Prospects for development of the potash deposits of the Danakil Depression in the Afar Regional State are increasing significantly. New investments underline the possibility that the Danakil Basin is going to develop into a significant international source of potash, a main source for fertilizer.

Yara International, a Norwegian fertilizer group and the world largest supplier of potash has decided to increase its stake in Ethiopotash, a firm working to exploit the potash deposits in the Depression, from 16 percent to 51%. The preliminary estimates last November were for the capacity to produce 1 million to 1.5 million tonnes a year of potash from resources that will last for about 30 years. The results exceeded the expectations of management and this led to Yara’s decision to increase its stake in Ethiopotash.

Yara’s sign of confidence in the potash prospects from the region will also be welcomed by Allana Potash which is currently working a concession adjacent to Yara’s Dallol site.

Allana has also recently announced a considerable increase, of some 90%, in its mineral resource estimates. The measured and indicated mineral resources are now calculated as a total of 1.3 billion tonnes with an average grade of 19.32% Potassium Chloride (KCL) representing approximately 250 millions of tonnes of KCL.

Last November, the preliminary economic assessment of the project suggested an internal rate of return of 36.8% and a net present value of US$1.85 billion, based on a 12% discount rate.

The Dallol project is said to have a significant advantage over potash projects in other parts of the world, especially compared to the production in Saskatchewan in Canada, since it has “one of the lowest capex and opex in the world” in the potash industry.

With the very high year–round temperatures in the Danakil Depression and minimum rainfall it also allows the opportunity of solar evaporation of potash extracted though saturated brine solution.

* This piece was first published on A Week in the Horn May 5, 2012 issue, titled ‘Improving prospects for potash developments in Afar State’.

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