Updated DX Pre-Feasibility Study

9 November 2020

Kore Potash Plc

("Kore Potash" or the "Company")

 

Updated Dougou Extension (DX) Pre-Feasibility Study Production Target

 

Kore Potash plc, the potash development company with 97%-ownership of the Kola and DX Potash Projects in the Sintoukola Basin, located within the Republic of Congo ("RoC"), is pleased to announce an update to the Dougou Extension ("DX") Pre-Feasibility Study ("PFS") published on 13 May 2020 (the "Original PFS") following the completion of a review of the Production Target by independent consultants Agapito Incorporated(the "Updated PFS"). A summary of the results is presented herein.

 

Highlights:

 

Updated Production Target

·   Kore completed a PFS on the DX Project in May 2020 and released the key outcomes in AIM/JSE/ASX release dated 13 May 2020.  The PFS mine schedule was comprised solely of declared Sylvinite Ore Reserves of 17.7 Mt at a grade of 41.7% KCl.  The Ore Reserve estimate for the DX Project is unchanged and all key assumptions and modifying factors remain valid.

·   The process of completing this Updated PFS has involved application of all modifying factors to that portion of Indicated Resources that were not converted to Ore Reserves and to Inferred Resources.  Kore has sufficiently advanced all modifying factors on this material such as to have a reasonable basis for the view that eventual conversion to Ore Reserves is likely for a significant portion of this material.  As a result, the production schedule in this Updated PFS includes 2.43 Mt of MoP from Indicated Mineral Resources and 2.31 Mt MoP from Inferred Mineral Resources that were not part of the PFS mine schedule. 

·    While each of the modifying factors was considered and applied to this additional material, there is no certainty of eventual conversion of this material to Ore Reserves or that the production target in the Updated PFS will be realised.

 

Updated Financial Outcomes

·    The Updated Production Target extends the project life from 18.4 years to 30 years at a production rate of 400,000 ktpa MOP based on Probable Ore Reserves, Indicated Mineral Resources and a portion of Inferred Mineral Resources (the "Production Target"). The scheduled extraction includes 34.5% of the Inferred Mineral Resources which contributes 20% of the life of project MoP production.

·    Approximately 4.3 years post-tax payback period from first production.

·   Attributed NPV_{10 (real)} of US$412 million and 23.4% IRR on a real post tax basis at life of project average granular MoP price of US$422/t (Argus Media's price forecast CFR for DX Project's target markets).

 

High quality Ore Reserves and Mineral Resources

·     The Sylvinite Ore Reserves of 17.7 Mt at a grade of 41.7% KCl, have not changed from the Original PFS.

·    Grade of the Ore Reserves is in the top quartile of all operating potash mines and potash development projects globally.

·     The total sylvinite Mineral Resources of 145 Mt at a grade of 39.7% KCl, remain unchanged.

 

 

Cautionary Statement

·     There is a low level of geological confidence associated with Inferred Mineral Resources. There is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised.

·     The Updated PFS referred to in this announcement has been undertaken to further investigate the potential for a new potash development in the Republic of Congo.

·    The Updated PFS is a preliminary technical and economic study of the potential viability of the DX project and is based on low level technical and economic assessments (AACE Class IV estimate).

·     The PFS Production Target is based on Probable Ore Reserves of 17.7 Mt sylvinite at an average grade of 41.7% KCl, plus production from Indicated Mineral Resources not included in Ore Reserves, plus production from 34.5% Inferred Resources totalling 20% of LOM production.  

·     The DX Sylvinite Production Target is 30.6 Mt of Sylvinite at 39% KCl, with an equivalent contained MoP of 12.1 Mt with a KCl grade of 98.5%.

·      The PFS Production Target is not reliant on any exploration targets or qualifying foreign estimates.

·     The Updated PFS is based on the material assumptions outlined in the announcement "Dougou Extension (DX) Pre Feasibility Study" dated 13^th May 2020 and updated in this announcement and Appendix B of this announcement. These include assumptions on availability of funding. While the Company considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the PFS will be achieved.

·     To achieve the range of outcomes indicated in both the Original PFS and the Updated PFS, base case funding in the order of US$286 million will likely be required. Investors should note that there is no certainty that the Company will be able to raise that amount of funding when needed. It is also possible that such funding may only be available on terms that may be dilutive to or otherwise affect the value of the Company's existing shares.

