TIDMDNK
RNS Number : 0886U
Danakali Limited
31 March 2021
Announcement Wednesday, 31 March 2021
============= =========================
Danakali releases 2020 Financial Report
Danakali Limited (ASX: DNK, LSE: DNK) (Danakali, or the
Company), the potash company focused on the development of the
Colluli Potash Project (Colluli, or the Project) in Eritrea, is
pleased to announce its Full Year Results for the year ended 31
December 2020.
Key project highlights
-- The Ministry of Energy & Mines accepted the Notice of
Commencement of Mine Development for Colluli
-- DRA Global, Colluli's EPCM Contractor, updated the FEED estimate and execution schedule.
-- The use of beach wells as the water intake alternative was
confirmed as a valid optimisation. Final test work underway to
confirm details of the filtered sea water optimisation for the
process plant.
-- Aggreko was appointed as preferred power provider to provide
full scope of support services for the supply, commissioning, and
maintenance of the power plant, then transfer to Colluli, under
5-year BOOT contract.
-- RA International was appointed as preferred contractor for
supply of Accommodation, Support Services and other infrastructure
buildings in support of the Colluli SOP Project development.
Key corporate highlights
-- Dr Rod McEachern former Director for Process and Product
Innovation at Nutrien and PotashCorp was appointed as Chief
Operating Officer
-- Three new directors appointed to the Board of Directors: Neil
Gregson, previously held the position of Portfolio Manager at JP
Morgan Asset Management Global Equities, London, Samaila Zubairu,
President & CEO of AFC and Taiwo Adeniji, Senior Director for
Investment Operations and Execution; both from African Finance
Corporation (AFC).
-- The first Sustainability Report which outlines the Company's
ongoing and planned contributions of its Colluli Potash Project to
the Sustainable Development in Eritrea was released.
Key financial highlights
-- Cash position of A$9.7M as at 31 December 2020
Post-period highlights
-- The Company announced that it will work with its preferred
power provider, Aggreko on incorporating its renewable energy
sources, solar, wind and geothermal for the generation of its
future power of the Project with the view to becoming Zero Carbon
in the production of Sulphate of Potash (SOP).
Corporate Governance Statement
The Corporate Governance Statement is available for download
from the Company's website at
https://www.danakali.com.au/images/stories/corporate-governance-statement/20210331_4_Corporate_Governance_Statement_2020.pdf
For more information, please contact:
Danakali
Seamus Cornelius Mark Riseley
Executive Chairman Head of Corporate Development &
+61 8 6266 8368 Investor Relations
+61 417 007 579
Corporate broker - Canaccord Genuity
James Asensio / Angelos Vlatakis /
+44 (0)20 7523 4680
Visit the Company's website: www.danakali.com
Follow Danakali on LinkedIn: www.linkedin.com/company/danakali-limited
Subscribe to Danakali on YouTube: www.youtube.com/channel/UChGKN4-M4lOvPKxs9b-IJvw
Announcement authorised for release by the Board of Danakali.
DANAKALI LTD
ABN 56 097 904 302
AUDITED FINANCIAL REPORT
FOR THE YEARED
31 DECEMBER 2020
The following sections from the Financial Report are available
on our website at www.danakali.com :
Auditor's Independence Declaration
Independent Auditor's Report
Corporate Information
Directors
Seamus Cornelius (Executive Chairman)
John Fitzgerald (Independent Non-Executive Director)
Zhang Jing (Non-Executive Director)
Robert Connochie (Independent Non-Executive Director)
Samaila Zubairu (Non-Executive Director)
Taiwo Adeniji (Non-Executive Director)
Neil Gregson (Independent Non-Executive Director)
Executive Management Joint Company Secretary
Stuart Tarrant (Chief Financial Officer) Catherine Grant Edwards
Melissa Chapman
Registered Office and Principal Place of Business
Level 1, 2A / 300 Fitzgerald
Street
NORTH PERTH WA 6006
Telephone: +61 (0)8
6266 8368
Bank Auditors
National Australia Bank Ernst and Young
Level 12, 100 St Georges Terrace 11 Mounts Bay Road
PERTH WA 6005 PERTH WA 6000
Share Register (Australia) Share Register (United Kingdom)
Computershare Investor Services Computershare Investor Services
Pty Limited PLC
Level 11, 172 St Georges Terrace The Pavilions, Bridgwater
Road
PERTH WA 6000 Bristol BS13 8AE, United Kingdom
Telephone: 1300 850 505 (Inside Telephone: +44 (0) 370 702
Australia) 0003
Telephone: +61 (0)3 9415 4000 www.computershare.com
(Outside Australia)
Facsimile: +61 (0)3 9473 2500
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 http://www.otcmarkets.com/stock/DNKLY/quote
here:
DNK's ADR information can also https://www.adrbnymellon.com/?cusip=23585T101
be viewed here:
ADR Holders seeking information on their shareholding should contact:
shrrelations@bnymellon.com OR
LONDON NEW YORK
Mark Lewis Rick Maehr
mark.lewis@bnymellon.com richard.maehr@bnymellon.com
Telephone +44 207 163 7407 Telephone +1 212 815 2275
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 2020.
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.
The Company restructured its permanent sub-committees on 23
January 2020. The Audit Committee was reconstituted to become the
Audit and Risk Committee, and the Technical and Risk Committee was
ceased..
Names, qualifications, experience and special
responsibilities:
Seamus Ian Cornelius
Non-Executive Chairman, LLB, LLM, initially appointed
Non-Executive Chairman 15 July 2013, transitioned to Executive
Chairman 14 June 2018, resumed Non-Executive Chairman role 25 June
2019, and transitioned to Executive Chairman 26 February 2021)
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 was appointed as Non-Executive Chairman of the
Company on 15 July 2013 and acted in the role of Executive Chairman
from 14 June 2018 to 25 June 2019. As announced on 26 February
2021, Mr Cornelius was re-appointed as Executive Chairman.
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:
During the year Mr Cornelius was a member of the Audit and Risk
Committee (and Audit Committee), a member of the Remuneration and
Nomination Committee, and a member of the Technical and Risk
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 a Non-Executive Director of Northern Star
Resources Limited (appointed 30 November 2012) and Medallion Metals
Limited (appointed 5 October 2020).
Previously Mr Fitzgerald was Non-Executive Chairman of Exore
Resources Limited (23 December 2015 to 25 September 2020).
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:
During the year Mr Fitzgerald was Chairman of the Audit and Risk
Committee (and Audit Committee) and a member of the Remuneration
and Nomination Committee.
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:
During the year Mr Connochie was a member of the Audit and Risk
Committee (appointed on 25 August 2020), and a member of the
Technical and Risk Committee.
Samaila Zubairu
Non-Executive Director, FCA, appointed 23 April 2020
Mr Zubairu is African Finance Corporation's (AFC) President and
Chief Executive Officer. Previously, he was the CEO of Africapital
Management Limited, where he established a joint venture with Old
Mutual's African Infrastructure Investment Managers to develop a
fund for infrastructure private equity across West Africa, and
Chief Financial Officer for Dangote Cement Plc. Prior to that, he
was the Treasurer for the Dangote Group during its transformation
from a trading company to an industrial conglomerate. He has
undertaken investments of over US$3 billion, financing green-field
project finance, acquisitions, corporate transformation,
privatization and equity capital market transactions.
Mr Zubairu is an Eisenhower Fellow and sits on the Eisenhower
Fellowship's Global Network Council and the President's Advisory
Council. He holds several non-executive board positions including
being the advisory board member for KSE Africa, a leading
operations and management provider of captive power plants in the
mining sectors in Botswana and Nigeria. He is also a Fellow of the
Institute of Chartered Accountants of Nigeria (FCA) and holds a BSc
in Accounting from Ahmadu Bello University, Nigeria.
Special Responsibilities:
None.
Taiwo Adeniji
Non-Executive Director, HCIB, appointed 23 April 2020
Mr Adeniji is Senior Director for Investment Operations &
Execution at AFC, where he has responsibility, amongst other
things, for the institution's investments in oil & gas, and
mining projects. Taiwo has had over 26 years of post-graduate and
extensive professional and managerial experience in several areas
of banking and finance. He has deep knowledge and extensive
experience with infrastructure and mining policy issues, as well as
the analysis, evaluation and financing of infrastructure and mining
projects. Mr Adeniji has supervised AFC's investments in mining
projects that spanned different products, including gold, copper,
bauxite, and iron ore, as well as in different geographies,
including countries in West, North and Central Africa. From 1994 to
2007, Mr Adeniji worked with the African Development Bank,
focussing largely on infrastructure investments and financial
sector development.
Mr Adeniji's academic background is in economics and finance. He
is an Honorary Senior Member (HCIB) of the Chartered Institute of
Bankers of Nigeria.
Special Responsibilities:
None.
Neil Gregson
Independent Non-Executive Director, Qualified Mining Engineer,
appointed 3 August 2020
Mr Gregson is an experienced resource sector investor having
spent over 30 years managing investments predominantly in mining
and energy companies.
Mr Gregson's previous roles included portfolio manager in J.P.
Morgan Asset Management's Global Equities Team based in London and
responsible for global natural resource mandates. Prior investment
roles were with CQS Asset Management as a Senior Portfolio Manager,
with a focus on the natural resource sector and Credit Suisse Asset
Management as Head of Emerging Markets and related sector
funds.
Mr Gregson began his career holding various positions at mining
companies, including a role as a mining investment analyst at South
African company Gold Fields. He is a qualified mining engineer.
Mr Gregson is currently a Director of Uranium Royalty Corp.
(appointed 14 October 2020) and Atalaya Mining Plc (appointed 10
February 2021).
Special Responsibilities:
During the year Mr Gregson was Chairman of the Remuneration and
Nomination Committee (appointed on 25 August 2020).
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, resigned 3
August 2020
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:
In the period prior to his resignation, Mr Donaldson was a
member of the Remuneration and Nomination Committee, and a member
of the Technical and Risk Committee.
Andre Liebenberg
Independent Non-Executive Director, MBA, BSc (Elec) Eng.,
appointed 2 October 2017, resigned 3 August 2020
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.
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 also included key roles in
the BHP merger with Billiton, the bid for Rio Tinto and the bid for
Potash Corp. of Saskatchewan. Prior to BHP, 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 (appointed 1 June 2018) and
Non-Executive Director of Zeta Resources Limited (appointed 30
December 2019).
Special Responsibilities:
In the period prior to his resignation, Mr Liebenberg was the
Chairman of the Remuneration and Nomination Committee, and a member
of the Audit and Risk Committee (and 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.
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 Ordinary Options over Ordinary Performance
Shares Shares Rights
S Cornelius 13,491,126 301,040 -
J Fitzgerald 526,453 - -
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 2020.
CORPORATE STRUCTURE
Danakali Limited is a company limited by shares that is
incorporated and domiciled in Australia.
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 Corporation (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 logistics potential. Colluli also boasts the
shallowest known mineralisation globally. 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). S hallow 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% K(2) O 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.
Due to the massive resource, Colluli has the potential to
produce a diverse and high volume of products however as a start up
development, focus has been placed on the highest value commodity,
SOP. Technical studies have been undertaken for the production of
high-quality SOP. The final Colluli study, Front-End Engineering
Design (FEED) (ASX announcement 29 January 2018) , defined in
initial SOP development:
-- Module I - 472ktpa SOP production
-- Module II - additional 472ktpa SOP production commencing in year 6
The above delivers a mine life of approximately 200 years,
demonstrating the capacity of Colluli to further expand and support
decades of growth beyond Modules I and II.
FEED demonstrates the robust project economics. The premium
commodity combined with industry leading capital intensity and
first quartile operating costs results in a Project Net Present
Value (NPV(10) ) of US$902M and Internal Rate of Return (IRR) of
29.9% (Post tax). The Danakali economic outcomes were an NPV(10) of
US$439M and IRR of 31.3% (Post tax and gearing).
Colluli's diversification potential beyond SOP includes the
option to produce additional potash and salt products such as MOP,
SOP-M, kieserite (MgSO(4) .H(2) O), gypsum (CaSO(4) .2H(2) O),
magnesium chloride (MgCl(2) ), 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 in a number of chemical
processes, for de-icing, and as a feed for the production of table
salt.
Colluli has in place a 10 year take or pay Offtake ( ASX
announcement 12 June 2018), executed Senior Debt documentation for
a $200M facility with African Finance Corporation (AFC) and African
Export Import Bank (Afreximbank) (ASX announcement 23 December
2019) and issued US$21.5M of Danakali equity to AFC ( ASX
announcement 3 December 2019) .
Project Execution
EPCM Phase 1 and 2 of project execution, which relates to the
process plant and associated infrastructure work has been
completed. The project now benefits from a more defined scope and
de-risked design and the robustness of the FEED results have been
confirmed. The capital estimate has been revised and remains within
the FEED cost estimate (ASX announcement 2 September 2020).
Early procurement commenced during 2020 with the order of the
Reverse Osmosis (RO) Plant. This equipment will be used to provide
potable and construction water prior to the commissioning of the
main Anfile Bay Water Intake Treatment Area (WITA) which will be
developed to provide higher volumes of water to support SOP
production. The Group has considered whether COVID-19 had an impact
for the Group for the year ended 31 December 2020. As the Project
is still in development and has not commenced operations, the
impact is limited, however, there is an uncertainty in the impact
of COVID-19 in the future as it relates to the extractive
activities.
Mining Agreement Executed and Mining Licenses Awarded
CMSC is fully permitted, having 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) .
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.
In accordance with the Mining Agreement, CMSC is obliged to
spend US$200 million on infrastructure and mine development within
the area of the Colluli project mining licences, and commence
Commercial Production in the 36 months following the provision of
formal Notice of Commencement of Mine Development (the Notice) to
the Ministry of Energy and Mines (MoEM). The Notice, dated 16
December 2019, was accepted by MoEM on 21 July 2020 (ASX
announcement 22 July 2020). The granted time by the MoEM to
commence Commercial Production and spend US$200M on infrastructure
and mine development is 36 months from submission of the Notice (15
December 2022).
A Social and Environmental Impact Assessment (SEIA) and
associated Social and Environmental Management Plans (SEMPs) have
been completed, consistent 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 were
signed off by the Ministry in August 2018. The SEMPs are a
cornerstone of the environmental, social and safety management
system being developed by CMSC and provide the foundation for
compliance.
The senior lenders have reviewed the SEIA and SEMPs and
determined that the foundation of Social and Environmental
compliance was robust which allowed execution of formal
documentation for the US$200M facilities. The review also
identified some outstanding documents, captured as an Environmental
and Social Action Plan (ESAP), that required completion as a
requisite to drawdown of the facilities. These specific outstanding
documents are required in CMSC's SEMPs, procedures, forms and
guidelines and once completed ensure alignment with the Equator
Principles and the IFC Performance Standards. Throughout 2020,
considerable efforts were made to close out the ESAP. As of
December 31(st) , 2020, the Company had completed 85% of the ESAP
requirements with plans in 2021 to have the process finalised well
in advance of project construction.
Carbon Neutral SOP
Early assessment work on the solar and wind energy potential of
Colluli has been completed and this has confirmed that both of
these renewable energy sources can be incorporated into the future
generation of power for the Project. Our initial goal is to create
a responsible, environmentally friendly, zero carbon, premium
fertilizer business that clearly links Colluli SOP with the
production of nutritious crops, bolsters global food and nutrition
security, and improves millions of lives.
MARKETING AND PROJECT FINANCE
Off-take
The company holds a binding take-or-pay offtake agreement 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
was instrumental in unlocking project funding.
