Review of Operations Quarter ended 31 March 2023
26/04/2023 07:00
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RNS Number : 4396X Kore Potash PLC 26 April 2023
26 April 2023
Kore Potash Plc
("Kore Potash" or "the Company")
Review of Operations for the Quarter ended 31 March 2023
Kore Potash (AIM: KP2, ASX: KP2, JSE:KP2), the potash development company with
97%-ownership of the Kola Potash Project ("Kola" or the "Kola Project") and
Dougou Extension ("DX") Potash Project in the Sintoukola Basin, located in the
Republic of Congo ("RoC"), provides its quarterly update for the period ended
31 March 2023 (the "Quarter").
Quarterly Highlights
Projects
· Discussions continue towards finalising terms for the Engineering,
Procurement and Construction ("EPC") contract at the Kola Project.
· PowerChina International Group Limited ("PowerChina") and SEPCO
Electric Power Construction Corporation ("SEPCO") have commenced work to
support the provision of guarantees regarding the EPC contract.
· Summit Consortium ("Consortium") has confirmed that the financing
proposal for the full capital cost of Kola will be provided within six weeks
of finalisation of EPC terms.
· On 24 January 2023, the Company announced an update of the JORC
(2012) compliant Mineral Resource, Ore Reserve, Pre-Feasibility Study ("PFS")
information and Production Target at the DX Project. The updated Mineral
Resource incorporates the most recent drilling results and interpretation of
the geophysical data.
· A review of the strategic options available for the DX Project is
underway.
· British Embassy staff visited Kola and Pointe Noire.
Corporate
· Mr Gavin Chamberlain, Chief Operations Officer ("COO"), finished
employment with the Company at the end of January 2023, as announced on 23
December 2022.
· On 31 March 2023, the Company released its Financial Results and
Annual Report for the Year Ended 31 December 2022.
· As of 31 March 2023, the Company held US$3.8 million in cash.
Operational Activities
Kola Project
The financing process for the construction of the Kola Project progressed, in
line with the process contained in the Memorandum of Understanding ("MoU")
signed with the Consortium in April 2021.
Kola EPC
Kore Potash signed an MoU with the Consortium in April 2021 for the
Optimisation of Kola, the provision of an EPC contract proposal and to provide
a debt and royalty financing proposal for the full construction cost of Kola.
The results of the Optimisation Study ("Study") announced on 27 June 2022
supported moving to the next phase of Kola's development.
On 28 June 2022, the Company announced that it had signed a Heads of Agreement
("HoA") for the construction of Kola with SEPCO.
Under the HoA, SEPCO undertook to continue negotiations with Kore Potash
towards an EPC contract for the construction of Kola. Importantly, the HoA
recognises the outcomes of the Study, and confirmed the capital cost of Kola,
the construction period and related EPC contract terms.
Discussions with SEPCO to finalise key EPC terms progressed through the end of
2022, despite some delays resulting from actions instigated in China to
control the Covid pandemic, as announced to Kore Potash shareholders on 10
October 2022.
Recognising the world-class scale of Kola, the length of the proposed
construction period and the total financing requirement, Kore Potash has
requested that SEPCO's parent company, PowerChina, provides the typically
required EPC contract guarantees, including performance and retention bonds
supporting the completion of construction and the operating performance of
Kola.
PowerChina is now actively involved in the process to finalise the EPC
contract terms. As part of this process, PowerChina is reviewing aspects of
the Kola design and the planned construction schedule and has had direct
communications with the management of Kore Potash. PowerChina's review has
generated a number of potential design improvements to the project that
identify opportunities to further reduce the capital cost and the construction
schedule. Discussions on incorporating these design improvements into the EPC
contract continue.
PowerChina has engaged a number of external experts to support its review of
the Kola design and they require completion of this review to support the
provision of the required EPC contract guarantees. PowerChina has not yet
advised Kore Potash of the timeline to complete its reviews and internal
approvals.
The process to conclude EPC contract discussions has taken longer than the
Consortium initially envisaged, however it is necessary to conclude these
discussions prior to receiving their financing proposal.
Kola Financing
Kore Potash continues to work with the Consortium to provide financing for the
full construction cost of Kola which is intended to be based on royalty and
debt finance.
The successful outcomes of the Kola Optimisation Study were in line with the
Consortium's requirements and supported the ongoing financing discussions. The
financing parties of the Consortium have again reinforced their ongoing strong
interest in financing Kola and await finalisation of the EPC contract terms.
The Consortium has advised that the financing proposal for the full
construction cost of Kola will be provided to the Company within six weeks of
EPC terms being finalised.
Kore Potash continues to hold the view that the members of the Consortium have
the capability to provide the required financing to commit to the construction
of Kola and that pursuing this financing opportunity currently remains the
best path forward for Kore Potash's shareholders.
