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

24 May 2024

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

2023 Financial Results

Emmerson, the Moroccan-focused potash development company, is pleased to announce its 2023 audited results.

2023 Highlights:

• Publication of a Scoping Study for a novel processing route developed by the Company, which has transformed the environmental and economic credentials of the Khemisset Project
• Obtaining approval of Environmental and Social Impact Assessment ("ESIA") remains the priority - updated study incorporating latest optimisations submitted in Morocco
• ·   Fundraise in April 2024 (including oversubscribed retail offer) raised US$2.5 million, providing the Company with additional funds to continue progressing work at Khemisset while waiting for the ESIA approval  

Graham Clarke, CEO, commented:

"Throughout 2023, our primary focus was on obtaining environmental approval, and this remains our priority at the present time.

"Work undertaken during 2023 also enabled us to announce, in February 2024, the results of our Scoping Study into a new processing route which we called the Khemisset Multi-mineral Process. As previously announced, this enhancement reduces the Khemisset Project's environmental impact by cutting water consumption by 50% and by eliminating the need to dispose of brines (as well as transforming the economics of the project).

"We updated our environmental assessment to incorporate these optimisations and submitted the document during April 2024. We are currently awaiting the outcome of the latest review, following the upholding of the Company's referral which resulted in the matter being returned to the Commission Régionale Unifiée d'Investissement for reconsideration, and will provide an update as soon as we hear news."

**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 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.

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. 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. Updated financial estimates published in February 2024 indicated a net present value of US$2.2 billion, with an internal rate of return of approximately 40%.

CHAIRMAN'S STATEMENT

It gives me great pleasure to present the 2023 financial results for Emmerson PLC ("Emmerson" or "the Company"). 

During 2023 and into 2024, our key priority has remained securing the approval of the Environmental and Social Impact Assessment ("ESIA") for Khemisset.  Whilst we have not yet received this critical approval, Graham and his team have used this extended period of time constructively, most notably with the development of the innovative Khemisset Multi-mineral Process ("KMP").  It is my belief that this will be seen as a seminal period for the Company, once the true environmental, commercial, and financial benefits of KMP are more widely recognised. 

In early April 2024, we submitted the latest, and we hope final, version of the ESIA to the Commission Régionale Unifiée de l'Investissement (the "CRUI"), the body responsible for granting environmental approval.

We very much hope that we are now at the final stages of the approval process, which has taken far longer than initially envisaged, and involved considerable additional work and iterations.

Environmental approvals in the mining sector have become more demanding in recent years, with an increasing focus on Environmental, Social, and Governance ("ESG") issues from both investors and regulators. We have never shied away from our obligations in this area, incorporating the highest possible standards of ESG into our design, and into our culture, from the outset. 

In Morocco, as in many countries, there are concerns regarding water. Climate change has led to seasonal rains becoming less reliable, resulting in droughts in recent years, and low water levels in reservoirs and aquifers.

In the context of this challenge, during 2023 our technical teams developed an innovative new processing method which we have called the KMP. We announced the results of our scoping study into KMP on 1 February 2024, and we have now included KMP in our updated ESIA, along with various other optimisations made in the past three years to the original design.

KMP arose from the investigation into a means of cleaning and recycling brines as an alternative to Deep Well Injection ("DWI") and resulted in a solution that not only eliminates DWI entirely, but in so doing reduces water consumption by 50%. We believe that the KMP can unlock significant value in other potash deposits and have filed a patent over the process.

The KMP brings more than environmental benefits, considerable though these are. It also transforms the Project's economics, by producing two new saleable fertiliser products: struvite and vivianite. The existing market for these is relatively small, as current production levels are modest. However, there is a huge potential demand for both products, as they are essentially slow-release multi-nutrient fertilisers, containing macro-nutrients phosphates and ammonia, and the micro-nutrients magnesium and iron in the case of struvite and vivianite respectively.

