REG - Emmerson PLC - Strategic Investment of up to US$46.75m
10/11/2021 07:05
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RNS Number : 9171R Emmerson PLC 10 November 2021
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
10 November 2021
Emmerson Plc Announces Strategic Investment of up to US$46.75 million(1,2) for
the Development
of the Khemisset Potash Project
General Meeting on 6 December 2021 to approve terms of Convertible Loan Notes
Emmerson, the Moroccan focused potash development company, is pleased to
announce it has secured a strategic investment of up to US$46.75 million(1,2)
from a group of investors to support the development of the Khemisset Potash
Project ("Khemisset" or "the Project"). The primary investor is Global
Sustainable Minerals Pte Ltd, a Singapore domiciled investment vehicle backed
by a significant south-east Asian investor. Defined terms used in this
Announcement are set out at the end of this Announcement.
Highlights
· Strategic investment of up to US$46.75m(123) structured in two tranches
comprising:
o An immediate direct equity investment of US$6.75m at 6 pence per share(1),
an 8% premium to the 30-day VWAP, under the Company's existing authority to
issue shares.
o Subscription for up to US$40m of convertible loan notes, principal and
interest with a conversion price of 8.2 pence per share(13) a 48% premium to
the 30-day VWAP, ("Convertible Loan Notes" or "CLN"). The Convertible Loan
Notes are designed to contribute directly to the construction funding for
Khemisset and are accessible by the Company once the overall funding package
for the Project is in place.
o Grant of 82,391,714 warrants pro rata to CLN subscribers, each warrant with
a 12-month term and an exercise of 8.2 pence per share. Exercise of all
warrants could secure additional c. US$9.3 million investment in the
Company(12).
· On conversion of the CLN, the Strategic Investors, including GSM, will
own up to a maximum of 29.9% of Emmerson Plc
· The US$6.75m(1) equity investment allows Emmerson to accelerate
pre-construction activities at Khemisset:
o Move into the execution phase on Project Financing discussions for debt to
support project development with the aim to close in the middle of 2022
o Immediately commence basic design and engineering for the project to prepare
to commence full construction during 2022
· The Convertible Loan Notes allow Emmerson to further discussions with
other providers of funding including project finance banks, sovereign wealth
funds and royalty and streaming providers as the Company seeks the optimal
overall funding solution for the Project
· Emmerson is well positioned to take advantage of the strongest fertiliser
market in more than a decade and Morocco's emerging position as gateway to
Africa
· General Meeting of shareholders on 6 December 2021 to approve terms of
Convertible Loan Note and issue of conversion shares and warrants
(1) Using a USD:GBP exchange rate of 1.375
(2) Assumes further issue of ordinary shares to maintain the Strategic
Investors holding at 29.9%
(3) Subject to shareholder approval and various conditions precedent including
closing the remaining finance to construct the Khemisset Potash Project
(4) Based on the Feasibility Study financial model assumptions per
announcement on 1 June 2020 with current Brazil spot prices
Graham Clarke, CEO of Emmerson commented:
"A major investment, at a premium to our current valuation, and long-term
strategic commitment by an investment group of this calibre, is a major
endorsement of the Khemisset Project. We have already formed a strong
partnership with the investors who share our vision of creating a new,
independent, and highly profitable and environmentally sustainable potash
company. We look forward to working closely with them to achieve our shared
vision.
"The whole Emmerson team and I have worked tirelessly, through an extremely
rigorous due diligence process, over several months, to secure this strategic
investment for the Company. It is a transformational investment for Emmerson,
and it is a major step to unlocking the full potential value of the world
class Khemisset Potash Project.
"The Project will be important for Morocco and will bring substantial social
and economic benefits to the region of Khemisset. Our Moroccan stakeholders
continue to be incredibly supportive of us as we move the Project into the
execution phase and develop it for the benefit of all of our stakeholders.
Emmerson expects to invest well over US$500 million over the Project's initial
19-year life of mine, creating over 2,000 direct and indirect jobs, and
establishing a long-term beneficial partnership with Morocco.
"Potash markets have strengthened considerably since we released our
Feasibility Study, with prices in Brazil now over US$800/tonne, effectively
double the base case assumptions from our previous studies. The strength in
potash clearly improves its already outstanding economics and, using current
spot price assumptions, it would push our post-tax NPV(8) from a very
respectable US$1.4 billion to US$3.9 billion(4) 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.
