9 January 2023

Emmerson PLC ("Emmerson" or the "Company")

Q4 Update

Emmerson, the Moroccan-focused potash development company, is pleased to provide an update on its corporate and operational activities for Q4 2022.

Highlights:

·     Environmental permit - discussions with relevant authorities have progressed closer towards approval, with the focus on management of water

·     Other technical workstreams (basic engineering) have progressed and are now near to completion

·     Offtake Memoranda of Understanding ("MOUs") signed in November

·     Strong expressions of interest from debt, equity financiers and potential strategic partners

·     Potash prices fell back in the quarter from historic peaks but remain well above long term averages

·     Liberum Capital appointed as Nominated Adviser

Graham Clarke, CEO, commented:

"At the end of Q3 we announced that we had renewed our strategic investment for a further 12 months and had strengthened our balance sheet with the raising of a further US$6.1 million, which will fund our planned activities in 2023 ahead of construction.

"During Q4, a considerable amount of work went into progressing discussions with regard to the environmental approval of the Khemisset Project, for which I am grateful to my team and the Moroccan authorities. A number of important issues that had held up progress have been resolved, and discussions have moved onto the specifics of the Project's water management, which is a key area of concern in Morocco following low rainfall in recent years. Our proposals (including specific revisions) are robust and I am cautiously optimistic they will be accepted, but the timing of approvals is in the hands of the Moroccan authorities. We appreciate the patience of our shareholders and are committed to doing everything that is needed to get this over the line.

"Work in other areas has continued. Our technical workstreams (which of course include key elements relevant to water management such as sourcing water and tailings facilities) are now nearing completion, and we were also able to sign MOUs for around 2/3rds of our potash production on a take or pay basis, demonstrating the strength of demand for potash. Discussions with financiers continue, and we will provide updates at the appropriate times, although understandably the environmental approvals will unlock progress, particularly on the equity side.

"I am confident we will be able to provide some substantive updates over the course of Q1, and that 2023 will be a transformative year for Emmerson."

Environmental permit

The Company's priority is to secure the necessary environmental approvals from the Moroccan authorities for the Khemisset project ("Khemisset" or "the Project"). As Khemisset will be the first potash mine in Morocco, the authorities have sought to ensure that all aspects of the Project comply with the highest standards. This process is iterative, and has taken time, and the Company is aware of the frustration felt by shareholders over its inability to provide firm deadlines, or detailed commentaries. To a large extent, this is in the nature of such processes.   

The Company has always emphasised the economic benefits of the Project to local communities, as well as the strategic importance of building a new source of potash in Morocco. These aspects have been widely acknowledged, and the Project has received significant support both in Morocco and in the UK.

Over the course of 2022, the Company has been able to address a number of the wider issues relating to the Project, in particular its potential impact on local and neighbouring communities and businesses. Discussions have progressed more specifically onto matters concerning the Project's water management.

Foremost among these is the confirmation of the capacity to use recycled water from the Khemisset Waste Water Treatment Plant, instead of drawing freshwater direct from the Ouljet Essoltane Dam. This revision, developed in conjunction with Reminex SA, significantly mitigates risks around water supply levels during dry periods.

The Company has also determined that a dry tailings system will now be employed at Khemisset to reduce water consumption and essentially eliminate any risk of saline fluid outflow in the event of an extreme rainfall event. Such tailings storage facilities are in use at various potash operations around the world.

The finer technical details of the above, and other specific areas, continue to be reviewed by the environmental and water agencies. These proposals are in line with Emmerson's determination, as a responsible investor, to pursue the highest environmental standards in everything that we do at Khemisset. The Company is working through these solutions with the relevant government departments to ensure they are acceptable to all stakeholders, although the timing of final approvals is in the hands of the Moroccan authorities.

Technical Workstreams

Basic Engineering workstreams have substantially progressed during the period. Design of the processing plant by US-based Barr Engineering is now 90% complete, and infrastructure design undertaken by the Moroccan firm Reminex SA is 80% complete. Both streams will be completed within Q1 2023 in readiness for financier due diligence and the transition into project execution.