As part of the scoping study into KMP, we updated our financial estimates for the Project, based on the original design, as well as based on a design incorporating the new process route. Cost inflation since the 2020 Feasibility Study was mitigated by some efficiency savings, and the revised estimates for the original design held up well. However, the design incorporating KMP has far superior economics, with a Net Present Value at 8% ("NPV_8") of US$2.2 billion, and an Internal Rate of Return ("IRR") of close to 40%.

In what have been challenging financial markets, with modest potash prices, it is important that new greenfield projects stand out. Khemisset incorporates an innovative, patent-pending processing method, which allows mixed potash ore types to be processed in a highly efficient manner, creating multi-nutrient fertilisers as by-products. No other potash project in the world can make such a claim, nor be as efficient with freshwater usage.

Furthermore, Khemisset has an advantageous geographical location, being located close to the Atlantic ports of Morocco. It is also likely to be Africa's first potash operation since the mid-1970s, which is significant as Africa is where the challenges of food security and self-reliance are most pressing. With the bulk of global population growth in the next 20 years, together with fertiliser application rates that are a fraction of those in the developed world, Africa needs to be able to feed itself and then the rest of the world.

Obtaining our environmental approval has taken time, and we are extremely grateful to our shareholders for their patience.  I was delighted that Global Sustainable Minerals and Gold Quay Capital supported our recent fundraise so strongly and that we continue to enjoy a constructive partnership. 

Khemisset is an outstanding potash development project and the benefits of KMP leave Emmerson well positioned to become a uniquely sustainable source of multi-nutrient fertiliser products, in a country which is already a major global fertiliser hub, and a gateway to the continent with the most identifiable growth over the medium term.

I look forward to updating you on our progress in 2024, which we hope will be a transformational year for Emmerson.

James Kelly

Chairman

23 May 2024

CHIEF EXECUTIVE OFFICER'S STATEMENT

During 2023, the Company faced challenges, notably in respect of the progress towards obtaining the environmental approval, but was also able to develop a new, innovative processing route that not only dramatically improves the environmental credentials of the Khemisset Project, but also transforms its economics. We believe Khemisset is a genuinely unique project that will produce, from one processing plant, fertilisers containing potash, phosphates, and ammonia, as well as magnesium and iron.

The ESIA Approval

The primary focus for the Company in 2023 remained obtaining the approval of its ESIA.

Some of Morocco's most significant environmental sensitivities relate to water. Climate change has impacted the country by making seasonal rainfall less reliable. Winter rains in recent years have been lower than historic averages, resulting in droughts and low water levels in reservoirs, and threatening agriculture and availability of potable water. In 2023, His Majesty King Mohammed VI directed a series of national measures to address this issue, which remains a focal point of  government policy.

Taking into account these concerns, the Company has invested significant efforts in this area, engaging in iterative consultations with authorities. The work has led in many cases to concrete improvements such as switching to dry stack tailings instead of wet, and sourcing grey water from the Khemisset Waste Water Treatment Plant, rather than drawing from nearby rivers or reservoirs as had previously been discussed, in addition to the substantial improvements by the KMP.

In July 2023, we announced that the CRUI had been unable to approve our ESIA, and the matter was referred up to the national level for review by the Commission Ministérielle de Pilotage (The "Ministerial Committee"). This Committee is a national body chaired by the Head of Government and is composed of a number of ministers in government.

The Ministerial Committee was unable to sit before late January 2024; government priorities were impacted in the intervening period by more pressing matters such as the tragic earthquake in September 2023.

Emmerson has always maintained that the Khemisset Project has adhered to the highest international standards in terms of environmental compliance, including its water use, and the responsible management of waste brines and tailings. However the Company has continued to explore optimisations to reduce further the Project's environmental footprint, and the KMP arose from this work. 

In March 2024, the Company was informed that the Ministerial Committee had upheld its appeal and referred the matter back to the CRUI for reconsideration, inviting the Company to include optimisations into its latest ESIA submission.