"Our attention now moves quickly to the task at hand, which is to get the
project into production as quickly as possible. Our advisors are well advanced
in their engagement with numerous potential banking partners, and we will move
to mandating banks as quickly as possible. We have also engaged with our
established engineering partners and will commence the basic design of the key
components of the Project while, in parallel, preparing work packages for
eventual tender with our EPCM partners. We have already made substantial
progress in pre-qualifying the groups who will eventually partner with us in
building Khemisset.
"We would like to thank our shareholders for their ongoing support through
this process."
Mark Zhou, Director of GSM commented:
"The Khemisset Potash Project is clearly a standout in the development MOP
space and we are excited to be partnering in its development with Emmerson
Plc.
"We have been very impressed with the technical work completed by Graham and
his team to date and the detailed execution plan they have presented to us,
which is the basis for this significant investment.
"We look forward to being a part of the development of what will be the only
producing MOP potash asset in Africa, in the dynamic Kingdom of Morocco, a
global leader in fertiliser that is playing a growing role in the development
of African agriculture. We believe this strategic location with developed
infrastructure within close proximity makes the asset all the more valuable as
Africa's importance for food production, and global food security, continues
to grow in the coming decades."
Overview of the Strategic Investment
The Company has raised US$6.75 million before expenses by way of a
subscription for 81,818,182 new Ordinary Shares at a price of 6 pence per
share by various investors (the "Equity Subscription"). Global Sustainable
Minerals Pte Ltd ("GSM") has subscribed for 48,484,848 new Ordinary Shares and
Gold Quay Capital Pte Ltd ("GQC") has subscribed for 21,818,182 new Ordinary
Shares, in aggregate investing US$5.8 million in the Company. The Subscription
Shares shall be admitted to trading on AIM on 24 November 2021.
Having acquired this initial stake, GSM and GQC have committed to acquire a
further strategic stake in the Company via a subscription for conditional
convertible loan notes (the "Convertible Loan Notes"). The subscription for
Convertible Loan Notes is subject to approval of Shareholders at a general
meeting of shareholders to be held on 6 December 2021, further details of
which are set out below. Draw-down of funds in respect of the Convertible Loan
Notes is subject to satisfaction of the CLN Subscription Conditions (as
defined below), subject to which GSM shall invest up to US$36 million and GQC
shall invest up to US$4 million for a total of up to US$40 million. The
proceeds of the Convertible Loan Notes shall be utilised at such point that
the Company has all necessary project funding in place for the construction of
the Khemisset Project and satisfied all other conditions precedent as
described further below.
The Convertible Loan Notes shall have a two-year term from their issuance
date. They will have a conversion price of 8.2 pence per share (the
"Conversion Price") (at the Exchange Rate) and will accrue interest at a rate
of 9% payable annually in arrears on the principal amount of funds drawn down,
such interest to be converted into new Ordinary Shares of the Company to be
issued to each holder of Convertible Loan Notes at 8.2 pence per share within
30 days after each 12-month interest period ("Interest Shares"). The aggregate
amount outstanding under the Convertible Loan Notes including, for the
avoidance of doubt, all Standard Interest (as defined below), will be
satisfied by the issue of new Ordinary Shares at 8.2 pence per share. In
addition, upon subscription for the Convertible Loan Notes commencing from the
date on which the Resolutions are approved by shareholders, GSM and GQC will
also be granted 12 month warrants to subscribe for in aggregate of up to
82,391,714 new Ordinary Shares representing a ratio of approximately 1 warrant
for every US$0.485 committed under the CLN Instrument), each warrant with an
exercise price of 8.2 pence per share (the "Warrants"). Each subscriber has
the right, but not the obligation, to convert Convertible Loan Notes and all
Standard Interest accrued thereunder into Ordinary Shares, at the Conversion
Price, in the event of a change of control of the Company (or analogous
transaction or occurrence in respect of the Khemisset Project).
The Warrants can be exercised within the 12-month period from the approval of
the Resolutions and, if exercised during this period, would result in GSM and
GQC (together the "Strategic Investors") (together with their respective
affiliates) being interested in 153,694,744 Ordinary Shares representing
15.41% of the Company's issued shares.
The CLN Subscription Conditions have until 30 September 2022 to be satisfied
(unless extended). On satisfaction of the CLN Subscription Conditions the
Company shall draw down the maximum nominal amount of Convertible Loan Notes
such that the Strategic Investors (together with their respective affiliates)
will be interested in up to 29.9% of the Company's issued shares. The maximum
number of shares that could be issued to the Strategic Investors is
572,320,021 Ordinary Shares, but the interest of the Strategic Investors shall
always be restricted (either under the terms of the Warrant Instrument or the
CLN Subscription Letter such that the shareholding of the Strategic Investors
(and their affiliates) cannot exceed 29.9%.