Traffic studies for the proposed highway interchange and the overall logistics model for transporting the final product from the mine site to the ports of Casablanca, undertaken by the Moroccan consultants Novec SA, have also been progressed to support both the wider Basic Engineering streams and the Environmental and Social Impact Assessment ("ESIA") submission.

While the Company continues to advance its strategy regarding renewable energy as part of its sustainability commitment, binding agreements for both the 225Kv and 22Kv powerlines have been signed with the Moroccan grid operator, Office National de l'Electricité et de l'Eau Potable (''ONEE''). The 22Kv line will be utilised as construction phase power before being converted to its primary purpose as contingency power for the production phase, which will be powered by the 225Kv supply.

Electrical Resistance Tomography ("ERT") results from the most recent exploration campaign have provided a sensible basis for finalising the mine site location, precise siting of key infrastructure (portal, declines and processing facility) and adapting the design to in-situ rock competence for site wide foundations.

Other technical details have been further de-risked in partnership with globally renowned subject matter experts. Cuttability testing has been completed on core samples obtained from the most recent exploration campaign in Komatsu laboratories, confirming adequacy of continuous miners for both underground workings and development of the access declines. Howden have been instrumental in progressing the ventilation model for the decline and the mine, enabling development of underground mine planning, final sizing of declines, and surface equipment specification, sizing and location.

Potash and Salt MOUs

In November, the Company announced the signing of non-binding MOUs relating to the offtake of potash and salt to be produced at Khemisset, as follows:

·    With Keytrade AG for the sale of a minimum of 245,000 metric tonnes per year of MOP for a period of 10 years; and

·    With Hexagon Group AG for the sale of a minimum of 245,000 metric tonnes per year of MOP and a minimum of 500,000 metric tonnes per year of salt product ("NaCl"), both for a period of 10 years.

Importantly, the MOUs contemplate "take or pay" provisions whereby the off-takers will market the product to end users and compensate the Company for any quantities not taken by end users or otherwise sold by the off-takers.

The MOUs are non-exclusive, and Emmerson will continue to engage in ongoing offtake discussions with other wholesale customers, distributors, and global traders for the remaining production capacity from Khemisset.

These initial offtake MOUs represent a material development for Emmerson and underpin an adequate proportion of future potash and salt sales to satisfy the banks. The Board believes that this is a strong endorsement for the Project, de-risking the financing.

Financing update

The Company is now finalising the first stage of securing the bank funding needed to bring the Project into construction. As previously noted, strong expressions of interest have been received from international and Moroccan lending banks, as well as development financial institutions and other financing counterparties, to underpin an attractive construction financing package. Updates in this matter will be provided in due course.

Global potash market outlook

Potash prices rose sharply in 2022 following the invasion of Ukraine, and the imposition of sanctions on both Russia and Belarus, who together account for approximately 40% of global potash production. By the end of the year, prices had fallen back somewhat, following a short-term drop in demand due to high prices and dry weather, but remain well above historic levels.

In the near-term, the market for agricultural produce such as grain, oilseed, and soya, are expected to be tight, leading to sustained high prices for those commodities as well as fertilisers such as potash. Longer term, the growing global population and the transition to more resource-intensive diets, combined with scarcity of cultivatable land, will lead to an increasing use of fertilisers to improve yields. Because the continent of Africa will have the highest population growth of all, it will also have the greatest need for increased food production.  Khemisset, which is expected to be the first commercial potash mine on the continent in almost 50 years, is therefore important due to geography, as well as in the context of worldwide potash demand.

Appointment of Nominated Adviser

On 3 January 2023, the Company announced the appointment of Liberum Capital as Nominated Advisor, enhancing our relationship with them following their appointment as Joint Corporate Broker to the Company in February 2022.

**ENDS**

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

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 only 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.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking second 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. 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, and the spot price for granular MOP fertiliser has since risen, further enhancing the valuations.