Q1 Activities Update

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

31 March 2022

Emmerson Plc ('Emmerson' or the 'Company')

Q1 Activities Update

Emmerson, which is developing the world class Khemisset Potash Project in Morocco ('Khemisset' or the 'Project'), is pleased to provide an update on its corporate and operational activities for Q1 2022.

Q1 2022 Key Events and Deliverables:

·    War in Ukraine has highlighted the importance to global food security of bringing on new sources of potash for fertilizer production, particularly in reliable well-situated locations such as Morocco;

·    Continued work to advance the Khemisset Project towards construction, including a programme of drilling to provide further information for the design of the declines and other underground structures, and to provide more data on the orebody;

·    Basic Engineering Package awarded to Reminex SA, a respected Moroccan engineering company that is part of the Managem SA group;

·    Environmental approval process continues to progress towards the final awarding of the permit;

·    Discussions with financing partners progressing well, with strong interest on both debt and equity;

·    Appointment of Liberum Capital Limited as a joint corporate broker;

·    Appointment of Mr Jim Wynn as Chief Financial Officer; and

·    Continued engagement with Moroccan authorities to enhance the strong relationship between Morocco and the UK and to underline the benefits of the Khemisset project to local and national stakeholders.

Global potash market

The war in Ukraine is bringing about a wide range of global consequences, the most important and immediate of which are humanitarian, for those most directly affected by this catastrophe. It is also having a major impact on the global potash market, as 38% of the world's recent potash supply has originated from Russia and its ally Belarus. Russia and Ukraine are also, under normal circumstances, major wheat exporters. With food security an increasing concern in the context of rising wheat and other agricultural commodity prices and global population growth (particularly in Africa), fertilizer production, which is the primary use of potash, has escalated in criticality.

Potash prices underwent significant increases in 2021, growing from the long-term average price assumption of approximately US$400/t at the time of the Khemisset Feasibility Study in June 2020 to around US$800/t by the end of 2021. Recent published spot prices for potash have now reached US$1,100/t.

The importance of the Khemisset project as a new source of potash has risen significantly, and the board is more committed than ever to bring the mine into production as soon as possible. To that end, the Company has made good progress in advancing the wide package of agreements relating to financing, offtake, equipment and consultants. The momentum in recent weeks has built noticeably across a number of fronts.

Operational Development

Work relating to the technical aspects of the design and engineering to take the Project towards construction readiness have continued to move forward during the period.  Additional drilling and geophysical surveys have been undertaken to obtain a more detailed understanding of the near surface geology, provide data for the design of the access declines and allow detailed mine design. A number of multi-purpose drill holes are in various stages of completion with these holes designed to help situate the declines into the mine, and also to provide additional data on deeper areas of the resource. Additional shallow holes have also been drilled in the planned process plant and tailings storage facility areas, to provide key geotechnical data ahead of construction.

Basic Engineering awarded to Reminex SA

During the quarter, the Company awarded the balance of basic engineering packages to Reminex SA ('Reminex') following the award of the basic engineering package related to the minerals processing facility to Barr Engineering in November 2021. This will enable the completion of the full basic engineering, including a water and power supply solution to the mine site, mine site access including a highway junction, all mine site infrastructure, portal and access declines and the tailings storage facility.

Reminex is the Research & Development, Engineering and Project Delivery arm of the Managem Group, an international and integrated mining group based in Morocco, which has been in existence for more than nine decades and operates in nine countries across Africa.  Reminex has a proven track record in operating mines and process plants in various commodities including salt, gold, silver, copper, cobalt, zinc and lead in different locations including Morocco, Guinea, Sudan, Gabon, Niger, DR Congo. Their appointment underpins Emmerson's commitment to maximising in-country opportunities via its procurement and job creation strategy.

Environmental approvals continue to make progress

The Company's Environmental and Social Impact Assessment ('ESIA') is awaiting final approvals. The Company has addressed all of the ESIA issues raised by the relevant authorities. In view of the importance of the project to the country, the authorities have been careful to ensure that the needs of the widest possible stakeholder group have been fully taken into consideration. The Company continues to work proactively with all the relevant parties and remains confident that the approval will be forthcoming.