·     It is also possible that the Company could pursue other 'value realisation' strategies such as a sale, partial sale or joint venture of the project. If it does, this could materially reduce the Company's proportionate ownership of the project.

·      Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Original PFS or the Updated PFS.

·     The Mineral Resources and Ore Reserves underpinning the production target and forecast financial information in this combined AIM/JSE/ASX Release were prepared by independent expert Dr Michael Hardy, Competent Persons in accordance with the requirements of the JORC Code 2012 edition (JORC).

 

Brad Sampson, CEO of Kore, commented: "We are very pleased to be able to provide updated outcomes for the DX PFS."

 

"We were already confident that DX is a world class asset, with very high grades and very low costs; and this update improves that confidence."

 

"The DFS for DX is already underway and we fully expect it to confirm the first-rate results we have published today. As we move towards the second phase of the DFS and to production we will be able to further de-risk the Project and demonstrate DX's investment case."

  

 

Table 1: Summary of Updated PFS Results

 

Capital Cost Estimate	US$285.9 million
Operating Cost: Mine Gate	US$65.26/t MoP
Operating Cost: FOB (Pointe Noire)	US$86.61/t MoP
Operating Cost: CFR (Africa)	US$114.61/t MoP
Life of Project	30 years
Potash Price	US$344 /t Ave for first 6 years
	US$456/t Ave for remaining years
	US$422/t LOM average
MoP Produced over life	12.10 Mt
Mineral Resource	145 Mt @ 39.7% KCl
Ore Reserve	17.7 Mt sylvinite @ 41.7% KCl
NPV10	US$ 412 million
IRR	23.4%
Mining Method	Single well selective dissolution
Ship loading	BOO at existing Pointe Noire Port

 

 

 

Table 2: Summary of changed outcomes between Original PFS published on 13^th May and Updated PFS

 

	Original PFS results 13 May 2020	Updated PFS results
Life of Project	18.4 years	30 years
MoP Produced over life	7.4 Mt	12.1 Mt
NPV10	US$319 million	US$421 million
IRR	22.9%	23.4%

 

 

Ore Reserves and Mineral Resources

Ore Reserves (Table 2) were determined from a portion of the Indicated Mineral Resource Estimate. The Sylvinite is hosted by two layers ('seams') referred to as the HWSS and the TSS, separated by 8 to 15 m of rock-salt. Table 3 provides the Mineral Resource Estimate.

Further detail on the Ore Reserves Estimates and Mineral Resource Estimate is provided in Appendix B: (Summary of Information required according to ASX listing Rule 5.9.1) and Appendix C (JORC Code Table 1, Sections 1-4).

 

Table 2: DX Sylvinite Ore Reserves

 

Classification	Ore Reserves (Mt)	KCl grade (% KCl)	Mg (% Mg)	Insolubles (% Insol.)
Probable	17.7	41.7	0.06	0.19
Total Ore Reserves	17.7	41.7	0.06	0.19

 

 

 

Notes to Table 2: The Ore Reserves in Table 2 are gross numbers and the attributable numbers are presented in Appendix D: Kore Potash Mineral Resources and Ore Reserves as of 13 May 2020.

 

 

Table 3: DX Sylvinite Mineral Resources (inclusive of Ore Reserves)

Classification	Mineral Resources (Mt)	KCl Grade (% KCl)	Mg (% Mg)	Insolubles (% Insol.)
Indicated	79	39.1	0.06	0.20
Inferred	66	40.4	0.05	0.22
Total Mineral Resources	145	39.7	0.05	0.21

 

 

Notes to Table 3: The Sylvinite Mineral Resources in Table 3 are gross numbers and the attributable numbers are presented in Appendix D: Kore Potash Mineral Resources and Ore Reserves as of 13 May 2020.

 

 

Reasonable Basis for Forward-Looking Statements (including production target and forecast financial information) and Ore Reserves

 

This release, inclusive of Appendix A: Summary results of DX Project PFS, contains a series of forward-looking statements. The Company has concluded that it has a reasonable basis for providing these forward-looking statements and the forecast financial information included in this release. This includes a reasonable basis to expect that it will be able to fund the development of the DX Project when required.

The detailed reasons for these conclusions are outlined throughout this release, including in Section 19 of Appendix A. All material assumptions, including the modifying factors, upon which the production target and forecast financial information is based are disclosed in this release (including the summary information in Appendix B and Appendix C). This announcement has been prepared in accordance with the requirements of the JORC and the ASX Rules.