Congo Government Relations
Since receiving the communication from the RoC Minister of Mines announced on
19 October 2022, the Company has significantly increased the frequency of
dialogue with the Ministry of Mines. The Company believes this has led to a
significant improvement in the relationship and improved understanding of the
Kola Project and its financing requirements.
A common theme throughout the Company's recent dialogue with the Ministry of
Mines is that the Ministry continues to express its strong support and the
support of the RoC Government, for Kore Potash to develop the Kola Project,
while encouraging Kore Potash to find ways to accelerate the smaller DX
Project.
Key members of the Consortium, including SEPCO and PowerChina, have
independently written to the Ministry, and met with them in-person, to assist
in establishing their credentials and experience. The feedback to us from the
Ministry is that these visits have been appreciated and are assisting the
Ministry to better understand the Kola Project and the capability of the
Consortium members.
British Embassy Visit to Kola
On 16 March 2023, Kore Potash hosted a site visit to Kola. The attendees
included a delegation from the British embassy in Kinshasa in the neighbouring
Democratic Republic of Congo. The British delegation included the Deputy
Ambassador, Mr Sam Jeremy. Kore Potash arranged for the delegation to visit an
important local museum, and to meet with the people in a village in the Kola
area where the Company has helped rebuild a school. The delegation was able to
visit the project areas where the Kola shaft, processing and transport
infrastructure will be built. The visit also created opportunity to discuss
Kore Potash's approach towards ensuring positive social and environmental
outcomes and helped develop understanding of the large positive economic
impact that the Kola Project will have in the region.
The Company is very appreciative that the embassy staff committed time to
visit the Kola site.
DX Potash Project
The DX Project update of the JORC (2012) compliant Mineral Resource, Ore
Reserve, PFS information and Production Target was announced on the 24 January
2023. The updated Mineral Resource incorporates the most recent drilling
results and interpretation of the geophysical data. A summary of the results
is presented below:
• Production Target of 15.5Mt sylvinite at a grade of 30.63 %
KCl demonstrates initial project life of 12 years at a production rate of
400,000 tpa Muriate of Potash ("MoP").
• Production Target based on Proven and Probable Ore Reserves
and 13% of the Inferred Mineral Resources that represents 30% of the life of
project MoP production.
• NPV10 (real) of US$275 million and 27% IRR on a real post tax
basis at life of project average granular MoP price of US$450/t.
• Approximately 2.9 years post-tax payback period from first
production.
• Proven and Probable Ore Reserve of 9.31 Mt sylvinite at an
average grade of 35.7% KCl.
• Mineral Resource of 129 Mt at an average grade of 24.8% KCl.
• Higher confidence in the distribution of Sylvinite within the
Top Seams and improved understanding of the Sylvinite/Carnallite boundary
within the Hanging Wall Seam.
The full announcement is available online on the Company's website at
https://korepotash.com/wp-content/uploads/2023/01/Updated-Dougou-Extension-DX-PFS-and-Production-Target.pdf
(https://korepotash.com/wp-content/uploads/2023/01/Updated-Dougou-Extension-DX-PFS-and-Production-Target.pdf)
The updated information confirms that the DX Project is a financially
attractive, low capital cost project with a shorter construction period than
Kola.
At present, the Company remains focused on completing the financing of Kola
and moving forward to construction of Kola as soon as possible. This strategy
is aligned with the expectations of the Government of the RoC.
Recognising the RoC Government's desire to accelerate the production of potash
in the Congo, Kore Potash has agreed with the Government to now consider the
strategic options available for the DX Project that can bring value forward
for all stakeholders and allow more rapid development of the DX Project to
contribute to the economy of the RoC. The Ministry of Mines is working
cooperatively with the Company to fully explore all strategic options. These
options may include forming a joint venture for the development of DX with a
third party or a sale of the DX Project.
Corporate
Mr Gavin Chamberlain, the COO left the organisation in January 2023. Mr Ryan
Leland continues in this role as Project Director for Kola and reports
directly to the Chief Executive Officer.
On 31 March 2023, the Company released its Financial Results and Annual Report
for the Year Ended 31 December 2022 to the market.
As at 31 March 2023, the Company held US$3.8 million in cash.
There were no mining production or construction activities during the Quarter.
Quarterly cashflow report
In accordance with the ASX Listing Rules, the Company will also lodge its
cashflow report for the Quarter today. Included in those cashflows are
non-executive directors' fees and the CEO's salary of US$198,000 settled in
cash.
The Company invested US$906,000 in exploration in the Quarter, which comprised
US$741,000 related to the Kola Study and US$165,000 for the DX DFS Study. The
Company ended the Quarter with US$3.8 million in cash.
