REG - Emmerson PLC - Q2 Update

EmmersonAnnouncement

06/07/2023 07:00

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RNS Number : 1791F  Emmerson PLC  06 July 2023

 

 

06 July 2023

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

Emmerson Q2 Update

Emmerson PLC, the Moroccan-focused potash development company, is pleased to
provide an update on its corporate and operational activities at the Khemisset
Project for Q2 2023.

Highlights

·   Environmental approval for the project referred from regional level to
the national Commission Ministérielle de Pilotage (''Committee'' or
''Ministerial Committee'')

·   Basic Engineering studies reaching completion with final reports and
designs due shortly

·  Project finance due diligence to run in parallel with updated Bankable
Feasibility Study ("BFS") following environmental approval

 

Environmental approval

The Environmental and Social Impact Assessment (''ESIA'') approval process
remains the key priority for the Company, and hinges on the impact of the
project on water resources for the region, a sensitive issue in the context of
climate change and recent droughts. In particular, the issues raised have
centred around the disposal of brines through deep well injection; the storage
of salt tailings at surface; the use of water from local sources; and the
impact of the project on local highways and land users.

The Company has invested considerable time and resources into developing
robust solutions in all these areas, reflecting international best practice,
including using dry stack tailings, and sourcing waste water rather than fresh
water from nearby reservoirs. In addition, the Company has committed to
completing in-situ injectivity testwork before construction to confirm
definitively the feasibility of deep well injection as a means of disposing of
brines, while examining alternative means to process brines in order to
minimise, or even eliminate, the requirement for brine disposal.

Following a recent evaluation meeting, the Commission Régionale Unifiée
d'Investissement ("CRUI"), the regional investment authority, was unable to
approve the application, and consequently the Company has exercised its right
to refer approval to the Ministerial Committee, which is chaired by the Head
of Government and includes several Government ministers. The Company believes
the measures taken to address all concerns raised, combined with the project's
significant economic benefits and contribution towards addressing food
security, are compelling and underline its strategic importance to the Kingdom
of Morocco. On this basis, the Company remains confident it will receive
approval for its proposals.

 

Technical Workstreams

The work on the seven technical packages that make up the Basic Engineering
workstream is now largely complete, with final drawings and reports only
remaining in respect of power supply, highway junction, mine-site
infrastructure and portal and decline designs.

Once completed, this information will be available for incorporation into an
updated BFS, which will be commenced once environmental approval has been
received, and is likely to take approximately six months to complete.

The BFS will include a detailed financial model based on the latest design of
the plant and mine workings, as well as reflecting cost inflation since the
Feasibility Study completed in 2020.

 

Project financing

Following environmental approval, the Company will proceed with the process of
fundraising for the Khemisset Project. Due diligence and legal work will be
required in respect of the bank debt, with the BFS a key part of this review.
As far as possible, due diligence and the BFS work programmes will proceed in
parallel in order to minimise the time between receiving environmental
approval and reaching financial close.

 

Graham Clarke, CEO, commented:

"Our primary focus has been obtaining the environmental approval for the
project, and a considerable amount of rigorous and detailed work has gone into
addressing all of the issues raised by the relevant authorities, which have
mainly related to water. The environmental approval has recently been referred
from the regional level up to the national Ministerial Committee.

"In reaching their decision, we remain confident that senior government
officials on that Committee will take into account the significant amount of
time and investment that has gone into minimising the environmental impact of
the project, which we believe aligns closely with the Government strategy
regarding sustainable development. Emmerson is firmly committed to maintaining
the highest environmental standards in Morocco at every stage, from
construction through to production.

"As soon as the permit has been granted, we will move to complete a BFS, which
will include updated numbers for the market. We expect this study, which is a
requirement of banks and other financiers, to take approximately six months.

"Thankfully, we are now seeing softening of inflation in capital costs along
with commodity and particularly energy prices. Energy forms the largest single
part of the operating costs. The improvements we have identified during the
basic engineering will also need to be quantified and used as updated inputs
for the financial model. We believe cost inflation will apply to all potash
projects, and we expect Khemisset to remain in a competitive position on the
cost curve not least due to its favourable geology and location.

"Morocco plays an important role in the global fertiliser market, building on
the kingdom's large phosphate product exports. The fast-growing market in
Africa, on top of established demand from Europe and Brazil, makes this an
exciting moment for potash. Once the environmental plan approval process is
completed, we look forward to moving towards the finance and construction of
this nationally important project."

**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

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

 Scott Mathieson / Kane Collings / Will King

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

 Damon Heath / Isabella Pierre

 BlytheRay (Financial PR and IR)                               +44 (0) 207 138 3204

 Tim Blythe / Megan Ray / Said Izagaren

 

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 2020 Feasibility Study delivered compelling
economics, including a post-tax NPV8 of approximately US$1.4 billion.

 

 

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