In April 2024, the Company submitted an updated ESIA, including the optimisations from the KMP related to water usage and waste management. Although the environmental and economic benefits of the KMP are considerable (as outlined below), the changes to the processing plant are relatively modest. The elimination of equipment and infrastructure related to DWI means that the KMP results in a net reduction in capex and the overall footprint of the Project, and therefore the modifications to the ESIA were straightforward.

Khemisset Multi-mineral Process ("KMP")

During 2023, the Company began to explore innovative solutions to the management of waste brines, which, under the original design set out in the 2020 Feasibility Study (the "2020 FS"), were proposed to be safely disposed of deep underground in porous/permeable rock structures in a process known as DWI. DWI is an established process in many other projects, but was new to Morocco, and while technical studies supported the robustness of the method, it remained a point of sensitivity.

In February 2024, the Company was able to announce the results of a Scoping Study which outlined a process enhancement, whereby magnesium and iron chlorides in the brines would be precipitated out as struvite and vivianite respectively, after reaction with phosphates and ammonia.

This process would then allow the brines to be recycled back into the plant, instead of disposed of through DWI. The recirculation of brines yields a number of benefits, notably a reduction in the overall consumption of raw water by 50% compared with the 2020 FS, and an improvement in potash recoveries from 85% to around 91%.

Both struvite and vivianite are slow-release multi-nutrient fertilisers, that are expected to attract a premium price above their nutrient value. Updated financial estimates completed as part of the KMP Scoping Study pointed to these new products more than doubling the NPV of the Project compared to the original design, based on relatively conservative pricing estimates from third party market consultants.

By being slow-release, struvite and vivianite also address one of the environmental challenges facing farmers applying phosphates. Most sources of phosphate are highly soluble, and susceptible to being washed away by rainfall in a process known as phosphate run-off. Not only does this result in the loss of the nutrient benefits to farmers (who either reapply or suffer lower crop yields), but it causes eutrophication of water courses, and algal blooms, which can be damaging to aquatic life.

By contrast, struvite and vivianite are less soluble, releasing their nutrients in line with demand from plants. This allows less frequent application (a benefit for farmers), while keeping the nutrient in the fields where it is needed, and not in rivers and lakes where it is not.

The KMP is at a Scoping Study level, but the changes to the process plant are relatively simple and use well-established processes. It is therefore now being adopted as the assumed production route, and while further testwork remains (particularly around crop-specific agronomic trials), it will be included in the planned updated Bankable Feasibility Study ("BFS") which will be completed once environmental approval has been obtained. 

Updated Financial Estimates

As part of the KMP Scoping Study, the financial estimates for the Project, which had been last calculated as part of the 2020 Feasibility Study, were updated on two bases: the "Original Design", assuming substantially the original design (without KMP but including various other optimisations); and incorporating KMP into the process route ("KMP Process Solution").

Cost inflation which has affected all capital projects inevitably led to an increase in the capex estimate for the Project, which rose by 31% for the Original Design, and 28% for the KMP Process Solution. Updated opex estimates, including revised pricing assumptions for costs such as electricity, staff costs, fuel, and transport were also factored in.

A summary of the key financial metrics of the Original Design and the KMP Process Solution, as compared with those in the 2020 Feasibility Study, is shown below. Further details can be found in the announcement of 1 February 2024.

Khemisset Basic Engineering

The basic engineering work, which commenced in 2022, was largely completed during 2023. Two engineering firms, Barr Engineering of the US, and Reminex S.A of Morocco, lead the workstreams for the processing plant, and the balance of the Khemisset potash project scope, respectively. At the time of writing, the only remaining deliverables are the final reports.

Financing

In 2022, the Company announced that it had signed mandates with a syndicate of international and Moroccan banks for a debt facility initially expected to be US$310 million, of which US$230 million would be a tranche covered by a UK Export Finance guarantee.

These mandates were renewed in December 2023 for a further year. This facility will be subject to the usual due diligence and credit committee approvals, and work will commence once the ESIA approval has been completed and the BFS updated.