The Conversion Price (and the exercise price for the Warrants represents a 48%
premium to the volume weighted average trading price of the Company's Ordinary
Shares traded on AIM over the 30-day period immediately before the date of the
CLN Subscription. The Conversion Price represents a premium of approximately
45% to the closing middle market price for the Company's Ordinary Shares on 9
November 2021
(being the last practicable date prior to publication of this announcement).
Global Sustainable Minerals is a Singapore based investment vehicle managed by
Mr. Mark Zhou You Chuan. Mr. Zhou is an executive director and the Chief
Investment Officer of Golden Energy and Resources Limited a company listed on
the Singapore Stock Exchange. GSM is funded by way of a fully committed
secured financing facility (by way of a secured note) provided by Asia Star
Fund Ltd, a fund controlled by Mr. Indra Widjaja.
Concurrent with the CLN Subscription, GSM will enter into a relationship
agreement with the Company and Shore Capital, the Nomad, on the terms set out
below.
Gold Quay Capital is an investment company based in Singapore and managed by
Mr Barry Dick and Mr Martin Otway. Both have over 30 years of experience in
the capital markets with much of that time spent in Asia.
GSM (and its affiliated persons) and GQC (and its affiliated persons) note
that they are acting together in their investment into the Company and would
therefore be deemed as acting in concert by the Panel on Takeovers and
Mergers. As a result they and the Company have sought to limit their maximum
collective holding in Ordinary Shares to 29.9% of the Company's issue share
capital at any one time.
The Fundraising is conditional, inter alia, upon the requisite majority of
Shareholders approving the Resolutions at the General Meeting that will grant
the Directors the authority to allot the new Ordinary Shares and the power to
disapply statutory pre-emption rights in respect of the new Ordinary Shares
Reason for the Equity Subscription, proposed issue of Conditional Convertible
Loan Notes, proposed grant of Warrants, proposed issue of Interest Shares and
use of proceeds of proceeds
The purpose of the Equity Subscription and the Fundraising is to provide
funding for Emmerson's Khemisset Project, located in Northern Morocco.
The Company has devoted significant time to securing cornerstone funding
commitments for the Khemisset project financing package, ahead of detailed
negotiations with likely debt funders and industry partners, and the Directors
believe the size of the proposed investment by GSM and GQC by way of the
Convertible Loan Notes, the identity of the investor group, and the structure
of the investment, is strategic in nature and securing this component of the
project finance package has the potential to unlock the overall funding
package for the Khemisset Project.
As investors will be aware, the development of the Khemisset Project has been
the Company's primary focus since acquiring 100% control of the potash
licenses in 2016. The recently completed Feasibility Study completed by Golder
Associates in June 2020 has confirmed the findings from the 2018 Scoping Study
by Golder Associates, which showed that Khemisset has the potential to be a
world class, low capital cost, high margin potash mine, which is a very rare
asset in the industry. The Feasibility Study is available on the Company's
website at www.emmersonplc.com (http://www.emmersonplc.com) .
The Feasibility Study supported robust economics for the Khemisset Project
with a projected post-tax NPV8 of US$1.4 billion and internal rate of return
of 38.5% based on production of up to 800,000 tonnes of K60 MOP per annum
during steady state operations over an estimated initial 19-year mine life,
using an assumed potash price of US$360/tonne. Importantly, the Feasibility
Study set out an estimated pre-production capital cost of US$387 million to
bring the Khemisset Project into production, less than half of its global peer
average capital intensity.
The Khemisset Project is ideally located to benefit from the expected high
growth in demand for NPK fertilisers in Africa. Its location, close to a
number of potential export ports with easy access to European, Brazilian and
US markets, means that the project is expected to receive a premium netback
price relative to many of its peers. The need to feed the world's rapidly
increasing population is driving demand for potash and the Company is well
placed to take full advantage of the opportunities this presents.
The Feasibility Study confirmed both the technical and economic viability of
the sale of 1 million tonnes per annum (Mtpa) of salt byproduct produced from
the Khemisset Project with, on average, a total of approximately 4.5Mtpa of
salt by-product over the life of the mine. As a result, there is clear
potential for significant increases in the tonnages of salt which could be
sold into the US de-icing salt market. As the salt is a bye-product of potash
production at the Khemisset Project, the operating cost associated with its
production is very low and the Company expects to be a very competitive
producer on a delivered cost basis to the US market.