The estimated Ore Reserves and Indicated Mineral Resources underpinning the production target have been prepared by a Competent Person in accordance with the requirements of JORC.  Details of those Ore Reserves and Mineral Resources are as set out in the release of the PFS on 13^Th May 2020.

The 400,000 tonnes per annum MoP production target over a 30 year life is underpinned by scheduling of Probable Ore Reserves, plus production from Indicated Mineral Resources not included in Ore Reserves, plus production from Inferred Resources totalling no more than 20% of LOM production. No exploration targets or qualifying foreign estimates underpin the production target.

 

This announcement has been approved by the Board of Kore Potash plc.

 

ENDS

 

For further information, please visit www.korepotash.com or contact:

Kore Potash Brad Sampson - CEO		Tel: +27 11 469 9140
Tavistock Communications Jos Simson Edward Lee		Tel: +44 (0) 20 7920 3150
Canaccord Genuity - Nomad and Broker James Asensio Henry Fitzgerald-O'Connor		Tel: +44 (0) 20 7523 4600
Shore Capital - Joint Broker Jerry Keen Toby Gibbs James Thomas		Tel: +44 (0) 20 7408 4050

 

Competent Persons Statement:

The estimated Ore Reserves and Mineral Resources underpinning the production target have been prepared by Dr Michael Hardy, a Competent Person in accordance with the requirements of the JORC Code.

All information in this report that relates to Mineral Resources is based on information compiled by Ms. Vanessa Santos, P.Geo. of Agapito Associates Inc. Ms. Santos is a licensed professional geologist in South Carolina (Member 2403) and Georgia (Member 1664), USA, and is a registered member (RM) of the Society of Mining, Metallurgy and Exploration, Inc. (SME, Member 04058318),   a Recognized Professional Organization' (RPO) included in a list that is posted on the ASX website from time to time.

Ms. Santos has sufficient experience that is relevant to the style of mineralisation and type of Deposit under consideration and to the activity she is undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC Code). Mrs. Santos consents to the inclusion in this report of the matters based on the information in the form and context in which it appears.

All information in this report that relates to Ore Reserves is based on information compiled or reviewed by, Dr. Michael Hardy, a Competent Person who is a registered member in good standing (Member #01328850) of Society for Mining, Metallurgy and Exploration (SME) which is an RPO included in a list that is posted on the ASX website from time to time.

Dr. Michael Hardy has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC Code).. Michael Hardy has verified that this report is based on and fairly and accurately reflects in the form and context in which it appears, the information in the supporting documentation relating to preparation of the Ore Reserves.

Dr. Michael Hardy president of Agapito Associates Inc is not associated or affiliated with Kore Potash or any of its affiliates. Ms. Santos is full time employee of Agapito Associates Inc. and is not associated or affiliated with Kore Potash or any of its affiliates. Agapito Associates Inc will receive a fee for the preparation of the Report in accordance with normal professional consulting practices. This fee is not contingent on the conclusions of the Report and Agapito Associates Inc.  Michael Hardy will receive no other benefit for the preparation of the Report. Michael Hardy does not have any pecuniary or other interests that could reasonably be regarded as capable of affecting their ability to provide an unbiased opinion in relation to the Dougou Extension Potash Project. Agapito Associates Inc does not have, at the date of the Report, and has not had within the previous years, any shareholding in or other relationship with Kore Potash or the Dougou Extension Potash Project and consequently considers itself to be independent of Kore Potash.

 

Forward-Looking Statements

This release contains certain statements that are "forward-looking" with respect to the financial condition, results of operations, projects and business of the Company and certain plans and objectives of the management of the Company. Forward-looking statements include those containing words such as: "anticipate", "believe", "expect," "forecast", "potential", "intends," "estimate," "will", "plan", "could", "may", "project", "target", "likely" and similar expressions identify forward-looking statements. By their very nature forward-looking statements are subject to known and unknown risks and uncertainties and other factors which are subject to change without notice and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct, which may cause the Company's actual results, performance or achievements, to differ materially from those expressed or implied in any of our forward-looking statements, which are not guarantees of future performance.

