Danakali : Colluli Project Update - Rock Salt Production

20 December 2021

ASXonlyRelease:

Rock Salt Production & New Generation Sodium Ion Batteries Opportunities Colluli will produce 1.8 million tonnes per annum of high-qualityRock Salt

Highlights

• Rock Salt in the Colluli resource has been estimated to total 347 million tonnes at a grade of 96.9% usesodium chloride (ASX Announcement 23 September 2015).

• Colluli will produce an estimated 128 Mt of Rock Salt in the first 60 years at a production rate of 1.8 million tpa from Modules 1 and 2 (ASX Announcement 29 January 2018). This creates another potential revenue tream for Colluli as Rock Salt prices rise 75% year on year from 2020-2021 (see Figure 3).

• Rock Salt is being used in a new generation of sodium-ion batteries.

Danakali Limited (ASX: DNK) (Danakali, the Company) is pleased to provide a market update on the Rock Salt

market potential and export capacity from the Colluli Project. DNK has previously stated its JORC-2012 complipersonalnt SOP reserve of 1.1Bt and the JORC-2012 compliant mineral resource of 347Mt of Rock Salt (ASX Announcement 23 September 2015).

With the test work completed (ASX Announcement 17 June 2021) and the mine plan confirmed in FEED (ASX a ou cement 29 January 2018), mining during Modules 1 and 2 will produce an estimated 128Mt of Rock Salt at an annual production rate of 1.8mtpa (as previously announced), from the Upper Rock Salt layer. The Rock Salt will initially be stockpiled at site in preparation for export from the proposed Anfile Bay export terminal during the first 60 years. With the recent rise in Rock Salt prices (see Figure 3), and new end uses in battery technology being developed by CATL(2) DNK considers Colluli's Rock Salt as a potential economic resource. DNK consider FEED inaccurately described Rock Salt as a waste product from the mining process.

Whilst Colluli' s primary focus is to develop the Colluli Project with the intention of exporting premium SOP to its targ t markets, the mine plan requires Colluli to mine through the Upper Rock Salt in order to access the target salt layers of carnallitite, sylvinitite and kainitite that start at 16 metres below surface. Colluli will produce a 96.9% ure Rock Salt which is produced as what was previous described as waste from the open-cut mining process. The final transportation and shipping cost have not been determined but the Rock Salt will most likely be sold FOB as a bulk commodity.

RForck salt prices have risen rapidly on year-on-year basis by approximately 47% (see Figure 3) with current average prices at US$50-$60/t. Interestingly for the Rock Salt market potential a new generation of sodium ion batteries are being developed that can reduce battery raw material production costs by approximately 30% compared to lithium-ion batteries (see Figure 2). Sodium ion-e cells are able to recharge faster than lithium-ion cells and operate better at low temperatures(2). Due to recent advancements in developing a new generation of sodium-ion batteries, Rock Salt is seen as a potential source of sodium needed for their mass production(3). Other primary applications for Rock Salt include its use for de-icing, water treatment and in the chemical, aluminium, oil, paper, textile, and food industries (see Figure 4).

Danakali Chairman, Seamus Cornelius said: "Colluli is a 200-year life of mine Project, the Rock Salt resource represents another potential revenue stream from Colluli and reinforces Colluli's primary business model. We believe that the new generation of sodium ion battery development is an opportunity that complements other potential end uses for our mined Rock Salt given Colluli's proximity to regional markets".

The Colluli Potash Project (Project, Colluli) is 100% owned by Colluli Mining Share company (CMSC,) a 50:50 Joint Venture between Danakali Limited (DNK) and Eritrean National Mining Corporation (ENAMCO)

Codes:

ASX: DNK, SO3-FRA,

SO3-BER.

US Level 1 ADR's OTC-

DNKLY,

CUSIP.23585T101

Highlights:

The world's largest JORC compliant solid salt, Sulphate of Potash (SOP) reserve, 1.1Bt

Aiming to be the world's first Zero Carbon SOP Producer

Development underway towards production

Financial facts:

Issued capital: 368.33m

Share price: A$0.43

Market cap: A$158m

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Figure 1: Rock salt potential at Colluli.

