Danakali : Annual Report for the Year Ended 31 December 2020

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ANNUAL REPORT

Corporate Information

Directors
Seamus Cornelius	(Executive Chairman)
John Fitzgerald	(Independent Non-Executive Director)
Zhang Jing	(Non-Executive Director)
Robert Connochie	(Independent Non-Executive Director)
Samaila Zubairu	(Non-Executive Director)
Taiwo Adeniji	(Non-Executive Director)
Neil Gregson	(Independent Non-Executive Director)
Executive Management	Joint Company Secretary
Stuart Tarrant	(Chief Financial Officer)	Catherine Grant Edwards
		Melissa Chapman

Registered Office and Principal Place of Business

Level 1, 2A / 300 Fitzgerald Street

NORTH PERTH WA 6006

Telephone: [phone]

Bank

National Australia Bank

Level 12, 100 St Georges Terrace

PERTH WA 6005

Share Register (Australia)

Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace

PERTH WA 6000

Telephone: [phone] (Inside Australia)

Telephone: [phone] (Outside Australia)

Facsimile: [phone] www.computershare.com

Auditors

Ernst and Young

11 Mounts Bay Road

PERTH WA 6000

Share Register (United Kingdom)

Computershare Investor Services PLC The Pavilions, Bridgwater Road Bristol BS13 8AE, United Kingdom Telephone: [phone] www.computershare.com

To facilitate trading of Danakali's shares on the Standard Segment of the London Stock Exchange (LSE) Main Market, Danakali has established a Depositary Interest (DI) facility, under which it has appointed Computershare Investor Services Plc as the depositary. Securities of Australian issuers such as Danakali cannot be directly registered, transferred or settled through CREST (which is the electronic settlement system in the UK). The DI facility overcomes this by creating entitlements to Danakali's shares (the DIs), which are deemed to be UK securities and therefore admissible to CREST. The underlying shares are listed and traded on the Standard Segment of the LSE Main Market, while the DIs are transferred in CREST to settle those trades.

Website

www.danakali.com

Stock Exchange Listing

Danakali Limited Shares are listed on the Australian Stock Exchange (ASX:DNK) and the London Stock Exchange (LSE:DNK).

American Depository Receipts

The Bank of New York Mellon sponsors DNK's Level 1 American Depository Receipts Program (ADR) in the United States of America. DNK's ADRs are traded on the over-the-counter (OTC) securities market in the US under the symbol DNKLY and CUSIP: 23585T101. One ADR represents one ordinary share in DNK.

US OTC Market information is available here:	http://www.otcmarkets.com/stock/DNKLY/quote
DNK's ADR information can also be viewed here:	https://www.adrbnymellon.com/?cusip=23585T101

ADR Holders seeking information on their shareholding should contact: [e-mail] OR

LONDON	NEW YORK
Mark Lewis	Rick Maehr
[e-mail]	[e-mail]
Telephone [phone]	Telephone [phone]

DANAKALI LIMITED ABN 56 097 904 302

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Contents

	Page
Chairman's Letter
Directors' Report	4
Auditor's Independence Declaration	33
Consolidated Statement of Profit or Loss and Other Comprehensive Income	34
Consolidated Statement of Financial Position	35
Consolidated Statement of Changes in Equity	36
Consolidated Statement of Cash Flows	37
Notes to the Consolidated Financial Statements	38
Directors' Declaration	64
Independent Auditor's Report	65
ASX Additional Information	71

DANAKALI LIMITED ABN 56 097 904 302

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Executive Chairman's Letter

Dear fellow shareholders and stakeholders.

2020 was a very challenging year for people and companies all over the World. This letter will be brief and focus on what we achieved and will achieve over the coming year. Many things changed during the Covid-19 pandemic and it's possible that some things will never be the same. That is not always a bad thing.

Danakali enters 2021 determined to get the Colluli Project funded and developed. We have learnt from our past successes and challenges and are looking forward to the year ahead. Colluli remains an outstanding asset that we are developing in a 50:50 joint venture with the Eritrean National Mining Corporation ("ENAMCO"). Our key relationships in Eritrea, including with ENAMCO and our primary regulator the Eritrean Ministry of Energy and Mines ("MoEM"), are strong and supportive. Our senior lenders Africa Finance Corporation ("AFC") and Africa Export Import Bank ("Afreximbank") have committed to provide the Colluli project with US$200m of senior project debt and we are working with both banks to enhance the lending package.

In 2020 we completed phases 1 and 2 out of 6 total phases of engineering and construction work with DRA our EPCM contractor. We also engaged a potash industry veteran expert, Rod McEachern as our COO and under Rod commenced and substantially completed the final pre-construction process test work at the SRC in Saskatchewan, Canada. As a result of all this work we have a very high level of confidence in our studies and most importantly in our ability to produce the right quality and quantity of SOP from our Colluli operation. Our relationship with our off-taker Eurochem remains strong and they have been working closely with our COO, Rod McEachern since Rod joined our team.

