REG - Emmerson PLC - End of Year Newsletter

EmmersonAnnouncement

31/12/2021 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211231:nRSe1087Xa&default-theme=true

RNS Number : 1087X  Emmerson PLC  31 December 2021

 

 

 

Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining

31 December 2021

Emmerson Plc ("Emmerson" or the "Company")

End of Year Newsletter

 

Emmerson Plc ("Emmerson" or "the Company"), the Moroccan focused potash
development company, is pleased to announce that a Shareholder Newsletter has
been uploaded to the Company's website at www.emmersonplc.com.  The letter,
which reflects on the major developments for the Company and the potash
industry during 2021, can be found using the following link
http://www.rns-pdf.londonstockexchange.com/rns/1087X_1-2021-12-30.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/1087X_1-2021-12-30.pdf) , and
also below.

 

 

Dear Shareholder,

 

2021 has been a successful year for Emmerson and major strides have been made
towards achieving our target of first production at the Khemisset Potash
Project ('Khemisset' or 'the Project') in Morocco.  The icing on the cake
came in the form of a strategic financing deal of up to $46.75 million in
November 2021 and accordingly, we look forward to 2022 with confidence as we
fast-track the development of Khemisset into a low cost, high margin supplier
of potash - the first primary producer on the African continent.

 

2021 Key Milestones

 

·    In February, we received the Mining Licence ('ML') for Khemisset from
the Moroccan Ministry of Energy, Mines and the Environment, providing the
exclusive right to develop and mine the potash deposit.

·    In April, we were delighted to join AIM to provide access to a larger
and more entrepreneurial market with an environment more suited to our size
and strategy.

·    In September, our Interim Results highlighted the strength of the
global potash market, which clearly improve the Project's already outstanding
economics: using current spot price assumptions, our post-tax NPV is pushed
from a very respectable US$1.4 billion to US$3.9 billion and IRR of over
85.4%, while average life of mine post tax cashflow increases to US$558
million per annum for an initial 19-year life of mine(1).

·    A major step to unlocking the full potential value of Khemisset was
achieved in November, when we announced a Strategic Investment of up to
US$46.75 million - the upfront cash injection enables us to advance the next
stage of the Project's development, the basic engineering and operational
developments, while the remaining $40m is available for drawdown as necessary,
potentially as part of the project finance.

·    Finally, in December, the Project moved into the pre-construction
phase of development with the award of the primary Basic Engineering contract
to Barr Engineering for the Mineral Processing Facility. We have also received
bids for the balance of the Basic Engineering packages of the Project,
comprising highways connection and site access; portal and declines; mine site
infrastructure; tailings storage facility; electrical power; and water.

 

(1) Using the Dec 2021 spot price for granular MOP in Brazil, with all other
inputs the same as the 2020 Feasibility Study.

 

Strategic Investment

The strategic investment by Singaporean fund Global Sustainable Minerals
("GSM") and Gold Quay Capital (the "Investors") is of great value to the
Company because of the significant financial and strategic support it confers.
GSM is funded by entities controlled by Mr. Indra Widjaja and he, and his
family, are among the wealthiest people in South-East Asia, with significant
investments across many industries including, most importantly for Emmerson,
agriculture and mining. The Widjaja Family are best known as the owners of the
Sinar Mas Group ("Sinar Mas"), which is a very well-known South-East Asian
conglomerate and one of the largest companies in Indonesia. Sinar Mas operates
large, geographically diverse, businesses across numerous verticals including
real estate and construction, financial services, telecoms and technology,
food and agribusiness and mining, with estimated group annual revenues of more
than US$30 billion in 2018.

 

The investment has been structured by way of an initial equity investment and
a second investment via a mandatory convertible note. The mandatory
convertible note can be drawn upon satisfaction of certain conditions, most
notably the completion of the project financing for the Project. The mandatory
convertible nature of the investment means once the instrument is drawn it
will always convert to equity. Therefore, investors should consider this as a
form of deferred equity, at a significant premium to the current share price,
to support the development of Khemisset.

 

Having the backing of such a powerful investor group puts the Company in a
strong position as we move to the development of Khemisset, in particular with
the ongoing project finance negotiations with a syndicate of banks. We welcome
the Investors to the register and look forward to continuing to strengthen our
partnership with them as we move to become the first MOP producer in Africa.

 

Ongoing Work

The Environmental and Social Impact Assessment ('ESIA') submission is awaiting
the final approval and the Company has completed various submissions to
government agencies including the water authority, l'Agence du Bassin
Hydraulique de Sebou, Regional Department of Environment, Regional Department
of Forestry, and Regional Centre of Investment, as well as the public enquiry
process with no objections and full support from local stakeholders.