The growing importance of the UK-Morocco business relationship was illustrated by the visit to the UK in March of Morocco's recently appointed Minister for Investment, Mohcine Jazouli, and launch of the Morocco Now campaign at an event in London, attended by Emmerson CEO, Graham Clarke. Morocco Now is a new economic brand launched by the Moroccan Investment and Export Agency that aims to build the economic position of Morocco and promote the kingdom as an investment destination.  The Company is engaging closely with the Moroccan authorities and other key stakeholders to ensure that the development of the Khemisset project aligns with the developing economic strategy of the country through a mutually beneficial partnership.

Project Finance update

Financing discussions for the Khemisset project have progressed well in the first quarter of the year. The Company has received interest from a number of local Moroccan and international banks, as well as support from Export Credit Agencies, which have submitted formal Expressions of Interest.  Good progress has also been made towards securing strategic equity partners, in addition to the existing strategic investors announced in November 2021. The board hopes to be able to provide further details once Emmerson has selected its preferred financing providers, but momentum has been building in this area and the board remains confident of securing good terms on all fronts.

Appointment of Liberum Capital

The board was delighted to announce the appointment of Liberum Capital ('Liberum') to Emmerson's advisory team in February.  Liberum is a leading investment bank with a specialist mining franchise and institutional reach across the UK, Europe and the U.S.  Liberum has a very strong mining heritage, with a number of high-profile metals and mining companies as corporate clients and having raised a total of £10.5bn for mining clients since inception.  Importantly, Liberum is also independently reported as having a leading research offering, with high quality and influential equity research produced across the sector. 

Appointment of Chief Financial Officer

In February 2022, Emmerson announced the appointment of Jim Wynn as Chief Financial Officer ('CFO'), effective immediately. Jim is a highly experienced mining CFO with experience of working in Morocco.  His experience of successfully moving companies through the final stages of development, construction and production will be invaluable to Emmerson over the coming years and his keen commercial knowledge will also be beneficial as the Company communicates its progress to stakeholders.

Morocco

The Company's activities in Morocco continue to intensify ahead of mine construction and with this in mind, the board made the decision to launch a communications programme focussed on stakeholders within the Kingdom of Morocco.  Led by the Company's in-country team, Emmerson and its operating subsidiary are now working with local agencies to amplify the work that is being done in the Khemisset region. A new website will be launched highlighting Emmerson's vision for a sustainable UK-Moroccan partnership.  As shareholders will be aware, Morocco is one of the region's most dynamic economies, a growing gateway to Africa and a welcoming environment for foreign direct investment.

Highlighting the Kingdom of Morocco's standing as desirable investment destination, the Emmerson team were delighted to be involved in two events showcasing the country's appetite and support for direct foreign investment.  The "Morocco: Gateway to Africa" and "Morocco Now" events, both held in London in March 2022, were highly productive and brought together business leaders, investors and representatives from the Moroccan government with the objective of demonstrating the country's geopolitical stability, economic growth potential and world leading renewable energy capabilities.  

**ENDS**

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Notes to Editors

Emmerson is focused on advancing the Khemisset project ("Khemisset" or the "Project") in Morocco into a low cost, high margin supplier of potash, and the first primary producer on the African continent.  With an initial 19-year life of mine, the development of Khemisset is expected to deliver long-term investment and financial contributions to Morocco including the creation of permanent employment, taxation and a plethora of ancillary benefits.  As a UK-Moroccan partnership, the Company is committed to bringing in significant international investment over the life of the mine, as outlined by a transformative strategic investment of US$46.75 million received from a major Singaporean fund and has a defined strategy and exceptional team of industry experts to deliver this large, and strategic national asset.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking third in the world in terms of tonnes produced annually, and the development of this mine is set to consolidate its position as the most important fertiliser producer in Africa. The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K2O, with significant exploration potential, and is perfectly located to support 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 Khemisset is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated the Project 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 NPV8 of approximately US$1.4 billion using industry expert Argus' price forecasts in 2020. The spot price for granular MOP fertiliser has since risen nearly three-fold, highlighting the significant upside to this valuation.