Emmerson plans to use the net proceeds of the Equity Subscription, if
exercised, the Warrants, and funds drawn-down pursuant to the Convertible Loan
Notes, to:
· Fund development capital expenditure on the Khemmiset project and
any growth opportunities for the Khemisset project including:
o Completion of basic design and engineering
o Completion of definition of work packages for tender from construction
contractors
o Examine expansion opportunities for salt and potash production
· Achieve financial close on project finance debt and other
financing streams for the development of the Khemisset project
· Build-out the owners' development team across all key technical
disciplines
Details of the Equity Subscription and Total Voting Rights
The Company has raised US$6.75 million (approximately £4.91 million) before
expenses through the issuance of 81,818,182 new Ordinary Shares at an issue
price of £0.06 (six pence) per Ordinary Share to GSM, GSQ and other unrelated
investors. GSM has subscribed for 48,484,848 new Ordinary Shares at 6 pence
per share and GQC has subscribed for 21,818,182 new Ordinary Shares at 6 pence
per share.
The Equity Subscription is being undertaken under the Company's existing
authority to issue Ordinary Shares for cash and is conditional, inter alia,
upon Admission becoming effective on 24 November 2021.
The Subscription Shares will be issued free of all liens, charges and
encumbrances and will, when issued and fully paid, rank pari passu in all
respects with the Existing Ordinary Shares, including the right to receive all
dividends and other distributions declared, made or paid after the date of
Admission.
Application will be made to the London Stock Exchange for the admission of the
Subscription Shares to trading on AIM. It is expected that Admission will
occur and that dealings will commence at 8.00 a.m. on 24 November 2021 at
which time it is also expected that the Subscription Shares will be enabled
for settlement in CREST.
Following Admission of the 81,818,182 Subscription Shares, the Company's
issued share capital will consist of 915,062,661 Ordinary Shares. Therefore,
following Admission the total number of voting rights in Emmerson will be
915,062,661, which is the figure which should be used by shareholders as the
denominator for the calculations by which they will determine if they are
required to notify their interest in, or a change to their interest in,
Ordinary Shares under the FCA's Disclosure and Transparency Rules.
CLN Subscription Letters
Subject to approval of Shareholders at the General Meeting the Company is
proposing to raise up to US$40 million, before expenses, by the issuance of
Conditional Convertible Loan Notes to GSM and GQC, pursuant to the terms of
CLN Subscription Letters signed by the Company and each of GSM and GQC on 10
November 2021. The CLN Subscription Letters confirm the legal obligation of
GSM and GQC to subscribe for Convertible Loan Notes subject to satisfaction of
relevant CLN Subscription Conditions, including but not limited to the
requisite majority of Shareholders approving the Resolutions at the General
Meeting. GSM and GQC have conditionally subscribed for the Convertible Loan
Notes set forth in the table below:
Name of Subscriber CLN Subscription
GSM Up to US$36,000,000
GQC Up to US$4,000,000
TOTAL Up to US$40,000,000
Under the terms of the CLN Subscription Letters the maximum principal amount
that can be drawn down by the Company under the Convertible Loan Instrument
and maximum amount of Convertible Loan Notes that will be issued to the
Strategic Investors is capped at an US$ amount that, at the Exchange Rate,
will result in the Strategic Investors (together with their respective
affiliates) holding no more than 29.9% of the issued shares of the Company
from time-to-time.
A summary of the CLN Subscription Conditions which have to be satisfied by the
30 September 2022 long-stop date (of which (ii) to (vii) below may be waived
by GQC and GSM jointly and not severally) are set out below:
(i) the requisite majority of Shareholders approving the
Resolutions at the General Meeting (this condition cannot be waived);
(ii) the Company confirming in writing that there are and
will be no Events of Default (as that term is defined below) on the proposed
date of the drawdown or will result from the proposed drawdown (the "Issuance
Date");
(iii) the Company obtaining all requisite Government
licences and approvals for the construction of its Khemisset Project and
making the requisite announcements on AIM in relation thereto;
(iv) the Company announcing on AIM that it has signed
definitive agreements and satisfied all conditions precedent for the draw-down
of all project finance (debt, equity and other components) for the funding of
the construction of the Khemisset Project ("Project Finance");
(v) the Company not being aware of any pending material
adverse event information concerning the Khemisset Project which is inside
information required to be disclosed under UK Market Abuse Regulation;
(vi) the Company having prepared a full "Definitive
Feasibility Study", acceptable to the banking syndicate providing the Project
Finance and providing a copy of such study to each of GQC and GSM; and
(vii) each of GQC and GSM satisfying themselves, in
conjunction with the Independent Technical Expert to be appointed by the
banking syndicate, of the operating and capital cost assumptions in the
Definitive Feasibility Study as referred to in paragraph (vi) above.
