6.    Hydrogeology

The DFS hydrogeological investigations have been used in the optimisation study and there are no changes to the information or assumptions related to hydrogeology. The hydrogeology test work that was carried out, is summarised below:

1.   Identify sources of fresh water supply for construction and operations.

These tests concluded that process plant area water supply is available at required rate of 150 m3/hr utilising 5 wells at a depth of 120 m. Similarly, the required water supply at the mine site of 30 m3/hr can be supplied via 2 wells sunk to 120 m depth. Hydrogeological modelling indicates that extraction of these quantities of water over the project life will not adversely impact the aquifers and minor drawdown in the aquifers is expected over the life of the project.

2.   Understand the risk that aquifer system poses to mining operations and how

      to mitigate this risk.

The risk of water ingress to the mining areas is a common risk in almost all salt and potash mines. These mines are typically overlain by water-bearing sediments. At operating potash mines in Canada and Europe, the hydrogeological risk is considered higher in areas of disturbance of the stratigraphy, referred to as geological or subsidence anomalies. At Kola, a detailed understanding of the aquifers overlying the evaporite rocks, as well as of the aquitards (or barriers to water flow), has been developed over a number of years. The conclusions drawn following hydrogeological testing were:

o  A problematic water ingress is considered a low probability as no linear faults have been identified and all potential subsidence features can be accurately delineated using (proposed 50 m spaced line) 3D seismic surveying, to add to the existing 186 km of seismic survey data over the Deposit.

o  No mining or shaft sinking is planned within areas of subsidence. In addition, horizontal 'cover drilling' and ground penetrating radar ("GPR") will be employed as forward-looking actions to improve understanding of ground conditions in advance of mining and further mitigate the risk of intersecting a structure or area of disturbance.

o  The mine design incorporates a 10-15 m minimum 'salt-back' barrier between the mining area and the anhydrite aquitard, effectively reinforcing the anhydrite member aquitard layer.

3.   Understand the impacts of groundwater composition and the aquifers on the shaft  

      sinking operation.  

The results of this testing confirmed:

o  That ground freezing during shaft sinking will not be impacted by hydraulic flow or high salinity in the deep aquifer. In fact, low permeability, and low total dissolve solids ("TDS") and salinity in both aquifers is to be expected, supporting the planned freeze-hole spacing and comparatively low energy consumption for the ground freezing operation.

o  The presence of a thick Anhydrite Member (12 m) overlying the salt member which acts as an aquitard and reduces risk of water inflow into the salt member.

7.    Metallurgy and Process

Ore from underground is transported to the process plant via an overland conveyor approximately 24 kilometers long.

A conventional potash flotation plant with a maximum designed production of 2.24 million tonnes per annum of MoP has been designed for the Kola Project. As a result of the low Insolubles content, no separate process circuit is required to remove Insoluble material.

The final MOP product is then transported 11 km by conveyor belt from process plant to the marine export facility at the coast.

A schematic of the full process to extract ore and produce MOP product is shown in Figure 5.

Figure 5: Process flow from mine to ship

http://www.rns-pdf.londonstockexchange.com/rns/2899Q_1-2022-6-27.pdf

The design strategy adopted delivers a Process Plant designed to produce 2.2 Mtpa of MOP at a KCl grade of 95.5 %w and that will accommodate the variety of ROM feedstock characteristics expected to be encountered during the Life of the project.

The optimised process design references the DFS metallurgical test work in 2017 and 2018. The description of the test work used in the optimisation study is summarised below.

Characterisation tests were performed on pure seam samples (USS, LSS and HWS) expected to be mined as part of the mine schedule. Composite samples of multiple seams, prepared to be as representative as possible of the expected range of Run of Mine Ore characteristics foreseen in the mine schedule, were prepared from the seam samples.

The insoluble content of the samples was less than 0.5%w and close to 0.1%w in the composite from the USS and LSS. The characterisation of both the composite samples and the pure seam samples established that the KCl content in the composite was 32.2%w.

The optimisation study determined the minimum process plant KCl recovery will be 90.4% and this recovery has been used in the economic evaluation. 

8.    Marine Facilities

The marine facility used in the optimisation study was based on the DFS design. A summary of the design is given below:

A trans-shipment arrangement has been designed whereby MOP for export is loaded from a dedicated Jetty into self-propelled shuttle Barges (two units), which then travel to the Ocean-Going Vessels (OGVs) anchored 11 nautical miles (20 km) offshore at a dedicated transshipment zone. The MOP is transferred from the Barges to the OGVs using a Floating Crane Transhipper Unit (FCTU).

Transshipping was selected over direct ship loading from the export jetty. The ocean depth along the coastline is shallow and it was not considered feasible to construct the length of jetty required to facilitate direct ship loading.