Other discussions with equity and royalty/offtake financiers have continued but at a background level, awaiting the ESIA approvals before full engagement is expected.

In April 2024, we announced the results of a successful share placing, bringing in gross proceeds of US$2.5 million. Of this, Global Sustainable Minerals Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC") (together the "Strategic Investors") contributed US$2.0 million and US$0.2 million respectively, at a price of 1.75 pence per share. The Strategic Investors also received 1:1 warrants at 3 pence per share, expiring on 31 December 2024.

In addition, we also raised US$0.3 million from our wider shareholder base at the same price, through the REX retail platform. This offering was significantly oversubscribed.

These funds strengthen the Company's balance sheet and will be used to continue our work on the KMP, the ESIA process, and for general working capital. The funds are sufficient to meet all existing obligations for over 12 months.

The further contribution from our Strategic Investors underlines their ongoing confidence in the Project. We expect them to form a key part of the construction funding package in due course, once we have received EIA approval.

Potash Market

After increasing during 2021 on the back of transportation issues during the pandemic, potash prices rose sharply during 2022 following the invasion of Ukraine. However, this increase led to fertilisers becoming unaffordable, despite crop prices also rising, and demand dropped off, leading to a fall in global MOP prices which continued during 2023 and into 2024. Potash production from sanctioned operations in Russia and Belarus also began to find ways into new markets, particularly in Asia, alleviating supply side constrictions.

By April 2024, MOP prices had recovered to around US$315 per tonne CFR Brazil, relatively low in the context of historic prices but improving since the start of the year. This led to demand returning, but weather patterns in 2023 affected agriculture which moderated the impact this had on prices.

The longer-term demand story for potash remains compelling: global population growth, changing dietary habits, and pressure on arable land usage, are all expected to increase the demand for potash, as well as other nutrients.

New sources of potash, not least the BHP Jansen project, are expected to come online in the next 5-10 years, but the most advanced of these are located in the traditional production centres of central Canada, Russia, and Belarus. Given transportation distances and ongoing sanctions, these are more likely to serve the markets of North America and Asia, with Europe, South America, and Africa (Khemisset's target markets) likely to remain undersupplied for the foreseeable future.

Outlook for 2024

The priority for 2024 is to obtain approval for our updated ESIA, incorporating the KMP optimisations, which we submitted to the Moroccan authorities for approval in April 2024.

Depending on the outcome of the next reviews, we expect to hear from the CRUI shortly thereafter. In view of the level of optimisations now incorporated into the ESIA, we very much hope that approval will be forthcoming soon.

Upon receipt of this approval, we will move forwards with completing the remaining studies on the KMP, such that it can then be incorporated into an updated BFS, based on the original 2020 Feasibility Study, but including all optimisations and improvements, and revised estimates, completed in the intervening years including the workstreams completed under the Basic Engineering. Due diligence with financiers will commence in parallel as far as possible but will need to await the completion of the BFS, and review of its findings, before it can be concluded.

I look forward to providing updates in 2024.

Graham Clarke

Chief Executive Officer

23 May 2024

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT

31 DECEMBER 2023

These financial statements were approved by the Board on 23 May 2024 and signed on their behalf by

Graham Clarke

Director                                                                                               

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023

The nature of the share-based payment and reverse acquisition reserves are described in note 12.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023

Significant non-cash transactions in respect of share issues are disclosed within note 12.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023

1.    General information

Emmerson PLC (the "Company") is a company incorporated and domiciled in the Isle of Man, whose shares were admitted to the Standard Listing segment of the Main market of the London Stock Exchange on 15 February 2017. On 27 April 2021, the Ordinary Shares of the Company were admitted to trading on AIM and the listing of the Company's ordinary shares on the Official List and their trading on the Main Market were cancelled.

The principal activity of the Group is the exploration, development and exploitation of the Khemisset potash project in Morocco.

2.    Basis of preparation

2.1.  General

2.2.  The Company and Group's Financial Statements have been prepared in accordance with UK-adopted international accounting standards ("IFRS"). The financial statements have been prepared under the historical cost convention except for the revaluation of certain financial instruments that are measured at fair value.