The Convertible Loan Notes will be issued, subject to satisfaction of relevant
conditions, pursuant to the terms of a convertible loan note instrument (the
"Convertible Loan Instrument") adopted by the Company on 9 November 2021. The
principal terms of the Convertible Loan Instrument are set out below:
(a) Due and payable in two years from Issuance Date (the
"Maturity Date").
(b) The entire principal amount of the Convertible Loan Notes to
be converted to the Conversion Shares, being Ordinary Shares of the Company at
the Conversion Price of 8.2 pence per share at the Exchange Rate.
(c) Coupon of 9% per annum payable annually in arrears
("Standard Interest") on principal amount of the issued Convertible Loan
Notes, with the payment of such interest to be satisfied by the issue of the
Interest Shares on an annual basis within 30 calendar days after the end of
each relevant interest period, being new Ordinary Shares at 8.2 pence per
share. Interest will accrue on any overdue amounts at the rate of 15% per
annum and interest in excess of 9% Standard Interest shall be payable in cash.
(d) Customary representations and warranties including warranty
confirming the Company has no other indebtedness and a covenant that it will
not incur other indebtedness other than as part of the Project Finance package
required to build the Khemisset Project.
(e) Customary adjustment mechanisms in the event any
reorganization of the Company's share capital occurs prior to Maturity Date.
(f) Interest payments made by the Company under the
Convertible Notes shall be grossed up to offset any withholding tax on
interest the Company is required to deduct.
(g) Each subscriber has the right, but not the obligation, to
convert Convertible Loan Notes and all Standard Interest accrued thereunder
into Ordinary Shares, at the Conversion Price, in the event of a change of
control of the Company (or analogous transaction or occurrence in respect of
the Khemisset Project).
(h) Upon the occurrence of certain insolvency events and/or a
change in control, all of the Convertible Loan Notes then in issue will be
immediately due and payable and redeemed in cash or converted to Ordinary
Shares of the Company at the Conversion Price, at the sole and absolute
discretion of each subscriber.
(i) The outstanding principal amount under the Convertible
Loan Notes will be converted to Ordinary Shares of the Company at the
Conversion Price:
(i) if the volume weighted average price of Ordinary
Shares on the AIM Market ("VWAP") following the Issuance Date for any
10-consecutive trading day period is above 16p; or
(ii) on the Maturity Date; or
(iii) prior to the Maturity Date at the election of the
Noteholder in respect of some or all of the Convertible Loan Notes and
Standard Interest accrued thereunder, by giving a notice in writing to the
Company setting out the number of Convertible Loan Notes to be converted, plus
Standard Interest that has accrued but which remains unpaid with such
conversion being completed by the Company within five (5) Business Days of
receipt of such written notice from such Noteholder.
(j) Ordinary Share(s) allotted and issued on conversion will
be fully paid ordinary shares in the capital of the Company and will rank pari
passu in all respects with the then existing Ordinary Shares, including in
respect of any dividends, rights or other distributions.
(k) Price protection events in favour of each holder of
Convertible Loan Notes, while the Convertible Loan Notes are issued and drawn,
such that if the Company issues or enters into any arrangement to issue
Ordinary Shares to any person at a price below 8.2 pence per share (a "Lower
Issue Price"), the Conversion Price will be reduced provided save that that
the maximum shareholding position of the Strategic Investors (together with
their respective affiliates) in the Company is capped at a maximum of 29.9%.
(l) Customary events of default.
Warrants
Concurrent with the signing of the CLN Subscription Letters by GSM and GQC,
the Company adopted a warrant instrument (the "Warrant Instrument") in respect
of up to 82,391,714 new Ordinary Shares ("Warrants") of the Company on the
terms set out below:
(a) 12-month term from date of approval of the Resolutions by
Shareholders ("Warrant Term");
(b) exercise price £0.082 (8.2 pence) per share (subject to
adjustment to match the issue price of new Shares in the event the Company
issues Shares during the Warrant Term at a price lower than £0.082 (8.2
pence));
(c) customary adjustment events on share capital reorganisation
or distributions by the Company during the Warrant Term;
(d) the Warrants may be assigned to affiliates of the holder but
not to third parties unless the Company provides its written consent in
relation thereto;
(e) grant of Warrants subject to the requisite majority of
Shareholders approving the Resolutions at the General Meeting; and
(f) the Warrants may not be exercised to the extent the issue
of new Ordinary Shares will result in the Strategic Investors (and their
respective affiliates) holding an interest of greater than 29.9% of the
Company's issued shares from time-to-time.
