TIDMEML
RNS Number : 0512S
Emmerson PLC
04 November 2019
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
4 November 2019
Emmerson Plc ("Emmerson" or the "Company")
Elimination of Port Infrastructure Capital Cost by using Port of
Casablanca
Emmerson Plc, the Moroccan focused potash development company,
is pleased to announce that it has finalised the Feasibility Study
components of port and transport and logistics, including capital
and operating cost estimates, for its world class Khemisset Potash
Project in Northern Morocco ("Khemisset" or "the Project"). The
Project benefits from industry leading capital costs and bottom
quartile all-in delivered cost to customer which yields outstanding
economic metrics, including average annual EBITDA of US$236 million
and a post-tax NPV(10) of US$1.14 billion. To view the press
release with illustrative maps and diagrams please click here:
http://www.rns-pdf.londonstockexchange.com/rns/0512S_1-2019-11-1.pdf
Highlights
-- The go-forward Feasibility Study ("FS") logistics strategy
has selected the outstanding Port of Casablanca ("PoC" or "the
Port")
o One of the largest ports in Africa, equipped to handle larger
vessels with higher loading rates
o Significant existing capacity, sufficient for Emmerson's
potash and salt production
-- Port Infrastructure pre-production capital cost has reduced
from US$7.5 million envisaged in the Scoping Study to zero in the
FS
o PoC is fully equipped to handle potash and salt with no
investment required from Emmerson
o The Port currently exports over 1 million tonnes of salt per
annum
-- Fully quoted product transport and logistics costs to Port of Casablanca of US$11.39/tonne
o An increase of US$1.39/tonne from Scoping Study to account for
slightly longer distance to PoC
o Quotes received from one of Morocco's largest transport
companies with a significant fleet of heavy vehicles
-- Supports Emmerson's goal of developing a sustainable, low capital cost, mine
-- Fully quoted product transport and logistics costs to Brazil of CFR US$29.05/tonne
o Inclusive of port fees, customs duties, shipping and
royalties
o Quotes received from Port operator, customs agents, and a
large shipping company
Hayden Locke, CEO of Emmerson, commented:
"The Emmerson team has visited the Port of Casablanca a number
of times and have been extremely impressed with the facilities
available. It was positive to note that the Port already exports a
significant quantity of de-icing salt, which has very similar
storage and handling characteristics to potash. In addition, the
Port handles large quantities of bulk commodities including
Phosphate, Clinker, and Fluorine.
"The management authorities for the Port confirmed that there is
sufficient storage and loading capacity, with equipment suitable
for both potash and salt, to handle all of Emmerson's export needs
with no additional investment.
"On top of saving US$7.5 million, we are pleased that the Port
already has expertise in managing products like potash, which will
reduce the overall execution risk for Emmerson as we move towards
production.
"This is the first workstream item from the ongoing Feasibility
Study, which is progressing well and is on schedule. We look
forward to continuing to keep the market updated with various parts
of the study as we progress towards its final release during the
first half of 2020."
Detail
Emmerson completed a detailed options study, which is a crucial
part of the Feasibility Study to assess all options available for
the various components of the Project and selected a "go-forward"
case to take into the more detailed engineering work.
The Company completed a comprehensive assessment of the various
options available for transport and logistics solutions from the
Project site to various potential export ports and local
customers.
Due to the outstanding local road infrastructure and the minimal
investment expected to be required to access it, and the very close
proximity to a number of potential ports, the Company's go-forward
logistics solution will remain trucking product from site to its
export terminal.
Due to the high-quality infrastructure already in place,
confirmed capacity, storage and handling capability for potash and
only minor additional transport cost, the Company has elected to
go-forward with the Port of Casablanca as its export terminal.
Port of Casablanca
The Port of Casablanca is one of the largest in Africa and
currently moves over 8 million tonnes per annum. It handles
multiple products including soft commodities (grains, wheat,
legumes), fertiliser, phosphate, coal and clinker. The Port
currently has total capacity of approximately 10 million tonnes per
annum and there are plans to further increase the capacity in the
coming years.
Figure 1: Port of Casablanca Facilities - see PDF
Although the PoC is now the preferred option for the Company for
the FS, consultation with the port authorities indicate that the
Port of Mohammedia is still a viable opportunity and, therefore,
will not be completely excluded from the overall development plans.
The Company believes this is a prudent risk mitigation measure to
ensure that its product can be export efficiently and with minimal
disruptions in all scenarios.