To ensure sufficient year-round operational availability of the Jetty, a breakwater structure has been designed to shelter the berthing area for Barge loading operations.

The Jetty has been widened to accommodate both a Seawater Intake ("SWI") and a Seawater Outfall ("SWO") system.

9.    Residue and Brine Disposal

The Kola Project's process residue is combined into a single waste stream composed of the NaCl (the brine from product and salt de-brining - bulk of the effluent) and the residue stream which originates from the insoluble de-brining circuit within the Process Plant. The residue is collected in onshore dissolution/dilution tanks and then discharged at sea via the SWO pipe and diffuser. The discharge stream's dispersion characteristics comply with the applicable environmental criteria.

Ecotoxicological test work of the expected discharge confirms that the discharge at sea of the combined salt and insoluble tails stream does not place undue stress on the marine environment.

No onshore tails storage facility is therefore required for the Kola Project.

10.  General Infrastructure

a.    Mine Site - Infrastructure

The Mine Site is located 24 km north and inland of the Project Process Plant Site which is near the village of Koutou and the current KP2 Exploration Camp.

The site can be accessed from Pointe Noire on the existing National Highway "Routes Nationales" RN5 and RN6, via Madingo Kayes.

The Mine Site surface facilities and infrastructure provides access and support facilities for the Underground Mining operations. 

No permanent living accommodation is planned at the Mine Site for the Operational phase of the Project.

b.    Process Plant Site - Infrastructure

The Process Plant Site is located 11 km inland from the marine facilities, approximately 60 km northwest of Pointe Noire. Run of Mine (ROM) ore is transferred from the Mine Site via the Overland Long Conveyor (OLC).

The Process Plant Site facilities and infrastructure produces granular Muriate of Potash (MOP), which is transferred to the Marine Facilities for export. The main administration, control and support functions (Maintenance, Storage, Logistics, Training, etc.) are also located within the Process Plant Site.

c.     Mining Complex & Off-Site - Infrastructure

The operation of the Kola Project's Mine and Process Plant sites are supported by ancillary sites (Accommodation Camp and Solid Waste Management Centre) and interconnecting infrastructures (Roads, Power, Water and Gas supply, and Communications).

The permanent accommodation camp will be located approximately 3 km from the Process Plant and will accommodate up to 850 people.

Operational electrical power will be sourced from the RoC national grid. A 57 km long 220 kV transmission line will be built from the Mongo Kamba II substation north of Pointe Noire to the Process Plant. The power demand is estimated to be 25 MVA at the Mine Site and 50 MVA at the Process Plant.

The natural gas needed for product drying will be supplied by a 73 km long pipeline from the M'Boundi gas treatment plant.

Memoranda of Understanding for the supply of electrical power and gas are in place with the intended suppliers.  Supply contracts are planned to be formalised post the final investment decision for the project. 

Raw water will be supplied from wells located at the Mine Site (2 wells), the process plant site (5 wells) and at the Accommodation Camp (4 wells).

11.  Environmental and Social Impact Assessment (ESIA)

The ESIA was prepared managed by SRK Consulting (UK) Limited's environmental and social (E&S) team. SRK partnered with "Cabinet Management & Etudes Environnementales S.A.R.L." (CM2E), which acted as the Congolese-registered consultancy.

The Kola ESIA, initially approved on 10 October 2013, was amended to reflect the design changes made to the Kola Project as part of the Definitive Feasibility Study ("DFS") and has been amended to include the service corridors for a gas pipeline and overhead power line. The application and terms of reference for amending the ESIA were approved on 12 April 2018 by the Minister of Tourism and Environment.

The ESIA for the Kola Mining License was approved on 31 March 2020 granting a 25-year approval.

The change in position of the process plant will now require an amendment to this ESIA and this will be actioned in the 2nd half of 2022.

The Company shall carry out their construction operations in compliance with the environmental and social management plan as part of the approved ESIA and will be subject to Regulator's environmental management compliance audits.

12.  Potash Marketing

Kore's potash marketing strategy recognises the supply opportunities arising from MOP market growth in Brazil, the project's proximity to Brazil and African markets and the cost competitiveness of the Kola Project.  The DFS and optimisation study demonstrate that the Kola project can deliver MOP into Brazilian and ports on the west coast of Africa at lower cost than all other international suppliers.

The same selling price that was used in the DFS economic evaluation has been used in the optimisation study.

The design of the processing plant allows Kore to produce red MOPG (Muriate of Potash - Granular) for the Brazil market.

13.  Capital and Operating Costs

a.    Capital Cost

The pre-production Capital Cost for the Kola Project is estimated at US$1.83 billion which includes US$80 million of Contingency, US$55million of Escalation and US$118 million owners' costs.

