TIDMEML
RNS Number : 0152M
Emmerson PLC
09 January 2023
Emmerson PLC / Ticker: EML / Index: AIM / Sector: Mining
9 January 2023
Emmerson PLC ("Emmerson" or the "Company")
Q4 Update
Emmerson, the Moroccan-focused potash development company, is
pleased to provide an update on its corporate and operational
activities for Q4 2022.
Highlights:
-- Environmental permit - discussions with relevant authorities
have progressed closer towards approval, with the focus on
management of water
-- Other technical workstreams (basic engineering) have
progressed and are now near to completion
-- Offtake Memoranda of Understanding ("MOUs") signed in November
-- Strong expressions of interest from debt, equity financiers and potential strategic partners
-- Potash prices fell back in the quarter from historic peaks
but remain well above long term averages
-- Liberum Capital appointed as Nominated Adviser
Graham Clarke, CEO, commented:
" At the end of Q3 we announced that we had renewed our
strategic investment for a further 12 months and had strengthen e d
our balance sheet with the raising of a further US$6.1 million ,
which will fund our planned activities in 2023 ahead of
construction .
" During Q4, a considerable amount of work went into progressing
discussions with regard to the environmental approval of the
Khemisset Project, for which I am grateful to my team and the
Moroccan authorities. A number of important issues that had held up
progress have been resolved, and discussions have moved onto the
specifics of the Project's water management, which is a key area of
concern in Morocco following low rainfall in recent years. Our
proposals (including specific revisions) are robust and I am
cautiously optimistic they will be accepted, but the timing of
approvals is in the hands of the Moroccan authorities. We
appreciate the patience of our shareholders and are committed to
doing everything that is needed to get this over the line .
" Work in other areas has continued. Our technical workstreams
(which of course include key elements relevant to water management
such as sourcing water and tailings facilities) are now nearing
completion, and we were also able to sign MOUs for around 2/3rd s
of our potash production on a take or pay basis , demonstrating the
strength of demand for potash. Discussions with financiers
continue, and we will provide updates at the appropriate times,
although understandably the environmental approvals will unlock
progress , particularly on the equity side.
" I am confident we will be able to provide some substantive
updates over the course of Q1, and that 2023 will be a
transformative year for Emmerson . "
Environmental permit
The Company's priority is to secure the necessary environmental
approvals from the Moroccan authorities for the Khemisset project
("Khemisset" or "the Project"). As Khemisset will be the first
potash mine in Morocco, the authorities have sought to ensure that
all aspects of the Project comply with the highest standards. This
process is iterative, and has taken time, and the Company is aware
of the frustration felt by shareholders over its inability to
provide firm deadlines, or detailed commentaries. To a large
extent, this is in the nature of such processes.
The Company has always emphasised the economic benefits of the
Project to local communities, as well as the strategic importance
of building a new source of potash in Morocco. These aspects have
been widely acknowledged, and the Project has received significant
support both in Morocco and in the UK.
Over the course of 2022, the Company has been able to address a
number of the wider issues relating to the Project, in particular
its potential impact on local and neighbouring communities and
businesses. Discussions have progressed more specifically onto
matters concerning the Project's water management.
Foremost among these is the confirmation of the capacity to use
recycled water from the Khemisset Waste Water Treatment Plant,
instead of drawing freshwater direct from the Ouljet Essoltane Dam.
This revision, developed in conjunction with Reminex SA,
significantly mitigates risks around water supply levels during dry
periods.
The Company has also determined that a dry tailings system will
now be employed at Khemisset to reduce water consumption and
essentially eliminate any risk of saline fluid outflow in the event
of an extreme rainfall event. Such tailings storage facilities are
in use at various potash operations around the world.
The finer technical details of the above, and other specific
areas, continue to be reviewed by the environmental and water
agencies. These proposals are in line with Emmerson's
determination, as a responsible investor, to pursue the highest
environmental standards in everything that we do at Khemisset. The
Company is working through these solutions with the relevant
government departments to ensure they are acceptable to all
stakeholders, although the timing of final approvals is in the
hands of the Moroccan authorities.
Technical Workstreams
Basic Engineering workstreams have substantially progressed
during the period. Design of the processing plant by US-based Barr
Engineering is now 90% complete, and infrastructure design
undertaken by the Moroccan firm Reminex SA is 80% complete. Both
streams will be completed within Q1 2023 in readiness for financier
due diligence and the transition into project execution.
Traffic studies for the proposed highway interchange and the
overall logistics model for transporting the final product from the
mine site to the ports of Casablanca, undertaken by the Moroccan
consultants Novec SA, have also been progressed to support both the
wider Basic Engineering streams and the Environmental and Social
Impact Assessment ("ESIA") submission.
While the Company continues to advance its strategy regarding
renewable energy as part of its sustainability commitment, binding
agreements for both the 225Kv and 22Kv powerlines have been signed
with the Moroccan grid operator, Office National de l'Electricité
et de l'Eau Potable ("ONEE"). The 22Kv line will be utilised as
construction phase power before being converted to its primary
purpose as contingency power for the production phase, which will
be powered by the 225Kv supply.
