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A recent Edison Report on Danakali Ltd. (ASX:DNK) highlighted the companies Colluli Potash Project in Eritrea, Africa

A recent Edison Report on Danakali Ltd. (ASX:DNK) highlighted the companies Colluli Potash Project in Eritrea, Africa
As quoted from the report:

Danakali (DNK) has completed the definitive feasibility study (DFS) for the Colluli (DNK 50%) sulphate of potash (SOP) project in Eritrea. Colluli is a globally significant open-pittable resource with substantial expansion and mine life potential beyond its initial phases. On our estimates, there is significant upside potential as Colluli advances.
DFS reduces capex by >30%
DNK has completed the DFS for its 50%-owned Colluli SOP project. It has reduced Phase 1 capital expenditure by 30% to US$298m (425ktpa SOP) and Phase 2 capital expenditure by 38% to US$175m (850ktpa). Initiatives supporting these cuts include a decrease in water requirements, using existing port facilities rather than a new export terminal (but at the expense of higher logistics costs) and optimising open-pit mine development.
Very low capital intensity in peer comparisons
The revisions have further enhanced Colluli’s low capital intensity. After adjustment to a muriate of potash (MOP) equivalent basis, we calculate a capital intensity of US$491/t for Phase 1 and US$390/t for Phase 1 and Phase 2 combined. This compares with a mean of US$781/t for the three other potash projects in the Danakil Basin, all of which propose solution mining. As a comparison, the capital intensity of the high-profile BHP Jansen project is approximately US$1,400/t.
Competitive strengths – large, shallow resource
The Colluli reserve ranks as one of the largest and shallowest potash resources globally. The potassium salts in solid form can be mined by conventional open-pit methods and converted by a low-energy, high-yield process to high-purity SOP. The project also has the flexibility to respond to market requirements and can produce other potash products such as SOP-M and MOP. There is also potential for additional co-product revenue from rock salt, magnesium chloride and gypsum.
Valuation: Growth potential offers substantial upside
At a forecast long-term price of US$550/t SOP, we have revised our valuation of DNK’s 50% share of Phase 1 and Phase 2 to A$262m and A$534m respectively, prior to funding. Under a funding scenario of 70% debt and 30% equity, we now value Phase 1 and Phase 2 respectively at A$0.51/share and A$0.86/share. This value is not captured in the current share price. Our valuations do not incorporate the potential for further expansions and the mine life potential.

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