The Capital Cost Estimates, expressed in US dollars, have been developed for each work breakdown area, and are based on December 2021 prices. The Capital Cost Estimates are based on Erected Quantities determined by ENFI's engineers involved in the optimisation study.

Rates for construction and installation are based on those of similar projects executed in recent years in the local area.

The rates of mine works are in reference to the Chinese Budget Quotes of Non-ferrous Metal Construction Projects (2019 Edition).

The rates for indirect costs are based on Chinese Government-Stipulated Social Average Prices for the Calculation of Indirect Costs in the Non-Ferrous Metals Industry (2019 Edition).

The prices of large special equipment have been sourced mainly from tender prices. The prices of a portion of the large equipment comes from Chinese suppliers, and those of other equipment such as the regrind mill are from corresponding non-Chinese suppliers. The prices of medium and small-sized mechanical and electrical equipment are adjusted according to the 2021 Chinese Price Inquiry System of Mechanical and Electrical Products.

The prices of non-standard equipment are adjusted in reference to the Chinese Method for Determining Non-Standard Equipment Prices issued in 2019, as well as recent order prices and delivery prices of the same kind of equipment.

For the DFS and optimisation study, Capital Costs have been grouped into Initial, Deferred and Sustaining Capital Costs.

o  Initial Capital Costs: all costs incurred up to the completion of First Barge Load milestone.

o  Deferred Capital Costs: all capital costs incurred from First Barge Load completion up to the Nominal production rate (Mine Steady State + 3 months of stabilized full production) achievement milestone.

o  Sustaining Capital Costs: all capital costs incurred after this last milestone. They represent the costs of investments to be carried out to maintain nominal production capacity over the years.

o  Capital Costs (Initial and Deferred) are summarized in Table 4.

Table 4 - Summary of Optimisation  Study Capital Costs

Sustaining capital costs cover expenditures required to ensure the operation can sustain the production at nameplate capacity. These costs include overhaul parts and labour, replacement of equipment, maintenance of infrastructures (road, jetty etc.), shut down costs, additional continuous miner and additional underground conveyor costs, and the inspection and maintenance of the trans-shipment vessels.

Sustaining Capital Costs of US$732 million have been included in the financial analysis, which is equivalent to US$11.20/t MOP.

b.    Operating Cost

The Operating Costs are expressed in US dollars on a real 2022 basis and are based on average annual production of 2.1 Mtpa of MOP over the life of mine. All costs have been prepared on an owner operated basis and are shown in Table 5.

Table 5 - Summary of Operating Costs

14.  Economic Evaluation

a.     Summary Economics

The economic evaluation delivers a post-tax NPV₁₀ (real) of US$1.623 billion and a real ungeared IRR of 20% on an 90% attributable basis, The evaluation is based on a granular MOP price of US$360/t MOP CFR Brazil (real 2022) which represents the same pricing scenario used in the DFS. The Quarter 1 average for  2022 CFR Brazil price was US$876 /t MOP.

The key assumptions underpinning the economic evaluation are as follows:

·      Construction start date: 1 January 2023.

·      25-year initial project life from first production based on depletion of Ore Reserves.

·      Subsequently an additional 6 year project life based on exploitation of a portion of the Inferred Mineral Resources

·      2.1 Mtpa average production of MOP.

·      Granulated MOP represents 100 % of total MOP production and sales.

·      All cashflows are on a real 2022 basis

·      NPVs are ungeared and calculated after-tax applying a real discount rate of 10%.

·      NPVs are calculated at a base date of 1 January 2023 prior to the potential dates for commencement of project construction

·      Fiscal regime assumptions are aligned with the recently finalised Mining Convention:

o   Corporate tax of 15% of taxable profit with concessions for the first 10 years of production (0% for the first 5 years and 7.5% for years 6 - 10).

o   Mining royalty of 3% of the Ex-Mine Market Value (defined as the value of the Product (determined by the export market price obtained for the Product when sold) less the cost of all Mining and Processing Operations including depreciation, all costs of Transport (including any demurrage), and all insurance costs).

o   Exemption from withholding taxes during the term of the Mining Convention.

o   Exemption from VAT and import duty during construction; and

o   Congo Government receives 10% of the shares in KPM which owns the Kola Project.

The forecast project cash flow on a 90% attributable basis for 31 years of production is illustrated in Figure 6.

Figure 6- Project Cash Flow Forecast (real 2022)  on a 90% Attributable Basis

http://www.rns-pdf.londonstockexchange.com/rns/2899Q_1-2022-6-27.pdf

b.    Price Sensitivity Analysis

The price sensitivity of the project financial performance to potash pricing is shown in Table 6 below.