Road
Over the last two decades, Morocco has invested considerably in
upgrading its national road infrastructure. The country now has
more than 57,300km of roads, 44,180km of which are paved, and more
than 1,800km of national highway including the A2, which runs
through the Khemisset Potash Project. The Moroccan Government plans
to spend over US$700 million per annum over the coming decades to
upgrade and extend the national roads network.
The A2, which is a very high quality four lane toll road,
crosses the project area and passes within a very short distance of
the two potential site locations. The Company will only need to
build a new entrance to the highway and approximately 1.5km of
paved road to connect one of the project sites to the proposed
highway entrance.
Figure 2: A2 highway road crossing the project area - See
PDF
Figure 3: Potential Project Sites (A & B) Relative to Road
Infrastructure - See PDF
Rail
ONCF ("Office National des Chemins de Fer") is a governmental
entity and the national railway owner and operator in Morocco. The
railway infrastructure is well developed in Morocco and ONCF has a
branch dedicated to the transportation and logistics of goods
including industrial products. ONCF controls 80 trains that are
specific for goods transport and move approximately 27 million
tonnes per annum 70% of which moves through the ports of Tangier,
Casablanca, and Jorf Lasfar.
The nearest loading platform is in Meknes, which is 55km from
the proposed Project. Access is via well maintained national roads.
There are several other loading sites with poorer road access.
The 2030 strategic line for ONCF highlights building of a new
railway line between Meknes and Rabat via Khemisset, this presents
a good opportunity for the project in case this new infrastructure
is built in the coming years.
Due to double handling (loading at site to trucks and then
offloading and reloading to trains), and an overall increase in
delivered cost to the Port of Casablanca it was decided to rule out
rail for the initial Khemisset Project development plan. However,
the availability and proximity of rail is a major positive factor
for any Project expansions in future.
Figure 3: Overview of Transport and Logistics Infrastructure
from Project Site to Ports and Customer - See PDF
Transport and Logistics Costs
Emmerson conducted detailed analyses of various logistics routes
and obtained firm quotes from several transport and logistics
providers.
Options reviewed included:
1) Trucking cost from site to Mohammedia and storage in a local warehouse at port;
2) Trucking cost from site to Casablanca with no local storage (i.e. on time delivery);
3) Trucking cost from site to Casablanca with storage in a local warehouse at port; and
4) Trucking cost from site to Meknes, loading to rail and rail to Port of Casablanca;
Although trucking to Mohammedia provided the best operating cost
outcome, the additional US$7.5m to US$10.0m of capital cost to
upgrade the port more than offset this operating cost gain and was
a key consideration in eventually selecting the Port of Casablanca
as the export terminal.
Consideration was also given for the requirement for a port
storage facility to help manage the logistics requirements for
Khemisset. After close consultation with the port operators and one
of the largest transport and logistics companies in Morocco, the
Company has concluded that it does not require onsite storage at
the port. The prime reason is the relatively small quantities that
Emmerson will ship are well within the limits of delivering and
loading in three to five days. The transport and logistics company
confirmed it has the trucks available to deliver product "on time"
to the wharf front to be loaded onto ships for export. This method
is currently utilised by de-icing salt and clinker operators at the
Port of Casablanca.
Table 1: Overview of Transport and Logistics Infrastructure
Options from Project Site to Ports and Customer - See PDF
For further information,
please visit
www.emmersonplc.com,
follow us on
Twitter (@emmerson_plc),
or contact: Emmerson Plc Tel: +44 (0) 20 7236
Hayden Locke 1177
Edward McDermott
Damon Heath Shard Capital Partners Tel: +44 (0) 20 7186
Isabella Pierre 9950
Isabel de Salis St Brides Partners Ltd Tel: +44 (0) 20 7236
Megan Dennison Financial PR/IR 1177
Notes to Editors
Emmerson's primary focus is on developing the Khemisset Potash
Project located in Northern Morocco. The project has a large JORC
Resource Estimate (2012) of 537Mt @ 9.24% K(2) O and significant
exploration potential with an accelerated development pathway
targeting a low capex, high margin mine. Khemisset is perfectly
located to capitalise on the expected growth of African fertiliser
consumption whilst also being located on the doorstep of European
markets. This unique positioning means the project will receive a
premium netback price compared to existing potash producers. The
need to feed the world's rapidly increasing population is driving
demand for potash and Emmerson is well placed to benefit from the
opportunities this presents.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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contact rns@lseg.com or visit www.rns.com.
END
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