This announcement has been approved for release by the Board of Kore Potash.
Market Abuse Regulation
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
ENDS
For further information, please visit www.korepotash.com
(http://www.korepotash.com) or contact:
Kore Potash Tel: +27 84 603 6238
Brad Sampson - CEO
Tavistock Communications Tel: +44 (0) 20 7920 3150
Emily Moss
Adam Baynes
SP Angel Corporate Finance - Nomad and Broker Tel: +44 (0) 20 7470 0470
Ewan Leggat
Charlie Bouverat
Shore Capital - Joint Broker Tel: +44 (0) 20 7408 4050
Toby Gibbs
James Thomas
Questco Corporate Advisory - JSE Sponsor Tel: +27 (11) 011 9205
Doné Hattingh
Tenement Details and Ownership
The Company is incorporated and registered in England and Wales and wholly
owns Kore Potash Limited of Australia. Kore Potash Limited has a 97%
shareholding in Sintoukola Potash SA ("SPSA") in the RoC. SPSA has 100%
ownership of Kola Potash Mining SA ("KPM"). KPM has 100% ownership of the Kola
Mining Lease on which the Kola Deposit is situated. The Kola Deposit is
located within the Kola Mining Lease. SPSA is also the 100% owner of the
Dougou Mining Lease. The Dougou Mining lease hosts the Dougou Deposit and the
DX Deposit.
Under the existing Mining Convention, the RoC Government is entitled to 10%
ownership in the Kola and DX Projects. The transfer of this 10% awaits
instructions from the Government and the Mineral Resources and Ore Reserves
are shown below in gross and 90% attributable bases.
Table 1: Schedule of mining tenements (Republic of Congo)
Project & Type Tenement Issued Company Interest Title Registered to
Kola Decree 2013-412 100% Kola Potash Mining S.A.
Mining of 9 August 2013 potassium rights only
Dougou Decree 2017-139 100% Sintoukola Potash S.A.
Mining of 9 May 2017 potassium rights only
Revised Decree No 2021-389 of 2 August 2021
Kore Potash Mineral Resources and Ore Reserves - Gross and according to future
90% interest (10% by the RoC government)
KOLA SYLVINITE DEPOSIT
Gross Net Attributable (90% interest)
Mineral Resource Category Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes
Measured 216 34.9 75.4 194 34.9 67.8
Indicated 292 35.7 104.3 263 35.7 93.9
Sub-Total Measured + Indicated 508 35.4 179.7 457 35.4 161.7
Inferred 340 34.0 115.7 306 34.0 104.1
TOTAL 848 34.8 295.4 763 34.8 265.8
Gross Net Attributable (90% interest)
Ore Reserve Category Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes
Proved 62 32.1 19.8 56 32.1 17.9
Probable 91 32.8 29.7 82 32.8 26.7
TOTAL 152 32.5 49.5 137 32.5 44.6
Ore Reserves are not in addition to Mineral Resources but are derived from
them by the application of modifying factors
DOUGOU EXTENSION SYLVINITE DEPOSIT (HWSS and TSS)
Gross Net Attributable (90% interest)
Mineral Resource Category Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes
Measured 20 32.4 6.5 18 32.4 5.9
Indicated 8 23.1 1.8 7 23.1 1.6
Sub-Total Measured + Indicated 28 29.9 8.3 25 29.9 7.5
Inferred 101 23.5 23.8 91 23.5 21.4
TOTAL 129 24.8 32.1 116 24.8 28.9
Gross Net Attributable (90% interest)
Ore Reserve Category Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes Sylvinite Million Tonnes Average Grade KCl % Contained KCl million tonnes
Proved 6.1 32.5 2.0 5.5 32.5 1.8
Probable 3.2 41.8 1.3 2.9 41.8 1.2
TOTAL 9.3 35.7 3.3 8.4 35.7 3.0
Ore Reserves are not in addition to Mineral Resources but are derived from
them by the application of modifying factors
DOUGOU CARNALLITE DEPOSIT
Gross Net Attributable (90% interest)
Mineral Resource Category Million Tonnes carnallite Average Grade KCl % Contained KCl million tonnes Million Tonnes carnallite Average Grade KCl % Contained KCl million tonnes
Measured 148 20.1 29.7 133 20.1 26.8
Indicated 920 20.7 190.4 828 20.7 171.4
Sub-Total Measured + Indicated 1,068 20.6 220.2 961 20.6 198.2
Inferred 1,988 20.8 413.5 1,789 20.8 372.2
TOTAL 3,056 20.7 633.7 2,750 20.7 570.3
KOLA CARNALLITE DEPOSIT
Gross Net Attributable (90% interest)
Mineral Resource Category Million Tonnes carnallite Average Grade KCl % Contained KCl million tonnes Million Tonnes carnallite Average Grade KCl % Contained KCl million tonnes
Measured 341 17.4 59.4 307 17.4 53.5
Indicated 441 18.7 82.6 397 18.7 74.4
Sub-Total Measured + Indicated 783 18.1 142.0 705 18.1 127.8
Inferred 1,266 18.7 236.4 1,140 18.7 212.8
TOTAL 2,049 18.5 378.5 1,844 18.5 340.6
Competent Persons Statements
All Mineral Resource and Ore Reserves are reported in accordance with the JORC
Code (2012 edition). Numbers are rounded to the appropriate decimal place.