Table 6: Sensitivity to potash price based on a 90% attributable basis

15.  Project Funding

The Directors of Kore have formed the view that there is a reasonable basis to believe that requisite future funding for development of the Kola Project will be available when required. Kore shareholders should be aware of the risk that future funding for development of the Kola Project may dilute their ownership of the Company or Kore's economic interest in the Kola Project.

There are a number of grounds on which this reasonable basis is held:

·      On the 6^th April 2021, in the release "Non-binding Memorandum of Understanding to arrange the full financing required for the construction of the Kola Project", Kore advised details of the Consortium that has undertaken to provide a debt and royalty financing proposal for the full construction cost of Kola. The Summit Consortium consists of Summit (an African strategic advisory and corporate finance investment group) and SEPCO (an international engineering and construction group) as its technical partner. Together they committed to a process to fully fund the construction of Kola. The first key milestone in this process, the optimisation study, has now been completed and is reported in this announcement. The next key milestone is the receipt of an EPC contract proposal from SEPCO and then is to be followed by the financing proposal from the Summit Consortium.

·      Kore has two large strategic shareholders on its register: (i) SQM (15.74%): a Chilean company with a market capitalisation in excess of US$26 B that is an integrated producer and distributor of specialty plant nutrients, including having an established business in the global potash market; and (ii)  OIA (19.35%): the sovereign wealth fund of Oman (formerly SGRF), which holds a range of natural resource investments, including on the African continent.  These two groups invested a total of US$40 million into Kore in late 2016 and have continued to invest in the company through additional fundraises and the issue of shares in lieu of cash for technical services totalling US$19.5 million.  They collectively bring a considerable and highly relevant combination of substantial financial capacity, specific potash experience, Latin American, Middle Eastern and African influence, and financing expertise.

·      The Kola Project optimisation study was completed by SEPCO with their technical consultants China ENFI Engineering corporation (for mining and process) and CCC-FHDI Engineering Co Ltd (Marine facilities). This team has the technical and commercial experience in potash and African projects that supports the successful execution of the Kola project.

·      The technical and financial parameters detailed in the Kola Project Optimisation study are robust and economically attractive. 

·      SQM and OIA hold a right of first refusal to product offtake from Kola proportionate to their shareholding interest (with each having a floor of 20% of production).  The residual 60% remains uncontracted and therefore a considerable attraction to other potential strategic financiers of the Kola Project.  In this respect, Kore has held, and continues to hold, discussions with respect to possible offtake and project funding/ownership via additional strategic partners.

·      Kore as 90% owner of Kola retains options for raising the required equity funding including selling down part of its interest in the Kola Potash Project to a third party to form a joint venture. Introduction of a joint venture partner may also provide further comfort for potential debt project financiers and could reduce Kore's share of the equity funding requirements for the project. Kore shareholders should be aware that any sale of a joint venture interest in the project to a third party would most likely dilute Kore's economic ownership of the project.

·      The Kore Board and management team is highly experienced in the broader resources industry.  They have played leading roles previously in the exploration and development of several large and diverse mining projects in Africa.  In this regard, key Kore personnel have a demonstrated track record of success in identifying, acquiring, defining, funding, developing and operating quality mineral assets of significant scale.

·      Funding for Kola Project pre-production and initial working capital is not expected to be required until post conclusion of an EPC agreement and receipt of financing proposal.  Kore has reasonable grounds to believe that obtaining requisite funding within this timeline is achievable.

Appendix B: Summary of Information required under ASX Listing Rule 5.9.1 (Ore Reserves), Listing Rule 5.16.1 (production target) and Listing Rule 15.7.1 (forecast financial information).

Pursuant to Listing Rules 5.9.1, 5.16.1 and 15.7.1, and in addition to the information contained in the body of this release, the Company provides the following summary information

Kola Project Ore Reserves and related production target and forecast financial information

Summary of Material Assumptions - Ore Reserves

Material assumptions relating to the statement of Ore Reserves for the Kola Project are summarised below:

·      Production life - Life of Mine ("LoM") based on Ore Reserves of 25 years at nominal 2.2 Mtpa MoP production, average 2.1 Mtpa MoP production, this was determined during the execution of the optimisation study and from an aligned production schedule for both mining and processing.

·      Product pricing - Average MoP price of US$360/t MoP CFR Brazil (real 2022) for granular product has been assumed which is considered to be highly conservative compared to prevailing prices of $1100/ t MoP CFR Brazil for 2021

·      Operating cost - average LoM mine gate operating cost US$63.6/MoP t real as detailed in the optimisation study

·      Shipping costs - LoM Shipping costs (trans-shipment and sea freight) of US$19.5 /MoP t were based on information and estimates from the DFS and review during the optimisation study.