Project Financing
Development finance institutions, Africa Finance Corporation
(AFC) and African Export Import Bank (Afreximbank, together the
Mandated Lead Arrangers), have executed documentation for the
provision of US$200M in senior debt finance to CMSC (each Mandated
Lead Arranger providing US$100M). The facility allows drawdown of
CMSC senior debt on satisfaction of customary conditions precedent
(ASX announcement 23 December 2019) for a project financing
facility of this kind and includes all project approvals required
to develop the project, and the balance of the equity contribution
having been raised. There is no deadline for the completion of such
conditions precedent however the project is required to be
completed by the Longstop Date which is 31 March 2023.
In addition to CMSC senior debt, AFC made a strategic equity
investment in Danakali for approximately 53M new Shares issued at
A$0.60 per Share to raise A$31.8M (US$21.5M), which was completed
on 10 December 2019. A second tranche totaling US$28.5 was planned
to be executed in 2020 but in light of the rapid spread of COVID-19
and its significant impact on global financial markets, Tranche 2
was deferred to allow for the stabilisation of market and global
conditions.
On 1 June 2020, it was announced that Danakali and AFC had
agreed on a deadline extension of 21 November 2020 to satisfy
remaining conditions precedent for Tranche 2 funding.
On 26 October 2020, the Company announced that it is unlikely
that all such conditions precedent will be satisfied and as such,
Tranche 2 will not complete in accordance with the terms of the
Subscription Agreement.
The Company continues to work with AFC as part of a total
funding solution for the Project.
The Company has engaged a range of advisers and brokers to
support our funding requirements, including the appointment of AFC
Advisory on an arm's length basis. We are pursuing multiple options
in partnership with ENAMCO, including debt, equity and quasi-equity
instruments.
Key Operational Contracts
The following operational contracts are key to advancing the
project.
Mining - undergoing negotiations with preferred mining services
provider
Earth Moving Worldwide (EMW) is the Company's preferred
contractor for Colluli's mining services scope, which covers the
pre-production period (development) plus the first 5 years of
production. The scope includes the provision, operation and
maintenance of excavation, haulage and dewatering equipment. EMW
has extensive global experience in mining services, earthworks and
water management and will provide the Project with strong
commercial and technical support.
The Mining Services Contract is complete for all material
matters. Execution of the contract will follow successful
completion of the project financing.
Power - Finalising documentation
Aggreko have been appointed as preferred power supply contractor
for a 12MW HFO power plant at Colluli. Under 5-year Built, Own,
Operate Transfer (BOOT) contract, Aggreko will supply, commission,
operate and maintain the power plant, then transfer the equipment
to CMSC. Aggreko will provide the funding for the power solution
which provides certainty over delivery of this preferred solution
(ASX announcement 8 October 2020).
The Power Contract is complete for all material matters.
Execution of the contract is expected during Q2 2021.
The early assessment work on the solar and wind energy potential
of Colluli has been completed and this has confirmed that both of
these renewable energy sources can be incorporated into the future
generation of power for the Project. The Company will now work with
Aggreko on further developing these solutions. Aggreko's ambition
is to be carbon net zero, aligning with the Paris Climate
Agreement, by helping its customers meet their sustainability
targets.
Camp -Contracts near completion
A contract with RA International (RAI) to provide the camp is
well advanced and early shipment of the accommodation camp and
infrastructure building to Eritrea has been negotiated with
RAI.Execution of the contract is expected during Q2 2021.
EPCM
The Company has engaged DRA Global (DRA) to support Project
Execution through the provision of Engineering, Procurement,
Construction and Management (EPCM) services. DRA is a high quality,
multi-disciplinary global project management and engineering group
with strong African experience and EPCM delivery capability. The
scope of DRA's contract includes:
-- all aspects of design, project management, procurement,
construction management and supervision;
-- commissioning of the complete process plant and associated infrastructure; and
-- awarding and overseeing major contracts such as early works,
earthworks, structural, mechanical, piping, electrical and
instrumentation works, laboratory and permanent camp.
In addition, multinational professional services company Turner
& Townsend has been engaged to support the Owner's Team.
Project Execution advanced during the year, most notably through
the completion of the first two stages of the EPCM scope.
CORPORATE
Board Changes
Africa Finance Corporation (AFC) President and CEO, Samaila D.
Zubairu, and AFC Senior Director for Investment Operations &
Execution, Taiwo Adeniji, joined Danakali's Board as Non-Executive
Directors on 23 April 2020.
On 3 August 2020, Mr Neil Gregson was appointed as a
Non-Executive Director.
Mr Paul Donaldson and Mr Andre Liebenberg resigned as
Non-Executive Directors on 3 August 2020.
Refer to events occurring after the balance date for board
changes that have occurred subsequent to 31 December 2020.
Management Changes
New Chief Operating Officer (COO) appointed
Dr Rod McEachern, previously Director for Process and Product
Innovation at Nutrien and PotashCorp, was appointed on 3 December
2020 as Danakali Chief Operating Officer (COO). Dr McEachern holds
a Ph.D in Physical Chemistry from the University of Saskatchewan.
Bringing with him significant experience in potash mining,
production, harvesting, process engineering, logistics and safety,
he has been given the responsibilities for the design and set up of
operation readiness including safe and sustainable mining and
processing operation for CMSC.
Dr McEachern's international potash experience spans three
decades with his most recent roles in senior management as
Director, Process and Product Innovation at Nutrien. He held prior
roles with Potash Corp as Senior Director for Innovation and
General Manager and held the Vice President of Operations role at
Arab Potash in Amman, Jordan.
Refer to events occurring after the balance date for management
changes that have occurred subsequent to 31 December 2020.
Shares
During the year, the Company issued the following fully paid
ordinary shares:
-- 20,000 shares on vesting of performance rights (Class 5:
20,000)
-- 25,000 shares on vesting of performance rights (Class 6:
25,000)
-- 50,000 shares on vesting of performance rights (Class 8:
50,000)
-- 100,000 shares on vesting of performance rights (Class 9:
100,000)
At 31 December 2020, there were a total of 318,741,306 fully
paid ordinary shares on issue.
Options
The following unlisted options were issued during the year:
-- 947,041 unlisted options at an exercise price of $0.00 each
expiring 31 December 2021 to management in lieu of cash payments
under the Company's short-term incentive scheme approved by the
Board on 20 August 2020
-- 200,000 unlisted options at an exercise price of $0.664 each
expiring 8 July 2023
A further 250,000 unlisted options at an exercise price of
$0.501 each expiring 3 December 2023 were granted during the year
and formally issued on 12 February 2021.
There were no unlisted options exercised and converted to shares
during the year.
The following unlisted options lapsed during the year:
-- 500,000 unlisted options exercisable at $0.912 expired on 11
May 2020
-- 1,440,000 unlisted options exercisable at $0.940 expired on
19 May 2020
At 31 December 2020, there were a total of 5,211,153(1) unlisted
options on issue at various exercise prices and expiry dates.
Performance Rights
There were no new performance rights issued during the year.
The following performance rights vested and were converted to
shares during the year:
-- 20,000 Class 5 performance rights
-- 25,000 Class 6 performance rights
-- 50,000 Class 8 performance rights
-- 100,000 Class 9 performance rights
The following performance rights were forfeited during the
year:
-- 15,000 Class 7 performance rights(2)
-- 15,000 Class 8 performance rights
-- 800,000 Class 4 performance rights
At 31 December 2020, there were a total of 1,260,000 performance
rights on issue in the following classes:
-- 280,000 Class 1 performance rights
-- 80,000 Class 5 performance rights
-- 900,000 Class 9 performance rights
(1) Excludes 250,000 unlisted options at an exercise price of
$0.501 each expiring 3 December 2023 that were granted during the
year on 3 December 2020 and formally issued on 12 February
2021.
(2) Comprises 15,000 class 7 performance rights that were
subject to forfeiture at 31 December 2019 and removed from the
register in January 2020.
Refer to events occurring after the balance date for details of
performance rights forfeited subsequent to 31 December 2020.
Annual General Meeting
The Company's annual general meeting was held on 15 July 2020
(AGM). For more information, refer to the Notice of AGM and Results
available via the Company's website.
Amended Constitution
An amended constitution was adopted by the Company following
receipt of shareholder approval by special resolution at the
AGM.
Environmental and Social Governance (ESG)
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.
The Company has implemented a Sustainable Development Framework
to address its ESG agenda 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.
The Company released its inaugural sustainability report in
2020. This report details the policies and frameworks in place to
ensure that the Company continues to operate in a sustainable
manner. The Company plans to release annual sustainability reports
with increased transparency as the project continues to grow and
evolve. The annual sustainability reports will align with the
Global Reporting Initiative once the Colluli project becomes
operational.
The Company initiated an independent human rights due diligence
study in 2020 to determine the potential risks and opportunities
with respect to the Colluli Project. Stakeholder engagement, field
work, capacity building and implementing potential mitigation
measures is planned in 2021 in advance of project construction.
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 2020. 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 2020 is as follows:
Table 1: Colluli Mineral Resource Estimate announced on 25
February 2015 with Kieserite added (announced on 15 August
2016)
Tonnes Density K(2) O Equiv. Kieserite
Rock Unit Mt t/m(3) % %
------- -------- -------------- ----------
Sylvinite 265 2.2 12% 0.03%
------- -------- -------------- ----------
Upper Carnallitite 51 2.1 12% 3%
------- -------- -------------- ----------
Lower Carnallitite 347 2.1 7% 22%
------- -------- -------------- ----------
Kainitite 626 2.1 12% 1%
------- -------- -------------- ----------
Total 1,289 2.1 11% 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 outcomes (ASX
announcement 19 February 2018). There have been no changes to the
Mineral Resource since 19 February 2018.
The Colluli JORC-2012 compliant Ore Reserve estimate by potash
mineral as at 31 December 2020 is as follows:
Table 2: JORC-2012 Colluli Potassium Sulphate Ore Reserve
(announced on 29 January 2018 and 19 February 2018)
Proved Probable Total
K(2) K(2)
K(2) K(2) K(2) SO(4) SO(4)
O Equiv O Equiv O Equiv Equiv Equiv
Occurrence Mt % Mt % Mt % % Mt(1)
---- --------- ---- --------- ------ --------- ------- -------
Sylvinite
(KCl.NaCl) 77 15.0% 173 12.1% 250 13.0%
---- --------- ---- --------- ------ --------- ------- -------
Carnallitite
(KCl.MgCl(2)
.H(2) O) 77 6.9% 279 7.8% 356 7.6%
---- --------- ---- --------- ------ --------- ------- -------
Kainitite
(KCl.MgSO(4)
.H(2) O) 131 11.8% 363 11.2% 494 11.4%
---- --------- ---- --------- ------ --------- ------- -------
Total 285 11.3% 815 10.3% 1,100 10.5% 18.5 203
---- --------- ---- --------- ------ --------- ------- -------
(1) Equivalent K(2) SO(4) (SOP) calculated by multiplying %K(2)
O 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 2020, the J ORC-2012 compliant Rock Salt
Mineral Resource is as follows:
Table 3: JORC 2012 Colluli Rock Salt Mineral Resource announced
on 23 September 2015
Classification Tonnes NaCl K Mg CaSO(4) Insolubles
(Mt)
Measured 28 97.2% 0.05% 0.05% 2.2% 0.23%
------- ------- ------- ------- -------- -----------
Indicated 180 96.6% 0.07% 0.06% 2.3% 0.24%
------- ------- ------- ------- -------- -----------
Inferred 139 97.2% 0.05% 0.05% 1.8% 0.25%
------- ------- ------- ------- -------- -----------
Total 347 96.9 % 0.06 % 0.05 % 2.1 % 0.24 %
------- ------- ------- ------- -------- -----------
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
Board and Management Changes
On 26 February 2021, the Company announced that the role of the
Chief Executive Officer, held by Mr Niels Wage, had been made
redundant as part of a reallocation of responsibilities.
Mr Seamus Cornelius was appointed as Executive Chairman on 26
February 2021.
Movements in Securities
On 29 January 2021, the Company issued 500,000 unlisted options
at an exercise price of $0.527 expiring on 29 January 2023. On 24
March 2021, the Company issued 250,000 unlisted options at an
exercise price of $0.78 expiring on 24 March 2023.
On 15 February 2021, the Company issued 947,041 fully paid
ordinary shares upon the exercise of unlisted options at an
exercise price of $0.00 expiring 31 December 2021 to management in
lieu of cash payments under the Company's short-term incentive
scheme approved by the Board on 20 August 2020. In addition, on 12
February 2021, the Company completed the formal issue of 250,000
unlisted options at an exercise price of $0.501 expiring 3 December
2023 (being options granted 3 December 2020).
On 26 February 2021, 900,000 performance rights (Class 9) were
forfeited. This forfeiture resulted from the role of Chief
Executive Officer being made redundant.
No other matters or circumstances have arisen since the end of
the financial year which significantly affected or may
significantly affect the operations of the Group, the results of
those operations, or the state of affairs of the Group in future
financial years.
ACTIVITIES PLANNED FOR 2021
The following key activities are scheduled over the coming
year:
-- Secure balance of funding to advance Colluli to Final Investment Decision
-- Execute the remaining phases of the EPCM contracts and commence the detailed design work
-- Finalise and execute the mining services, power provider and camp contracts
-- Advance the Company's ESG objectives
-- Close out the Conditions Precedent to allow draw down of the CMSC Senior Debt Facility
FINANCE REVIEW
The Group recorded a net loss after tax of $8,259,370 for the
financial year to 31 December 2020 compared to a loss of $3,148,734
for the financial year to 31 December 2019. As the Group is still
in the development stage, revenue streams mainly relate to interest
earned on surplus funds from capital raisings held at bank. The net
losses after tax reflect the remeasurement loss of the receivable
at fair value arising from the change in the loan repayment
profile, foreign exchange loss on the loan receivable denominated
in USD and administrative costs incurred by the Group.
Total consolidated cash on hand at the end of the financial year
was $9,738,794 (31 December 2019: $33,800,104) .
Operating activities utilised $2,881,504 (31 December 2019:
$2,538,695 utilised) of net cash flows. Net cash outflow from
investing activities of $17,572,229 (31 December 2019: $4,407,612)
was predominantly expenditure made to advance the Colluli Project
in relation to:
-- Executing Phase 1 and 2 of project execution
-- Establishment of the Owners Team
-- Early procurement of the Reverse Osmoses Plant
-- Advancing key operational contracts
-- Advancing the ESAP
-- Payment of senior lender fees subsequent to the execution of
documentation for US$200M of senior debt facilities on behalf of
CMSC
Net cash outflow from financing activities of $3,302,478 in the
financial year to 31 December 2020 was attributable to costs of
capital accrued for in the previous financial year (31 December
2019: $32,286,301 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.
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.
DIVIDS
No dividends were paid or declared during the financial year to
31 December 2020. No recommendation for payment of dividends has
been made.
DIRECTORS' MEETINGS
The number of meetings of the Company's Board of Directors and
permanent Board sub-committees held during the financial year ended
31 December 2020 and the number of meetings attended by each
Director were:
Board of Directors Audit and Risk Remuneration and
Committee(1) Nomination Committee
Total meetings Total Total meetings Total Total meetings Total
held / eligible attended held / eligible attended held / eligible attended
Director to attend to attend to attend
-------------- ----------------- ---------- ----------------- ---------- ----------------- ----------
S Cornelius 13 13 6 5 4 4
J Fitzgerald 13 13 6 6 7 7
J Zhang 13 10 - - - -
R Connochie 13 9 2 2 - -
S Zubairu 9 6(2) - - - -
T Adeniji 9 6 - - - -
N Gregson 5 4 - - 4 4
P Donaldson 8 5 - - 3 2
A Liebenberg 8 6 3 3 3 3
-------------- ----------------- ---------- ----------------- ---------- ----------------- ----------
(1) The Audit Committee was reconstituted to become the Audit
and Risk Committee on 23 January 2020. References to meetings held
in the above table includes those of the Audit Committee.
(2) The number of meetings attended include those attended by Mr
Zubairu (2) or his representative (4).
(3) The Technical and Risk Committee ceased on 23 January 2020.