2.3. Functional and presentational currency

The financial information of the Group is presented in US dollars. The functional currency of the Company changed on 1 January 2022 from GBP to US$, reflecting the stage in development of activities whereby the cost base of the Group changed from GBP to US$. The effect of a change in functional currency was accounted for prospectively. All items were translated into the new functional currency using the exchange rate at the date of the change.

The individual financial statements of each of the Company's wholly-owned subsidiaries are prepared in the currency of the primary economic environment in which they operate (functional currency), these being US dollar and Moroccan Dirhams.

2.4. Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the Company and its subsidiaries.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·    The contractual arrangement with the other vote holders of the investee;

·    Rights arising from other contractual arrangements; and

·    The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the Group Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

All the Group's companies have 31 December as their year-end. Consolidated financial statements are prepared using uniform accounting policies for like transactions.

2.5. Going concern

The financial statements have been prepared on a going concern basis. The Group has not yet earned revenues and is in the pre-construction phase of its business. The operations of the Group are currently financed from funds raised from shareholders and strategic investors. In common with many pre-production entities, the Group will need to raise further funds in order to progress the Group from the feasibility phase into construction and eventually into production of revenues.

The Group had cash and cash equivalents of US$3.1 million at 30 April 2024 and the Directors are of the view this is sufficient to fund the Group's non-discretionary expenditure and maintain good title to the exploration licences over the next 12 months from the date of approval of these financial statements. The Company will continue to work on advancing the Khemisset project and to commence construction as soon as practicable, however the timing of these activities will be dependent on availability of funds.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

2.6. Changes in accounting policies

Standards, interpretations and amendments to published standards effective from 1 January 2023

There were no new standards or interpretations effective and adopted for the first time for the year beginning on or after 1 January 2023 that had a significant effect on the Group's or Company's financial statements. 

Standards, interpretations and amendments to published standards not yet effective

At the date of approval of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

·    Amendments to IAS 1: Classification of current or non-current liabilities (effective 1 January 2024);

·    Amendments to IAS 1: Presentation of Financial Statements - Non-current liabilities with covenants (effective 1 January 2024).

The effect of these new and amended standards and interpretations, which are in issue but not yet mandatorily effective, is not expected to be material.

2.7. Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

The Directors are of the opinion that the Group is engaged in a single segment of business being the exploration and development of potash in one geographical area, being Morocco.

2.8. Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another.

(a) Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income ("OCI"), or fair value through profit and loss.

The classification of financial assets at initial recognition that are debt instruments depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. The Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest ("SPPI")' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

·    Financial assets at amortised cost (debt instruments)

·    Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

·    Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

·    Financial assets at fair value through profit or loss

Financial assets at amortised cost (debt instruments)

This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:

·    The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

·    The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest rate ("EIR") method and are subject to impairment. Interest received is recognised as part of finance income in the statement of profit or loss and other comprehensive income. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired. The Group's financial assets at amortised cost include trade receivables (not subject to provisional pricing) and other receivables.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

·    The rights to receive cash flows from the asset have expired; or

·    The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Impairment of financial assets

The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through the profit and loss. For trade receivables (not subject to provisional pricing) and other receivables due in less than 12 months, the Group applies the simplified approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on the financial asset's lifetime ECL at each reporting date.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.

A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows and usually occurs when past due for more than one year and not subject to enforcement activity. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 (b) Financial liabilities

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables and loans.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

·      Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive income.

·      Financial liabilities at amortised cost

After initial recognition, interest-bearing loans and borrowings and trade and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the statement of profit or loss and other comprehensive income when the liabilities are derecognised, as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss and other comprehensive income. This category generally applies to trade and other payables.

Derecognition

A financial liability is derecognised when the associated obligation is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss and other comprehensive income.

(c) Financial liabilities

Liabilities within the scope of IFRS 9 are classified as financial liabilities at fair value through profit and loss or other liabilities, as appropriate.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Financial liabilities included in trade and other payables are recognised initially at fair value and subsequently at amortised cost.