Neither the Company, nor any other person, gives any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statement will occur.  Except as required by law, and only to the extent so required, none of the Company, its subsidiaries or its or their directors, officers, employees, advisors or agents or any other person shall in any way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatever nature arising in any way out of, or in connection with, the information contained in this document.

In particular, statements in this release regarding the Company's business or proposed business, which are not historical facts, are "forward-looking" statements that involve risks and uncertainties, such as Mineral Resource estimates market prices of potash, capital and operating costs, changes in project parameters as plans continue to be evaluated, continued availability of capital and financing and general economic, market or business conditions, and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements. Shareholders are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. The forward-looking statements are based on information available to the Company as at the date of this release. Except as required by law or regulation (including the ASX Listing Rules), the Company is under no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise.

 

Summary information

This announcement has been prepared by Kore Potash plc. This document contains general background information about Kore Potash plc current at the date of this announcement and does not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The announcement is in summary form and does not purport to be all-inclusive or complete. It should be read in conjunction with the Company's other periodic and continuous disclosure announcements which are available to view on the Company's website www.korepotash.com. 

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

 

Not financial advice

This document is for information purposes only and is not financial product or investment advice, nor a recommendation to acquire securities in Kore Potash plc. It has been prepared without considering the objectives, financial situation or needs of individuals. Before making any investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction.

 

Market Abuse Regulation

This announcement is released by the Company and contains inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person who arranged for the release of this announcement on behalf of the Company was Brad Sampson, CEO. This announcement has been authorised for release by the Board of Directors

 

 

 

 

APPENDIX A
Summary results of Production Target for DX Project Updated PFS

 

1.    Project Introduction:

Kore Potash Plc ("Kore", the "Company" or "KP2") is a mineral exploration and development company that is incorporated in the United Kingdom and listed on the AIM  (as KP2), the Australian Securities Exchange (ASX, as KP2) and the Johannesburg Stock Exchange (JSE, as KP2).

The primary asset of Kore is the Sintoukola Potash Project which includes the Dougou Extension Sylvinite Deposit ("DX") and the Kola Sylvinite deposit ("Kola") in the Republic of Congo (RoC), held by the 97%-owned Sintoukola Potash SA (SPSA). SPSA has 100% ownership of the Dougou Mining Lease, on which the DX Project is located. All outcomes detailed within this PFS are expressed on a 100% basis with exception of Project Net Cashflow, NPV and IRR, which are expressed on a 90% attributable basis.

Following a review of the strategic options within the Sintoukola District, the Company formed the view that a reduced-scale potash development at the DX Project has strong potential to expedite the Company's path to cash flow generation and consequently, accelerate the subsequent development of the Kola Project.

The DX Solution Mining Project (the "DX Project") provides a more rapid path to production with a significantly smaller capital cost than required for the Kola project. Development of this project will establish Kore Potash as the first potash producer in the Republic of Congo in over 40 years. The smaller scale of the Project comes with lower operational and financial risks.

The May 2020 reporting of the PFS financial results considered a production target based solely on Ore Reserves only.  Further production scheduling work has now been completed that includes Ore Reserves, Indicated Mineral Resources that currently sit outside Ore Reserves and a portion of Inferred Mineral Resources.

Specific modifying factors were applied to these Mineral Resources, in line with the Competent Persons determination of the degree of certainty associated with these Mineral Resources. No other changes were made to the PFS inputs or modifying factors.

Development of the DX Project is expected to create a low-cost potash operation producing approximately 400,000 tons per annum (tpa) of K60 Muriate of Potash (MoP) annually. The mining target is the DX Sylvinite Mineral Resource, a sylvinite deposit with exceptionally high KCl grade.  Selective solution mining and processing technology will be employed, resulting in minimal waste brine which will be disposed of to the sea. Solution mining is the most effective means of exploiting an underground potash resource at a reduced scale, and the method is proven across other operations globally.

The DX Project is located approximately 65 km North of Pointe Noire and 13 km from the coast (Figure 1).

The DX PFS considers the mining of the Production Target for the DX PFS Sylvinite, and the production of circa 400,000 ktpa of K60 MoP and its export and all associated infrastructure. The Production Target is based on Ore Reserves, Indicated Mineral Resources not included in Ore Reserves, and a portion of the Inferred Resources totalling no more than 20% of LOM production. It delivers an economic model with a scheduled life of project of 30 years based on a DX Sylvinite Ore Production Target of 30.6 Mt at 39% KCl, with an equivalent contained MoP of 12.1 Mt with a KCl grade of 98.50%.