Pursuant to the terms of the CLN Subscription Letters, subject to the requisite majority of Shareholders approving the Resolutions at the General Meeting, the Company has granted Warrants to GSM and GQC pro rata to their respective commitment to the CLN Subscription as set out below:
Name of Warrant Holder Number of Warrants
GSM 74,152,543
GQC 8,239,171
TOTAL 82,391,714
Relationship Agreement with GSM
The Company, Shore Capital and GSM have entered into an agreement to regulate
the relationship between the Company and GSM. The relationship agreement
contains undertakings from GSM that, amongst other things, it will not seek to
interfere with overall balance and independence of the Company's board, the
day-to-day control of the Company and that all transactions and arrangements
between the Company and GSM and members of its group will be at arm's length
and on normal commercial terms. The Relationship Agreement will continue in
full force and effect for so long as the Ordinary Shares are admitted to
trading on AIM and GSM is interested in 20% or more of the Company's issued
ordinary share capital.
Board & Investor Accountant Appointment Rights
Under the Relationship Agreement, GSM has the right to appoint and maintain in
office one Director for such time any amounts remain outstanding pursuant to
Convertible Loan Instrument, or it has an interest in not less than 20% of
issued Ordinary Shares, and such party shall be appointed to the Board's
Nominations Committee. In addition, GSM also has the right to appoint, at its
cost, an accountant ("Investor Accountant") in an observational role, with
full access to the Company's Chief Financial Officer (currently FIM Capital
Limited) and Project Control Manager, to monitor the expenditure in relation
to the Khemisset Project. In addition, the Company agrees to consult with GSM
in relation to the termination of the Company's current Chief Executive
Officer or Chief Financial Officer and/or proposed candidates to fill such
roles if vacant (or to be vacated) for any reason.
Pre-emption Issue of new Shares
Under the Relationship Agreement, for such time as GSM is interested in
aggregate in greater than 5% of issued Ordinary Shares of the Company, GSM
shall have the right to participate in relation to any new issue of Ordinary
Shares by the Company for cash (other than pursuant to exercise of options or
warrants or under the terms of any employee incentive scheme) pro-rata to its
interest in the Company as at the date of issue of the new shares.
General Meeting and Posting of Circular
The Company's existing share issuance authorities, are insufficient to allow
the issue of the Conversion Shares, the Warrant Shares and the Interest
Shares. A General Meeting will therefore be convened to seek shareholders'
approval to the allotment and issue of such shares. It is currently
anticipated that the General Meeting will be convened for 6 December 2021 and
it is anticipated that a circular (containing notice of general meeting) will
be issued on or around 11 November 2021.
The Directors have irrevocably undertaken to vote on or procure to vote in
favour of the Resolutions in respect of 47,060,055 Existing Ordinary Shares,
in aggregate representing approximately 5.65% of the existing issued ordinary
share capital of the Company.
Expected Timetable of Principal Events
Announcement of the Proposals 10 November 2021
Publication and posting of circular to shareholders 11 November 2021
Admission of the Subscription Shares 8.00 a.m. on 24 November 2021
Latest time and date for receipt of proxy forms 11 a.m. 2 December 2021
Record Date for voting at the General Meeting 6 p.m. 2 December 2021
Latest time and date for receipt of Forms of Proxy or CREST Proxy Instructions 11.00 a.m. on 2 December 2021
(as applicable) for the General Meeting
General Meeting 11.00 a.m. on 6 December 2021
Announcement of the result of the General Meeting 6 December 2021
Grant of Warrants on or around 10 December 2021
Issue of the Convertible Loan Notes on or before 30 September 2022
Notes
(i) Each of the times and dates set out in the above timetable and
mentioned in the circular to shareholders is subject to change by the Company,
in which event details of the new times and dates will be notified to the
London Stock Exchange and the Company will make an appropriate announcement to
a Regulatory Information Service.
(ii) References to times in this Announcement are to London time (unless
otherwise stated).
**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
Hayden Locke
+44 (0)20 7408 4090
Shore Capital (Nominated Adviser and Joint Broker)
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 NPV(8) of approximately US$1.4 billion using industry expert, Argus',
price forecasts.
Further Information
About Emmerson
Emmerson Plc is developing the world class Khemisset Potash Project which is
located in northern Morocco in between the capital of Rabat and regional
centre of Fes. The Project is benefitted by Morocco's excellent infrastructure
and proximity to existing export routes including ports, roads and railway
lines.
