Review of Ops for the Quarter ended 30 June 2022
18/07/2022 07:00
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RNS Number : 7268S Kore Potash PLC 18 July 2022
18 July 2022
Kore Potash Plc
("Kore Potash" or "the Company")
Review of Operations for the Quarter ended 30 June 2022
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 the following quarterly update for the
period ended 30 June 2022 (the "Quarter").
Quarterly Highlights:
Kola Potash Project
· The process to potentially finance the construction of Kola
progressed in line with the Memorandum of Understanding ("MoU") signed with
the Summit Consortium ("Consortium") in April 2021.
· Receipt of the Optimisation Study ("Study") on the Kola Project was
announced to shareholders on 1 April 2022.
· Kore Potash completed its detailed review of the Study and announced
the outcomes of the Study to shareholders on 27 June 2022.
· On 28 June 2022, the Company announced it had signed a Heads of
Agreement ("HoA") for the construction of Kola.
· Engineering, Procurement and Construction ("EPC") contract proposal
for the construction of Kola based on the outcomes of the Study expected in
August 2022.
· Financing proposal for the complete construction of Kola is expected
following Kore Potash's receipt of the EPC contract proposal and agreement on
key EPC terms.
Corporate Highlights
· 550,000 new ordinary shares of US$0.001 each in the capital of the
Company ("Ordinary Shares")were issued on 5 May 2022 following vesting of
performance rights.
· The Company held its Annual General Meeting ("AGM") on 9 June 2022.
· 44,132,674 new Ordinary Shares were issued to Sociedad Quimica y
Minera de Chile S.A. ("SQM") on 13 June 2022.
· The Kore Potash registered address changed and was announced on 14
June 2022.
· As of 30 June 2022, the Company held US$7.6 million in cash.
Brad Sampson, Chief Executive Officer of Kore Potash, commented:
"Recent global events have heightened concerns for food security and
continuity of supply of fertiliser to feed the world's growing population. The
dramatic increase in the potash price reinforces the need for the development
of new low-cost potash production from high quality potash deposits located
close to customers, such as our projects in the Sintoukola basin. The progress
towards financing our Kola Project is exciting and we look forward to
receiving the financing proposal later this year."
Operational activities
Kola Potash Project
The financing process for the construction of the Kola Project progressed in
line with the MoU signed with the Consortium in April 2021.
Optimisation Study
The highlights of the outcomes of the Study completed by the Consortium as
announced on 27 June 2022 were:
· Capital cost reduced by US$520 million to US$1.83 billion on an EPC
basis compared to the Definitive Feasibility Study ("DFS") capital cost of
US$2.35 billion on an equivalent EPC basis.
· Construction period reduced to 40 months from the DFS construction
period of 46 months.
· Key financial metrics improved on DFS outcomes (at potash pricing
averaging US$360/ tonne unchanged from the DFS):
o Kola net present value ("NPV") NPV(10) post tax improved to US$1.623
billion
o Internal Rate of Return ("IRR") improved to 20% on ungeared post tax basis
· At a potash price of US$1000/t Muriate of Potash ("MoP") CFR Brazil
(less than current potash price of approximately US$1100/t MoP CFR Brazil) the
Kola financial metrics improve to:
o Kola NPV(10) post tax US$9.354 billion
o IRR of 49% on ungeared post tax basis
· Kola designed with a nameplate production capacity of 2.2 million
tonnes per annum ("Mtpa") of MoP.
· MoP production from Kola scheduled over an initial 31 year project
life.
· Kola is designed as a conventional mechanised underground potash mine
with shallow shaft access. Ore from underground is transported to the process
plant via an overland conveyor approximately 25 km long. After processing, the
MoP product is conveyor transported 11 km to the marine export facility. MoP
is conveyed from the storage area onto barges via the dedicated barge loading
jetty and then trans-shipped into ocean going vessels for export.
Heads of Agreement
Kore Potash signed a HoA for the construction of Kola in the presence of the
Minister of State and Minister of Mining, Industry and Geology of the RoC, Mr
Pierre Oba. Following the signing of the HoA the Minister of State commented
that, "the Kola project is of vital international interest and congratulated
Kore Potash on the successful outcome of negotiations with SEPCO".
The HoA confirms the timeline for SEPCO Electric Power Construction
Corporation ("SEPCO") to complete their discussions with Kore Potash ahead of
presenting the Company an EPC contract proposal for Kola. It also provides
additional clarity on matters that SEPCO are required to finalise in advance
of presenting Kore with the construction contract proposal.