In accordance with JORC, the Competent Persons (CP) for the DX Project are:

Ms. Vanessa Santos, P.Geo. of Agapito Associates Inc., for the Exploration Results and Mineral Resources.  Ms. Santos is a licensed professional geologist in South Carolina (Member 2403) and Georgia (Member 1664), USA, and is a registered member (RM) of the Society of Mining, Metallurgy and Exploration, Inc. (SME, Member 04058318), an RPO included in a list that is posted on the ASX website from time to time.

Dr. Michael Hardy of Agapito Associates Inc, for the Reserve Review (RR).  Dr. Hardy is a registered member in good standing (Member #01328850) of Society for Mining, Metallurgy and Exploration (SME), an RPO included in a list that is posted on the ASX website from time to time.

 

Appendix A Figure 1 : Location Map showing DX Project

(available at www.korepotash.com)

 

2.    Sylvinite Mineral Resource:

No change to the Mineral Resources as published in the "Dougou Extension (DX) Pre-feasibility Study" 13^th May 2020 have occurred.

Appendix C provides the JORC Table 1 Sections 1 to 4.

At DX the potash is hosted by two flat-lying or gently dipping (mostly <10°) layers (referred to as 'seams') at a depth of approximately 300-450 metres below surface. These seams are separated by 8 to 15 metres of rock-salt. The uppermost seam is the Top Seam (TS) and the lowermost is the Hanging Wall Seam (HWS).  These seams may be composed of sylvinite or carnallite. Carnallite may occur immediately below the sylvinite but these rock types are never mixed. The Mineral Resources Estimate ("MRE") is for the sylvinite only and the sylvinite seams are referred to as the HWSS and the TSS and average 3.5 and 7.4 m thick respectively. The TSS is comprised of 3 sub-seams between which there are layers of rock-salt.

In September 2019 the Company commissioned DMT GmbH & Co. KG of Germany (DMT) to carry out a 60-line km 2D seismic survey over an area coinciding with the Indicated Mineral Resource (Figure 2) to provide higher resolution data for important geological contacts and to guide the improved  interpretation of the position and dip of the potash layers. Processing of this data was carried out by DMT Petrologic GmbH & Co. KG of Germany (Petrologic). Between November 2019 and January 2020 Kore completed 2 new drill-holes; DX_07 and DX_09B. A third drill-hole DX_08 was stopped above the evaporite due to drilling difficulties. The positions of all drill-holes within the DX MRE are provided in Table 1. The sylvinite intersections in these new holes are provided in Table 2 along with the intersections of all previous drill-holes. The MRE was completed by creating a 3D wireframe for the sylvinite seams using drilling and seismic data, then by creating a 50 x 50 m block model with variable thickness into which grade was estimated using Inverse Distance Squared (IDW²). Only blocks with a thickness of 1 metre or more were considered for the MRE. Table 3 provides the MRE for the HWSS and TSS 6-8. Figures 3 and 4 are maps showing the distribution and thickness of the HWSS and the TSS. Figure 5 provides a typical cross-section through the deposit.

 

Appendix A Figure 2 : Map showing the Exploration data supporting the DX MRE

(available at www.korepotash.com)

 

Appendix A Table 1: Collar positions of all holes within the DX deposit. All holes were drilled vertically

BHID	X	Y	Z	Depth (m)	Collar Survey type	Notes
DX_01	787201.22	9529045.8	54.64	551.7	DGPS	Kore hole
DX_02	782845.02	9529278.3	34.73	484.4	DGPS	Kore hole
DX_03	790475.49	9533343.7	39.54	421.9	DGPS	Kore hole
DX_06	788565	9531306	51.90	343.0	GPS/DTM	failed hole
DX_07	790559.2	9529112.8	61.40	486.0	DGPS	Kore hole
DX_08	790550.6	9529982.8	52.40	323.0	DGPS	failed hole
DX_09B	791082.6	9530224	50.50	480.0	DGPS	Kore hole
ED_01	791144.84	9529490.7	55.29	525.2	DGPS	Kore hole
ED_03	789848.75	9528941.2	62.9	492.2	DGPS	Kore hole
K52	791162.76	9529488.7	56.57	1050.0	Historic survey	Historic
K62	789179.19	9530654.4	59.79	531.0	DGPS	Historic