2.9. Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, determined using tax rates that are expected to apply when the related deferred tax asset or liability is realised or settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

2.10.              Intangible assets - exploration and evaluation expenditure

Exploration expenditure comprises all costs which are directly attributable to the exploration of a project area. 

When it has been established that a mineral deposit has development potential, all costs (direct and applicable overheads) incurred in connection with the exploration and development of the mineral deposits are capitalised until either production commences, or the project is not considered economically viable.

In the event of production commencing, capitalised costs in respect of the asset are transferred into Tangible Fixed Assets, and are depreciated over the expected life of the mineral reserves on a unit of production basis. Other pre-trading expenses are written off as incurred.

For the purposes of impairment testing, intangible assets are allocated to specific projects with each licence and reviewed annually. Where a project is abandoned or is considered to be of no further interest, the related costs are written off.

Intangible assets are not subject to amortisation and are tested annually for impairment, where indicators of impairment are considered to be present in accordance with IFRS 6. The recoverability of all exploration costs, licenses and mineral resources is dependent on the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production, or proceeds from the disposition thereof.

2.11.              Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand and deposits held at call with financial institutions.

2.12.              Foreign currencies

Assets and liabilities in foreign currencies are translated into US$ at the rates of exchange ruling at the Statement of Financial Position date.  Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction.  Exchange differences are taken into account in arriving at the operating result.

On consolidation of a foreign operation, assets and liabilities are translated at the closing rate at the date of the Statement of Financial Position. Income and expenses for each Statement of Comprehensive Income presented are translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive income and accumulated in equity.

2.13.              Share-based payment arrangements

The Group operates equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of employee services received in exchange for the grant of share options are recognised as an expense. The total expense to be apportioned over the vesting period is determined by reference to the fair value of the options granted:

·       including any market performance conditions;

·       excluding the impact of any service and non-market performance vesting conditions; and

·       including the impact of any non-vesting conditions.

Any non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period the Group revises its estimate of the number of options that are expected to vest.

The Group recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

When options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

The fair value of goods or services received in exchange for shares is recognised as an expense and included within administrative expenses.

2.14.              Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise its judgement in the process of applying the Group's accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed below:

a)            Recoverability of intangible assets

The Group tests annually for impairment or more frequently if there are indications that the intangible assets might be impaired.

IFRS 6 requires entities recognising exploration and evaluation assets to perform an impairment test on those assets when specific facts and circumstances indicate an impairment test is required. The assessment involves judgement as to the status of licenses and the likelihood of renewal of exploration licenses which expire in the near future. Where impairment indicators are present, the Group is required to evaluate the future cash flows expected to arise from the cash-generating unit and the suitable discount rate in order to calculate the present value.

The carrying value of Group's exploration and evaluation intangible assets at 31 December 2023 was US$20.5 million (2022: US$18.6 million), which relates to the Khemisset project.

The Directors therefore undertook an assessment of the following areas and circumstances that could indicate the existence of impairment in accordance with IFRS 6:

·    The Group's right to explore in an area has expired, or will expire in the near future without renewal;

·    No further exploration or evaluation is planned or budgeted for;

·    A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial level of reserves; or

·    Sufficient data exists to indicate that the book value will not be fully recovered from future development and production.

The Board has reviewed the project for indicators of impairment and is satisfied that the prospects of deriving economic value are likely to be considerably in excess of the carrying value of the asset in the accounts.

In arriving at this conclusion, the Directors considered the ongoing commitment to the project, the economic metrics of the project as set out in the 2020 Feasibility Study, as well as the valuation enhancements indicated by the scoping study announced in February 2024 in relation to the new processing route.

Following their assessment, the Directors concluded that no impairment charge was necessary for the year ended 31 December 2023.

b)            Share-based payments

The Group has made awards of options on its unissued share capital to certain Directors and employees as part of their remuneration package.