To view this section with illustrative images please use the following link:
http://www.rns-pdf.londonstockexchange.com/rns/9171R_1-2021-11-10.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9171R_1-2021-11-10.pdf)
Khemisset is relatively shallow, commencing from approximately 350m below
surface, and is the lack of aquifer unit overlying the potash seam allows
access via a low cost decline. This is one of the key capital cost savings
when compared to typical potash mines.
Feasibility Study Overview
The Company released a Feasibility Study in June 2020, which highlighted the
outstanding features of the Project including industry leading, low, capital
expenditure to bring the Project into production, bottom quartile
all-in-sustaining delivered cost to targeted customers and an initial mine
life of 19 years. The Feasibility Study estimated Khemisset could be built
with industry leading capital costs of just over US$400m, while projected
operating costs of US$168/tonne, delivered to Brazil, put the Project in the
lowest quartile on the cost curve.
The key assumption underpinning the Feasibility Study is an average annual
extraction rate of approximately 6 million tonnes of ROM ore with an average
grade (undiluted) over the life of mine of 9.12% K2O. The Feasibility Study is
based on 43% of the JORC compliant Mineral Resource Estimate of 537Mt at an
average grade of 9.24% K2O, delivering an initial mine life of 19 years.
Significant potential remains to increase the mine life by including
additional resources, notably in the south-west of the project area, and
through further exploration work.
Processing assumes a hot leaching and crystallisation process to extract and
purify the KCl in the ore into saleable grade K60 MOP. Over the life of mine,
the process plant delivers an average of approximately 735,000 metric tonnes
per annum of K60 product and 1 million metric tonnes of de-icing salt for
sale.
The Feasibility Study assumes all MOP and salt product is exported through the
Port of Casablanca, using trucks from mine site, to be sold in Emmerson's
target markets in the Atlantic corridor, which includes Morocco.
World Class Economics
Economic sensitivity analyses of Khemisset shows it to be a financially robust
project that delivers strong NPVs and healthy cashflows through a range of
potash prices. Strong cashflow generation at a variety of low potash prices is
fundamental to the ability to finance the Project.
The Base Case for the Project delivered a post-tax NPV8 of US$1.4 billion and
average life of mine EBITDA of US$294m per annum assuming an average potash
price of US$412/tonne over the life of mine. Increasing the potash price
assumption to US$680/tonne, which is an approximately 15% discount to the
current spot price, increases the post-tax NPV8 to over US$3 billion with
average life of mine EBITDA of US$556 million.
DEFINITIONS
The following definitions apply throughout this announcement unless the
context otherwise requires:
Admission means the admission of the Subscription Shares to trading on AIM in accordance
with the AIM Rules
AIM means the market of that name operated by the London Stock Exchange
Board means the board of directors of the Company from time to time
Business Day means any day (excluding Saturdays and Sundays) on which banks are open in
London for normal banking business and the London Stock Exchange is open for
trading
CLN Subscription means the conditional subscription for up to US$40 million of Convertible Loan
Notes by the Strategic Investors in accordance with the terms of the CLN
Subscription Letters
CLN Subscription Conditions means the conditions precedent to be satisfied by the Company before draw-down
of the funds pursuant to the CLN Subscription
CLN Subscription Letters means the subscription letters signed by the Company and each of GSM and GQC
setting out their binding commitment to subscribe for up to US$40 million in
respect of the CLN Subscription
Company or Emmerson means Emmerson plc
Conversion Price means 8.2 pence
Conversion Shares means the new Ordinary Shares to be issued to the Strategic Investors on
conversion of the principal amount of the Convertible Loan Notes in accordance
with the terms of the Convertible Loan Instrument
Convertible Loan Notes means up to US$40 million of convertible loan notes to be issued to the
Strategic Investors under the terms of the Convertible Loan Instrument subject
to satisfaction of the CLN Subscription Conditions
Convertible Loan Instrument means the convertible loan instrument adopted by the Company on 9 November
2021 pursuant to which the Company will, on the terms and subject to the
conditions of each CLN Subscription Letter, issue up to US$40 million in
principal amount of Convertible Loan Notes
Directors means the directors of the Company at the date of this Announcement
Equity Subscription means the subscription by new and existing investors (including the Strategic
Investors) for the Subscription Shares announced by the Company on 10 November
