Davenport Resources (ASX: DAV) has raised $420,000 before costs with a placement of 8.4 million shares to continue work on its four South Harz projects located in a historic German potash district located in the former East Germany.
The placement to sophisticated investors at $0.05 per share represented a 43% premium to Davenport’s last traded price of $0.035, and a 22% premium to the 10-day volume weighted average price (VWAP).
This comes as the company is in discussions with potential partners as a first step to upgrading the scoping studies to feasibility studies.
Davenport plans to begin the upgrading process this year.
As part of the placement, the company will issue one option for every two shares issued in the placement. These options will have an exercise price of $0.075 and expire on 31 July 2023.
Davenport managing director Dr Chris Gilchrist said the raising is to a private company as well as existing shareholders and directors. The money will be used to continue engagement with potential partners to develop the company’s “world-class” potash deposits.
“We have very cost effectively built Western Europe’s largest inventory of potash and already demonstrated through technical scoping studies the technical and economic viability for three of our four potential projects,” Dr Gilchrist said.
Davenport has signed non-disclosure agreements with several parties. Discussions, due to the COVID-19 emergency, are continuing remotely with potential partners, as well as with a UK broker and advisory firm.
Building on Germany’s rich potash mining legacy
Until 1914, Germany supplied almost all the world’s potash, with its production rising from 2,293 tonnes per annum in 1861 to 12.04 million tpa in 1925.
Germany remained the world’s only potash producer until the beginning of the 20th century.
It is still the world’s fifth largest producer, with a total output of 2.9 million tonnes in 2018.
Davenport’s projects are located in the South Harz potash district, once one of the world’s most important muriate of potash (MOP) producing regions, with a history of mining going back over 120 years.
Prior to the re-unification of Germany in the 1990s, the former German Democratic Republic (usually known as East Germany) produced approximately 3.3Mt of potassium oxide annually from mines within and around the district.
It is Davenport’s belief that targeted and strategic investment in the South Harz potash district can support modern day potash production rates similar to those of former times.
Mining possible at current prices
In February, Davenport announced a preliminary technical and economic study of its Nohra-Elende project in the South Harz region had demonstrated it could be mined at current and forecast potash and fertiliser prices.
Research was based on Nohra-Elende’s previously announced inferred resource of 1.7 billion tonnes at 9.7% potassium oxide.
The study envisaged a minimum 34-year mine life producing MOP, Kieserite monohydrate (a high-value magnesium sulphate used in specialty fertilisers) and industrial-grade sodium chloride.