Figure 2: Potential rock salt use in battery industry.

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Figure 3: Rock salt price movement.

Figure 4: Rock Salt uses.

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1. Source: Science Daily, Sodium-ion batteries are a valid alternative to Lithium-ion batteries, September 2020, https://bit.ly/3FcoJsS, retrieved November 2021
2. Source: Just Auto, Could CATL's sodium-ion battery be the next breakthrough in electric vehicle batteries?, October 2021,

https://bit.ly/30nRLH4, retrieved November 2021

(3) Source: Asia Times, China EVs getting charged about sodium-ion batteries, July 16 2021, https://bit.ly/3wP0IFj, retrieved November 2021

This announcement authorised for release by the Board of Danakali Limited.

For more information, please contact:

Danakali

Seamus Cornelius	Mark Riseley
Executive Chairman	Head of Corporate Development & IR
[phone]	[phone]

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

About Danakali

Danakali Limited (ASX: DNK) (Danakali, or the Company) is an ASX listed potash company focused on the development of the Colluli Sulphate of Potash Project (Colluli or the Project). The Project is 100% owned by the Colluli Mining Share Company (CMSC), a 50:50 joint venture between Danakali and the Eritrean National Mining Corporation (ENAMCO).

The Project is located in the Danakil Depression region of Eritrea, East Africa, and is ~75km from the Red Sea coast, making it one of the most accessible potash deposits globally. Mineralisation within the Colluli resource commences at just 16m, making it the world's shallowest known potash deposit. The resource is amenable to open cut mining, which allows higher overall resource recovery to be achieved, is generally safer than underground mining, and is highly advantageous for modular growth.

The Company has completed a Front-End Engineering Design (FEED) for the production of potassium sulphate, otherwise known as Sulphate of Potash or SOP. SOP is a chloride free, specialty fertiliser which carries a substantial price premium relative to the more common potash type; potassium chloride (or MOP). Economic resources for production of SOP are geologically scarce. The unique composition of the Colluli resource favours low energy input, high potassium yield conversion to SOP using commercially proven technology. One of the key advantages of the resource is that the salts are present in solid form (in contrast with production of SOP from brines) which reduces infrastructure costs and substantially reduces the time required to achieve full production capacity.

The resource is favourably positioned to supply the world's fastest growing markets. A binding take-or-pay offtake agreement has been confirmed with EuroChem Trading GmbH (EuroChem) for up to 100% (minimum 87%) of Colluli Module I SOP production.

Development Finance Institutions, Africa Finance Corporation (AFC) and African Export Import Bank (Afreximbank), have obtained formal credit approval to provide CMSC with US$200M in senior debt finance. The credit documentation was executed in December 2019, allowing drawdown of CMSC senior debt on satisfaction of customary conditions precedent. This represents the majority of funding required for the development and construction of the Colluli.

Project execution has commenced, and the Company's vision is to bring Colluli into production using the principles of risk management, resource utilisation and modularity, using the starting module (Module I) as a growth platform to develop the resource to its full potential.

Forward looking statements and disclaimer

The information in this document is published to inform you about Danakali and its activities. Danakali has endeavoured 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

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statements are based on reasonable assumptions, such statements are not guarantees 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.

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% K20 Equiv. and 7% Kieserite. The Mineral Resource contains 303Mt @ 11% K20 Equiv. and 6% Kieserite of Measured Resource, 951Mt @ 11% K20 Equiv. and 7% Kieserite of Indicated Resource and 35Mt @ 10% K20 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.au. 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% K2O Equiv. The Ore Reserve is classified as 285Mt @ 11.3% K2O Equiv. Proved and 815Mt @ 10.3% K2O Equiv. Probable. The Colluli SOP Mineral Resource includes those Mineral Resources modified to produce the Colluli SOP Ore Reserves.

The information relating to the January 2018 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.au. 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.

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