2021
Exchange Rate GBP: USD 1.375
Existing Ordinary Shares means the existing 833,244,479 Ordinary Shares in issue as at the date of this
Announcement
FCA means the Financial Conduct Authority of the United Kingdom
Feasibility Study means the technical feasibility study in relation to the Khemisset Project
completed by Golder Associates in June 2020 available on the Company's website
at www.emmersonplc.com
Fundraising means the proposed subscription by the Strategic Investors for the Convertible
Loan Notes, issue of Interest Shares and the Warrants pursuant to which the
Company will raise finance of up to US$40 million by issue of the Convertible
Loan Notes
GM or General Meeting means the general meeting of the Company convened for 11.00 a.m. on 6 December
2021 at the offices of Emmerson plc at 55 Athol Street, Douglas, IM1 ILA, Isle
of Man by the Notice of GM and any adjournment thereof
GQC means Gold Quay Capital Pte Ltd
GQC Subscription Shares means the 21,818,182 Subscription Shares subscribed for by GQC pursuant to the
Subscription Agreements
GSM means Global Sustainable Minerals Pte Ltd
GSM Subscription Shares means the 48,484,848 Subscription Shares subscribed for by GSM pursuant to the
Subscription Agreements
Interest Rate, also defined as Standard Interest means 9% per annum
Interest Shares means the up to 63,858,093 new Ordinary Shares to be issued to the Strategic
Investors to pay Standard Interest accrued under the Convertible Loan Notes
prior to the conversion or repayment of such Convertible Loan Notes, each
issued at an issue price of £0.082 (8.2 pence) per share
Issued share capital means, except where stated to the contrary, the issued share capital of the
Company excluding treasury shares
K60 MOP means the minimum saleable grade for standard MOP for agricultural uses is 60%
K20
Khemisset Project means the Khemisset potash project in Morocco
LSE or London Stock Exchange means London Stock Exchange plc
Maturity Date means the date falling on the second anniversary of draw-down of funds
pursuant to the Convertible Loan Instrument
MOP means Muriate of Potash
Notice of GM means the notice of the GM sent to shareholders with the circular setting out
the proposed terms of the Fundraising
Ordinary Shares means the issued ordinary shares of nil par value in the capital of the
Company
Proposals means the proposed issue of the Conditional Convertible Loan Notes, proposed
grant of the Warrants and proposed issue of the Interest Shares
Relationship Agreement means the relationship agreement between GSM, the Company and Shore Capital to
be executed by the parties on first draw-down of funds pursuant to the
Convertible Loan Instrument
Resolutions means the following resolutions:
1. Resolution 1, which will be proposed as an ordinary resolution, to
authorise the Directors to allot and issue (i) Ordinary Shares pursuant to the
terms of the Convertible Loan Notes (including the Interest Shares), and (ii)
the Warrant Shares, being up to a maximum amount of 501,016,991 Ordinary; and
2. Resolution 2, which will be proposed as a special resolution, to
disapply the statutory pre-emption rights in respect of the Ordinary Shares
allotted for cash, pursuant to the authority conferred on them by resolution 1
to allot such shares up to a maximum amount of 501,016,991 Ordinary Shares.
"SCC" or "Shore Capital & Corporate" means Shore Capital and Corporate Limited, the Company's nominated adviser and
financial adviser
"SCS" or Shore Capital Stockbrokers means Shore Capital Stockbrokers Limited, the Company's joint broker
Shareholders means holders of Existing Ordinary Shares
Shore Capital means SCC and/or SCS, as the context permits
Standard Interest Coupon of 9% per annum payable annually in arrears
Strategic Investors means GQC and GSM.
Subscription Agreements means the subscription agreements dated 10 November 2021 entered into by the
Company and GQC, GSM and certain other unconnected investors in relation to
the subscription for the Subscription Shares by GSM, GQC and the other
unconnected investors
Subscription Shares means the 81,818,182 shares comprising the GQC Subscription Shares, the GSM
Subscription Shares and the 11,515,152 shares subscribed for by certain other
unconnected investors
United Kingdom or UK means the United Kingdom of Great Britain and Northern Ireland
£ or Pounds means UK pounds sterling, being the lawful currency of the United Kingdom
Warrant Instrument means the Warrant Instrument adopted by the Company on 9 November 2021
Warrant Shares means up to 82,391,714 Ordinary Shares to be issued to the Strategic Investors
on exercise of the Warrants at a price of 8.2 pence per share in accordance
with the terms of the Warrant Instrument
Warrant Term 12-month term from date of approval of the Resolutions
Warrants means the 12-month warrants granted to GSM and GQC to subscribe for in
aggregate up to 82,391,714 new Ordinary Shares at an exercise price of 8.2
pence per share
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