 

Work relating to the technical aspects of the design and engineering to take
the Project towards construction readiness such as additional geophysical
surveys and shallow drilling to further characterise the near surface geology,
decline alignment drilling and further deep drilling for detailed mine design
are underway.  Progress is also being made with developing the Project's
execution plan with constructive engagement with potential engineering and
EPCM partners. A contract has now been signed for the basic engineering of the
process plant with Barr Engineering, a multi-award-winning engineering firm
based in Minneapolis, USA. Negotiations for the contracts covering the
engineering of all other work packages for the project are now at an advanced
stage and should be awarded shortly.

 

The land acquisition programme is advancing with relevant owners and
stakeholders identified in addition to engagement with the relevant
authorities in relation to the water and power supply routes to site and the
highways connection.

 

Project Finance Update

 

During 2021 in the various webinars and investor updates it has been explained
that we have been able to advance the project finance in parallel with the
other workstreams. As mentioned above, the whole debt process has benefitted
substantially from the strategic equity investment. I am pleased to report
that we have not only engaged with a number of international and Moroccan
banks, but also that the initial due diligence has now been completed. This
means that we move to the next stage where we confirm the Managing Lead
Arrangers ("MLAs") - we expect to be in position to update the market on this
in the first quarter of 2022.

 

Team Appointments

As the Project moves into the construction phase, we have strengthened the
team at every level to support this transition.  We have hired a Project
Controller, Josh Mitchell, who has hit the ground running with the
identification, budgeting and now negotiation of the basic engineering
contracts who is being supported by our new Project Engineering Manager Haitam
Ennadif who is based in Morocco.

 

At board level, James Kelly replaced Mark Connelly, who retired in April 2021.
James has over 20 years of experience in the mining sector, particularly in
the areas of corporate finance and financing strategy. Additionally, Rupert
Joy, who has high level international experience including seven years as a
diplomat in Morocco, joined as a Non-Executive Director.

 

Morocco

The Company has worked hard during 2021 to build the foundations of a
long-term partnership with Morocco, one of the region's most dynamic economies
and a welcoming environment for foreign direct investment. The Kingdom's
expertise in fertiliser production and emerging position as an African leader
in agriculture, water management and renewables make it an ideal partner for
Emmerson. The Project is anticipated to bring substantial social and economic
benefits to the region of Khemisset, as identified in the socio-economic study
and based on both the significant investment over the life of the mine and the
creation of over 2,000 direct and indirect jobs.

 

Potash Industry

As shareholders will be aware, potash is a widely used fertiliser and plays a
central role in feeding the world's growing population. Potash has many
benefits including increased crop quality and yield, improved uptake of
nitrogen and more efficient use of water.

 

Potash (MOP) accounts for 95% of global demand for the vitally important
potassium fertilisers. There is no substitute for potash, with MOP continuing
to be the cheapest and most utilised source of potassium for agricultural
processes globally.

 

Annually, global potash (MOP) consumption in 2017 was 64m tonnes, growing to
71.6m tonnes in 2020, with this figure forecast to further increase over the
next decade to 84m tonnes in 2029. This is an average increase of 2.6% per
annum for the consumption of MOP globally. Improving yields to feed the
growing population are just a few of the drivers in this growth in demand for
potash, and these drivers are only going to grow in decades to come. These
factors have seen prices of fertilisers grow significantly over the past 12
months, with potash doubling or tripling in price depending on buyer.
Tightened supply alongside robust demand and increasing crop prices will see
prices for MOP to remain at strong levels over the next decade.

 

As the first commercial potash mine in Africa, Emmerson is expected to benefit
from the high growth forecasted for fertilisers across the African continent.

 

Looking Ahead

We have some major targets to hit in 2022, not least the successful receipt of
our ESIA permit, and the project finance facility to be finalised.  However,
with a mining licence secured, strong balance sheet, very robust market
fundamentals, supportive shareholders and stakeholders, and an exceptional
team, we expect 2022 to be a transformational year for Emmerson.

 

I would like to take this opportunity to thank our shareholders for their
ongoing support and wish you all a very happy and healthy New Year.

 

Graham Clarke

CEO

 

 

**ENDS**

 

For further information, please visit www.emmersonplc.com
(http://www.emmersonplc.com/) , follow us on Twitter (@emmerson_plc), or
contact:

 

 Emmerson Plc                                        +44 (0) 20 7236 1177

 Graham Clarke

 Shore Capital (Nominated Adviser and Joint Broker)  +44 (0)20 7408 4090

 Toby Gibbs / John More

 Shard Capital (Joint Broker)                        +44 (0)20 7186 9927

 Damon Heath / Isabella Pierre

 St Brides Partners (Financial PR/IR)                +44 (0)20 7236 1177

 Susie Geliher / Isabel de Salis

 

Notes to Editors

Emmerson's primary focus is on developing the Khemisset project ("Khemisset"
or the "Project") located in Northern Morocco.  The Project has a large JORC
Resource Estimate (2012) of 537Mt @ 9.24% K2O 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 Feasibility Study released in June 2020 indicated Khemisset 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 NPV10 of approximately US$1.4 billion using industry expert, Argus',
price forecasts.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCFLFSDFFLIVIL