REG - Emmerson PLC - Q3 2023 and Financing update

EmmersonAnnouncement

21/09/2023 07:00

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RNS Number : 1385N  Emmerson PLC  21 September 2023

 

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

 

21 September 2023

 

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

Q3 2023 and Financing update

 

Emmerson, which is developing the world class Khemisset Potash Project in
Morocco ("Khemisset" or the "Project"), is pleased to provide an update on
activities during Q3 2023 and financing discussions relating to its strategic
investors.

 

Highlights

 

·  Emmerson expresses its deepest condolences to all those affected by the
devastating earthquake of 8 September in Morocco.

·   The earthquake has not directly impacted the Project or Emmerson staff
and their families, although further delays to the environmental approval
process are possible as the Government focuses on the aftermath and
humanitarian relief efforts.

·  Environmental approval is awaiting session of the Commission
Ministérielle de Pilotage (''Ministerial Committee'' or the ''Committee'')
chaired by the Moroccan Head of Government.

·   The Company's strategic investors, being Global Sustainable Minerals
Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC"), have confirmed their
intention to replace the existing convertible loan note facility (due to
expire 30 September 2023) with a more suitable financing support once
environmental approval in place, subject to finalisation of terms.

·    Technical workstreams finalising optimisation designs ahead of
incorporation into a Bankable Feasibility Study.

 

 

Chief Executive Graham Clarke said: "The earthquake in Morocco shocked us all
and on behalf of the Company, I would reiterate our expression of condolences
and our sympathy for everyone affected. Understandably, relief efforts will
dominate government focus in the near term, as we await the Ministerial
Committee meeting to approve our environmental permit, but we remain confident
of a favourable outcome.

 

The existing financing facility with our strategic investors was due to expire
at the end of the month. Given the long stop date required all permits and
funding for construction to be in place, this deadline will not be met. In
addition, the facility is now two years old, and various elements of the
agreement now need to be revisited. The right time to do this is once the
environmental approval is in place, and our strategic investors, who are also
our largest shareholders, remain committed to the project, and are working
with us to put in place something more appropriate as soon as possible."

Mark Zhou, director of GSM, commented: "We are happy to confirm our commitment
to the Khemisset Project as Emmerson's largest shareholders and look forward
to negotiating new funding which works for both parties at the appropriate
time, in order to move the Project forwards towards construction as quickly as
possible."

Earthquake

On Friday 8 September 2023, a magnitude 6.8 earthquake struck Morocco. The
epicentre was located in the High Atlas Mountains, approximately 70km south of
Marrakech. Emmerson's project and offices are located some distance away and
were not affected directly. The Company has expressed its deepest sympathies
to the people of Morocco at this difficult time and has made contributions
both to the British Moroccan Society's fundraise, and the Moroccan Special
Fund for the Management of the Effects of the Earthquake.

 

Environmental approval

The Company's primary focus during 2023 has been on obtaining the
Environmental & Social Impact Assessment (''ESIA'') approval for its
Khemisset Project. As previously communicated, the main sensitivities have
centred around the potential impact of the Project on regional water resources
in the context of climate change and recent droughts, and considerable effort
has been undertaken by the Company and the relevant authorities to identify
solutions satisfactory to all stakeholders.

 

In July 2023, the environmental approval for the Project was referred by the
Company to the Ministerial Committee to enable the decision to be taken at a
national level on the basis that the Project is of strategic significance, and
in the context of the sensitivity of water resources in Morocco.

 

Further to ongoing discussions, the Company remains confident that approval
will be forthcoming and is not aware of any significant outstanding issues to
be resolved.

 

The Ministerial Committee was unable to sit ahead of the summer recess and was
due to reconvene at a suitable time once government departments returned to
work in late August. The precise timing of the Committee meeting remains to be
determined, and it is likely that government resources are prioritised in the
coming weeks on humanitarian relief and rehabilitation efforts following the
recent earthquake.

 

Strategic Investor

In November 2021, the Company signed a financing agreement with Global
Sustainable Minerals Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC")
(together the "Strategic Investors") for U$5.8 million of equity at 6 pence
and up to US$40 million of Convertible Loan Notes ("CLNs") at a conversion
price of 8.2 pence. The original CLN agreement had a long stop date of 30
September 2022 (the "Long Stop Date"). In September 2022, this facility was
extended with substantially the same terms for a year until 30 September 2023
(the "Extended Long Stop Date"), with a further US$6 million of equity
subscribed by GSM, also at 6 pence.

 

Drawdown of the funds under the Convertible Loan Notes is subject to
satisfaction of conditions precedent by the Long Stop Date, including inter
alia, (i) the Company obtaining all requisite Government licences and
approvals for the construction of the Project; and (ii) the Company having
signed definitive agreements and satisfied all conditions precedent for the
drawdown of all project finance (debt, equity and other components) for the
funding of the Project. As these conditions precedent and others (see 10
November 2021 announcement for full details) will not be satisfied by the
Extended Long Stop Date, and will not be capable of being fully satisfied in
the near term, the Company and the Strategic Investors, have agreed that the
financing commitment will lapse on the Extended Long Stop Date.

However, the Strategic Investors, who are the Company's largest shareholders
with a combined interest of 15.5%, remain supportive and have confirmed their
intention to engage with the Company in relation to a cornerstone contribution
to the Project's construction financing requirements. It is the preference of
the Company and the Strategic Investors to revisit the form of this financing
support once the timing of the environmental approval is clear and the permit
received.

 

Technical workstreams

Basic Engineering for the Khemisset project is now almost complete, with final
designs and reports remaining in certain areas including the recent design
optimisations in relation to water in-take and tailings management. Once
environmental approval has been obtained, the Company will complete any
remaining optimisation work, and look to provide updated indicative financials
for the Project incorporating any new design elements. Thereafter, work will
begin on a Bankable Feasibility Study ("BFS"), which will be based on the 2020
Feasibility Study, updated to bankable level in all areas, and incorporating
design changes, an updated mine plan, and revised pricing assumptions.

 

Market Abuse Regulation (MAR) Disclosure

This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.

 

**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) 207 138 3204

 Graham Clarke / Jim Wynn / Charles Vaughan

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

 Scott Mathieson / Matthew Hogg / Kane Collings

 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 delivered outstanding economics, including a
post-tax NPV(8) of approximately US$1.4 billion using industry expert Argus'
price forecasts.

 

 

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