·      Project duration - A project capital expenditure period of 40 months was assumed in the optimisation study and a deferred capital expenditure period from month 49 to month 72. Sustaining capital was assumed in the optimisation study to be spent over a period from month 44 to month 408.

·      Project Capital - A total nominal Project Capital of US$1.83 billion (including EPC costs and mark-up) was estimated in the optimisation study

·      Fiscal parameters - The mining convention between the Company and the Republic of Congo specifies the fiscal parameters summarised below:

o  Company tax rate (15%),

o  Initial tax rates (5 years at 0% + 5 years at 7.5%)

o  Royalties (3% of revenue) (Mining Convention)

o  Government free carry (10%) (Mining Convention)

o  Other minor duties and taxes (Mining Convention)

·      Working capital assumptions - Working capital based on 30 days Debtors and Creditors, 60 days Stores.

Summary of Material Assumptions - production target and forecast financial information based on the optimisation study

Material assumptions relating to the production target and forecast financial information for the Kola Project which incorporate results from the optimisation study are summarised below:

·      Production life - LoM of 31 years at an average annual production of 2.1 Mtpa MoP production. The production life fully depletes Ore Reserves and incorporates a portion of Inferred Mineral Resource into the production target.

·      Product pricing - Average MoP price of US$360/t MoP CFR Brazil (real 2018) for granular product.

·      MoP Product - The process design is based on a single product type, Red Granular MOP. (The MoP produced will comprise at least 95.3% KCl, with a maximum of 0.2% Mg and 0.3% Insolubles).

·      Operating cost - mine gate operating cost of US$63.60/t and export (FOB) cost of US$90.80/t were reported in the Optimisation Study.

·      Project duration - A project capital period 40 months was reported in the Optimisation Study.

·      Project Capital - A Project Capital of US$1.83 billion (including EPC costs and profit margin) was reported in the optimisation study

Criteria for Mineral Resource and Ore Reserve Classification

The criteria for Mineral Resource and Ore Reserve Classification remain unchanged from the "Definite Feasibility Study" released on 29^th January 2019.

The Ore Reserve estimate is based on the Kola Sylvinite Indicated and Measured Mineral Resources reported by Met-Chem DRA in accordance with the JORC Code (2012 edition) and announced by the Company on 6 July 2017.

Drill-hole and seismic data were relied upon in the geological modelling and grade estimation. Across the deposit the reliability of the geological and grade data is high. Grade variation is small within each domain reflecting the continuity of the depositional environment and 'all or nothing' style of Sylvinite formation.

Drill hole data spacing determines confidence in the interpretation of the seam continuity and therefore confidence and classification; the further away from seismic and drill-hole data the lower the confidence in the Mineral Resource classification. In the assigning confidence category, all relevant factors were considered, and the final assignment reflects the Competent Persons view of the deposit.

Table 1: Summary of Criteria used for the Classification of the Kola Mineral Resource

The Measured and Indicated Mineral Resources for sylvinite are hosted by 3 layers (or 'seams') which are from uppermost; the Hanging Wall Seam (HWS), the Upper Seam (US) and the Lower Seam (LS), each separated by rock-salt (a rock-type typically comprised of >95% halite).

Magnesium and insoluble content are considered deleterious but are present in only very small amounts in the ore (average of 0.07% and 0.14%respectively).

The Mineral Resource Estimate was delivered to the Ore Reserve consultants in the form of a standard block model, blocks having dimensions 250 x 250 x 1 m, each block having a KCl grade, a density, and magnesium and insoluble content.

The Mineral Resources are inclusive of the Ore Reserves i.e. the Ore Reserves are the mineable part of the Mineral Resources after the application of technical, economic and other modifying factors.

Areas of potential structural disturbance, referred to as geological anomalies were excluded from the Measured and Indicated Mineral Resource. They were identified from seismic data as is standard in potash mining districts elsewhere.

A 10% cut-off grade (CoG) was used in the Mineral Resource Estimate.

Mining Method and assumptions

The mining method and assumptions remain unchanged from the "Kola Definite Feasibility Study" ("DFS") released on 29 January 2019.

Mining factors and assumptions have been derived from the historical information available for mature potash mines, and the current best mining practices. The Kola orebody will be mined using conventional underground (UG) mining method consisting of room and pillar in a 'chevron' (or herringbone) pattern, with Continuous Miners (CM's) mining machines of the drum-cutting type.

Most of the mining will be on one level only where only the US will be extracted. In some areas, both the US and the LS will be mined, in which case the LS will only be mined after the US. In other areas only the HWS will be mined.

In determining the Ore Reserves, a minimum mining height of 2.5 m was selected based on capability of the selected CM which is also capable of mining up to 6 m. Areas of the Mineral Resource with a seam height of less than 2.5 m were excluded from the Ore Reserves.