There were no meetings held during the current period.
OPTIONS
At the date of this report, unissued ordinary shares in respect
of which options are outstanding are as follows:
Number of options
Balance at the beginning of the year 6,004,112
Movements of share options during the financial year
ended 31 December 2020:
Issued, exercisable at $0.00, expiry date 31 December
2021 947,041
Issued, exercisable at $0.664, expiry date 8 July 2023 200,000
Expired, exercisable at $0.94, expiry date 19 May 2020 (1,440,000)
Expired, exercisable at $0.912, expiry date 11 May 2020 (500,000)
Share options outstanding at 31 December 2020 5,211,153
Movements since the financial year ended 31 December
2020:
Issued, exercisable at $0.527, expiry date 29 January
2023 500,000
Issued, exercisable at $0.501, expiry date 3 December
2023 250,000
Issued, exercisable at $0.78, expiry date 23 March 2023 250,000
Exercised, exercisable at $0.00, expiry date 31 December
2021 (947,041)
Total number of share options outstanding as at the
date of this report 5,264,112
-----------------
Expiry date Exercise price Number of options
24 January 2022 $1.031 1,469,312
13 March 2022 $1.108 583,000
28 March 2022 $1.119 561,800
30 May 2022 $1.114 1,450,000
3 December 2023 $0.501 250,000
29 January 2023 $0.527 500,000
23 March 2023 $0.78 250,000
8 July 2023 $0.664 200,000
Total number of share options outstanding at the date
of this report 5,264,112
-----------------
No option holder has any right under the option to participate
in any share issue of the Company or any other entity.
No options were granted to key management personnel of the
Company since the end of the financial year .
PERFORMANCE RIGHTS
Details of performance rights over unissued shares in Danakali
Ltd as at the date of this report are set out below:
Number of rights
Balance at the beginning of the year 2,285,000
Movements of performance rights during the financial
year ended 31 December 2020:
Vested and exercised (195,000)
Forfeited (a) (830,000)
Performance rights outstanding at 31 December 2020 1,260,000
Movements since the financial year ended 31 December
2020:
Forfeited (b) (900,000)
Total number of performance rights as at the date of
this report 360,000
----------------
Note:
(a) Performance rights forfeited as performance hurdles not met
(15,000) and upon resignation of director and employee
(815,000).
(b) Performance rights forfeited on 26 February 2021 upon
termination of employment of Mr Niels Wage pursuant to
redundancy.
No performance rights holder has any right to participate in any
other share issue of the company or any other entity.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Indemnification
An indemnity agreement has been entered into with each of the
directors and company secretary of the Company named earlier in
this report. Under the agreements, the Company has agreed to
indemnify those officers against any claim or for 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 $413,795 (2019: $213,272) were paid
in respect of directors' and officers' liability cover. The
insurance policies outlined above do not contain details of the
premiums paid in respect of individual officers of the Company.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst and Young, as part of the terms of
its audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment has
been made to indemnify Ernst and Young during or since the
financial year.
AUDIT PARTNER EXTENSION
On 25 October 2019, the Board granted approval pursuant to
section 324DAC of the Corporations Act 2001 (Cth), for Mr Gavin
Buckingham of Ernst & Young to play a significant role in the
audit of the Company for an additional one financial year through
to the financial year ending 31 December 2020.
The Board considered the matters set out in section 324DAB(3) of
the Act and is satisfied that the approval:
i) is consistent with maintaining the quality of the audit provided to the Company; and
ii) would not give rise to a conflict of interest situation.
Reasons supporting this decision include:
-- the benefits associated with the continued retention of
knowledge regarding key audit matters;
-- the Board being satisfied with the quality of Ernst &
Young and Mr Buckingham's work as auditor; and
-- the Company's ongoing governance processes to ensure the
independence of the auditor is maintained.
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:
2020 2019
$ $
Tax compliance services 10,792 22,073
Fees for regulatory services 61,800 -
------ ------
72,592 22,073
------ ------
CORPORATE GOVERNANCE
The Company's corporate governance statement can be found at the
following URL:
http://www.danakali.com.au/our-business/corporate-governance.
RISK MANAGEMENT
The Company has established a Risk Management Policy which
outlines the Board's expectations in relation to risk management,
responsibilities, risk management objectives, and the principles of
its risk management framework.
The Board, through the Audit and Risk Committee is responsible
for overseeing the establishment and implementation of effective
risk management and internal control systems to manage the
Company's material business risks and for reviewing and monitoring
the Company's application of those systems.
The Audit and Risk Committee continues to work closely with
management to assess, monitor and review business risks and to
carry out assessments of internal controls and processes for
improvement opportunities. In support of this, the Committee
receives reports from management on new and emerging risks and
related controls and mitigation measures that management have
implemented.
A summary of the material business risks of the Company is set
out in the below table.
RISK MITIGATION / CONTROL
Strategic Risks
--------------------------------------------
The Group is reliant on the success The Group has implemented a comprehensive
of a single asset located in a risk management framework to early
remote region in Eritrea. Any detect and manage adverse events
adverse event affecting the Colluli that would affect the Project.
Potash Project (Project), either The Group maintains a strong relationship
during its development or following with a broad base of government
the commencement of production, and community stakeholders to
would have a material adverse monitor the political environment
effect on the value of the business. in Eritrea and to stay ahead of
Changes to government, existing any legislative and regulatory
applicable laws and regulations, changes.
more stringent interpretations The Group's public relations and
of existing laws or inconsistent investment strategies promote
interpretation or application the international awareness of
of existing laws by relevant authorities the benefits of doing business
have the potential to adversely in Eritrea. As further investment
impact business activities. is made into the country further
Eritrea has limited local resources, infrastructure can be developed.
infrastructure and skills, has The commencement of training programmes
a less tested legislative and in conjunction with Government
regulatory framework compared and other mining companies is
to more established mining jurisdictions planned to increase the number
and is generally perceived as of skilled and semi-skilled persons
a jurisdiction where there is in Eritrea.
a high risk of corruption. Whilst the Group has not experienced
any corruption in Eritrea, the
Anti-Bribery & Corruption Policy
provides the framework for the
appropriate conduct when dealing
with government officials. The
Groups' values further promote
the proper behaviour of its employees
and contractors.
--------------------------------------------
Financial Risks
--------------------------------------------
The Group is yet to commence production The Group has adopted robust financial
and is in its development phase, management practices to ensure
therefore the company has no cash that cash outflows are closely
generating assets which could governed and that future requirements
put a strain on long -term cash remain adequate to continue as
flows. a going concern.
The Group continues to execute
its fund-raising strategies to
obtain the required capital to
fully fund the Project and working
capital of the business.
--------------------------------------------
The Group is aware that the economics The Group continuously monitors
for the development of the Project the SOP market and forecast demand
is strongly linked to the market to ensure that the economics of
price of SOP and its ability to the project remain favourable.
sell the product. A natural risk mitigant exists
against lower SOP prices in the
form of an industry cost curve,
of which Colluli is expected to
be in the bottom quartile.
An offtake agreement with Eurochem
has been executed for up to 100%
of the production for the first
10 years of the project. There
is regular ongoing engagement
with Eurochem to continue to build
the future partnership.
--------------------------------------------
The Group is aware of the requirement The Group has established a funding
to raise additional funding to strategy to fund the project through
finance the Project. Without the debt and equity sources.
required raise, the business will A US$200m debt facility has been
not be able to develop the Project secured with African Finance Corporation
and long-term cashflow will become (AFC) and African Export-Import
a concern. Bank (Afreximbank). Drawdown on
this facility is subject to a
number of conditions precedent.
A detailed plan is in-progress
to close out these conditions
to enable drawdown as required
by the project.
The company continues to identify
and engage further strategic and
institutional investors through
its advisers and brokers.
--------------------------------------------
The ability for CMSC to spend The Group is engaged in sourcing
US$200 million on infrastructure necessary funding to close the
and mine development and commence project funding. With regard to
Commercial Production before 15 the development schedule, work
December 2022. is being undertaken by DRA Global
to compress the development timeline.
If it is assessed that the company
will not be able to achieve the
production date, CMSC would in
the normal course of business,
apply to the MoEM for an extension
of the date.
--------------------------------------------
The Group is aware that foreign The Group implements appropriate
exchange movements and interest treasury management processes
rate changes could affect the and procedures to monitor and
financial performance of the company. manage its foreign exchange exposures.
The Group seeks to pursue natural
foreign exchange hedges through
the negotiation, where appropriate,
of USD denominated commercial
contracts.
The senior debt funding facility
is linked to the LIBOR rate which
is relatively stable and does
not fluctuate significantly. The
Group monitors the transition
of LIBOR to SOFR to assess the
impact, if any, of this change.
--------------------------------------------
Compliance Risks
--------------------------------------------
The Group is aware that the mining The Group has regular and effective
industry is subject to a number engagement with the Eritrean Ministry
of laws and governmental regulations of Energy and Mines to ensure
which need to be complied with. that it remains compliant with
Non-compliance could result to regulatory requirements and that
the loss of the Groups' mining the government is made aware of
licence. the company's commitments to develop
the project.
--------------------------------------------
The Group is aware of its Environmental The Group has engaged industry
& Social responsibilities and experts to develop the management
the impact it would have on the systems to ensure that the environment
company if regulatory compliance and social compliance requirements
requirements have not been met. are achieved.
--------------------------------------------
Operation/ Project Risks
--------------------------------------------
The Group is reliant on a number The Group has developed succession
of key personnel. The loss of plans to reduce the exposure to
one or more of its key personnel the loss of any key personnel.
could have an adverse impact on In addition, incentive plans have
the business of the Group been implemented.
--------------------------------------------
The Group is in the early stages The Group has identified a number
of development and therefore is of controls to reduce its exposure
exposed to various development to development risks.
risks. During phase 1 and 2, risk reviews
were undertaken and collated in
a project risk register. These
reviews will continue as the project
progresses.
--------------------------------------------
The Group is reliant on third The Group has awarded contracts
parties to develop and operate or preferential status to reputable
the Project, including mining, third-party contractors to develop
EPCM, and power contracts. and operate the project. The company
continues to engage these parties
as the Project develops.
--------------------------------------------
The Project is reliant on developing The Group has detailed plans to
its own infrastructure including, develop these infrastructures
processing plant, water and roads. and continue to engage with reputable
contractors.
--------------------------------------------
Health event that could impact The company has developed a business
the employee wellbeing or disrupt continuity plan in the event of
business continuity. a business interruption event
and developed various controls
to limit the impact of a Pandemic.
--------------------------------------------
Reputational Risks
--------------------------------------------
The Group is aware of the risk The Group has appointed an in-country
that Community and Government manager to regularly engage with
support could deteriorate if the the government and community to
Colluli project does not commence provide regular feedback on the
in the near term. development of the project.
The strategies to complete the
funding package to develop the
project are key to maintaining
the Groups reputation.
--------------------------------------------
The Group is aware of the external The Group intends to comply with
perception of Eritrea with respect IFC Performance Standards and
to political or economic instability. Equator Principles.
Specifically, allegations of Human The business has implemented a
Rights violations. number of policies and procedures
to ensure compliance with fair
work and human rights practices.
--------------------------------------------
Health & Safety
--------------------------------------------
Physical development of the Project In recognition of the physical
has not yet commenced, however remoteness of the Project, a well-equipped
the Group is aware of the activities medical clinic is planned for
and the environments in which on-site. The business has engaged
the project is located presents with an internationally recognised
inherent hazards, including the health and safety consultant to
risk of serious injury or fatality assist in to further develop these
while working on site. plans.
--------------------------------------------
The physical remoteness of Project Emergency response plans and travel
increases the risk of commuting safety strategies have been implemented.
to site and the availability of
medical assistance in the event
of an incident.
--------------------------------------------
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 INDEPENCE DECLARATION
A copy of the auditor's independence declaration as required
under section 307C of the Corporations Act 2001 is set out
separately in this report.
REMUNERATION REPORT (AUDITED)
The Remuneration Report outlines the director and executive
remuneration arrangements of the Group in accordance with the
requirements of the Corporations Act 2001 (Cth) and its
Regulations. For the purposes of this report, Key Management
Personnel (KMP) of the Group are defined as those persons having
authority and responsibility for planning, directing and
controlling the major activities of the Group, directly or
indirectly, including any director (whether executive or otherwise)
of the Company. For the purposes of this report, the term
'Executive' includes the Chief Executive Officer and key management
personnel of the Group.
The Key Management Personnel of Danakali Ltd and the Group
during the financial year to 31 December 2020 were:
Directors
S Cornelius Non-Executive Chairman (transitioned to Executive Chairman
26 February 2021)
J Fitzgerald Non-Executive Director
J Zhang Non-Executive Director
R Connochie Non-Executive Director
S Zubairu Non-Executive Director (appointed 23 April 2020)
T Adeniji Non-Executive Director (appointed 23 April 2020)
N Gregson Non-Executive Director (appointed 3 August 2020)
P Donaldson Non-Executive Director (resigned 3 August 2020)
A Liebenberg Non-Executive Director (resigned 3 August 2020)
Non-Director Key Management Personnel
N Wage Chief Executive Officer (employment terminated 26 February
2021 pursuant to redundancy)
S Tarrant Chief Financial Officer
C Grant-Edwards Joint Company Secretary
M Chapman Joint Company Secretary
All of the above persons were key management personnel during
the financial year to 31 December 2020 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 Item Purpose Link to
Performance
Fixed Remuneration Provide competitive Executive performance
* Base salary remuneration with and remuneration
reference to the packages are reviewed
role and responsibilities, at least annually
* Superannuation contributions market and experience, by the Board and
to attract high Remuneration and
calibre people. Nomination Committee.
* Other benefits The review process
includes consideration
of the individual's
performance in
addition to the
overall performance
of the Group.
------------------------------------ ---------------------------- -------------------------
Performance Based Provide reward Award of STI linked
Short Term Incentive * Cash bonus to KMP for the directly to achievement
(STI) achievement of of company and
individual and individual KPI's
* Options Group performance and performance
targets linked targets.
to the Company's
short-term goals
and strategic
objectives.
------------------------------------ ---------------------------- -------------------------
Performance Based: Provide reward Award of LTI linked
Long Term Incentive * Shares to KMP for their directly to achievement
(LTI) continued service of strategic Company
and their contribution objectives.
* Options to achieving corporate
objectives set
by the Board to
* Performance Rights ensure the long-term
growth of the
Company.
------------------------------------ ---------------------------- -------------------------
The Remuneration Report has been set out under the following
headings:
a) Decision Making Authority for Remuneration
b) Principles Used to Determine the Nature and Amount of Remuneration
c) Voting and Comments Made at the Last Annual General Meeting
d) Details of Remuneration
e) Service Agreements
f) Details of Share Based Compensation
g) Equity Instruments Held by Key Management Personnel
h) Loans to Key Management Personnel
i) Other Transactions with Key Management Personnel
j) Additional Information
a) Decision Making Authority for Remuneration
The Company's remuneration policy and strategies are overseen by
the Remuneration and Nomination Committee on behalf of the Board.
The Remuneration and Nomination Committee is responsible for making
recommendations to the Board on all aspects of remuneration
arrangements for key management personnel including:
-- the Company's remuneration policy and framework;
-- the remuneration arrangements for the Chief Executive
Officer, Executive Chairman 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 development 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' 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 prior to any
statutory superannuation payments;
-- Additional fees are paid to Directors who serve on the board sub-committees; 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 $500,000 as approved by
shareholders on 27 May 2019. Effective from 27 May 2019, the base
fee paid to each Non-Executive Director was increased from $40,000
to $60,000 per annum. In response to COVID-19, effective 1 May 2020
until 31 October 2020, the base fee paid to each Non-Executive
Director was reduced from $60,000 to $48,000 per annum. Effective
from 1 March 2021, Non-Executive Director base fees were reduced to
$40,000 per annum.