 

Appendix A Table 2:  All drill hole intersections within the DX deposit including those of carnallite and halite

Drill-hole	Seam	Mineralogy	Depth From (m)	Depth To (m)	True Thickness (m)	KCl %
ED_01	TSS	sylvinite	403.98	409.14	5.16	31.8
	HWSS	sylvinite	421.93	426.4	4.47	57.7
ED_03	TS	halite	-	-	-	-
	HWSS	sylvinite	398.95	403.16	4.21	59.5
DX_01	TSS	sylvinite	430.76	437.59	6.83	27.8
	HWS	carnallite	449.4	462.35	12.95	24.6
DX_02	TS	truncated	-	-	-	-
	HWSS	sylvinite	429.4	430.43	1.03	61.6
DX_03	TSS	sylvinite	309.43	310.58	1.15	59.1
	HWSS	sylvinite	323.9	324.51	0.61	62.9
	HWS	carnallite	324.51	336.9	12.39	25.1
DX_07	TSS	sylvinite	388.48	391.2	2.72	25.6
	HWSS	sylvinite	401.1	405.32	4.22	56.4
DX_09B	TSS	sylvinite	361.9	366.75	4.85	32
	HWSS	sylvinite	379.3	381.01	1.71	53.8
	HWS	carnallite	381.01	386.25	5.24	No data
K52	TSS	sylvinite	406.15	411.02	4.87	31.9
	HWSS	sylvinite	423.55	427.16	3.61	57.5
K62 Historic potash hole	TS	carnallite	440.41	445.73	5.32	19.1
	HWS	carnallite	455.42	461.98	6.56	24.3

 

Note to Table 2: TS or HWS refers to intersections where the seam is not sylvinite
 

Appendix A Table 3: Dougou Extension for the HWSS and the TSS (Mineral Resources are reported inclusive of Ore Reserves)

Mineral Resource Category	Seam	Sylvinite (Mt)	Average grade (% KCl)	Contained KCl (Mt)	Average thickness (m)	Insol content (%)	Mg (%)
Measured	-	-	-	-	-	-	-
Indicated	HWSS	28	57.1	15.9	3.8	0.12	0.02
Inferred	HWSS	17	60.4	10.2	3.0	0.17	0.02
Total	HWSS	45	58.3	26.1	3.5	0.14	0.02
Measured	-	-	-	-
Indicated	TSS 6-8	51	29.3	14.9	4.6	0.25	0.08
Inferred	TSS 6-8	49	33.5	16.5	4.2	0.24	0.07
Total	TSS 6-8	100	31.4	31.4	4.4	0.24	0.07
Measured	-	-	-	-
Indicated	both seams	79	39.1	30.8	4.3	0.20	0.06
Inferred	both seams	66	40.4	26.7	3.8	0.22	0.05
Total	both seams	145	39.7	57.5	4.1	0.21	0.05
Notes to Table 3 ·      The effective date of this MRE is 13 May 2020. ·      Mineral Resources are reported using a 15% KCl cut-off grade. ·      The MRE is for sylvinite only and includes areas that are modelled as being underlain by carnallitite. ·      The density was calculated for each model block based on the KCl content using the formula DENSITY= (KCl-742.53)/ (-337.53), based on a regression line of density data (by pycnometer) versus KCl %.

 

Appendix A Figure 3 : HWSS thickness map

(available at www.korepotash.com)

 

Appendix A Figure 4 : TSS thickness map

(available at www.korepotash.com)

 

Appendix A Figure 5 : Typical cross-section through the DX deposit. Annotations referred to in the JORC Table in Appendix C

(available at www.korepotash.com)

3.    Ore Reserves:

No change to the Ore Reserves as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

The DX Sylvinite Ore Reserves are 17.7 Mt at 41.7% KCl, with an equivalent contained MoP of 7.37 Mt with a KCl grade of 98.5%. The estimate of Ore Reserves was completed by Agapito Associates Inc and was prepared in accordance with the JORC Code.

Appendix B contains a summary of information required according to ASX Listing Rule 5.9.1 and Appendix C contains section 4 of the JORC Code Table 1 Checklist of Assessment and Reporting Criteria.

Details of the Ore Reserve Estimate are shown in Table 4 below.

