Khemisset Project Socio-Economic Study Results

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

26 August 2020

Emmerson Plc

("Emmerson" or "the Company")

 Results from the Khemisset Project Socio-economic Study

Emmerson Plc, the Moroccan focused potash development company, is pleased to announce the results from the Socio-economic Study for its Khemisset Potash Project in Morocco ('Khemisset' or 'the Project') which provides measurable and verifiable confirmation of the significant benefits that the Project will deliver at a local, regional and national level.

The highlights of the study include:

·    A total of 2,385 direct and indirect jobs will be created during the construction of the project. Once fully operational a total of 1,500 jobs will be created with 760 being direct employees and the Company is targeting to fill 90% of roles at the mine with employees living within Khemisset and the surrounding communes

·    Total investment over the life of the Project is estimated to be US$2.5bn and the Company will adopt a procurement strategy to provide preferential treatment to local, regional and in country providers to maximise the benefits to Morocco

·    The economic impact of the Project will increase the local GDP per capita by an estimated 40%

·    The additional tax contributions resulting from the Project represent an estimated 176% of tax revenues generated locally, 5.1% regionally and almost 1% nationally

·    The study was carried out by renowned Professor in Economics, Dr Sallem Koubida.

Emmerson CEO, Graham Clarke, commented, "We are delighted with the outputs of the study which demonstrate that the local, regional and national benefits that the Project will bring are significant.  Our company values are summarised by the phrase "doing the right things in the right way" so it is an important part of the Company's approach that the development of the Khemisset project has a positive impact on the local area and has a national significance which we have now demonstrated will be the case."

Summary of the Socio-economic Study

The socio-economic baseline settings were analysed and applied to the calculated potential monetary and non-monetary impacts using a multi-dimensional framework.  This process has methodically proven the potential for the Project to be a development catalyst for the province of Khemisset in particular and Morocco in general.

The Study has proved that Khemisset combines the appropriate attributes for sustainable development, namely its location, outstanding economic metrics, corporate policies & standards, and government support.

Background

The Khemisset Potash Project will have a significant positive impact on the Moroccan economy. Total project investment is projected to be US$2.5 billion over the life of mine. The Project will produce over 700,000 tonnes of saleable K₆₀ MOP (Muriate of Potash) and 1 million tonnes of de-icing salt per year.  The projected mine life is 19 years although there is potential to extend this timeframe based on the mineral resources already in place.

Employment Benefits

Construction of the mine and associated infrastructure is expected to generate a total of more than 2,385 direct and indirect jobs. When operational, the mine will directly employ over 760 people whilst a total of 1,500 roles will be created by the effect of the employment multiplier.  The Company has a policy to source, where skills are available, ninety per cent (90%) of all employees from the local area including the city of Khemisset and its surrounding communes.

Procurement Strategy

Capital costs to build the mine are estimated at US$411 million.  Construction is expected to take 24 months.  Operating costs are estimated to be over US$100 million per annum and the Company will adopt a procurement strategy that seeks to provide preferential treatment to locally based providers of equipment and labour.  Maximising the value of Capex and Opex procured from within Morocco will further increase the benefits to the local, regional and national economy.

Fiscal Contribution

Fiscal contributions from the Project include mineral extraction tax, corporate income tax, payroll tax, and withholding tax on dividends. The direct fiscal contribution of the Project is estimated to be approximately US$63 million per annum.  Indirect fiscal contribution by effect of a multiplier is estimated at around US$146 million per annum meaning a total potential contribution of over US$200 million per annum. This fiscal contribution represents an estimated 176% of taxes generated by the local economy, 5.1% of regional taxes, and almost 1% of national tax revenues.  These numbers confirm the potential for the Project to significantly contribute to Moroccan tax revenues, and thus to socio-economic development in the country.

Export Revenues

Products generated by the Khemisset Potash Project will likely be exported to markets in the USA, Europe and Brazil.  Revenue from the export of MOP and de-icing salt is estimated to contribute an additional 8% to Morocco's mineral export revenue, 110% to non-phosphates export revenue, and is expected to have a significant positive effect on Morocco's current account deficit. Capital investment financed from overseas and reinvested profit will also contribute to foreign direct investment to Morocco.

Significant GDP Impacts

The Khemisset Potash Project will not only be the first potash project in Morocco, but the first in Africa.  The economic impacts of the Project will be profound with significant benefits being felt at the local, regional and national level:

·    Locally within the city of Khemisset and surrounding communes the Project is estimated to increase GDP per capita by 40% (approximately US$180 million per annum)

·    Regionally within Rabat-Sale-Kenitra the GDP per capita contribution is projected to be 1.24% (approximately US$234 million per annum)

·    Nationally, the GDP per capita contribution is forecast to be 0.42% (approximately US$500 million per annum).

Contribution to Sustainable Development

The Company's corporate policies and standards aim to deliver sustainable benefits for the Project and its stakeholders. Analyses of the potential impacts through a five-dimensional work frame has confirmed the potential contribution of the Project to the Sustainable Development Goals of the United Nations Development Program in Morocco.

Study Author

The study was carried out by Dr Sallem Koubida, a Moroccan Professor of Economics.  Dr Koubida is a renowned economist and has completed similar studies for several industrial development projects including a multi-national company investing in fast moving consumer goods in Morocco.  Currently, he is Associate Professor of Economics and the Chair of Quality Assurance and Operating Effectiveness at the School of Business Administration, Al Akhawayn University Ifrane, Morocco.

**ENDS**

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

Notes to Editors

Emmerson's primary focus is on developing the Project located in Northern Morocco.  The Project has a large JORC Resource Estimate of 537Mt @ 9.24% K₂O and significant exploration potential with an accelerated development pathway targeting a low capex, high margin mine. Khemisset is perfectly located to capitalise on the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. This unique positioning means the Project will receive a premium netback price compared to existing potash producers. The need to feed the world's rapidly increasing population is driving demand for potash and Emmerson is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated Khemisset has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. This delivered outstanding economics including a post-tax NPV₈ of approximately US$1.4 billion using industry expert, Argus', price forecasts.