Although ASX- and LSE-listed potash producer Danakali has been working in “good faith” to satisfy the conditions precedent for the Africa Finance Corporation’s (AFC’s) second tranche equity funding of $28.5-million, the company’s board now considers it unlikely that the conditions precedent will be satisfied prior to the deadline of November 21.

Danakali is developing the Colluli project in the Danakil depression region of Eritrea.

Tranche 2 of the AFC’s equity funding, which was first announced on December 3, 2019, was in June deferred to enable for the stabilisation of market and global conditions. At the time, Danakali and AFC agreed to an extension to the deadline for completion of the tranche to on or before November 21.

The extension was to enable time for satisfaction of the remaining conditions precedent and was considered necessary in response to, besides other things, the constraints arising from global restrictions imposed as a result of the Covid-19 pandemic.

However, at this point in time, the miner reports that Tranche 2 will not complete in accordance with the terms of the subscription agreement.

Danakali notes that, as an international financial institution with a mandate to support infrastructure and industrial development in Africa, AFC’s support for the development of the Colluli project “remains firm”.

As Danakali’s largest shareholder and one of the two mandated lead arrangers and lenders under the Colluli project’s $200-million debt financing, AFC is in discussion with Danakali with a view to finding a funding structure suitable to both parties that will ensure the start of construction of the project as soon as possible.

AFC president and CEO Samaila Zubairu says the AFC’s mandate is to develop Africa and ensure more of the value of the continent’s resources benefit the continent’s people through the creation of jobs and opportunities along with improving living standards.

“AFC are fully committed to seeing Colluli developed as quickly and safely as possible and look forward to working with the key stakeholders, the Eritrean National Mining Corporation, Afreximbank and Danakali on this important objective and ensure the project is fully funded as soon as possible so production commences in 2022.”