The valuation of these options involved making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and interest rates.  These assumptions are described in more detail in note 12.

There was a charge to the Statement of Comprehensive Income during the year in relation to share based payments of US$335k (2022: US$256k).

d)            Going concern

In their assessment of going concern, the Directors have prepared cash flow forecast showing the Group's non-discretionary expenditure obligations, as well as discretionary activities.

The Group has sufficient cash reserves to cover non-discretionary expenditure beyond the Going Concern horizon of at least 12 months from the date of this report, and accordingly the Board believe the Going Concern basis to be appropriate for the preparation of the 2023 Financial Statements.

e)            VAT recoverable in Morocco

Included in Trade and Other Receivables is a balance of 9.1 million MAD (US$0.9 million) relating to VAT on exploration and other development expenditure. Although there is no time limit on eligibility for reclaiming VAT, this amount will not be recoverable until the Khemisset project is revenue-generating. The Board is of the view that the Khemisset project will be constructed and will generate more than sufficient revenues to allow this balance to be recovered in full.

3.    Expenses by nature

4.    Directors' remuneration

Details of Directors' remuneration during the year are as follows:

Robert Wrixon (and, in 2022, Hayden Locke) also received fees for consultancy services which are disclosed within note 15. During 2022, certain Directors received share options and shares as part of their remuneration (see note 12).

5.    Income tax

Reconciliation of income tax                                                                                                                     

The weighted average applicable tax rate was 19.2% (2022: 16.6%). Emmerson PLC is registered for taxation in the United Kingdom, where the corporation tax rate was 19%.  Morocco has a 20% tax rate applicable to mining companies, including Emmerson's Moroccan subsidiaries, while the British Virgin Islands have a tax rate of 0%.

A deferred tax asset has not been recognised in respect of deductible temporary differences relating to certain losses carried forward at the year end, as there is insufficient evidence that taxable profits will be available in the foreseeable future against which the deductible temporary difference can be utilised.

The unrecognised deferred tax asset for the Group was approximately US$2,361k (2022: US$1,806K). The unrecognised deferred tax asset relating to Moroccan tax losses amounted to approximately US$97k (2022: US$109k).

6.    Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

The potential number of shares which could be issued following the exercise of options and warrants currently outstanding amounts to 73,163,000 (see note 12). Dilutive earnings per share equals basic earnings per share as, due to the losses incurred, there is no dilutive effect from the existing share options and warrants.

7.    Intangible assets

The intangible assets consist of capitalised exploration and evaluation expenditure in respect of the Company's potash interests in Morocco (the Khemisset project).

Intangible assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. See note 2.13 detailing the Company's judgement in this area.

8.    Trade and other receivables

Other receivables include recoverable VAT and other taxes.

9.    Trade and other payables

Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method. Other payables consist of supplier invoices for administration expenses.

In addition to trade creditors, the Company also had contractual commitments totalling US$0.3 million with Barr Engineering, and US$0.4 million (4 million MAD) with Reminex. Both of these amounts relate to basic engineering contracts signed in 2021, and which are yet to be completed.

10.  Financial instruments

Categories of financial instruments

Financial risk management objectives and policies

The Company is exposed through its operations to credit risk and liquidity risk. In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout this financial information.

General objectives, policies and processes

The Directors have overall responsibility for the determination of the Company's risk management objectives and policies. Further details regarding these policies are set out below:

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The capital structure of the Group consists of issued capital, reserves and retained earnings. The Directors reviews the capital structure on a semi-annual basis. As a part of this review, the Directors consider the cost of capital, the risks associated with each class of capital and overall capital structure risk management through the new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

The management's strategy remained unchanged from 2022. 

Market price risk

The development and success of any project of the Group will be primarily dependent on the future price of potash. Potash prices are subject to significant fluctuation and are affected by a number of factors which are beyond the control of the Company. Future production from the Khemisset Project is dependent on potash prices that are adequate to make the project economic. After increasing significantly following supply disruption in the wake of the Russian invasion of Ukraine, potash prices fell during 2023. Long-term demand for potash, as a fertiliser, is expected to continue to grow, driven by population growth, changing dietary habits, and increasing pressure on land usage, however short-term volatility remains possible.