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 Non-Director 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 Non-Director 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 Non-Director
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 Non-Director key
management personnel may consist of the following areas:
i) Fixed Remuneration
ii) Variable Short-Term Incentives
iii) Variable Long-Term Incentives
The combination of these would comprise the Non-Director 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.
Non-Director 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
Non-Director key management personnel is reviewed annually to
ensure the executives' pay is competitive with the market. The pay
of Non-Director key management personnel is also reviewed on
promotion. There is no guaranteed pay increase included in any
Non-Director key management personnel's contract.
In response to COVID-19, effective 1 May 2020 until 31 October
2020, the fixed remuneration paid to each KMP was reduced by
20%.
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 Non-Director 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.
Information in relation to STI awarded for performance year
FY19
In line with the recommendation from the Remuneration and
Nomination Committee, the Board formally approved the results of
the FY19 key performance indicators (KPIs) on 23 March 2020.
Following board approval received in FY20, an offer of zero
exercise price options (ZEP Options) was made to eligible
employees, resulting in the formal issue of 947,041 ZEP Options
occurring in the current year. The share based payment expense
associated with the ZEP Options has been recognised in the current
year.
The Board approved KPIs for prior 2019 year were linked to the
following:
-- Securing senior debt
-- Securing funds from equity raising
-- Operational readiness
-- License to develop
Information in relation to STI awarded for performance year
FY20
Following a review of performance against FY20 key performance
indicators (KPIs), the Board determined that no STIs would be
awarded in respect of FY20.
Information in relation to STI awarded for performance year
FY21
The Board has approved KPIs for the upcoming 2021 year
being:
-- Secure balance of Colluli funding and maintain Senior Lender Support
-- Successful completion of process test work
-- Mining Services, Power Contract and Camp Contract signed subject to conditions precedent
-- No ESG, Health and Safety or corporate governance incidents
and no notice of licence breach.
iii) Variable Remuneration - Long Term Incentives (LTI)
The Company does not currently have a formal long term incentive
plan approved by shareholders in place under which long term
incentives are offered. No long term incentives have been provided
to employees during the year.
In previous financial years, long term incentives have been
provided to employees in the form of non-plan performance rights,
and performance rights under the Performance Rights Plan (PRP). The
PRP was re-approved by shareholders at the general meeting held 17
November 2014.
Details of options issued to Non-Director key management
personnel in the previous years can be found in section f(i)
below.
Details of performance rights issued to Non-Director 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 98% of votes in favour of its
Remuneration Report for the financial year ending 31 December 2020
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
Non-Director key management personnel of Danakali Ltd are set out
in the following table. The disclosed directors' fees are inclusive
of committee fees.
Key management personnel of the Company for the financial year
to 31 December 2020:
Financial Year Short-Term Post-Employment Long Total Performance
to Benefits Term Share Based Payments Remuneration related (h)
31 December Benefits
2020
Long
Service STI LTI Performance
Salary Super- Leave Options Options Rights (b)
and Fees annuation (c) Shares (b)(f)(g) (b)(d) (d)
---------- --------------- -------- ------- --------- ------- ----------- ------------ -----------
$ $ $ $ $ $ $ $ %
---------- --------------- -------- ------- --------- ------- ----------- ------------ -----------
Non-Executive
Directors
S Cornelius
(g) 91,985 7,546 - - - 3,567 - 103,098 3%
P Donaldson
(g) 42,465 4,034 - - - - (111,319) (64,820) 0%
J Fitzgerald
(g) 70,000 6,650 - - - - - 76,650 0%
J Zhang (g) 54,000 - - - - - - 54,000 0%
R Connochie(g) 56,485 - - - - - - 56,485 0%
A Liebenberg
(g) 47,763 - - - - - - 47,763 0%
N Gregson (g) 25,268 - - - - - - 25,268 0%
S Zubairu (g) 35,067 - - - - - - 35,067 0%
T Adeniji (g) 35,067 - - - - - - 35,067 0%
Other
Non-Director
Key Management
Personnel
N Wage (f) 450,993 40,569 12,562 - 226,094 58,435 52,881 841,534 40%
S Tarrant (f) 254,970 23,119 5,307 - 116,145 18,587 - 418,128 32%
C
Grant-Edwards
(a) 37,950 - - - - - - 37,950 0%
M Chapman (a) 37,950 - - - - - - 37,950 0%
TOTAL 1,239,963 81,918 17,869 - 342,239 80,589 (58,438) 1,704,140 27%
Note:
(a) Company secretarial services are provided through Bellatrix
Corporate Pty Ltd. Fees charged are on an arms-length basis. In
response to COVID-19, fees were reduced by 10% over the six-month
period from May to October 2020.
(b) The recorded values of options will only be realised by the
KMP's in the event the Company's share price exceeds the option
exercise price. The recorded values of performance rights will only
be realised by the KMP's in the event the Company achieves its
stated objectives, which is expected to create further value for
shareholders.
(c) Long service leave reported in this table represents amounts accrued during the year.
(d) This amount refers to the share-based payment expense/(reversal) recorded in the statement of comprehensive income during the period in respect of the options and performance rights to KMP's (refer details below).
(e) In response to COVID-19, salaries were reduced by 20% over
the six-month period from May to October 2020.
(f) In response to COVID-19, non-executive director base fees
were reduced by 20% over the six-month period from May to October
2020.
(g) Refers to ZEP Options issued constituting a short term
incentive (STI) award in respect of the FY19 year results (as
detailed above).
(h) Performance related percentage calculated in reference to
share based payments divided by total remuneration (excluding
reversal amounts).
Key management personnel of the Company for the financial year
to 31 December 2019:
Financial Year Short-Term Post-Employment Long Share Based Payments Total Performance
to Benefits Term Remuneration related (h)
31 December Benefits
2019
Long
Salary Service LTI Performance
and Fees Super- Leave STI Options Rights (d)
(e) annuation (f) Shares Options (d) (g) (g)
---------- --------------- -------- ------- ------- ------- ----------- ------------ -----------
$ $ $ $ $ $ $ $ %
---------- --------------- -------- ------- ------- ------- ----------- ------------ -----------
Non-Executive
Directors
S Cornelius
(a) 99,497 - - - - - - 99,497 -
P Donaldson 78,514 7,459 - - - - 18,919 104,892 18%
J Fitzgerald 68,451 6,503 - - - - - 74,954 -
J Zhang 52,473 - - - - - - 52,473 -
R Connochie 58,554 - - - - - - 58,554 -
A Liebenberg 78,823 - - - - 15,865 - 94,688 17%
Executive
Directors
S Cornelius
(a) 69,028 - - - - 33,656 - 102,684 33%
Other
Non-Director
Key Management
Personnel
N Wage (b) 306,504 29,668 4,189 - - 130,241 160,138 630,740 46%
S Tarrant 271,651 25,156 (14) - - 75,382 (145) 372,030 20%
C
Grant-Edwards
(c) 48,000 - - - - - - 48,000 -
M Chapman (c) 48,000 - - - - - - 48,000 -
TOTAL 1,179,495 68,786 4,175 - - 255,144 178,912 1,686,512 26%
Note:
(a) Mr S Cornelius transitioned from the role of Executive
Chairman to Non-Executive Chairman on 25 June 2019.
(b) Mr Wage was appointed Chief Executive Officer 25 March 2019.
(c) Company secretarial services are provided through Bellatrix
Corporate Pty Ltd. Fees charged are on an arms-length basis.
(d) The recorded values of options will only be realised by the
KMP's in the event the Company's share price exceeds the option
exercise price. The recorded values of performance rights will only
be realised by the KMP's in the event the Company achieves its
stated objectives, which is expected to create further value for
shareholders.
(e) Amounts shown in salary and fees includes annual leave movements during the year.
(f) Long service leave reported in this table represents amounts accrued during the year.
(g) This amount refers to the share-based payment expense
recorded in the statement of comprehensive income during the period
in respect of the options and performance rights to KMP's (refer
details below).
(h) Performance related percentage calculated in reference to
share based payments divided by total remuneration (excluding
reversal amounts).
The relative proportions of remuneration that are linked to
performance and those that are fixed are as follows:
Financial Year to 31 December 2020
Name Fixed Remuneration At risk - STI At risk - LTI
------------------- -------------- --------------
Non-Executive Directors
S Cornelius 97% - 3%
J Fitzgerald 100% - -
J Zhang 100% - -
R Connochie 100% - -
N Gregson 100% - -
S Zubairu 100% - -
T Adeniji 100% - -
P Donaldson 100% - -
A Liebenberg 100% - -
Other Non-Director Key
Management Personnel
N Wage 60% 27% 13%
S Tarrant 68% 28% 4%
C Grant-Edwards 100% - -
M Chapman 100% - -
------------------- -------------- --------------
e) Service Agreements
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.
N Wage, Chief Executive Officer:
-- Appointed 25 March 2019 to role of CEO
-- Engaged as a permanent full-time employee
-- Effective from 1 January 2020, Mr Wage's salary was increased to EUR257,500 per annum plus superannuation at the Australian statutory rate and health insurance for Mr Wage and his dependents
-- In response to COVID-19, effective from 1 May 2020 until 31
October 2020, Mr Wage's salary was reduced by 20% to EUR206,000 per
annum plus superannuation at the Australian statutory rate
-- Notice period of six months, required to be given by either party for termination
S Tarrant, Chief Financial Officer
-- Appointed 12 June 2017
-- Engaged as a permanent full-time employee
-- Effective from 1 January 2020, Mr Tarrant's salary was
increased to $306,000 per annum inclusive of superannuation
-- In response to COVID-19, effective from 1 May 2020 until 31
October 2020, Mr Tarrant's salary was reduced by 20% to $244,800
per annum inclusive of superannuation
-- Notice period of three months, required to be given by either party for termination
f) Details of Share Based Compensation
(i) Options
During the year, the following options were issued to KMP's as
part of remuneration:
-- 471,030 unlisted options with an exercise price of $0.00 each
expiring 31 December 2021 (no vesting conditions due to options
being issued in compensation for satisfaction of historical KPIs)
to Mr Niels Wage,
-- 241,968 unlisted options with an exercise price of $0.00 each
expiring 31 December 2021 (no vesting conditions due to options
being issued in compensation for satisfaction of historical KPIs)
to Mr Stuart Tarrant; and
representing the STI award as equity in lieu of cash in relation
to performance against 31 December 2019 KPIs.
There were no new options granted to key management personnel
during the year, other than listed above.
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 2020 are set out in
the following table:
Value
Vesting and per option Vested
first exercise Number Exercise at grant and exercisable
Grant date date Expiry date of Options price date %
24 January 24 January
27 May 2019 2020 2022 301,040 $1.031 $0.124 100% (a)
----------------- ------------- ------------ --------- ------------ -----------------
13 March 13 March
2019 13 March 2020 2022 583,000 $1.108 $0.161 100% (a)
----------------- ------------- ------------ --------- ------------ -----------------
31 January
30 May 2019 2020 30 May 2022 725,000 $1.114 $0.130 100% (a)
----------------- ------------- ------------ --------- ------------ -----------------
30 May 2019 31 July 2020 30 May 2022 725,000 $1.114 $0.130 100% (a)
----------------- ------------- ------------ --------- ------------ -----------------
20 August 28 August 31 December
2020 2020 2021 712,998 $0.000 $0.480 100% (b)
----------------- ------------- ------------ --------- ------------ -----------------
Total Options 3,047,038
------------------------------------------------- ------------ --------- ------------ -----------------
Note:
(a) Options vest subject to service condition being met
(b) No vesting conditions
Details of options over ordinary shares in the Company, provided
as remuneration to key management personnel are set out in the
following table.
Unamort-ised
Year in Value of value of
Year which Number options options Number
of options of options at grant at 31 Dec of options Vested
Name grant vest granted date 2020 vested and exercisable
S Cornelius 2019 2020 301,040 $37,234 - 301,040 100%
-------- ---------- ------------ ---------- ------------- ------------ -----------------
N Wage 2019 2020 1,450,000 $188,676 - 1,450,000 100%
-------- ---------- ------------ ---------- ------------- ------------ -----------------
N Wage 2020 2020 471,030 $226,094 - 471,030 100%
-------- ---------- ------------ ---------- ------------- ------------ -----------------
S Tarrant 2019 2020 583,000 $93,670 - 583,000 100%
-------- ---------- ------------ ---------- ------------- ------------ -----------------
S Tarrant 2020 2020 241,968 $116,145 - 241,968 100%
-------- ---------- ------------ ---------- ------------- ------------ -----------------
Total Options 3,047,038 3,047,038
------------------------------------- ------------ ---------- ------------- ------------ -----------------
There were no remuneration options exercised by key management
personnel during the year.
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.
(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 2020 are as set out in the following
table:
Performance rights Number of performance Performance
granted rights vested rights forfeited
Year In prior In current Total
Name of grant Class Number periods period Unvested
--------- ----------- ----------- -----------
Class
P M Donaldson 2014 4 2,450,000 1,650,000 - 800,000 -
Class 50,000
S Tarrant 2017 6 50,000 (a) - - -
Class
S Tarrant 2017 7 50,000 20,000 - 30,000 (b) -
Class
N Wage 2019 9 (c) 1,000,000 100,000 - - 90%
----------- --------- ----------- ----------- ----------- ------------------ ----------
(a () Includes 25,000 performance rights in respect of which the
performance hurdle was met in the year ended 31 December 2019 and
were formally converted 13 January 2020.
(b () Includes 15,000 performance rights in respect of which the
performance hurdle failed to be met in the year ended 31 December
2019 and were formally forfeited 13 January 2020.
(c) Class 9 performance rights were granted on 30 May 2019. The
fair value of rights at grant date was $0.75 per right. The rights
do not have an expiry date, but unvested rights are subject to
forfeiture upon employee ceasing to be employed. As at 31 December
2020, the unamortised value of the rights is $536,981. The 900,000
Class 9 performance rights which were on issue at 31 December 2020
were forfeited subsequent to year end.
The performance rights on issue to key management personnel, as
set out above, vest, subject to the following vesting
conditions:
These conditions were selected to incentivise the progression of
the Project development.
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. On 3 August 2020, Mr Paul Donaldson resigned as
Non-executive Director and were forfeited as a result.
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 (vested October 2019); and
-- 25,000 upon term sheets being signed for the project
financing of the Colluli project (vested during December 2019 and
shares issued January 2020).
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% (performance hurdle forfeited as not met
at December 2019 and rights were formally removed from the register
in January 2020); and
-- 15,000 on signing a debt term sheet for project financing or
debt is secured from a strategic investor (forfeited June
2019).
Class 9:
-- 100,000 when CMSC commences early works at Colluli provided
this occurs in 2019 (vested December 2019 and shares issued January
2020);
-- 300,000 when construction at Colluli is considered to be 50%
complete provided construction is materially on time and on budget
and Danakali are meeting safety standards (forfeited subsequent to
year end);
-- 500,000 when CMSC commences commercial production at Colluli
provided this is materially on time and on budget, meeting safety
and product quality standards (forfeited subsequent to year end);
and
-- 100,000 when CMSC have shipped and been paid for 100,000t of
SOP provided this occurs materially on time, meeting safety and
product quality standards (forfeited subsequent to year end).
No performance rights held by key management personnel were
forfeited during the year, other than those detailed above.
Subsequent to year end, all the Class 9 performance rights were
forfeited.
g) Equity Instruments Held by Key Management Personnel
(i) Shares
No shares were granted as remuneration during the year ended 31
December 2020.
