REG - Emmerson PLC - Q2 Activities Update

EmmersonAnnouncement

11/07/2022 07:00

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RNS Number : 9270R  Emmerson PLC  11 July 2022

 

 

Emmerson PLC / Ticker: EML / Index: AIM / Sector: Mining

11 July 2022

Emmerson PLC ("Emmerson" or the "Company")

Q2 Activities Update

 

Emmerson, which is developing the world class Khemisset Potash Project in
Morocco ("Khemisset" or the "Project"), is pleased to provide an update on its
corporate and operational activities for Q2 2022.

 

Q2 2022 Key Events and Deliverables:

 

·     Global potash market remains strong with spot prices of US$1,100/t
in Brazil

·     Discussions with debt, equity financiers and potential strategic
partners continue to progress well, with the tailwind of high potash prices
and the accepted strategic importance of new sources of potash such as
Khemisset

·     Project development work has continued in the quarter:

o   Exploration work has unlocked cost effective construction options -
portal and decline location has been updated and is expected to deliver
technical benefits and capex savings

o   All key infrastructure locations established following successful
completion of geotechnical drilling and additional Electrical Resistance
Tomography surveys

o   Improved and environmentally friendly water solution that increases
security of supply for process water

o   All engineering packages advancing, including basic engineering with
Reminex and process engineering with Barr Engineering

 

Global potash market

 

The potash market has remained extremely strong in the quarter, with supply
issues exacerbated by the war in Ukraine. As of mid-June, reported Muriate of
Potash ("MOP") sales prices were showing that the Brazil market had steadied
at approximately US$1,100/t, while other markets around the world were also
showing marked increases in pricing. Global shortages have led to a supply
response from producers, and analysts are predicting increased production from
Canada, specifically from BHP's Jansen project, and from the world's largest
producer, Nutrien, although these developments will take, in some cases,
several years to come online. At the same time, production from Belarus or
Russia may not become widely available for some considerable time.

 

The price of all food crops has risen sharply, which has the potential to
sustain the demand for potash even at current elevated prices. The world needs
agricultural production to increase further to control food prices globally,
and it remains critical that potash mines such as Khemisset, as well as other
fertilizer projects are brought into production to support this.

 

Financing update

 

The Company has continued to make good progress towards securing the funding
needed to bring the project into construction, with positive dialogues with
banks, equity investors and potential strategic partners, in addition to the
existing Singapore-based cornerstone investors Global Sustainable Minerals Pte
Ltd and Gold Quay Capital Pte Ltd, who committed up to US$46.8m in November
2021.

 

Project Development Update

 

Environmental approvals

Environmental approval for the project remains outstanding. The Company has
invested significant resources into meeting Moroccan requirements, including
various important design optimisation steps since the submission of the
Environmental and Social Impact Assessment in 2020. No specific environmental
objections have been raised by the Moroccan authorities and the Company is not
aware of any reason why the ESIA will not be granted in due course.

 

Geology

The geological programme continued during Q2 with the completion of further
deep drill holes supplemented by directional drilling and four additional
Electrical Resistance Tomography (ERT) surveys. The deeper drill holes had the
dual purpose of further understanding the lithography around the declines to
assist in finalising the precise siting of this key infrastructure to take
advantage of the most competent ground conditions. One of the holes has been
extended to provide detailed data to feed into the design of the DWI (Deep
Well Injection) for some of the process tailings.  The 8km of ERT surveys
have covered the tailings storage facility (TSF) area and the Mining
Infrastructure Area (MIA), for best understanding of rock competence for
foundations.

 

Engineering

Following the award of the Basic Engineering packages at the end of 2021 and
in Q1 2022, the main focus has been on the seven packages covered in the
Reminex contract and the key areas of progress are summarised below. In
parallel, work is progressing well with the process engineering being
undertaken by Barr Engineering.

 

Water Supply

In conjunction with Reminex, an improved solution for process plant water
supply has been investigated in detail and now approved as the go forward case
for further design work. Whereas in the 2020 Feasibility Study the mine site
water supply was envisaged to be from the Ouljet Essoltane dam, it will now be
taken either partially or fully from the Khemisset Waste Water Treatment
Plant, with the ultimate goal of requiring no fresh water for the process.
This is a scientifically robust and environmentally friendly approach that
both reduces risks of water supply to the project, and further reduces
environmental impacts with a shorter pipeline required.

 

Electrical Power

The power strategy has been more clearly defined with the main feed onto site,
back up feed and substation now confirmed. Engagement will now move forward
with the state grid owner, ONEE, to develop key design criteria.

 

Highway Connection

Having engaged with a specialist consultant to assist in the design of the
highway connection, a baseline study was completed to understand local
transport characteristics such as travel directions and distances, traffic,
air pollution or quality of roads, as well as to assess the impact of the
future mine. This work is currently ongoing, and options for the location of
the road junction have been identified and are under discussion with the
relevant government bodies to achieve the best outcome.

 

Portals and Declines

The mine site location has been adjusted following the geotechnical work that
has been undertaken specifically for this purpose. Early results of the
decline alignment drilling had demonstrated potentially disadvantageous
geological conditions, from a constructability perspective, for the previously
proposed portal location. Further to this, more recently completed decline
alignment drilling evidenced better than anticipated ore conditions at the end
of the decline, which would be potentially sterilised if the existing portal
and decline philosophy was adopted.

 

Based on further geological information, developed from boreholes and ERT
surveys, an area has been identified with more advantageous constructability
conditions, and in a location which positions the decline in an appropriate
area.  The new portal location was approved as the go forward case for more
detailed engineering.

 

The remaining MIA infrastructure layout was proposed and approved. Engineering
is well underway on each of the key infrastructure areas. Civil and structural
work has now commenced following the decisions made with regards to mine site
and portal locations, as outlined above.

 

The revised site location uses less private land plots and more 'collective
land' (i.e., the land owned by the state, which produces a useful cost benefit
in the land acquisition programme.

 

Tailings Storage Facility

The location of the TSF remains unchanged. The early basic engineering
discussions were around the optimal solution for the transport of tailings
from the mineral processing facility to the TSF (piped as a slurry or conveyed
as a drier material). Although both systems are effective and can meet project
requirements, the decision was made to progress with a dry tailings system.
The key advantages of the dry tailings system are the environmental benefits
of reduced footprint, reduced water consumption and also reduced risk in the
event of any extreme weather events.

 

Process Plant

Basic engineering is well advanced with process flow diagrams, piping and
instrumentation diagrams and function specifications now completed.
Specifications have been chosen for the mechanical equipment and electrical
and automation drawings are ongoing.

 

 

**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 / Jim Wynn / Charles Vaughan

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

 Toby Gibbs / John More

 Liberum Capital Limited (Joint Broker)              +44 (0)20 3100 2000

 Scott Mathieson / Lydia Zychowska
 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 / Charlotte Page

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
first 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 third 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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