Credit risk

The Company's credit risk arises from cash and cash equivalents with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "A" are accepted.

Liquidity risk

Liquidity risk arises from the Directors' management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due.

The Directors' policy is to ensure that the Company will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, the Directors seek to maintain a cash balance sufficient to meet expected requirements.

The Directors have prepared cash flow projections on a monthly basis through to 31 December 2025. At the end of the period under review, these projections indicated that the Group is expected to have sufficient liquid resources to continue in operational existence and meet its obligations under all reasonably expected circumstances.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations. The consolidated accounts use US$ as a presentational currency, and from 1 January 2022, Emmerson PLC (the parent company) determined that US$ was the appropriate functional. The Group's Moroccan entities use MAD as their functional currency.

Net current assets denominated in MAD at the year-end amounted to US$1.0 million and net liability of US$0.18 million respectively.

At 31 December 2023, had the exchange rate between the US$ and MAD increased or decreased by 5% with all other variables held constant, the increase or decrease respectively in net assets would amount to approximately US$42k.

The Group does not hedge against foreign exchange movements.

11.  Share capital

The Ordinary Shares issued by the Company have no par value and are fully paid. Each Ordinary Share carries one vote on a poll vote. The Company does not have a limited amount of authorised capital.

12.  Share-based payments

The following is a summary of the share options as at 31 December 2023:

The weighted average remaining contractual life of the options at year-end was 2.74 years

The options and warrants issued were valued using the Black-Scholes valuation method and the assumptions used are detailed above.  The expected future volatility has been determined by reference to the historical volatility.

The Group operates equity-settled, share-based compensation plans, under which the entity receives services from Directors and employees as consideration for equity instruments (options) of the Group.

During 2022, James Kelly and Rupert Joy received 218,406 and 66,371 shares respectively at a VWAP of 7.1 pence (total value US$25k) as part of their contractual remuneration. No shares were issued during 2023.

The total share-based payment recognised in the Statement of Changes in Equity during the year was a US$335k (2022: US$256k), in respect of the fair value of employee share options.

There were 47,263,000 (2022: 53,763,000) options at the year-end held by current Directors and employees at year end.  Vesting of the options is subject to the option holder providing continuous service during the vesting period and there are no other performance conditions attached to the options.

13.  Reserves

The following table describes the nature and purpose of various reserves within owner's equity:

14.  Future rental payments

The commitments arising from operating leases are largely rental payments for buildings. The future minimum lease payments (payables) under non-cancellable operating leases are:

15.  Related party transactions

Directors' consultancy fees

Robert Wrixon is a Director of the Company and also provides consulting services to the Company. During the year, Robert Wrixon received fees of US$30K (2022: US$71k). The amount outstanding as at the year-end was US$ nil (2022: US$ nil).

Hayden Locke is a Director of the Company and is a Director of Benson Capital Limited, which provided consulting services to the Company during 2022. During 2023, Benson Capital Limited received no fees (2022: US$95k). There was no amount outstanding as at the year-end (2022: US$9K).

Details of Directors' remuneration during the year are given in note 4.

There were no other related party transactions.

16.  Ultimate controlling party

The Directors consider that there is no controlling or ultimate controlling party of the Company.

17.  Events after the reporting date

On 8 April 2024, the Company raised gross proceeds of US$2.5 million through the placing of 121.3 million ordinary shares at a price of 1.75 pence per share. US$2.2 million of this amount was placed through Global Sustainable Minerals Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC") (together the "Strategic Investors"), who subscribed for US$2.0 million and US$175k retrospectively. The Strategic Investors also received 1:1 share warrants at an exercise price of 3 pence per share, expiring on 31 December 2024. The balance of the funding (US$0.3 million) was raised with other shareholders through the REX retail platform.