The mine design is typical of potash mines, having 4 entries for accessing panels. Each drive will typically be 8 m wide and 3 m to 6 m high depending on the seam height. The typical configuration for the chevron pattern is an angle of 65 degrees from the middle entry, and length of 150 m approximately.

The Mine design relies on geotechnical modelling, carried out in FLAC 3D software. The modelling was based on geotechnical test-work carried out on representative core samples from the sylvinite seams and host rocks (rock-salt and lesser carnallitite). The geotechnical modelling established that the mine design is stable over the LoM and includes the following geotechnical parameters:

·      Where both the US and LS seams are to be mined, the support interval between the US and LS must be at least 3 m thick,

·      An 8 m wide pillar between two consecutive production rooms (of 8 m each).

·      A 50 m wide pillar between two production panels. Similarly, a 50 m wide pillar will be left in place between the side of the production panel and the main haulage access drift.

·      The interval of rock-salt between the mine openings and the floor of the overlying anhydrite member is referred to as the 'salt back'. This is typically over 30 m but is less in some areas. The DFS design allows that it may be a minimum of 15 m unless the Anhydrite Member is well developed where it may be 10 m. This is based on the results of the geotechnical model.

·      A stand-off distance of 20 m radius from the exploration holes.

·      A stand-off distance of 30 m radius from class 2 geological anomalies and 60 m radius from class 3 geological anomalies.

·      A pillar of 300 m in radius around the exhaust and intake shafts.

Based on the selected mining equipment (CMs), it is anticipated that a good cutting selectivity would be achieved, and that a maximum of 0.2 m of dilution material above and/or below the potash seam is likely. Carnallitite is present in the floor of the seam in some areas. The roof is always of rock-salt.

On average, the dilution material is equivalent to approximately 10% of the tonnage of the Ore Reserves. Dilution material was assigned a grade of 3% KCl if rock-salt and 0% KCl if Carnallitite.

Based on the configuration of the proposed mining layout, and the anticipated fleet of mining equipment, it is assumed that the mining recovery in the different extraction chambers will be 90% on average (i.e. mining losses will be 10%). This considers the mining action which will lead to some losses such as material being excavated and left in the production chamber, or mineralized material left in the floor or roof, etc.

The Global extraction ratio is 30% (25% in the LS, 33% in the US and 28% in the HWS). This is after the removal from Ore Reserves of all pillars (pillars around the geological anomalies, the barrier pillars, the shaft pillar, the pillars between chevrons and main access drifts), the stand-off distance around boreholes, mining losses and the exclusion of sylvinite <2.5 m thick.

Two vertical shafts, each of 7 m internal diameter, will be sunk at a central location in the Ore Reserves, to provide access to the underground. The intake shaft will be equipped with a hoist and cage system for transportation of persons and material, while the exhaust shaft will be equipped with a vertical conveyor system to convey the mined-out ore to the surface. Both shafts are approximately 270 m deep.

Ore haulage from the CMs to the feeder breaker apron feeder will be done using electrically- powered Shuttle Cars.

Underground conveyor belts will be used for ore transportation in all the areas of the mine. The belts are distributed in the mains and submains and ultimately in the working panels near the CM working face. The ore will be placed on the belts from the feeder breakers that were fed by the shuttle cars.

The belt conveyors will carry the ore loaded by the feeder breakers to the ore bins. Then the ore is conveyed from the ore bins to the Pocket Lift system located in the exhaust shaft.

Processing Method and Assumptions

The changes to the processing method and assumptions arising from the optimisation study are as follows.

·      The product will be granular MoP K60, comprising at least 95.3% KCl. The optimisation study design allows for the production of a single product, red granular MOP.

·      The process flow sheets were optimised to produce a maximum of 2.2 Mtpa of Muriate of Potash (MOP), at 95.3% KCl purity, with a minimum KCl recovery of 90.4% of the KCl content in the ROM fed to the Process Plant.

·      Eight key areas of process design were changed in the optimisation study

o  The crushing circuit was changed from 3 stage crushing to 2 stage crushing

o  The mixing tanks post crushing were replaced with a combination of screens and tanks

o  The scrubbing capacity has been reduced

o  The thickening capacity has been increased

o  Column cells have been replaced with floatation cells

o  Re-grind flows have been re-routed

o  Tailings centrifuges has been replaced with a belt filters

o  Compaction circuit has been simplified

A conventional flotation process will be utilised for potash concentration. This method is well established and is the most widely used method in the potash industry.