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 Balance Granted Received Received On market Other Balance
Year to at as on exercise / entitled purchases/ at
31 December 31 December compensation of to receive (sales) 31 December
2020 2019 remuneration on conversion 2020
options of performance
Shares rights
Directors
S Cornelius 10,328,965 - - - 3,162,161 - 13,491,126
J Fitzgerald 526,453 - - - - - 526,453
J Zhang - - - - - - -
R Connochie - - - - - - -
N Gregson - - - - - - -
S Zubairu - - - - - - -
T Adeniji - - - - - - -
(2,957,751)
P Donaldson 2,957,751 - - - - (a) -
A Liebenberg - - - - - - -
Other KMP
N Wage 100,000 - - - - - 100,000
S Tarrant 229,857 - - - - - 229,857
C
Grant-Edwards - - - - 13,156 - 13,156
M Chapman - - - - 13,156 - 13,156
TOTAL 14,143,026 - - - 3,188,473 (2,957,751) 14,373,748
(a () At the date of resignation on 3 August 2020, Mr Donaldson
held 2,957,751 shares.
(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 Balance Granted Exercised Expired Cancelled Balance Vested Unvested
Year to at at and exercisable
31 December 31 December 31 December
2020 2019 2020
Options
Directors
S Cornelius 601,040 - - (300,000) - 301,040 301,040 -
P Donaldson 100,000 - - (100,000) - - - -
J Fitzgerald 250,000 - - (250,000) - - - -
J Zhang 100,000 - - (100,000) - - - -
R Connochie 500,000 - - (500,000) - - - -
A Liebenberg 500,000 - - (500,000) - - - -
N Gregson - - - - - - - -
S Zubairu - - - - - - - -
T Adeniji - - - - - - - -
Other KMP
N Wage 1,450,000 471,030 - - - 1,921,030 1,921,030 -
S Tarrant 583,000 241,968 - - - 824,968 824,968 -
C Grant-Edwards - - - - - - - -
M Chapman - - - - - - - -
------------ ------- --------- ----------- --------- ------------ ---------------- --------
TOTAL 4,084,040 712,998 - (1,750,000) - 3,047,038 3,047,038 -
------------ ------- --------- ----------- --------- ------------ ---------------- --------
(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 Balance Granted Vested Forfeited Other Unvested
to at 31 December as Remuneration Balance
31 December 2020 2019 at 31 December
2020
Performance Rights
Directors
S Cornelius - - - - - -
(800,000)
P Donaldson 800,000 - - (a) - -
J Fitzgerald - - - - - -
J Zhang - - - - - -
R Connochie - - - - - -
A Liebenberg - - - - - -
N Gregson - - - - - -
S Zubairu - - - - - -
T Adeniji - - - - - -
Other KMP
N Wage(b) 900,000 - - - - 900,000
S Tarrant - - - - - -
C Grant-Edwards - - - - - -
M Chapman - - - - - -
--------------- ---------------- ------ ----------- ------- -----------------
TOTAL 1,700,000 - - (800,000) - 900,000
--------------- ---------------- ------ ----------- ------- -----------------
Note:
(a) Lapse of performance rights upon ceasing to be a Director
pursuant terms of Performance Rights Plan.
(b) Performance rights lapsed subsequent to year end on 26 February 2021.
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.
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, corporate and project development activities
were undertaken to progress the Colluli Potash Project. The
remuneration paid during the period is commercially reasonable for
a 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 development stage and revenue streams
only relate to interest earned on surplus funds from capital
raisings held at bank. The net losses after tax reflect the
remeasurement loss of the receivable at fair value arising from the
change in the loan repayment profile, foreign exchange loss on the
loan receivable denominated in USD and administrative costs
incurred by the Group. The table below shows the performance of the
Group over the last 5 reporting periods:
Financial 31 Dec 2020 31 Dec 2019 31 Dec 2018 31 Dec 2017 31 Dec 2016
Year
Basic loss
per share
(Cents) (2.59) (1.16) (2.66) (2.85) (2.35)
------------- ------------- ------------- ------------- -------------
Share Price $0.315 $0.60 $0.74 $0.715 $0.48
------------- ------------- ------------- ------------- -------------
(Loss) for
the period ($8,259,370) ($3,148,734) ($6,944,413) ($6,839,936) ($4,925,558)
------------- ------------- ------------- ------------- -------------
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.
- - OF REMUNERATION REPORT - -
MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
In accordance with the requirements set out in DTR4.1 of the
Disclosure and Transparency Rules in the United Kingdom, the
Directors' Report and Corporate Governance Statement, incorporated
by reference, when taken as a whole, form the Management
Report.
The Directors (as listed under Corporate Information) confirm to
the best of their knowledge, that:
a) the consolidated financial statements and notes to the
financial statements were prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group
and the undertakings included in the consolidation taken as a
whole; and
b) the Directors' Report includes a fair review the development
and performance of the business and the position of the Group and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties they face.
Signed in accordance with a resolution of the directors.
Seamus Cornelius
EXECUTIVE CHAIRMAN
Perth, 31 March 2021
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% K (2) 0 Equiv.
and 7% Kieserite. The Mineral Resource contains 303Mt @ 11% K (2) 0
Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K (2) 0
Equiv. and 7% Kieserite of Indicated Resource and 35Mt @ 10% K (2)
0 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 . 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% K (2) O Equiv. The
Ore Reserve is classified as 285Mt @ 11.3% K (2) O Equiv. Proved
and 815Mt @ 10.3% K (2) O Equiv. Probable. The Colluli SOP Mineral
Resource includes those Mineral Resources modified to produce the
Colluli SOP Ore Reserves.
The information relating to the 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 . 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 . 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 potash
salt rocks chemical analysis (K (+) , Na(+) , Mg(2+) , Ca(2+) ,
Cl(-) , SO(4) (2-) , H(2) O) 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.
Forward looking statements and disclaimer
The information in this document is published to inform you
about Danakali and its activities. Danakali has endeavored to
ensure that the information enclosed is accurate at the time of
release, and that it accurately reflects the Company ' s
intentions. All statements in this document, other than statements
of historical facts, that address future production, project
development, reserve or resource potential, exploration drilling,
exploitation activities, corporate transactions and events or
developments that the Company expects to occur, are forward looking
statements. Although the Company believes the expectations
expressed in such statements are based on reasonable assumptions,
such statements are not guaranteeing 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.
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes $ $
REVENUE AND OTHER INCOME
Interest revenue 4 71,841 81,338
Sundry 117,500 2,169
EXPENSES
Depreciation expense 9 (3,939) (5,880)
Loss on disposal of plant and equipment 9 (3,499) (3,074)
Administration expenses 5 (3,493,175) (2,780,202)
Share based payment expense 22 (420,063) (730,096)
Net gain/(loss) on financial assets classified
at fair value through profit or loss 8 (2,669,808) 4,400,730
Share of net gain/(loss) of joint venture 10 15,242 ( 2,957,269)
Foreign exchange gain/(loss) (1,873,469) (1,156,450)
LOSS BEFORE INCOME TAX (8,259,370) (3,148,734)
Income tax expense 7 - -
----------- ------------
LOSS FOR THE YEAR (8,259,370) (3,148,734)
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 10,14 (1,550,097) (18,178)
----------- ------------
OTHER COMPREHENSIVE LOSS FOR THE YEAR,
NET OF TAX (1,550,097) (18,178)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (9,809,467) (3,166,912)
=========== ============
Loss per share attributable to the ordinary
equity holders of the Company:
Basic loss per share (cents per share) 17 (2.59) (1.16)
Diluted loss per share (cents per share) 17 (2.59) (1.16)
The above Consolidated Statement of Profit or Loss and Other
Comprehensive Income should be read in conjunction with the
accompanying notes.
Consolidated Statement of Financial Position
AS AT 31 DECEMBER 2020
2020 2019
Notes $ $
CURRENT ASSETS
Cash and cash equivalents 6 9,738,794 33,800,104
Receivables 8 103,045 281,804
Prepayments 411,808 269,878
TOTAL CURRENT ASSETS 10,253,647 34,351,786
------------ ------------
NON--CURRENT ASSETS
Receivables 8 12,504,442 15,204,815
Investment in joint venture 10 34,194,212 27,975,738
Plant and equipment 9 12,401 13,998
TOTAL NON--CURRENT ASSETS 46,711,055 43,194,551
------------ ------------
TOTAL ASSETS 56,964,702 77,546,337
------------ ------------
CURRENT LIABILITIES
Trade and other payables 11 726,271 11,794,757
Provisions 12 73,002 80,623
TOTAL CURRENT LIABILITIES 799,273 11,875,380
------------ ------------
NON-CURRENT LIABILITIES
Provisions 12 65,684 45,229
------------ ------------
TOTAL NON-CURRENT LIABILITIES 65,684 45,229
TOTAL LIABILITIES 864,957 11,920,609
------------ ------------
NET ASSETS 56,099,745 65,625,728
============ ============
EQUITY
Issued capital 13 109,058,372 109,194,951
Reserves 14 12,793,237 13,923,271
Accumulated losses 15 (65,751,864) (57,492,494)
------------ ------------
TOTAL EQUITY 56,099,745 65,625,728
============ ============
The above Consolidated Statement of Financial Position should be
read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
FOR THE YEARED 31 DECEMBER 2020
Reserves
Share Based Foreign Currency Accumulated
Issued Capital Payments Translation Losses Total Equity
Notes $ $ $ $ $
BALANCE AT 1 JANUARY 2020 109,194,951 11,962,019 1,961,252 (57,492,494) 65,625,728
Loss for the period - - - (8,259,370) (8,259,370)
Other comprehensive Loss 14 - - (1,550,097) - (1,550,097)
-------------- ----------- ---------------- ------------ ------------
Total comprehensive loss for the
period - - (1,550,097) (8,259,370) (9,809,467)
Transactions with owners in their
capacity as owners:
Shares issued 13 - - - - -
Costs of capital raised 13 (136,579) - - - (136,579)
Share based payments 14 - 420,063 - - 420,063
-------------- ----------- ---------------- ------------ ------------
BALANCE AT 31 DECEMBER 2020 109,058,372 12,382,082 411,155 (65,751,864) 56,099,745
============== =========== ================ ============ ============
BALANCE AT 1 JANUARY 2019 79,576,117 11,231,923 1,979,430 (54,343,760) 38,443,710
Loss for the period - - - (3,148,734) (3,148,734)
Other comprehensive loss 14 - - (18,178) - (18,178)
-------------- ----------- ---------------- ------------ ------------
Total comprehensive loss for the
period - - (18,178) (3,148,734) (3,166,912)
Transactions with owners in their
capacity as owners:
Shares issued 13 32,413,295 - - - 32,413,295
Costs of capital raised 13 (2,794,461) - - - (2,794,461)
Share based payments 14 - 730,096 - - 730,096
-------------- ----------- ---------------- ------------ ------------
BALANCE AT 31 DECEMBER 2019 109,194,951 11,962,019 1,961,252 (57,492,494) 65,625,728
============== =========== ================ ============ ============
The above Consolidated Statement of Changes in Equity should be
read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
FOR THE YEARED 31 DECEMBER 2020
2020 2019
Notes $ $
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received 71,898 81,693
Payments to suppliers and employees (2,953,402) (2,620,388)
NET CASH OUTFLOW USED IN OPERATING ACTIVITIES 16(a) (2,881,504) (2,538,695)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Funding of joint venture (17,566,388) (4,407,612)
Payments for plant and equipment (5,841) -
NET CASH OUTFLOW USED IN INVESTING ACTIVITIES (17,572,229) (4,407,612)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of ordinary shares - 32,413,295
Payment of costs of capital raised (3,302,478) (126,994)
NET CASH INFLOW FROM FINANCING ACTIVITIES (3,302,478) 32,286,301
------------ -----------
NET INCREASE / (DECREASE) IN CASH (23,756,211) 25,339,994
Cash at the beginning of the financial
year 33,800,104 9,550,585
Net foreign exchange differences (305,099) (1,090,475)
CASH AT THE OF THE YEAR 6 9,738,794 33,800,104
============ ===========
The above Consolidated Statement of Cash Flows should be read in
conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
FOR THE YEARED 31 DECEMBER 2020
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 2020 comprises the Company and its subsidiaries
(together referred to as the Group ). The address of the registered
office is Level 1, 2A / 300 Fitzgerald Street, North Perth, WA,
6006.
The financial statements are presented in the Australian
currency.
The financial report of Danakali for the year ended 31 December
2020 was authorised for issue by the Directors on 31 March 2021.
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 consolidated 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 2020,
including:
AASB 2019-1 Conceptual Framework for Financial Reporting and
relevant amending standards (Conceptual Framework)
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
AASB 2019-1 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 AASB in situations where no standard
applies to a particular transaction or event. In addition, relief
has been provided in applying AASB 3 and developing accounting
policies for regulatory account balances using AASB 108, such that
entities must continue to apply the definitions of an asset and a
liability (and supporting concepts) in the 2010 Conceptual
Framework, and not the definitions in the revised Conceptual
Framework.
At 1 January 2020 it was determined that the adoption of the
Conceptual Framework had no material impact on the Group.
AASB 2018-7 Definition of Material (Amendments to AASB 101 and
AASB 108)
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.
At 1 January 2020 it was determined that the adoption of AASB
2018-7 had no material 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 2020. The
relevant standards are outlined in the table below.
Reference Title Summary Application date
of standard for Group
------------ ----------
AASB Amendments The amendments clarify that 1 January 1 January
2014-10 to Australian a full gain or loss is recognised 2022 2022
Accounting when a transfer to an associate
Standards or joint venture involves
- Sale or a business as defined in
Contribution AASB 3 Business Combinations.
of Assets Any gain or loss resulting
between an from the sale or contribution
Investor and of assets that does not
its Associate constitute a business, however,
or Joint is recognised only to the
Venture extent of unrelated investors'
interests in the associate
or joint venture.
In December 2015, the IASB
postponed the effective
date of the amendments to
IFRS 10 and IAS 28 indefinitely
pending the outcome of its
research project on the
equity method of accounting.
---------------- ------------------------------------------------------------ ------------ ----------
AASB 2020-1 Amendments A liability is classified 1 January 1 January
to AASs - as current if the entity 2023 2023
Classification has no right at the end
of Liabilities of the reporting period
as Current to defer settlement for
or Non-current at least 12 months after
the reporting period. The
AASB recently issued amendments
to AASB 101 Presentation
of Financial Statements
to clarify the requirements
for classifying liabilities
as current or non-current.
Specifically:
* The amendments specify that the conditions which
exist at the end of the reporting period are those
which will be used to determine if a right to defer
settlement of a liability exists.
* Management intention or expectation does not affect
classification of liabilities.
* In cases where an instrument with a conversion option
is classified as a liability, the transfer of equity
instruments would constitute settlement of the
liability for the purpose of classifying it as
current or non-current.
---------------- ------------------------------------------------------------ ------------ ----------
AASB 2020-3 Amendments AASB 137 defines an onerous 1 January 1 January
to AASB 137 contract as a contract in 2022 2022
- Onerous which the unavoidable costs
Contracts of meeting the obligations
- Cost of under the contract exceed
Fulfilling the economic benefits expected
a Contract to be received under it.
Unavoidable cost is the
lower of the cost of fulfilling
the contract and any compensation
or penalties arising from
failure to fulfil it.
AASB 137 does not specify
which costs to include in
determining the cost of
fulfilling a contract. Consequently,
AASB 137 was amended to
clarify that when assessing
whether a contract is onerous,
the cost of fulfilling the
contract comprises all costs
that relate directly to
the contract, which includes
both the:
* Incremental costs of fulfilling that contract (e.g.,
materials and labour); and
* An allocation of other costs that relate directly to
fulfilling contracts (e.g., depreciation of property,
plant and equipment)
An entity shall apply these
amendments to contracts
for which it has not yet
fulfilled all its obligations
at the beginning of the
annual reporting period
in which it first applies
the amendments (the date
of initial application).
Comparative information
is not restated. Instead,
the cumulative effect of
initially applying the amendments
is recognised as an adjustment
to the opening balance of
retained earnings or other
component of equity, as
appropriate, at the date
of initial application.
