Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining

30 September 2021

Emmerson Plc ("Emmerson" or the "Company")

Operational Update: Khemisset Potash Project

Emmerson, the Moroccan focused potash development company, is pleased to provide an update on progress at its world class Khemisset potash project ("the Project") in Morocco.

Overview

·    The Environmental and Social Impact Assessment (ESIA) submission has progressed towards the final assessment stage and the Company has provided all information that has been requested by the Moroccan authorities subsequent to the last update

·    Decline alignment drilling underway, to be followed by further deep drilling for detailed mine design

·    Land acquisition programme advancing with relevant owners and stakeholders identified. The land acquisition process is being finalised with the Moroccan authorities

·    SOP feasibility study is ongoing, led by Barr Engineering

·    Continued progress in building the project delivery team ahead of the construction phase - key Project Engineer role expected to be filled shortly

·    Significant progress made with developing the project execution plan - constructive engagement potential engineering and EPCM partners

·    Strategic investor and project debt financing process advancing positively

·    Global potash prices have increased significantly with spot prices above those used in the Project feasibility study, underlining the value of the Khemisset project

Graham Clarke, CEO of Emmerson commented:

"Our work on site at Khemisset continues to gain momentum and hit important milestones.  Investors will naturally be focused on the status of the ESIA permit process and the financing process which are of course crucial milestones to attain, and we are well advanced on both objectives.  The reality of a large project like this is that there is much work to be done throughout this preparation time, by the many different members of the team, and we are ensuring that all workstreams continue to advance in parallel with the ESIA and financing processes.  In line with this, I am delighted to report on the work we are doing on site ahead of the commencement of construction, which is making excellent progress.

It is also worth highlighting just how strong potash prices are. There are considerable variations by geographical market, as is often the case. Being independent, as we are, means to be able to supply the local markets with highest demand and pricing. At this point, that market is Brazil, which is growing its demand by about 1 million tonnes per year and now paying over $700/t for granular potash, as against the consensus long term price of $412/t that was used in our 2020 Feasibility Study. This is an excellent backdrop for our financing negotiations."

Permitting and Licencing

The team has completed various submissions to government agencies including, the water authority, l'Agence du Bassin Hydraulique de Sebou, Regional Department of Environment, Regional Department of Forestry, and Regional Centre of Investment. The water authority discussions necessitated the production of an additional study, adding time to the permitting process that was not envisaged earlier in the year. We are pleased to say that all parties are currently satisfied with the thorough supplementary work and the final meeting with the Environmental Evaluation Committee ("EEC") (referred to in Morocco as the "Commission Regionale Unifiée de l'Investissement"), should take place in due course. 

A total of 17 research permits outside of the mining licence block were due for renewal and renewal decisions have been received for 10 of these research permits, with seven still pending. These permits are not immediately critical for the Project, but the team will seek renewals as a matter of course.

The water sampling programme, conducted during Q3 2021, has now been completed and when the results have been processed, they will be integrated into the database. A dust monitoring programme has also been initiated.

Land access permits are now in place for the remaining surface geotechnical surveys.

Geology and Exploration

There has been ongoing geotechnical and geophysical data gathering to inform the design of surface infrastructure and the tailing storage facility (TSF). This involves reprocessing seismic, core logging, and mapping.

The geotechnical drilling campaign for the main access decline has commenced, with the sequencing of drill holes such that deeper geological holes covering the first mining blocks can begin when the drillhole deviation contractor is in place.

There are to be four holes drilled in total over the access decline, including one deep hole to provide data in support of the deep well injection studies, with the aim of reducing surface tailings, which would result in significant savings in both capital and operating expenditures.

The geotechnical information the Company receives from this campaign will also assist in refining the model for ultimate ore recovery from mining, as well as siting the precise location of the access declines. An additional two holes will be drilled to provide more detailed data on the mining blocks that feature in the early years of the mine plan.

Engineering and Design

Work continues on the feasibility study for an SOP plant that could complement the Khemisset MOP operation by capturing additional margin through vertical integration. The port of Jorf Lasfar is one of the largest integrated fertilizer complexes in the world, making it a highly attractive hub to plug into. The preliminary site layout plan for a potential SOP plant has now been produced, demonstrating that the preferred site, which covers 15 hectares at Jorf Lasfar, is of sufficient size to accommodate all the plant facilities. There are still options available regarding the exact positioning of LPG storage and an administration facility.

Although the standalone economics of the Khemisset MOP sales are the primary value driver for the Company, the opportunity to supplement this with additional profit margins from SOP (produced from the Company's own MOP) and potentially other agricultural co-products like DAP, provides further potential upside for Emmerson and is likely to be incorporated into the Project in due course.

Barr Engineering, who designed the main MOP process plant for Khemisset, is undertaking the SOP study also, with the assistance of the EML technical team.  The Company expects to be in a position to complete the SOP Feasibility Study by the end of this year.

Engineering and project delivery

Progress has been made in developing the execution strategy for the project following substantial interactions with potential engineering and EPCM partners.

The Company has already identified and received a proposal for the basic engineering design for the process plant and will soon be requesting the same for the remainder of the project including the highways connection, power connection, surface infrastructure, portal and decline and the tailings facility. As we move closer to entering the construction phase, the role of Project Engineer will need to be filled. The work has been done to identify a suitable candidate who will join the team shortly.

Strategic Investor and Debt Process

The Company is seeking a balanced project financing package that delivers an appropriate and sustainable capital structure for the Company.  It is anticipated that the funding package will comprise multiple elements including both debt and equity tranches.  The debt process is linked to the strategic equity investor process, in that one will provide the catalyst to complete the other. The overall ability to use institutional investors to complete the financing of the whole project capital depends on both the debt and a portion of strategic equity being in place, so that any funding requirement from public equity investors is smaller and more defined.  The Company is pleased to report that all participants in these processes have made encouraging advances.  The Company expects to be in a position to provide significant further detail before the end of Q4 2021.

**ENDS**

For further information, please visit www.emmersonplc.com, follow us on Twitter (@emmerson_plc), or contact:

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 NPV10 of approximately US$1.4 billion using industry expert, Argus', price forecasts.