Danakali Limited (ASX: DNK) issued a stark warning to its shareholders on Friday, alerting them to the emergence of “predatory activity” from unidentified groups. These groups are currently approaching investors with “vulture” share purchase offers for their stakes in the company, valuing each share at as little as A$0.01. This development comes in the wake of Danakali’s recent sale of its 50% stake in the Colluli potash project in Eritrea to Chinese buyers for a substantial $121 million (A$154.7 million) in the previous year. In a move to safeguard shareholder interests, the company has returned nearly 90% of the proceeds from this sale to its investors in mid-January.
With the recent cash infusion, Danakali now boasts cash reserves totaling approximately A$38 million, equivalent to roughly A$0.11 per share. However, the offers made to shareholders currently stand at less than 10% of the underlying value of their shares. This alarming situation prompted Danakali to issue a statement indicating that the company is actively exploring a range of new liquidity options for its shareholders. These options include an off-market share buyback and a further distribution of the firm’s substantial cash reserves in the form of a capital return.
These proposed alternatives are an integral part of Danakali’s ongoing efforts to get its shares re-listed on the Australian Stock Exchange (ASX). Unfortunately, the company’s latest proposal to resume trading on the ASX was met with rejection.
In response to these challenges, Danakali’s Executive Chairman, Seamus Cornelius, expressed the company’s stance, saying, “We believe the extended suspension of our shares puts our shareholders in a difficult position, and we will now explore other options to achieve additional liquidity while continuing to engage with the ASX.”
As the situation intensifies, it appears that most of the predatory activity has originated offshore, potentially placing it beyond the reach of Australian regulators. Cornelius advised any shareholder who has received such an offer to contact Danakali directly for further guidance and support.
Amidst these complex financial manoeuvres, the Perth-based miner is not resting on its laurels. Danakali has set its sights on a new project in Eritrea and has taken the initial steps by applying for an exploration licence covering an extensive area of 1,537 km². Preliminary assessments of this property have shown promising signs, indicating the potential for substantial copper and gold deposits. Danakali has assured its shareholders that it will keep them informed of the board’s progress and updates from ongoing discussions in the coming weeks.
The Australian mining industry has been closely following Danakali’s journey and the challenges it faces. With its impressive track record, the company’s foray into Eritrea is generating significant interest. However, the emergence of predatory share offers has cast a shadow on the company’s plans. Investors are urged to exercise caution and remain vigilant while the situation unfolds.
The Colluli potash project, which Danakali sold a 50% stake in last year, was a significant milestone for the company. Located in Eritrea, the project holds immense potential as one of the world’s most advanced and economically attractive potash projects. The Chinese buyers who acquired the stake recognized its value, making it a highly profitable deal for Danakali. However, the windfall from the sale has attracted unwanted attention from opportunistic groups looking to purchase shares at an unfairly low valuation.
Danakali’s decision to return a substantial portion of the sale proceeds to its shareholders was aimed at ensuring they share in the benefits of the lucrative Colluli project. However, the predatory activity threatens to undermine these efforts and deprive investors of their rightful returns.
With cash reserves amounting to A$38 million, Danakali is well-positioned to explore new opportunities in the mining sector. The company’s application for an exploration licence in Eritrea signifies its commitment to discovering new mineral resources and capitalizing on them for the benefit of its shareholders.
In recent years, Eritrea has become an attractive destination for mining companies due to its untapped mineral potential and a conducive regulatory environment. The preliminary findings suggesting the presence of copper and gold deposits in the area covered by Danakali’s exploration licence have further heightened interest in the project. These minerals are in high demand globally, making any potential discoveries in Eritrea a valuable asset
Danakali’s willingness to keep shareholders informed of developments is commendable. It demonstrates the company’s commitment to transparency and accountability. Despite the challenges posed by the suspension of its shares on the ASX and the predatory share offers, Danakali is actively working towards finding a solution that benefits both the company and its shareholders.
As the situation unfolds, it is clear that Danakali remains resolute in its pursuit of new opportunities and its dedication to protecting the interests of its shareholders. The company’s focus on exploration in Eritrea, coupled with its efforts to address the challenges it faces, positions it well for future growth and success in the mining industry.
In conclusion, Danakali Limited’s recent warning to shareholders about predatory share offers highlights the challenges faced by the company as it seeks to protect the interests of its investors. The emergence of opportunistic groups offering significantly undervalued share prices threatens to undermine the value created by Danakali’s successful sale of its stake in the Colluli potash project. However, with substantial cash reserves and a commitment to exploring new opportunities, Danakali remains resilient in the face of adversity.
The company’s exploration efforts in Eritrea hold promise, with preliminary assessments indicating the potential for copper and gold deposits. This move aligns with the global demand for these minerals, making any discoveries in Eritrea a valuable asset. Danakali’s dedication to transparency and communication with shareholders further strengthens its position as a responsible and forward-thinking mining company.