---------------- ------------------------------------------------------------ ------------ ----------
AASB 2020-3 Amendment Under AASB 9, an existing 1 January 1 January
to AASB 9 financial liability that 2022 2022
- Fees in has been modified or exchanged
the '10 per is considered extinguished
cent' Test when the contractual terms
for of the new liability are
Derecognition substantially different,
of Financial measured by the "10 per
Liabilities cent" test. That is, when
(Part of Annual the present value of the
Improvements cash flows under the new
2018-2020 terms, including any fees
Cycle) paid or received, is at
least 10 per cent different
from the present value of
the remaining cash flows
of the original financial
liability.
The amendment to AASB 9
clarifies that fees included
in the 10 per cent test
are limited to fees paid
or received between the
borrower and the lender,
including amounts paid or
received by them on the
other's behalf. When assessing
the significance of any
difference between the new
and old contractual terms,
only the changes in contractual
cash flows between the lender
and borrower are relevant.
Consequently, fees incurred
on the modification or exchange
of a financial liability
paid to third parties are
excluded from the 10 per
cent test.
---------------- ------------------------------------------------------------ ------------ ----------
(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 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.
At balance date, the Group had cash and cash equivalents of
$9,738,794 (31 December 2019: $33,800,104) and a net working
capital surplus of $9,454,374 (31 December 2019: $22,476,406).
Whilst the existing cash reserves are sufficient to cover the
working capital requirements of the Group for the next 12 months,
the Group has commenced execution of the project development and as
such, additional funding will be necessary to carry out these
planned activities. The directors are confident that the Group will
be able to obtain the additional funding requirement to continue
with the development of the project as evidenced by the execution
of documentation for a conditional US$200M debt facility.
The balance of the funding is being pursued through a mix of
debt, equity and quasi-equity instruments for Danakali and CMSC.
Where such financing was likely to be delayed, as was experienced
during 2020 in part due to the COVID-19 pandemic, the directors
seek to defer its planned capital expenditure on the project.
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 and commence Commercial
Production in the 36 months following the provision of formal
Notice of Commencement of Mine Development (the Notice) to the
Ministry of Energy and Mines (MoEM). The Notice, dated 16 December
2019, was accepted by MoEM on 21 July 2020 (ASX announcement 22
July 2020). The granted time by the MoEM to commence Commercial
Production and spend US$200M on infrastructure and mine development
is 36 months from submission of the Notice (15 December 2022).
The ability for CMSC to spend US$200 million on infrastructure
and mine development and commence Commercial Production before 15
December 2022 is determined by two factors; available funding and
the development schedule. With regard to the availability of
funding, as described above, the Group is engaged in sourcing
necessary funding to close the project funding. With regard to the
development schedule, work is being undertaken by DRA Global to
compress the development timeline. The combination of the timing of
funding and schedule compression may not be sufficient to satisfy
the 15 December 2022 date. Should this be the case, CMSC would, in
the normal course of business, apply to the MoEM for an extension
of the date. Based on informal discussions with the MoEM and our
partners, and previous experience in Eritrea, the directors are
satisfied that there are reasonable grounds to believe that an
extension will be granted if requested.
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.
(f) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
Australian dollars, which is Danakali's functional and presentation
currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
(iii) Foreign operations
The results and financial position of foreign operations (none
of which has the currency of a hyperinflationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-- assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date
of that statement of financial position;
-- income and expenses for each statement of comprehensive
income are translated at average exchange rates (unless that is not
a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
-- all resulting exchange differences are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part
of the net investment are repaid, a proportionate share of such
exchange differences is reclassified to profit or loss, as part of
the gain or loss on sale where applicable.
(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
Group as Lessee
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration.
(i) Right of use asset
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the
Group is reasonably certain to obtain ownership of the leased asset
at the end of the lease term, the recognised right-of-use assets
are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right-of-use assets are
subject to impairment.
(ii) Lease Liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an
index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
The Group recognised the lease payments as an expense on a
straight line basis over the lease term.
The Group has elected not to recognise right of use assets and
lease liabilities for short term leases and low value assets.
(iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption for
those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option. It also
applies the lease of low-value assets recognition exemption to
leases of plant and equipment that are considered of low value.
Lease payments on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis over the lease
term.
(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
(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
(FVTPL). The loan to Colluli Mining Share Company is measured at
FVTPL.
(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) Investment in joint venture
A joint venture is a type of joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The Group's investment in a joint venture is accounted for using
the equity method.
Under the equity method, the investment in a joint venture is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the joint venture since the acquisition date. Goodwill relating
to the joint venture is included in the carrying amount of the
investment and is neither amortised nor individually tested for
impairment.
The statement of profit or loss reflects the Group's share of
the results of operations of the joint venture. Any change in other
comprehensive income of those investees is presented as part of the
Group's other comprehensive income. In addition, when there has
been a change recognised directly in the equity of the joint
venture, the Group recognises its share of any changes, when
applicable, in the statement of changes in equity. Unrealised gains
and losses resulting from transactions between the Group and the
joint venture are eliminated to the extent of the interest in the
joint venture.
The aggregate of the Group's share of profit or loss of a joint
venture is shown on the face of the statement of profit or loss
outside operating profit and represents profit or loss after tax
and non-controlling interests in the subsidiaries of the joint
venture.
The financial statements of the joint venture are prepared for
the same reporting period as the Group. When necessary, adjustments
are made to bring the accounting policies in line with those of the
Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its joint venture. At each reporting date, the Group
determines whether there is objective evidence that the investment
in the joint venture is impaired. If there is such evidence, the
Group calculates the amount of impairment as the difference between
the recoverable amount of the joint venture and its' carrying
value, then recognises the loss as 'Share of profit of the equity
accounted investment' in profit or loss.
Upon loss of joint control over a joint venture, the Group
measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the joint venture
upon loss of joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or
loss.
(n) 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 those
assets to retained earnings.
(o) Exploration and evaluation costs
Acquired exploration and evaluation costs are capitalised.
Ongoing exploration and evaluation costs are expensed in the period
they are incurred.
(p) Development Expenditure costs
When proven mineral reserves are determined and an application
for development has been submitted subsequent development
expenditure is capitalised and classified within development
capital expenditure, a non-current asset, provided commercial
viability conditions continue to be satisfied. Capitalised
exploration and evaluation expenditure is reclassified into
capitalised development and maintained on the consolidated balance
sheet as a non-current asset and evaluated for impairment annually.
On completion of development, all development capital expenditure
and exploration and evaluation expenditure are reclassified as
either plant and equipment or other mineral assets and depreciation
commences.
(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 long term benefits are measured using the projected unit
credit valuation method.
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 is 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 were a modification of the
original award.
(s) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair
value less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest rate method.
Borrowings are classified as current liabilities unless the
Consolidated Entity has the unconditional right to defer settlement
of the liability for at least 12 months after the reporting
date.
(t) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset (i.e. an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale) are capitalised as part of the cost
of that asset. Borrowing costs are capitalised from the date that
sufficient funding has been secured and unconditional and the
project development execution has started. This judgment will be
reviewed periodically relative to the project development. All
other borrowing costs are expensed in the period they occur.
Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
(u) 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.
(v) 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.
(w) 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 investment in
CMSC joint venture is tested for impairment when there is objective
evidence of impairment. As at 31 December 2020 the Group assessed
that, no indicator of impairment existed (31 December 2019:
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, being a shareholder(s) holding at least a 75%
interest in the share capital of CMSC. Neither ENAMCO of STB
Eritrea Pty Ltd (Danakali's wholly owned subsidiary) hold a 75%
shareholding in CMSC and as such material decisions require
unanimous approval of CMSC directors. Additionally, the annual
budget for CMSC is required to be approved by the shareholders with
a simple majority. As each shareholder holds 50% of the shares,
this is interpreted as a simple majority therefore can only be
achieved if both shareholders agree. This indicates there is no
control by one party. In light of the considerations mentioned, 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.
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.
Judgments include consideration of inputs including foreign
exchange risk, interest rate risk, credit risk, development risk
and country risk. At 31 December 2020 a discount rate of 21% (31
December 2019: 21%) 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 June 2026 quarter (2019:
June 2024 quarter).
Further context is detailed in note 10.
(iii) Share based payment transactions
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value of options is
determined by an internal valuation using a Black-Scholes option
pricing model, using the assumptions detailed in note 22.
The fair value of performance rights is determined by the share
price at the date of grant and consideration of the probability of
the vesting condition being met.
(x) 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.
(y) 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 development of the Colluli Potash
Project 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, other than financial instruments
are geographically located in Eritrea.
4. REVENUE
2020 2019
$ $
Interest 71,841 81,338
------ ------
5. EXPENSES
2020 2019
$ $
Employee benefits (net of recharges) 427,935 361,103
Directors' fees 476,330 519,301
Compliance and regulatory expenses 1,285,515 1,095,671
Lease payments relating to short term
leases 69,925 125,974
Insurance 304,390 235,944
Investor and public relations 473,158 225,718
Other administration expenses 455,922 216,491
--------- ---------
3,493,175 2,780,202
--------- ---------
6. CASH AND CASH EQUIVALENTS
2020 2019
$ $
Cash at bank and on hand 9,738,794 19,543,204
Short term deposits - 14,256,900
--------- ----------
9,738,794 33,800,104
--------- ----------
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 one month depending on the immediate cash requirements of
the Group and earn interest at the respective short-term deposit
rates.
7. INCOME TAX
2020 2019
$ $
(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 (8,259,370) (3,148,734)
----------- -----------
Prima facie tax benefit at the Australian
tax rate of 30.0% (2019: 30.0%) (2,477,811) (944,620)
Adjustment of under-provision of deferred
tax in prior year (806,717) (25,372)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Share-based payments 126,019 219,029
Share of net (gain)/loss of joint venture (4,573) 887,180
Net (gain)/loss on financial assets at fair
value through profit or loss 800,942 (1,320,219)
Movements in unrecognised temporary differences
and tax effect of current year tax losses: 2,362,139 1,184,002
Income tax expense/(benefit) - -
=========== ===========
(c) Deferred Income Tax
Deferred income tax at 31 December relates to the following:
Statement of Statement of Statement of
Financial Position Comprehensive Income Change in Equity
2020 2019 2020 2019 2020 2019
$ $ $ $ $ $
Deferred Tax Liabilities:
Interest receivable (17) (34) 17 95
Deferred Tax Assets:
Provision for employee
entitlements 41,606 37,756 3,850 (2,142)
Accrued expenditure 44,850 18,107 26,743 16,134
Unrealised foreign
exchange gain/loss 130,684 324,850 (194,166) 324,850
Share issue expenses 576,064 786,410 - - (210,346) 598,369
Tax losses 8,443,603 5,917,891 2,525,712 689,148
Deferred tax assets
not brought to account
as realisation is
not probable (9,236,790) (7,084,980) (2,362,156) (1,028,085) 210,246 (598,369)
----------- ----------- ----------- ----------- --------- ---------
- - - - - -
=========== =========== =========== =========== ========= =========
8. RECEIVABLES
2020 2019
$ $
Current
Net GST receivable 47,962 225,023
Accrued interest 57 114
Other receivables at amortised cost 26 1,667
Security bonds at amortised cost 55,000 55,000
---------- ----------
103,045 281,804
---------- ----------
Non-Current
Loan to Colluli Mining Share Company - at
fair value 12,504,442 15,204,815
---------- ----------
Carrying value of loans 12,504,442 15,204,815
========== ==========
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 interest rate
of 21% (2019: 21%).
During the years ended 31 December 2020 and 31 December 2019,
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. The
remeasurement of the receivable at fair value resulted in a loss of
$2,669,808 through profit or loss (2019: gain of $4,400,730) (see
note 10).
The undiscounted underlying loan balance at 31 December 2020 is
$40,506,332 (USD 31,226,502) (31 December 2019: $40,053,560) (USD
28,061,524).
2020 2019
$ $
Reconciliation of movement in loan to Colluli
Mining Share Company
Opening carrying amount at beginning of the
year 15,204,815 9,283,670
Additional loans during the year 1,537,805 1,586,388
Foreign exchange gain/(loss) (1,568,370) (65,973)
Net gain/(loss) on financial assets at fair
value through profit or loss (2,669,808) 4,400,730
----------- ----------
Closing carrying amount at end of the year 12,504,442 15,204,815
----------- ----------
9. PLANT AND EQUIPMENT
2020 2019
$ $
Plant and equipment
Gross carrying value - at cost 26,511 39,874
Accumulated depreciation (14,110) (25,875)
Net book amount 12,401 13,998
======== ========
Plant and equipment
Opening net book amount at beginning
of the year 13,998 22,952
Additions 5,841 -
Disposals (3,499) (3,074)
Depreciation charge (3,939) (5,880)
Closing net book amount at end of the
year 12,401 13,998
======== ========
10. INVESTMENT IN JOINT VENTURE
The Group has an interest in the following joint
arrangement:
Equity Interest Carrying Value
2020 2019 2020 2019
Project Activities % % $ $
Colluli
Potash Mineral Exploration 50 50 34,194,212 27,975,738
-------- -------------------- -------- ------- ---------- ----------
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 2020.
2020 2019
$ $
Reconciliation of movement in investments
accounted for using the equity method:
Opening carrying amount at beginning of the
year 27,975,738 19,829,489
Additional investment during the year 7,753,329 11,121,696
Share of net (loss)/profit for the year 15,242 (2,957,269)
Other comprehensive income for the year (1,550,097) (18,178)
----------- -----------
Closing carrying amount at end of the year 34,194,212 27,975,738
----------- -----------
Summarised financial information of joint venture:
2020 2019
$ $
Financial position (Aligned to Danakali accounting
policies)
Current Assets:
Cash 36,043 81,067
Other current assets 110,132 109,984
------------ ------------
146,175 191,051
------------ ------------
Non-current assets
Fixed Assets 86,186 114,708
Development costs capitalised 5,189,033 204,109
Prepaid finance costs 11,070,564 12,046,633
Mineral Property 28,404,193 31,302,663
------------ ------------
44,749,976 43,668,113
------------ ------------
Current liabilities
Trade & other payables and provisions (3,622,125) (4,786,610)
------------ ------------
(3,622,125) (4,786,610)
------------ ------------
Non-current liabilities
Loan from Danakali Ltd - at amortised cost (10,706,959) (12,901,373)
------------ ------------
(10,706,959) (12,901,373)
------------ ------------
NET ASSETS 30,567,067 26,171,181
============ ============
Group's share of net assets 15,283,534 13,085,590
============ ============
Reconciliation of Equity Investment:
Group's share of net assets 15,283,534 13,085,590
Share of initial contribution on establishment
of the Joint Venture not recognised by Danakali (4,305,107) (4,305,107)
Outside shareholder interest in equity contributions
by Danakali 23,215,782 19,195,255
------------ ------------
Carrying amount at the end of the period 34,194,211 27,975,738
------------ ------------
2020 2019
$ $
Financial performance
Interest expense relating to the unwinding
of discount on joint venture loan (3,397,462) (2,340,278)
(Loss)/gain on re-measurement of loan to
joint venture carried at amortised cost 5,859,365 323,465
General administrative costs (2,431,419) (3,897,725)
----------- -----------
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE
YEAR 30,484 (5,914,538)
----------- -----------
Group's share of total gain/(loss) for the
year 15,242 (2,957,269)
=========== ===========
During the year ended 31 December 2020 no dividends were paid or
declared (2019: Nil).
Colluli Mining Share Company has the following commitments or
contingencies at 31 December 2020:
COMMITMENTS
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 (Mining Agreement), CMSC is obliged to spend
US$200 million on infrastructure and mine development within the
area of the Colluli project mining licences, and commence
Commercial Production in the 36 months following the provision of
formal Notice of Commencement of Mine Development (the Notice) to
the Ministry of Energy and Mines (MoEM). The Notice, dated 16
December 2019, was accepted by MoEM on 21 July 2020 (ASX
announcement 22 July 2020). The granted time by the MoEM to
commence Commercial Production and spend US$200M on infrastructure
and mine development is 36 months from submission of the Notice (15
December 2022).