 

Appendix A Table 4: DX Sylvinite Ore Reserves

 

Seam	Classification	Ore Reserves Tonnage (Mt)	KCl (%KCl)	Mg (%Mg)	Insolubles (%Insol.)
TSS	Proved	0	0	0	0
	Probable	9.9	29.8	0.08	0.23
	Total	9.9	29.8	0.08	0.23
HWSS	Proved
	Probable	7.7	57.1	0.02	0.12
	Total	7.7	57.1	0.02	0.12
Total both seams	Proved	0	0	0	0
	Probable	17.7	41.7	0.06	0.19
	Total Ore Reserves	17.7	41.7	0.06	0.19

 

4.    Production Target

The Production Target is intended to provide a view of the expected mining operations including the Ore Reserves, as well as the additional expected Mineral Resources to be mined and processed in addition to the Ore Reserves. The Ore Reserves are unchanged from the original DX PFS announcement.

The methodology used to determine the expected production target was similar to the methods used for the determination of Ore Reserves. Suitable modifying factors were applied to the additional Indicated and Inferred Mineral Resources, reflecting the reduced certainty associated with these classifications of Mineral Resources.

The DX Sylvinite Ore Production Target is 30.6 Mt at 39% KCl, with an equivalent contained MoP of 12.1 Mt with a KCl grade of 98.50%. The estimate of Production Target was completed by Agapito Associates Inc and was prepared in accordance with the JORC Code.

Details of the Production Target are shown in Table 5 below:

 

Appendix A Table 5: DX Sylvinite Production Target

 

Seam	Category	Production Target Tonnage	KCl
		(Mt)	(%KCl)
	Probable Ore Reserves	9.9	29.8
TSS	Indicated Mineral Resource	5.0	28.4
	Inferred Mineral Resource	4.8	28.3
	Total TSS Production Target	19.7	29.0
	Probable Ore Reserves	7.7	57.1
HWSS	Indicated Mineral Resource	1.5	57.4
	Inferred Mineral Resource	1.7	57.7
	Total HWSS Production Target	10.9	57.2
Total both seams	Probable Ore Reserves	17.7	41.7
	Indicated Mineral Resource	6.5	35.1
	Inferred Mineral Resource	6.5	36.0
	Total DX Production Target	30.6	39.0

 

5.    Geotechnical and Hydrogeology:

No change to the geotechnical and hydrogeology as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

The design for the single-well solution mining caverns is based on a radius of 60 m, with cavern centers spaced 144 m apart. This layout results in an aerial extraction ratio of 62.9% with a volumetric extraction of 46.2%.

During the PFS, no specific hydrogeological investigations were carried out.  For the small quantity of well water required for the process plant utilities and camps, the hydrogeological test work for the nearby Kola Definitive Feasibility Study was referenced.  The DX area was covered in the general Kola hydrogeologic model, and the conditions at DX were assumed to be similar to Kola, where 15 m3/h was easily sustainable from a single well.  Specific Hydrogeological investigations in the DX area are planned to be conducted during a Definitive Feasibility Study ("DFS") phase for DX, including a test well to verify availability and quality of well water.

For some mining methods, disturbance to aquifers overlying the deposit may present risk. In the case of solution mining of potash, disturbance of overlying water bearing strata does not present a material risk to the operation. Production caverns and closed caverns contain brine of higher density and pressure than that of the overlying groundwater. There may be a possibility of brine leaking into overlying ground water. Local communities draw water from upper aquifers which are not expected to be impacted by operations at DX.

Zones of subsidence and structures have been avoided in the mine planning to further mitigate risk. If connection is made to the overlying aquifer(s) during operations, leakage can be detected. If the leakage is significant, a submersible pump can be used to lower the pressure in the cavern to control the leakage.

 

6.    Mining:

No change to the Mining as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

The Dougou Extension solution mining method utilises one well per cavern, drilled to a vertical depth of approximately 460 m for areas where HWSS will be mined and approximately 440 m in areas where only mining of TSS is planned. Surface casing will be installed to the top of the salt at about 400 m, then an intermediate casing will be installed to the base of the HWSS and an open hole extended to the total depth of 460 m or 440 m for TSS only caverns.

In the scoping study, dual-well caverns were planned. Single well caverns have been selected for the PFS as this presents a lower initial capital cost approach and the smaller circular caverns are better suited to the varying dip of the DX deposit.