The HoA provides for:
· Kola to be designed and constructed as a conventional underground
potash mine and processing plant producing up to 2.2 mtpa of granular MoP over
an initial 31 year life.
· The granular MoP produced by Kola will be at a minimum quality of
95.3% Potassium Chloride ("KCl") in line with international standards.
· The capital cost to construct Kola will be US$1.83 billion and the
construction period will be 40 months.
· During the preconstruction engineering design phase, the HoA provides
SEPCO with an opportunity to adjust the costs related to the underground mine
portion of the works. SEPCO's current capital cost is based in part upon
information collected during the DFS Study phase, some of which SEPCO
continues to review. Should the final agreed quantities of materials and
labour or the underground construction period differ materially from the
baseline, SEPCO will be able to adjust proportionately. The underground
portion of the works (excluding equipment and infrastructure) is currently
estimated as US$164 million, which represents 9% of the total Kola capital
cost.
· SEPCO will also be able to adjust the capital cost if the Chinese RMB
or Congolese FCFA currency exchange rates to the US dollar vary materially
prior to commencement of the works. In such circumstance only the cost of
affected works or components may be adjusted.
Kola EPC
The results of the Study support moving to the next phase of the Kola
development. Therefore, the Consortium has advised that SEPCO will continue
negotiations with Kore Potash with a view to finalising all EPC terms based on
FIDIC Silver book 2017 and present the complete EPC contract proposal for the
construction of Kola during August 2022. The EPC contract proposal will be
based on the capital cost and construction schedule from the Study.
Kola Financing
The Summit consortium has advised that the strongly positive outcomes of the
Study continue to support their financing of Kola and it intends to provide
the financing proposal for the construction cost of Kola after the Company's
receipt of the EPC proposal and agreement on key EPC terms.
Other Kola matters
Separate from the Consortium's activity, Kore Potash's management team also
continued discussions with potential offtake partners with the capability to
procure all the Kola production and who have expressed interest in partnering
with the Company.
DX Potash Project
The Company's focus during the Quarter remained on the Kola Project. The
Company is assessing the most appropriate next steps for developing the DX
deposit and intends to update shareholders further once these steps have been
confirmed.
Corporate
On 5 May 2022, a total of 550,000 new Ordinary Shares were issued to employees
and ex-employees following the vesting of Performance Rights awarded under the
Company's Employee Performance Incentive Plans, of which 283,333 shares were
issued to Gavin Chamberlain, Chief Operating Officer.
At the Company's AGM held on 9 June 2022, all resolutions were all duly passed
on a poll by the requisite majority.
On 13 June 2022, pursuant to the resolution passed at the AGM, 44,132,674 new
Ordinary Shares were issued to SQM in lieu of fees payable under a Technical
Services Agreement. The value of the work performed under the Technical
Services Agreement by SQM on the DX DFS was US$375,470.
On 14 June 2022, the Company announced that its registered office in the
United Kingdom had changed to 45 Gresham Street, London, EC2V 7BG.
As at 30 June 2022, the Company held US$7.6 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$1,253,000 in Exploration and Evaluation in the Quarter
on the Kola Study. The Company ended the Quarter with US$7.6 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
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 - - - - - -
Indicated 79 39.1 30.8 71 39.1 27.7
Sub-Total Measured + Indicated 79 39.1 30.8 71 39.1 27.7
Inferred 66 40.4 26.7 59 40.4 24.0
TOTAL 145 39.7 57.5 130 39.7 51.8
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 - - - - - -
Probable 17.7 41.7 7.4 16 41.7 6.6
TOTAL 17.7 41.7 7.4 16 41.7 6.6
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 1789 20.8 372.2
TOTAL 3,056 20.7 633.7 2750 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 1140 18.7 212.8
TOTAL 2,049 18.5 378.5 1844 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 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 DX sylvinite Mineral Resources and Ore Reserves were reported in an
announcement titled "Dougou Extension (DX) Project Pre-Feasibility Study" on
13 May 2020. Ms. Vanessa Santos, P.Geo. of Agapito Associates Inc. was the
Competent Person, for the Exploration Results and Mineral Resources. Ms.
Santos is a licensed professional geologist in South Carolina (Member 2403)
and Georgia (Member 1664), USA, and is a registered member (RM) of the Society
of Mining, Metallurgy and Exploration, Inc. (SME, Member 04058318). 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, other than the activity currently underway to
develop an improved geological model for the DX deposit which may in the
future necessitate a change in the DX Mineral Resources, 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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