Development
At 31 December 2020, development work had commenced including
the engagement of DRA Global (DRA), CMSC's EPCM contractor. There
were no material commitments on 31 December 2020.
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 (Debt). 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.
At 31 December 2020, CMSC has commitments of $0.4M in annual
agent fees and $0.3M in due diligence costs.
CMSC will be liable for facility fees of $3.4M (2019: $3.8M) to
the financial advisors on the draw down of the facility.
CONTINGENCIES
At 31 December 2020, CMSC had contingency liabilities of $2.6m
(2019: $2.9m) payable to the MLAs on the draw down of the
facility.
11. TRADE AND OTHER PAYABLES
2020 2019
$ $
Trade payables (i) 483,282 4,213,886
Accrued expenses (ii) 149,500 7,580,871
Other payables 93,489 -
726,271 11,794,757
======= ==========
i) 2019 includes $2,790,642 fees payable to financial advisors.
ii) 2019 includes lenders fees of USD5,275,000 ($7,520,545)
associated with the debt financing.
12. PROVISIONS
2020 2019
$ $
Current
Employee entitlements 73,002 80,623
Non-Current
Employee entitlements 65,684 45,229
------- -------
138,686 125,852
======= =======
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
2020 2019
Number Number
of shares $ of shares $
(a ) Share capital
Ordinary shares fully paid 318,741,306 109,058,372 318,546,306 109,194,951
----------- ----------- ----------- -----------
Total issued capital 318,741,306 109,058,372 318,546,306 109,194,951
=========== =========== =========== ===========
(b) Movements in ordinary share
capital
Balance at the beginning of the
year 318,546,306 109,194,951 264,422,398 79,576,117
Issued during the year:
* Issued at $0.543 per share on option exercise - - 250,000 135,750
* Issued at $0.558 per share on option exercise - - 900,000 502,200
* Issued on vesting of performance rights (iii) 195,000 - 15,000 -
* Issued at $0.60 per share pursuant to placement (i) - - 52,958,908 31,775,345
( 2,794,461
* Costs of capital raised (ii) - (136,579) - )
----------- ----------- ----------- -----------
Balance at the end of the year 318,741,306 109,058,372 318,546,306 109,194,951
=========== =========== =========== ===========
(i) On 3 December 2019, the Company announced that AFC had
agreed to make a US$50M (A$74M) strategic equity investment in
Danakali to fund construction and project execution for Colluli (
Placement ). The subscription price of A$0.60 per Share represented
a 5% discount to Danakali's 30-day VWAP. The Placement is being
conducted in two tranches. The first tranche consisted of
52,958,908 new Shares issued at A$0.60 per Share to raise A$31.8M
(US$21.5M); this tranche was completed on 10 December 2019 (
Tranche 1 ). The second tranche totals US$28.5M ( Tranche 2 ).
Under the terms of the Tranche 2, certain conditions precedent
relating to CMSC's debt financing and execution of certain
documents ancillary to that debt financing, in addition to the
senior debt agreements already executed required satisfaction
before completion. Approval of Danakali's shareholders remains a
further condition precedent. In light of the rapid spread of
COVID-19 and its significant impact on global financial markets,
Tranche 2 was deferred to allow for the stabilisation of market and
global conditions.
On 1 June 2020, it was announced that Danakali and AFC had
agreed on a deadline extension of 21 November 2020 to satisfy
remaining conditions precedent for Tranche 2 funding.
On 26 October 2020, the Company announced that it is unlikely
that all such conditions precedent will be satisfied and as such,
Tranche 2 will not complete in accordance with the terms of the
Subscription Agreement.
(ii) Includes fees paid or payable to financial advisers in
relation to funds raised pursuant to the Placement.
(iii) Includes 175,000 shares issued upon conversion of
performance rights during the period in respect of which the
performance hurdle had been met during the year ended 31 December
2019. The balance of 20,000 shares relates the issue of shares upon
conversion of performance rights in respect of which the
performance hurdle was met during the year ended 31 December
2020.
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends
and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have
a limited amount of authorised capital.
2020 2019
Options Options
(d) Movements in options on issue
Balance at beginning of the year 6,004,112 2,990,000
Issued during the year:
* Exercisable at $0.912, on or before 11 May 2020 - 500,000
* Exercisable at $1.031, on or before 24 January 2022 - 2,025,055
* Exercisable at $1.108, on or before 13 March 2022 - 583,000
* Exercisable at $1.119, on or before 28 March 2022 - 561,800
* Exercisable at $1.114, on or before 30 May 2022 - 1,450,000
* Exercisable at $0, on or before 31 December 2021 947,041 -
* Exercisable at $0.664, on or before 8 July 2023 200,000 -
Exercised, lapsed or expired during the year:
* Exercised, exercisable at $0.543 on or before 7
October 2019 - (250,000)
* Exercised, exercisable at $0.558, on or before 8
August 2019 - (900,000)
* Expired, exercisable at $0.96 on or before 20 June
2019 - (400,000)
* Expired, exercisable at $0.94 on or before 19 May
2020 (1,440,000) -
* Expired, exercisable at $0.912 on or before 11 May
2020 (500,000) -
* Lapsed, exercisable at $1.031 on or before 24 January
2022 - (555,743)
------------ ---------
Balance at end of the year 5,211,153(1) 6,004,112
============ =========
(1) Excludes 250,000 unlisted options at an exercise price of
$0.501 each expiring 3 December 2023 that were granted during the
year on 3 December 2020 and formally issued on 12 February
2021.
14. RESERVES
2020 2019
$ $
(a) Reserves
Share-based payments reserve
Balance at beginning of the year 11,962,019 11,231,923
Employee and contractor share options and
performance rights (note 22) 420,063 730,096
Balance at end of the year 12,382,082 11,962,019
----------- ----------
Foreign currency translation reserve
Balance at beginning of the year 1,961,252 1,979,430
Currency translation differences arising
during the year/ period (1,550,097) (18,178)
----------- ----------
Balance at end of the year 411,155 1,961,252
----------- ----------
Total reserves 12,793,237 13,923,271
=========== ==========
(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
2020 2019
$ $
Balance at beginning of the year (57,492,494) (54,343,760)
Loss for the year (8,259,370) (3,148,734)
Balance at end of the year (65,751,864) (57,492,494)
------------ ------------
16. STATEMENT OF CASH FLOWS
2020 2019
$ $
(a) Reconciliation of net loss after income
tax to net cash outflow from operating activities
Net loss for the year (8,259,370) (3,148,734)
Non--Cash Items:
Depreciation of plant and equipment 3,939 5,880
Loss of disposal of plant and equipment 3,499 3,074
Share-based payment expense 420,063 730,096
Share of net (gain)/loss of associate (15,242) 2,957,269
Unrealised foreign exchange (gain)/loss 1,873,469 1,156,446
Net (gain)/loss on financial assets at fair
value through profit or loss 2,669,808 (4,400,730)
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables 175,497 28,521
Decrease/(increase) in trade and other payables 233,999 148,714
Increase/(decrease) in provisions 12,834 (19,231)
Net cash outflow from operating activities (2,881,504) (2,538,695)
------------ -----------
(b) Funding of joint venture operations
Cash contribution to joint venture operations
during the period (17,566,388) (4,407,612)
(c) Payments of leases
Payment of leases 69,925 125,974
17. EARNINGS PER SHARE
(a) Reconciliation of earnings used in calculating earnings per
share (EPS)
2020 2019
$ $
Loss attributable to the owners of the Company
used in calculating basic and diluted loss ( 3,148,734
per share (8,259,370) )
----------- -----------
( b) Weighted average number of shares used as the
denominator
2020 2019
No. of Shares No. of Shares
Weighted average number of ordinary shares
used as the denominator in calculating basic
and diluted loss per share 318,726,073 270,813,912
------------- -------------
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 5,461,153(1) (2019: 6,004,112)
share options and 1,260,000 (2019: 2,285,000) 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.
(1) Includes 250,000 unlisted options at an exercise price of
$0.501 each expiring 3 December 2023 that were granted during the
year on 3 December 2020 and formally issued on 12 February
2021.
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 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 receivable of $12,504,442 (2019: $15,204,815) to
Colluli Mining Share Company is denominated in US Dollars.
As at 31 December 2020, the Group held $9,191,452 (2019:
$30,659,500) of cash and term deposits denominated in US
Dollars.
Included within trade and other payables are $18,281 (2019:
$2,836,192) trade payables and nil (2019: $7,520,545) accrued
expenses denominated in US Dollars.
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 Effect on Effect
USD Rate Loss before on Equity
% tax $
$
Year to 31 December 2020 +5% (1,083,881) 1,083,881
-5% 1,083,881 (1,083,881)
Year to 31 December 2019 +5% ( 1,775,379) 1,775,379
--------------------------
-5% 1,775,379 (1,775,379)
-------------------------- ---------- -------------- ------------
(ii) Interest rate risk
The Group is exposed to movements in market interest rates on
cash. The Group's policy is to monitor the interest rate yield
curve out to six months to ensure a balance is maintained between
the liquidity of cash assets and the interest rate return. The
entire balance of cash for the Group of $9,738,794 (2019:
$33,800,104) 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 0.44% (2019: 0.95%).
Sensitivity analysis
At 31 December 2020, 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 $77,910 higher/lower (2019: $270,401 higher/lower) as a
result of lower/higher interest income from cash and cash
equivalents and changes in the fair value of loans.
For the interest rate risk relating to the loan at fair value
through profit or loss, refer to note (d) below.
(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.
(c) Credit risk
The Group's significant concentration of credit risk includes
cash, which is held with a major Australian bank with AA3 credit
rating, accordingly the credit risk exposure is minimal. In
addition, there is a significant concentration of risk in relation
to the receivable from CMSC. The maximum exposure to credit risk at
balance date is the carrying amount of cash and 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 which is
carried at fair value, 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 at bank and on hand and short-term deposits, held by the
group as at 31 December 2020:
Fair value
through other
At amortised through profit comprehensive
cost and loss income
$ $ $
Financial Assets:
Receivables 103,045 - -
------------- --------------- ---------------
Total current 103,045 - -
------------- --------------- ---------------
Receivable - 12,504,442 -
------------- --------------- ---------------
Total non-current - 12,504,442 -
------------- --------------- ---------------
Total Assets 103,045 12,504,442 -
============= =============== ===============
Financial liabilities:
Trade and other payables 726,271 - -
------------- --------------- ---------------
Total current 726,271 - -
------------- --------------- ---------------
Total Liabilities 726,271 - -
============= =============== ===============
Set out below is a comparison of the carrying amount and fair
values of financial instruments as at 31 December 2020:
Carrying
Value Fair Value
$ $
Financial Assets:
Receivables 103,045 103,045
----------- -----------
Total current 103,045 103,045
----------- -----------
Receivable 12,504,442 12,504,442
----------- -----------
Total non-current 12,504,442 12,504,442
----------- -----------
Total Assets 12,607,487 12,607,487
=========== ===========
Financial liabilities:
Trade and other payables 726,271 726,271
----------- -----------
Total current 726,271 726,271
----------- -----------
Total Liabilities 726,271 726,271
=========== ===========
Set out below is an overview of financial instruments, other
than cash at bank and on hand and short-term deposits, held by the
group as at 31 December 2019:
Fair value
through other
At amortised through profit comprehensive
cost and loss income
$ $ $
Financial Assets:
Receivables 281,804 - -
------------- --------------- ---------------
Total current 281,804 - -
------------- --------------- ---------------
Receivable - 15,204,815 -
------------- --------------- ---------------
Total non-current - 15,204,815 -
------------- --------------- ---------------
Total Assets 281,804 15,204,815 -
============= =============== ===============
Financial liabilities:
Trade and other payables 11,794,757 - -
------------- --------------- ---------------
Total current 11,794,757 - -
------------- --------------- ---------------
Total Liabilities 11,794,757 - -
============= =============== ===============
Set out below is a comparison of the carrying amount and fair
values of financial instruments as at 31 December 2019:
Carrying
Value Fair Value
$ $
Financial Assets:
Receivables 281,804 281,804
----------- -----------
Total current 281,804 281,804
----------- -----------
Receivable 15,204,815 15,204,815
----------- -----------
Total non-current 15,204,815 15,204,815
----------- -----------
Total Assets 15,486,619 15,486,619
=========== ===========
Financial liabilities:
Trade and other payables 11,794,757 11,794,757
----------- -----------
Total current 11,794,757 11,794,757
----------- -----------
Total Liabilities 11,794,757 11,794,757
=========== ===========
The current receivables carrying values 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 21% which incorporates an appropriate adjustment for credit risk
(2019: 21%). The timing of cash receipts has been adjusted
according to management's best estimate and it is currently
estimated that receipts commence in the June 2026 quarter (2019:
June 2024). The fair value measurement for 2020 and 2019 is
categorised as Level 3 in the fair value hierarchy as the estimated
market interest rate is an unobserved input in the valuation. The
fair value of the loan is sensitive to the discount rate applied. A
300bps (2019: 50bps) movement in the discount rate would change the
valuation by $1,725,122 (2019: $313,663).
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 $56,099,745 (2019: $65,625,728). The focus of the Group's
capital risk management is the current working capital position
against the requirements of the Group to meet exploration and
project development programmes plus corporate overheads. The
Group's strategy is to ensure appropriate liquidity is maintained
to meet anticipated operating requirements, with a view to
initiating appropriate capital raisings as required.
20. CONTINGENCIES
There are no material contingent liabilities or contingent
assets of the Group at balance date.
21. COMMITMENTS
2020 2019
$ $
Short-term lease commitments:
Minimum lease payments
* within one year - 13,640
Advisory fees pursuant to contracts - 206,104
Total Commitments - 219,744
==== =======
Operating Leases:
The minimum future payments above relate to non-cancellable
leases for offices.
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:
2020 2019
$ $
Shares - -
Options issued to directors, employees and
contractors 582,012 486,427
Performance Rights issued to directors, employees
and contractors (161,949) 243,669
--------- -------
420,063 730,096
========= =======
(b) 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).
2020 2019
Weighted
Number of average exercise Number of Weighted average
options price options exercise price
Outstanding at the beginning
of the year 6,004,112 $1.035 3,490,000 $0.811
Granted 1,397,041 $0.185 4,619,855 $1.077
Exercised - - (1,150,000) $0.555
Lapsed / expired (1,940,000) $0.933 (955,743) $1.001
----------- ----------------- ----------- ----------------
Outstanding at end of the
year(a) 5,461,153 $0.854 6,004,112 $1.035
----------- ----------------- ----------- ----------------
Exercisable at end of the
year 5,011,153 $0.879 1,940,000 $0.933
----------- ----------------- ----------- ----------------
(a) The weighted average exercise price of options outstanding
at end of the year of $0.854 has been calculated inclusive of
947,041 zero exercise price options (ZEP Options). Excluding ZEP
Options from this calculation, the weighted average exercise price
of unlisted options outstanding at end of the year is $1.033.
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 Granted Exercised Lapsed Closing
balance / Expired balance
31 Dec 2019 31 Dec 2020
Exercise price $0.940 expiry 1,440,000
date 19/05/2020 (i) - - (1,440,000) -
Exercise price $0.912 expiry 500,000
date 11/05/2020 (i) - - (500,000) -
Exercise price $1.031 expiry 1,168,272
date 24/01/2022 1,168,272 - - - (i)
Exercise price $1.031 expiry 301,040
date 24/01/2022 301,040 - - - (i)
Exercise price $1.108 expiry 583,000
date 13/03/2022 583,000 - - - (i)
Exercise price $1.119 expiry 561,800
date 28/03/2022 561,800 - - - (i)
Exercise price $1.114 expiry 1,450,000
date 30/05/2022 1,450,000 - - - (i)
Exercise price $0.000 expiry 947,041
date 31/12/2021 - 947,041 - - (i)
Exercise price $0.664 expiry
date 08/07/2023 - 200,000 - - 200,000
Exercise price $0.501 expiry
date 03/12/2023 - 250,000(ii) - - 250,000
6,004,112 1,397,041 - (1,940,000) 5,461,153
------------ ----------- --------- ----------- ------------
(i) Vested options.