Rounding 'errors' may be reflected in the "totals".
The Kola Mineral Resources were reported 6 July 2017 in an announcement titled
'Updated Mineral Resource for the High -Grade Kola Deposit'. It was prepared
by Competent Person Mr. Garth Kirkham, P.Geo., of Met-Chem division of DRA
Americas Inc., a subsidiary of the DRA Group, and a member of the Association
of Professional Engineers and Geoscientists of British Columbia. The Ore
Reserves for sylvinite at Kola was first stated on 29 January 2019 in an
announcement titled "Kola Definitive Feasibility Study" and was prepared by
Met-Chem. The Competent Person for the estimate was Mr Mo Molavi, member of
good standing of Engineers and Geoscientists of British Columbia. The Ore
Reserves were reviewed when the changes to the underlying assumptions (as
detailed in the 27 June 2022 announcement "Kola Project optimisation study
outcomes") were made and Mr Molavi verified that the Ore Reserves remained
unchanged.
The Dougou carnallite Mineral Resources were reported on 9 February 2015 in an
announcement titled 'Elemental Minerals Announces Large Mineral Resource
Expansion and Upgrade for the Dougou Potash Deposit'. It was prepared by
Competent Persons Dr. Sebastiaan van der Klauw and Ms. Jana Neubert, senior
geologists and employees of ERCOSPLAN Ingenieurgesellschaft Geotechnik und
Bergbau mbH and members of good standing of the European Federation of
Geologists.
The Dougou Extension sylvinite Mineral Resource Estimate and Ore Reserve
Estimate were reported in an announcement titled "Updated Dougou Extension
(DX) PFS and Production Target" on 24 January 2023. Dr. Douglas F. Hambley,
Ph.D., P.E., P.Eng., P.G of Agapito Associates Inc., for the Exploration
Results and Mineral Resources. Mr. Hambley is a licensed professional
geologist in states of Illinois (Member 196-000007) and Indiana (Member 2175),
USA, and is an Honorary Registered Member (HRM) of the Society of Mining,
Metallurgy and Exploration, Inc. (SME, Member 1299100RM), a Recognized RPO
included in a list that is posted on the ASX website from time to time and Dr.
Michael Hardy was the Competent Person for the Ore Reserves, and he is a
registered member in good standing (Member #01328850) of Society for Mining,
Metallurgy and Exploration (SME) which is an RPO included in a list that is
posted on the ASX website from time to time.
The Company confirms that, it is not aware of any new information or data that
materially affects the information included in the original market
announcements and, in the case of estimates of Mineral Resources or statements
of Ore Reserves that all material assumptions and technical parameters
underpinning the estimates in the relevant market announcement continue to
apply and have not materially changed. The Company confirms that the form and
context in which the Competent Person's findings are presented have not been
materially modified from the original market announcement.
Forward-Looking Statements
This release contains certain statements that are "forward-looking" with
respect to the financial condition, results of operations, projects and
business of the Company and certain plans and objectives of the management of
the Company. Forward-looking statements include those containing words such
as: "anticipate", "believe", "expect," "forecast", "potential", "intends,"
"estimate," "will", "plan", "could", "may", "project", "target", "likely" and
similar expressions identify forward-looking statements. By their very nature
forward-looking statements are subject to known and unknown risks and
uncertainties and other factors which are subject to change without notice and
may involve significant elements of subjective judgement and assumptions as to
future events which may or may not be correct, which may cause the Company's
actual results, performance or achievements, to differ materially from those
expressed or implied in any of our forward-looking statements, which are not
guarantees of future performance. Neither the Company, nor any other person,
gives any representation, warranty, assurance or guarantee that the occurrence
of the events expressed or implied in any forward-looking statement will
occur. Except as required by law, and only to the extent so required, none of
the Company, its subsidiaries or its or their directors, officers, employees,
advisors or agents or any other person shall in any way be liable to any
person or body for any loss, claim, demand, damages, costs, or expenses of
whatever nature arising in any way out of, or in connection with, the
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