previously, Danakali is keen to get back working in the country. The company has applied for an exploration license for the Ela Gedel Gold and Base Metal Project, with the license nearing final approval.
With the application still in process, Danakali cannot comment too much on this yet, but notes the strong government support for the mining industry and their positive experience developing projects in-country.
Looking at Eritrea, Cornelius notes that “every mining company that’s been there has had success”. Situated on the shores of the Red Sea, Eritrea is directly across from Saudi Arabia, which is another key country for Danakali’s strategic development.
Saudi Arabia: A JV-led entry with exciting prospectivity
Cornelius notes that “Saudi Arabia hosts the same suite of rocks as Eritrea,” making it another highly prospective region for mining.
Danakali has a joint venture (JV) agreement with Massadir Al-Zamrda (Emerald, which forms part of the Al Qurashi group of companies, for an 80% interest in a joint venture to explore the Kingdom’s resources).
The region is quite prospective for both gold and base metals, Cornelius notes, and so Danakali, together with its JV partners will start identifying exploration opportunities within the Kingdom.
“Saudi is a very bureaucratic place, and while it’s modern in so many ways, can also be quite old fashioned,” Cornelius says, and so having strong relationships in-country allows a company like Danakali to push forward with local projects much more easily.
There are two basic pathways to gain licenses for exploration land in Saudi Arabia.
“There’s the public auction pathway, which is what most companies go through, or you can go privately, through local companies, which is what we’re doing,” Cornelius explains.
“We’re going to apply directly for the ground that our JV partners have identified for us.”
Adding more bureaucratic levels to the set up in the Kingdom, Cornelius notes how expensive it can be for a junior to establish themselves in Saudi Arabia.
“You can’t simply go there and set up a shelf company. If you add up the real cost of setting up, it’s probably the better part of a million dollars, just to gain the right to exploration.
“If you look at the public auction system, there have been nine rounds so far and if you look at the juniors that have won ground through the public auction, basically no one’s done any work because what happens is you can win the ground, but then it costs you a million dollars just to set up, and most juniors don’t have that kind of cash.”
Danakali has two main strategies when it comes to acquiring ground in Saudi Arabia. First, to work with their JV partners in identifying ground outside of the public auction system, which is already underway.
Second, the company plans to look for ground that’s been awarded in earlier rounds of public auction but has stalled for any exploration work.
“Ultimately, we’ll be there with a properly functioning, fully established company with our JV partners to get the ground work started,” Cornelius says.
And also, Danakali is still cashed up from its sale of Colluli, which is an advantage that many juniors do not have at the moment.
The Kingdom’s push for modern exploration and a processing ecosystem
Looking at the Saudi plan for industry growth, Cornelius notes that the Kingdom has quite a detailed vision for how they’re planning to develop their own mining exploration industry.
While there are some pretty big mining companies there already, “what we haven’t seen is an industry driven by juniors and driven by exploration,” Cornelius says.
The mining exploration industry is still a bit new, but Saudi Arabia is pushing a lot of money into it now to get it up and running.
At the same time, Saudi has an incredible amount of cheap and available power and land and so the Kingdom is also exploring avenues to become a key processing hub for African minerals.
Right now, most minerals from Africa end up on a ship to China. Saudi Arabia is much closer and has both the money to invest in a new processing industry and the power needed to run it.
Cornelius notes that Saudi Arabia is also openly talking about investing in earlier stage projects in Africa. With Danakali’s imminent return to Eritrea, their relationships across the Red Sea are a strategic asset.
“There are two main aspects to why we want to go to Saudi Arabia,” Cornelius says.
“First, it’s an interesting suite of rocks and there’s government money to develop the junior industry.
“Second, we have friends and relationships there, providing alternative funding for our project in Africa.”
Western Australia: Refining a large domestic portfolio
Lastly there’s Western Australia. Danakali has a lot of ground here and are currently working through that portfolio now to figure out which projects to keep and develop further and which ones to sell off.
“In Western Australia, the system is so advanced and suitable for junior explorers, it’s very easy to get ground and drop ground very cheaply if you know what you’re doing — and we know what we’re doing.
Danakali will be prioritising those key projects in Western Australia and has plans to get out on the ground in 2026 to start doing some groundwork, including soil sampling.
Looking forward: Multi-jurisdictional growth strategy
The big plan now is to get some real activity on the ground in Western Australia, doing some geological work in Q3 this year.
As for Eritrea and Saudi Arabia, Cornelius notes the high level of alignment between the various targets for Danakali and why each piece makes sense for the company.
“The Eritrean piece is really our focus and we think the Ela Gedel Project, when we eventually get it going, is going to be great. We want to take it all the way through.
“The cost of securing the Eritrean project is very low at just a few thousand dollars for the application, and we have already earmarked some money for more exploration and for the development of that project.
“It’s the same for Saudi, though it does cost a million just to set the company up there and meet all local requirements, in addition to the $4 million we’ve committed to exploration with our partners.
“Then in WA, for a junior, we are very well funded to the point we are not come-issue like so many junior explorers.”
Danakali is awaiting news on a number of fronts to get these projects all up and running soon and once secured, will be ready to hit the ground running.
Write to Amy Rotman at Mining.com.au
Images: Mining.com.au and Danakali