(ii) Refers to unlisted options granted on 3 December 2020,
which were formally issued on 12 February 2021.
Remaining contractual life
The weighted average remaining contractual life of share options
outstanding at the end of the period was 2.635 years (31 December
2019: 2.82 years), with exercise prices ranging from $0.000 to
$1.119.
Options granted during the year
A summary of options granted during the year ended 31 December
2020 is included in the following table and as detailed below. The
weighted average fair value of the options granted during the year
ended 31 December 2020 was $0.507.
Details of options valued using the Black &Scholes Option
Pricing Model to produce the fair value per option are as
follows:
Share
Price
at Risk Free
Number Grant Expiry Fair Value Exercise Grant Interest Estimated
of Options Date Date per Option Price Date Rate Volatility
200,000 08/07/2020 08/07/2023 $0.135 $0.664 $0.500 0.27% 53.31%
250,000 03/12/2020 03/12/2023 $0.110 $0.501 $0.365 0.23% 59.27%
As detailed in the Company's 2019 Annual Report, a short-term
incentive (STI) scheme applies to executives in the Company and is
designed to link any STI payment with the achievement of specified
key performance indicators (KPI's) which are in turn linked to the
Company's strategic objectives and targets. In line with the
recommendation from the Remuneration and Nomination Committee, the
Board formally approved the results of the FY19 KPIs on 23 March
2020. In order to preserve cash reserves, STI bonuses earned will
be paid in equity by way of zero exercise price options (ZEP
Options).
On 20 August 2020, the Board approved an offer of a total of
947,041 ZEP Options expiring 31 December 2021 with no vesting
conditions to eligible employees of the Company. The Company has
recorded a share based payment expense of $454,580 associated with
the issue of ZEP Options, which has been determined in reference to
the share price of $0.48 at 20 August 2020 (date of grant).
A summary of options granted during the year ended 31 December
2019 is included in the following table. The weighted average fair
value of the options granted during the year ended 31 December 2019
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:
Share
Price
at Risk Free
Number Grant Expiry Fair Value Exercise Grant Interest Estimated
of Options Date Date per Option Price Date Rate Volatility
1,724,015 24/01/2019 24/01/2022 $0.152 $1.031 $0.735 1.78% 44.49%
301,040 27/05/2019 24/01/2022 $0.124 $1.031 $0.730 1.21% 42.71%
583,000 13/03/2019 13/03/2022 $0.161 $1.108 $0.795 1.53% 43.92%
561,800 28/03/2019 28/03/2022 $0.152 $1.119 $0.780 1.53% 43.94%
1,450,000 30/05/2019 30/05/2022 $0.130 $1.114 $0.750 1.21% 42.76%
Historical volatility has been used as the basis for determining
expected share price volatility as it assumed that this is
indicative of future trends, which may not eventuate. The life of
the options is based on historical exercise patterns, which may not
eventuate in the future.
(c) Performance Rights
Movements in the number of performance rights on issue during
the year is as follows:
Performance Rights Opening balance Granted Vested Forfeited Cancelled Closing
- Class 31 Dec 2019 balance
31 Dec 2020
Class 1 (1) 280,000 - - - - 280,000
Class 4 (1) 800,000 - - (800,000) - -
Class 5 (1) 100,000 - (20,000) - - 80,000
Class 8 (1) 15,000 - - - (15,000) -
Class 9 900,000 - - - - 900,000
2,095,000(2) - (20,000) (800,000) (15,000) 1,260,000
--------------- ------- -------- --------- --------- ------------
(1) Issued under the Performance Rights Plan which was
re-approved at the annual general meeting of the Company held 17
November 2014.
(2) The opening balance excludes: 25,000 performance rights in
respect of which the performance hurdle had been met 23 December
2019 (formal conversion occurred 13 January 2020); 50,000
performance rights in respect of which the performance hurdle had
been met 3 December 2019 (formal conversion occurred 13 January
2020); and 100,000 performance rights in respect of which the
performance hurdle had been met 20 December 2019 (formal conversion
occurred 28 January 2020).
Movements in the number of performance rights during the prior
year is as follows:
Performance Rights - Class Opening Granted Vested Forfeited Closing
balance balance
31 Dec 2018 31 Dec 2019
Class 1 280,000 - - - 280,000
Class 4 800,000 - - - 800,000
Class 5 100,000 - - - 100,000
Class 6 40,000 - (40,000)(1) - -
Class 7 30,000 - - (30,000) -
Class 8 65,000 - (50,000)(2) - 15,000
Class 9 - 1,000,000(4) (100,000)(3) - 900,000
1,315,000 1,000,000 (190,000) (30,000) 2,095,000
------------ ------------ ------------ --------- ------------
(1) Includes 25,000 performance rights in respect of which the
performance hurdle had been met 23 December 2019. Issue of shares
following conversion occurred 13 January 2020.
(2) Includes 50,000 performance rights in respect of which the
performance hurdle had been met 3 December 2019. Issue of shares
following conversion occurred 13 January 2020.
(3) Includes 100,000 performance rights in respect of which the
performance hurdle had been met 20 December 2019. Issue of shares
following conversion occurred 28 January 2020.
(4) The fair value of performance rights is determined by the
share price at the date of grant. The share price at the on date of
grant of the Class 9 performance rights of 30 May 2019 was $0.75
per share.
Under the Performance Rights Plan, shares are issued in the
future subject, to the performance-based vesting conditions being
met. The 1,260,000 Performance Rights on issue at 31 December 2020
are subject to the following performance conditions:
Class 1:
-- 280,000 upon completion of securing finance for the
development of the Colluli Potash Project.
Class 5:
-- 60,000 upon 6-month construction mark if safety, costs and schedule are all on target; and
-- 20,000 upon completion of commissioning and completion of
performance testing (performance testing to meet contractual
requirements).
Class 9:
-- 300,000 when construction at Colluli is considered to be 50%
complete provided construction is materially on time and on budget
and Danakali are meeting safety standards;
-- 500,000 when CMSC commences commercial production at Colluli
provided this is materially on time and on budget, meeting safety
and product quality standards; and
-- 100,000 when CMSC have shipped and been paid for 100,000t of
SOP provided this occurs materially on time, meeting safety and
product quality standards.
Subject to achievement of either one of these performance
conditions, one share will be issued for each Performance Right
that has vested.
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
2020 2019
$ $
Short-term benefits 1,239,963 1,179,495
Post-employment and long-term benefits 99,787 72,961
Share-based payments 364,390 434,056
--------- ---------
1,704,140 1,686,512
--------- ---------
(e) Transactions with directors, director related entities and
other related parties
AFC is deemed to be a related party of the Company on the basis
of significant influence. The related party status applies from 23
April 2020, being when AFC held an interest of 16.6% in the issued
capital of the Company and the date that Danakali appointed two AFC
nominees to its Board of Directors.
AFC and Afreximbank (together the Mandated Lead Arrangers), have
executed documentation for the provision of US$200M in senior debt
finance to CMSC (each Mandated Lead Arranger providing US$100M).
The facility allows drawdown of CMSC senior debt on satisfaction of
customary conditions precedent (refer ASX announcement 23 December
2019) for a project financing facility of this kind and includes
all project approvals required to develop the project, and the
balance of the equity contribution having been raised.
Additionally, AFC executed a Subscription Agreement and made a
strategic equity investment in Danakali on 10 December 2019 of
A$31.8M (US$21.5M) for 53M new Shares issued at A$0.60 per
Share.
AFC President and CEO, Samaila D. Zubairu, and AFC Senior
Director for Investment Operations & Execution, Taiwo Adeniji,
joined Danakali's Board as Non-Executive Directors on 23 April
2020. These appointments are in accordance with the terms of the
Subscription Agreement which provides AFC the right to appoint two
nominees to the Board of Danakali provided AFC's Danakali ownership
remains above certain thresholds. As at the date of release of this
report, AFC holds two out of seven board seats on the Company.
On 14 July 2020, the Company executed a mandate with AFC for the
provision of capital raising advisory services. Pursuant to the
mandate, AFC will be entitled to receive an industry standard
transaction fee on capital raising funds receipted by the Company
in respect of equity investors identified within the mandate with
AFC.
There were no other material related party transactions.
24. REMUNERATION OF AUDITORS
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:
2020 2019
$ $
Assurance related 149,582 54,393
Tax compliance services 10,792 22,073
Fees for regulatory services 61,800 -
222,174 76,466
------- ------
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:
Equity Holding
2020 2019
Country of Class of
Name Principal Activities Incorporation Shares % %
STB Eritrea Investment in
Pty Ltd Potash Exploration Australia Ordinary 100 100
------------ --------------------- --------------- --------- ------- -------
The proportion of ownership interest is equal to the proportion
of voting power held.
26. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Danakali
Limited. The information presented here has been prepared using
accounting policies consistent with those presented in note 2.
2020 2019
$ $
Current assets 10,253,645 34,351,786
Non-current assets 20,435,046 20,461,260
------------ ------------
Total assets 30,688,691 54,813,046
------------ ------------
Current liabilities 799,273 11,875,379
Non-current liabilities 65,684 45,229
------------ ------------
Total liabilities 864,957 11,920,608
------------ ------------
Net Assets 29,823,734 42,892,438
------------ ------------
Issued capital 109,058,372 109,194,951
Share-based payments reserve 12,382,082 11,962,020
Accumulated losses (91,616,720) (78,264,533)
------------ ------------
Total equity 29,823,734 42,892,438
------------ ------------
Loss for the year (13,352,187) (25,900,207)
------------ ------------
Total Comprehensive loss for the year (13,352,187) (25,900,207)
------------ ------------
27. DIVIDS
No dividends were paid during the financial period. No
recommendation for payment of dividends has been made.
28. EVENTS OCCURRING AFTER THE BALANCE DATE
Board and Management Changes
On 26 February 2021, the Company announced that the role of the
Chief Executive Officer, held by Mr Niels Wage, had been made
redundant as part of a reallocation of responsibilities.
Mr Seamus Cornelius was appointed as Executive Chairman on 26
February 2021.
Movements in Securities
On 29 January 2021, the Company issued 500,000 unlisted options
at an exercise price of $0.527 expiring on 29 January 2023. On 24
March 2021, the Company issued 250,000 unlisted options at an
exercise price of $0.78 expiring on 24 March 2023.
On 15 February 2021, the Company issued 947,041 fully paid
ordinary shares upon the exercise of unlisted options at an
exercise price of $0.00 expiring 31 December 2021 to management in
lieu of cash payments under the Company's short-term incentive
scheme approved by the Board on 20 August 2020. In addition, on 12
February 2021, the Company completed the formal issue of 250,000
unlisted options at an exercise price of $0.501 expiring 3 December
2023 (being options granted 3 December 2020).
On 26 February 2021, 900,000 performance rights (Class 9) were
forfeited. This forfeiture resulted from the role of Chief
Executive Officer being made redundant.
No other matters or circumstances have arisen since the end of
the financial year which significantly affected or may
significantly affect the operations of the Group, the results of
those operations, or the state of affairs of the Group in future
financial years.
Directors' Declaration
In the Directors' opinion:
(a) the financial statements and notes of Danakali Limited for
the financial year ended 31 December 2020 are in accordance with
the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the Group's financial
position as at 31 December 2020 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, 31 March 2021
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 5 March 2021.
(a) Distribution of equity securities
Analysis of numbers of equity security holders by size of
holding:
Holders Securities %
1 -- 1,000 541 212,048 0.07%
1,001 -- 5,000 793 2,069,612 0.65%
5,001 -- 10,000 348 2,693,810 0.84%
10,001 -- 100,000 661 22,365,066 7.00%
100,001 and over 194 292,347,811 91.45%
------- ----------- -------
TOTAL 2,537 319,688,347 100.00%
======= =========== =======
The number of shareholders holding less than a marketable parcel
was 473.
(b) Twenty largest shareholders
The names of the twenty largest holders of quoted ordinary
shares are:
Listed ordinary shares
Number of shares Percentage
of ordinary
shares
1 AFC EQUITY INVESTMENTS LIMITED 52,958,908 16.57
2 CITICORP NOMINEES PTY LIMITED 45,441,495 14.21
3 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 26,059,209 8.15
4 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 17,283,850 5.41
5 MR LIAM RAYMOND CORNELIUS 13,402,515 4.19
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
6 <DRP A/C> 8,667,205 2.71
7 BNP PARIBAS NOMS PTY LTD <DRP> 7,807,232 2.44
8 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 7,760,103 2.43
9 ELEMENT 25 LIMITED 6,209,097 1.94
COMPUTERSHARE CLEARING PTY LTD <CCNL DI
10 A/C> 5,335,979 1.67
11 WELL EFFICIENT LIMITED 5,000,000 1.56
12 BRISPOT NOMINEES PTY LTD <HOUSE HEAD NOMINEE 4,998,813 1.56
A/C>
BNP PARIBAS NOMINEES PTY LTD <IB AU NOMS
13 RETAILCLIENT DRP> 4,865,802 1.52
14 MR SEAMUS CORNELIUS 4,404,097 1.38
15 SINO WEST ASSETS LIMITED 4,308,037 1.35
16 MR SEAMUS IAN CORNELIUS 4,178,992 1.31
17 ALPHA BOXER LIMITED 3,910,000 1.22
18 RANGUTA LIMITED 3,195,685 1.00
19 DUKETON CONSOLIDATED PTY LTD 2,981,500 0.93
20 MR JOHN JOSEPH WALLACE <WALLACE FAMILY A/C> 2,848,983 0.89
231,617,502 72,45
================ ============
(c) Substantial shareholders
The names of substantial shareholders who have notified the
Company in accordance with section 671B of the Corporations Act
2001 are:
Number of Shares
AFC Equity Investments Limited (AFC Equity) and Africa
Finance Corporation (AFC) 52,958,908
Well Efficient Ltd 35,000,000
(d) Voting rights
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.
(e) Unquoted securities
At 5 March 2021 the Company has on issue 5,014,112 unlisted
options over ordinary shares and 360,000 performance rights.
The names of security holders holding more than 20% of an
unlisted class of security are listed below.
Holder Unlisted Options
$1.031 $1.108 $1.119 $1.114 $0.664 $0.501 $0.527
24/01/2022 13/03/2022 28/03/2022 30/05/2022 08/07/2023 03/12/2023 29/01/2023
Gregory Ian - - -
MacPherson 344,500 - - -
Redgate Beach - - -
Investments Pty
Ltd
<Redgate Beach
Invest A/C> 823,772 - - -
Melissa Rose - - -
Tarrant - 583,000 - -
Anthony William - - -
Harrington - - 561,800 -
Niels Wage - - - 1,450,000 - - -
Seamus Ignatius - - -
Quan Cornelius 301,040 - - -
Romaine 200,000 - -
International
Consulting Inc. - - - -
Rod McEachern - - - - - 250,000 -
Colin MacKay - - - - - - 500,000
Holders - - -
individually less
than 20% - - - -
Total 1,469,312 583,000 561,800 1,450,000 200,000 250,000 500,000
Holder Performance Rights
Class 1 Class 5
Mr Zeray Lake 75,000 -
Mascots International Ltd 85,000 -
Mr Tony Harrington - 80,000
Holders individually less than 20% 120,000 -
Total 280,000 80,000
(f) Schedule of Interests in Mining Tenements
Tenement: Colluli, Eritrea
License Type: Exploration
License
Nature of Interest: Owned
Current equity 50%
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FR WPURUWUPGUQG
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