Update on Kola Financing and RoC Activities

Kore Potash

31/03/2023 07:01

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RNS Number : 9140U  Kore Potash PLC  31 March 2023

31 March 2023

Update on Kola Financing Process and Activities in Republic of Congo

Kore Potash plc ("Kore" or "the Company"), the potash development company with
97%-ownership of the Kola and DX potash projects in the Sintoukola Basin,
located within the Republic of Congo ("RoC"), is pleased to announce an update
on the Kola financing process and the Company's recent activity in the RoC.

 

Highlights

·    Discussions continue towards finalising terms for the Engineering,
Procurement and Construction ("EPC") contract at the Kola potash 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 confirms the financing proposal for the full
capital cost of Kola will be provided within 6 weeks of finalisation of EPC
terms.

·    Increased communication with the RoC Ministry of Mines is improving
support for Kore.

·    A review of the strategic options available for the DX project is
underway.

·    British embassy staff visits Kola and Pointe Noire.

 

Construction Contract Negotiations

On 28 June 2022 Kore announced the signing of a Heads of Agreement ("HoA")
with SEPCO for the construction of the Kola potash project ("Kola").

Under the HoA, SEPCO undertook to continue negotiations with Kore towards an
EPC contract for the construction of Kola. Importantly, the HoA recognises the
outcomes of the Kola Optimisation Study, which was announced on 27 June 2022
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 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 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. 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 of the timeline to complete its reviews and internal approvals.

The process to conclude EPC contract discussions has taken longer than the
Summit consortium initially envisaged, notwithstanding it is necessary to
conclude these discussions prior to receiving their financing proposal.

 

Kola Financing Process

On 6 April 2021 Kore announced the signing of a Memorandum of Understanding
("MoU") with the Summit consortium for the financing of Kola, which required
completion of an optimisation study on Kola and agreement on terms for an EPC
contract. Kore continues to work with the Summit 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
Summit consortium's requirements and supported the ongoing financing
discussions. The financing parties of the Summit consortium have, again,
reinforced their ongoing strong interest in financing Kola and await
finalisation of the EPC contract terms.

Summit has advised that the financing proposal for the full construction cost
of Kola will be provided to the Company within 6 weeks of EPC terms being
finalised.

Kore continues to hold the view that the members of the Summit 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'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. This has led to a significant improvement
in our relationship and a mutual understanding of the road ahead.

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 to find ways to accelerate the smaller DX project.

Key members of Summit 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
Summit consortium members.

 

DX Project

On 24 January 2023, the Company announced updated Mineral Resources, Ore
Reserves and the Production Target for the DX project. This updated
information incorporated all results from the completed diamond drilling
campaign initially announced to Kore shareholders on 27 May 2021.

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 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
3rd party or a sale of the DX project.

 

British embassy visit to Kola

On 16 March 2023, Kore Potash hosted a site visit to Kola by 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 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'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.

 

 

This announcement has been approved by the Board of Kore Potash plc.

 

 

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 Joint 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

 

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