Over the last year we also made substantial progress on a number of fronts including with our preferred power provider Aggreko, our preferred mining contractor EMW and our preferred camp and camp service provider RA International.

Our mission together with ENAMCO is to bring Colluli into production as quickly and safely as possible. This will bring the highest value to our shareholders, stakeholders and the wider community in Eritrea and around the World. We have known for some time that Colluli has unrivalled potential to provide very attractive economic returns and contribute to many important United Nations Sustainable Development Goals including poverty reduction, improved farming methods, food and nutrition security, reduce water wastage and combat climate change1. The development of Colluli is one of those very rare opportunities to be involved in something that is unquestionably good and which will make a strong, positive difference to millions of people. We will not rest until every open-minded person sees what we see at Colluli and will not be deterred by doubters, naysayers or the lies of those with ulterior motives.

While we are well aware that many people do not know as much as they should about Eritrea's very successful track record as a mining jurisdiction and the achievements of its people and Government in important areas such as public health and education, we believe that the truth will prevail and in developing Coluili we are firmly on the side of truth, fairness and justice. Together with our partners in Eritrea and beyond we will make a real, long lasting contribution toward the betterment of millions of lives by developing Colluli.

Yours sincerely

Seamus Cornelius

Executive Chairman

1. UNDP Report, Analysis of the Potential Contribution of Colluli Potash Project to Sustainable Development Goal in Eritrea, January 2019

DANAKALI LIMITED ABN 56 097 904 302

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Directors' Report

The directors present their report together with the financial statements of the consolidated entity being, Danakali Limited (Danakali or the Company) and its controlled entities (the Group) for the financial year ended 31 December 2020.

DIRECTORS

The names and details of the Company's directors in office during the financial period and until the date of this report are as follows. Where applicable, all current and former directorships held in listed public companies over the last three years have been detailed below. Directors were in office for this entire period unless otherwise stated.

The Company restructured its permanent sub-committees on 23 January 2020. The Audit Committee was reconstituted to become the Audit and Risk Committee, and the Technical and Risk Committee was ceased..

Names, qualifications, experience and special responsibilities:

Seamus Ian Cornelius

Non-Executive Chairman, LLB, LLM, initially appointed Non-Executive Chairman 15 July 2013, transitioned to Executive Chairman 14 June 2018, resumed Non-Executive Chairman role 25 June 2019, and transitioned to Executive Chairman 26 February 2021)

Mr Cornelius is a corporate lawyer and former partner of one of Australia's leading international law firms. He has a high degree of expertise in cross-border transactions, particularly in the resources and finance sectors.

Mr Cornelius was appointed as Non-Executive Chairman of the Company on 15 July 2013 and acted in the role of Executive Chairman from 14 June 2018 to 25 June 2019. As announced on 26 February 2021, Mr Cornelius was re-appointed as Executive Chairman.

Mr Cornelius is currently the Non-Executive Chairman of Buxton Resources Ltd (appointed 29 November 2010), Element 25 Limited (appointed 30 June 2011), and Duketon Mining Ltd (appointed 8 February 2013).

Special Responsibilities:

During the year Mr Cornelius was a member of the Audit and Risk Committee (and Audit Committee), a member of the Remuneration and Nomination Committee, and a member of the Technical and Risk Committee.

John Daniel Fitzgerald

Independent Non-Executive Director, CA, appointed 19 February 2015

Mr Fitzgerald has over 30 years of finance and corporate advisory experience in the resource sector.

Previously, he held senior positions at NM Rothschild and Sons, Investec Bank Australia, Commonwealth Bank, HSBC Precious Metals and Optimum Capital.

Mr Fitzgerald is a Non-Executive Director of Northern Star Resources Limited (appointed 30 November 2012) and Medallion Metals Limited (appointed 5 October 2020).

Previously Mr Fitzgerald was Non-Executive Chairman of Exore Resources Limited (23 December 2015 to 25 September 2020).

Mr Fitzgerald is a Chartered Accountant, a Fellow of the Financial Services Institute of Australasia (FINSIA) and a graduate member of the Australian Institute of Company Directors.

Special Responsibilities:

During the year Mr Fitzgerald was Chairman of the Audit and Risk Committee (and Audit Committee) and a member of the Remuneration and Nomination Committee.

Zhang Jing

Non-Executive Director, M.Sc, appointed 17 June 2016

Ms Zhang has more than 15 years of international trading and business development experience in China and previously held investment and project managerial roles in public listed companies.

Ms Zhang holds a Master's degree in International Consultancy and Accounting from the university of Reading in the United Kingdom.

Special Responsibilities:

None.

DANAKALI LIMITED ABN 56 097 904 302

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