Electrical Resistance Tomography ("ERT") results from the most
recent exploration campaign have provided a sensible basis for
finalising the mine site location, precise siting of key
infrastructure (portal, declines and processing facility) and
adapting the design to in-situ rock competence for site wide
foundations.
Other technical details have been further de-risked in
partnership with globally renowned subject matter experts.
Cuttability testing has been completed on core samples obtained
from the most recent exploration campaign in Komatsu laboratories,
confirming adequacy of continuous miners for both underground
workings and development of the access declines. Howden have been
instrumental in progressing the ventilation model for the decline
and the mine, enabling development of underground mine planning,
final sizing of declines, and surface equipment specification,
sizing and location.
Potash and Salt MOUs
In November, the Company announced the signing of non-binding
MOUs relating to the offtake of potash and salt to be produced at
Khemisset, as follows:
-- With Keytrade AG for the sale of a minimum of 245,000 metric
tonnes per year of MOP for a period of 10 years; and
-- With Hexagon Group AG for the sale of a minimum of 245,000
metric tonnes per year of MOP and a minimum of 500,000 metric
tonnes per year of salt product ("NaCl"), both for a period of 10
years.
Importantly, the MOUs contemplate "take or pay" provisions
whereby the off-takers will market the product to end users and
compensate the Company for any quantities not taken by end users or
otherwise sold by the off-takers.
The MOUs are non-exclusive, and Emmerson will continue to engage
in ongoing offtake discussions with other wholesale customers,
distributors, and global traders for the remaining production
capacity from Khemisset.
These initial offtake MOUs represent a material development for
Emmerson and underpin an adequate proportion of future potash and
salt sales to satisfy the banks. The Board believes that this is a
strong endorsement for the Project, de-risking the financing.
Financing update
The Company is now finalising the first stage of securing the
bank funding needed to bring the P roject into construction . As
previously noted, s trong expressions of interest have been
received from international and Moroccan lending banks, as well as
development financial institutions and other financing
counterparties, to underpin an attractive construction financing
package. Updates in this matter will be provided in due course.
Global potash market outlook
Potash prices rose sharply in 2022 following the invasion of
Ukraine, and the imposition of sanctions on both Russia and
Belarus, who together account for approximately 40% of global
potash production. By the end of the year, prices had fallen back
somewhat, following a short-term drop in demand due to high prices
and dry weather, but remain well above historic levels.
In the near-term, the market for agricultural produce such as
grain, oilseed, and soya, are expected to be tight, leading to
sustained high prices for those commodities as well as fertilisers
such as potash. Longer term, the growing global population and the
transition to more resource-intensive diets, combined with scarcity
of cultivatable land, will lead to an increasing use of fertilisers
to improve yields. Because the continent of Africa will have the
highest population growth of all, it will also have the greatest
need for increased food production. Khemisset, which is expected to
be the first commercial potash mine on the continent in almost 50
years, is therefore important due to geography, as well as in the
context of worldwide potash demand.
Appointment of Nominated Adviser
On 3 January 2023, the Company announced the appointment of
Liberum Capital as Nominated Adviso r, enhancing our relationship
with them following their appointment as Joint Corporate Broker to
the Company in February 2022.
**ENDS**
For further information, please visit www.emmersonplc.com ,
follow us on Twitter (@emmerson_plc), or contact:
Emmerson PLC +44 (0) 20 7236
Graham Clarke / Jim Wynn / Charles Vaughan 1177
Liberum Capital Limited (Nominated Advisor
and Joint Broker) +44 (0)20 3100
Scott Mathieson / William King 2000
Shard Capital (Joint Broker) +44 (0)20 7186
Damon Heath / Isabella Pierre 9927
St Brides Partners (Financial PR/IR) +44 (0)20 7236
Susie Geliher / Charlotte Page 1177
Notes to Editors
Emmerson is focused on advancing the Khemisset project
("Khemisset" or the "Project") in Morocco into a low cost, high
margin supplier of potash, and the only primary producer on the
African continent. With an initial 19-year life of mine, the
development of Khemisset is expected to deliver long-term
investment and financial contributions to Morocco including the
creation of permanent employment, taxation, and a plethora of
ancillary benefits. As a UK-Moroccan partnership, the Company is
committed to bringing in significant international investment over
the life of the mine.
Morocco is widely recognised as one of the leading phosphate
producers globally, ranking second in the world in terms of tonnes
produced annually, and the development of this mine is set to
consolidate its position as the most important fertiliser producer
in Africa. The Project has a large JORC Resource Estimate (2012) of
537Mt @ 9.24% K2O, with significant exploration potential, and is
perfectly located to support the expected growth of African
fertiliser consumption whilst also being located on the doorstep of
European markets. The need to feed the world's rapidly increasing
population is driving demand for potash and Khemisset is well
placed to benefit from the opportunities this presents. The
Feasibility Study released in June 2020 indicated the Project has
the potential to be among the lowest capital cost development stage
potash projects in the world and also, as a result of its location,
one of the highest margin projects. This delivered outstanding
economics, including a post-tax NPV8 of approximately US$1.4
billion using industry expert Argus' price forecasts, and the spot
price for granular MOP fertiliser has since risen, further
enhancing the valuations.
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END
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