No new metallurgical test work was carried out in the optimisation study, the test work completed remains as per the DFS released on 29 January 2019, and is summarised below:

The metallurgical test work campaigns were based on representative core samples of the three seams, collected from the exploration drill hole cores. They comprised US (114.5 kg), LS (102.0 kg) and HWS (10.3 kg). All test work was carried out at the Saskatchewan Research Council ("SRC") laboratory in Saskatoon, Canada

Two metallurgical test work campaigns were conducted during the DFS in 2017 and 2018. The main philosophy of the first DFS test work campaign was to prepare representative test feedstocks for each seam, confirm KCl liberation, characterize the feedstock, perform flotation tests, optimize the operating conditions, optimize reagent consumption for optimum KCl recovery and grade performance, perform a sensitivity test on flotation.

The objective of the second test work campaign was to optimize the flotation process and improve the plant recovery from the initial flow sheet. The results of this second test work campaign demonstrated that the new flotation process performed above the project performance minimum target.

Magnesium and insoluble material are considered deleterious. The extremely low content of these materials in the ore mean that their removal is relatively straightforward. Insoluble material is removed by attrition scrubbing and magnesium removed by brine purge.

Cut-off Grades

The cut off grades remain the same as the DFS published on 29th January 2019.

A Cut-off grade ("CoG") of 10% KCl has been calculated within the process to state Ore Reserves. The cut-off grade calculation included all operating costs associated with the extraction, processing and marketing of ore material. The cut-offs are based on a Muriate of Potash (MoP) price of US$250 per tonne of MoP. Inputs to the calculation of CoG included:

o  Mining costs

o  Metallurgical recoveries

o  Processing costs

o  Shipping costs

o  General and administrative costs

All sylvinite of the Measured and Indicated Resource is above 9.9% KCl (the Ore Reserve calculated CoG), therefore all the Measured and Indicated Sylvinite Resources have been considered for the Ore Reserve Estimate by application of the other modifying factors.

The uniformly very low content of deleterious elements (magnesium and insoluble material) meant that these did not require consideration in the CoG determination.

Cost Estimation Methodology

Capital Cost:

·      Capital costs have been estimated for each scope area, expressed in United States dollars (US$) and based on December 2021 prices.

·      Escalation of 3.3% of direct costs (up to project completion) has been modelled, and a Contingency of 5% of direct costs has been added.  

·      Three capital periods have been defined: Initial (Construction and up to first barge loading, Month +40); Deferred (up to ramp-up completion, Month +65); Sustaining (after Month +65)

Operating Cost:

·      Operating Cost covering the Life of Mine (31 years) has been estimated in US dollars and reported in the SEPCO Optimisation Study report 2022. They include costs for Electric power, Fuel, Gas, Labour, Maintenance parts, Operating Consumables, General and Administration costs and Contract for Employee Facilities.

·      Transshipment costs were supplied by SEPCO in the optimisation study report based on work done by their marine consultant.

·      Ocean Freight Transportation estimate produced were supplied by SEPCO in the optimisation study report based on work done by their marine consultant.

·      Mine Closure cost estimated in accordance with the Conceptual Rehabilitation and Closure Plan developed by SRK Consulting.

·      Mine Closure duration of 24 months (2 years)

·      Quantities of equipment, materials and works directly assessed from the Material Take-off prepared within the framework of the DFS for the Kola Potash Project.

·      Unit rates for dismantling, demolition and rehabilitation works directly based on the Construction Unit rates applied for the CAPEX estimate of the Kola Potash Project and adjusted by using ratios to assess the lower consuming time and means for dismantling, removing and demolition works.

·      State mineral royalties of 3% of Gross Revenue were applied

·      Measured Mineral Resources were used for the estimation of the Proved Ore Reserves. Indicated Mineral Resources were used for the estimation of Probable Ore Reserves.

·      The conversion of Measured and Indicated Mineral Resource to Proved and Probable Ore Reserve reflects the Competent Person's view of the deposit.

·      40.6% of the Ore Reserves are classified in the Proved category and 59.4% of the Ore Reserves are classified in the Probable category

Material Modifying Factors

·      Status of Environmental Approvals

The Kola Environmental and Social Impact Assessment ("ESIA"), initially approved on 10 October 2013, was amended to reflect the design changes made to the Kola Project as part of the Definitive Feasibility Study ("DFS") and has been amended to include the service corridors for a gas pipeline and overhead power line. The application and terms of reference for amending the ESIA were approved on 12 April 2018 by the Minister of Tourism and Environment.

The ESIA for the Kola Mining License was approved on 31 March 2020 for 25 years.

The proposed new position of the process plant resulting from the optimisation study creates a requirement to further amend the ESIA. It is intended that work on this amendment will commence in the second half of 2022.

·      Status of Mining Tenements and Approvals

Kore has a 97%-holding in Sintoukola Potash SA (SPSA), a company registered in the ROC. The remaining 3% in SPSA is held by "Les Establissements Congolais MGM" (Republic of Congo). SPSA in turn has a 100% interest in its two ROC subsidiaries, Kola Potash Mining SA ("KPM") and Dougou Potash Mining SA ("DPM").  The Mining Convention includes a requirement for 10% of the shares in KPM and DPM to be assigned to the Government of the Congo. The Company is currently awaiting instructions on how to affect this transfer.

The Kola Deposit is within the Kola Mining Lease which is 100% owned by KPM

o  In May 2008, a non-exclusive Prospecting Authorisation was granted to Sintoukola Potash covering an area of 1,436.5 km2. On 13 August 2009, this was changed to a "Permis de Recherches" (Exploration Permit) named 'Permis Sintoukola' under decree No. 2009-237 giving the Company exclusive rights to explore.

o  On 27 November 2012, the first renewal of the permit was made, by decree No. 2012-1193 and reduced in size to 1,408 km2.

o  On the 9 August 2013, a Mining Lease for Kola issued under decree No. 2013-312, totaling 204.52 km2 falling entirely within the Exploration Permit.

·      Déclaration d'Utilité Publique" or "DUP

Exclusive land acquisition rights have been granted to the Project company for plant development through ministerial order gazetted on 30 August 2018 (the "Déclaration d'Utilité Publique" or "DUP") valid for three years and renewable once for a two-year period.

As a result of the proposed optimised processing plant location, a new application, to cover the optimised processing plant location is planned to be submitted to the Government after receipt and acceptance of the financing proposal from Summit

·      Other Governmental Factors

The Company entered into a mining convention with RoC government on 8 June 2017 and it was gazetted into law on 7 December 2018. The Mining Convention provides certainty and enforceability of the key fiscal arrangements for the development and operation of the Kola Project. This includes clarifying import duty and VAT exemptions and agreed tax rates during mine operations. The Mining Convention provides strengthened legal protection of the Company's investments in the Republic of Congo through the settlement of any disputes by international arbitration.

Infrastructure Requirements for Selected Mining, Processing and Product Transportation to Market

The project infrastructure is comprised of the mine-site (shaft and offices), the process plant 24 km from the mine and a product and marine export facility at the coast (at Tchiboula), the 34 km infrastructure corridor between these (including the overland conveyor, service road and power line), the gas line from M'boundi gas field, overhead line from the MKII substation, the accommodation and administrative camp and the transshipment facilities.

Changes to the infrastructure requirements that arise from the optimisation study and are thus different from the DFS are summarised below.

·      The process plant position has been moved 11 km inland which has allowed optimisation of the foundation design, the resultant infrastructure at the coast consists of the product storage building and marine export facilities. The design of the barge loading jetty has also been optimised.

·      Road access to the Kola Potash Project sites will be via the existing Route Nationale 5 (RN5). Two external access roads will be built, which are respectively connected from RN5 to the mining site and from RN5 to the mineral processing site and living quarter, with a length of 2.0 km and 4.3 km respectively. Two maintenance roads for long-distance belt conveyors will be built. One of the roads for RoM belt conveyor maintenance is about 24.0 km, connecting Koutou camp and the mineral processing site. The other road is for MOP belt conveyor maintenance,

·      Raw Water will be supplied from wells located at the Mine Site and at the Accommodation Camp close to the Process Plant Site.

·      The Accommodation Camp has been sized for a capacity of 850 beds and will be located 3 km southwest of the Process Plant

·      Electrical Power will be sourced from the ROC national grid. A 57 km long 220 kV transmission line will be built from the Mongo Kamba II substation north of Pointe Noire to the Process Plant Site. A second 34 km long 220 kV transmission line will be built from the Process Plant Site to the Mine Site and the marine facility at the coast.

·      The Natural Gas needed for product drying will be supplied by a 73 km long pipeline from the M'Boundi gas treatment plant.

The infrastructure requirements that have not been modified in the optimisation study and thus remain the same as the DFS are summarised below.

·      Ongoing operational labour will be a combination of permanent employees, permanent contract services, and part-time contract services for intermittent needs.  The total requirement for permanent employees is expected to be 731.  Local labour resources will be used for the majority of labour requirements, while some selected positions are planned as expat roles.

·      The Kola Potash Project intends to export up to 2.2 Mt MoP to world markets each year. A transshipment solution has been developed, whereby MoP for export is loaded at a dedicated jetty onto self-propelled shuttle barges (two units), which will then travel to Ocean Going Vessels (OGVs) anchored 11 nautical miles (20 km) offshore in a dedicated transshipment area. The cargo will be transferred from the Barges to the OGVs using a Floating Crane Transhipper Unit (FCTU).