This change also resulted in the following advantages

·    well completion and equipping are easier due to fewer valves and in-connection pipes not being required

·    reduced Mineral Resource loss due to the dip of the potash beds

·    improved extraction ratio, as more circular caverns can be placed tightly along the irregular Mineral Resource boundary

·    improved extraction ratio because of the higher density of caverns (packing factor)

·    operational advantage because the single-well cavern development is 3 months less than for the dual-well caverns

For the single-well caverns, a radius of 60 m was selected. Additional numerical modelling of single-well cavern deformations is planned to be undertaken as part of the Definitive Feasibility Study ("DFS"). Geotechnical studies competed to date indicate that the caverns are expected to be stable, and some yielding of pillars may occur, with no adverse consequences expected as a result.

The solution mining method is divided into four phases: (1) sump development, (2) roof development, (3) continuous mining and (4) cavern closure. Figures 6 and 7 show schematically the HWSS and the TSS in solution mining mode respectively.

 

Appendix A Figure 6 : HWSS solution mining     Appendix A Figure 7 : TSS solution mining

(available at www.korepotash.com)

 

Successful application of the selective dissolution method requires maintenance of adequate permeability through the potash zone during operation. Our experts have advised that a rule of thumb is that a minimum grade of 30% KCl is sufficient to create adequate permeability for the economic selective solution mining process to be sustained. The percentage of KCl in the HWSS is 57.1% which should facilitate selective mining. However, mining of the TSS which also has very high grade KCl, may be more challenging because the halite interbeds will not be dissolved by the NaCl-rich solvent, requiring other techniques to access the overlying high-grade potash beds. The mining method proposed for the TSS is to selectively mine the high-grade beds and induce the low-grade beds to fall to the bottom of the cavern. This technique has been used successfully in similar application in other potash solution mines.

In the determination of Ore Reserves, the TSS tonnage was modified downwards by 15% to provide for potential risk associated with the extraction of the TSS. Production scheduling prioritises HWSS extraction first to further mitigate potential risks associated with TSS extraction. In the first 7 years of operation, 78.1% of KCl production will be from the HWSS and 21.9% will come from the TSS. Prior to mining the TSS, pilot testing and evaluation of alternate ways to maximise recovery in the TSS are planned to be undertaken. 

The estimated MoP production from each seam is shown in Table 6  Some production boreholes are planned to intersect both the HWSS and TSS where caverns are planned in both seams and other production boreholes are planned to only intersect one of the sylvinite seams and in those holes, caverns are only planned in the relevant seam.

 

Appendix Table 6:  Breakdown of MoP produced from each source for Probable Ore Reserves

Source	Number of Caverns	Average MoP produced per Cavern (tonnes)	MoP produced (tonnes)
HWSS + TSS	97	45,197	4,384,151
HWSS (only)	51	27,702	1,412,821
TSS (only)	90	17,505	1,575,491
All Caverns	238	30,977	7,372,463

 

The mine scheduling and processing of the Probable Ore Reserves for the Dougou Extension results in an equivalent contained MoP of 7.37 Mt with a KCl grade of 98.5%.

The cavern production estimate includes the following steps:

·    gridding potash grade, bed thickness and bed elevation over the Indicated Mineral Resource areas based on known drill hole data and

·    estimating recoverable KCl tonnages for each planned cavern.

Drill hole data was used to calculate recoverable tonnes for each planned cavern.

KCl tonnage within the cavern boundary depends on the cavern dimension, potash bed thickness and grade distribution within the cavern footprint. Potash beds within the Indicated Mineral Resource areas are generally flat lying, but local dips exist which can result in either dilution or loss of resource as the solution mining method leaches and recovers soluble material in horizontal slices.

A model has been developed by AAI and employed to calculate the production and brine history for each cavern. The program is based on the mass balance and simulates the entire cavern life from sump development to the end of selective mining using a time-differential method. The program output includes KCl, NaCl and magnesium chloride (MgCl₂) production rates and concentrations. KCl production is the total dissolved KCl minus the KCl left in the cavern.

The cavern layout within the mine plan boundary is shown in Figure 8.

The mine layout shown in Figure 8 below is the basis for the DX production plan given in Table 6

 

Appendix A Figure 8 : Cavern layout for the DX Life of Mine for Probable Ore Reserves

(available at www.korepotash.com)

 

7.    Life of Mine Production Schedule:

The Updated Production Target extends the project life from 18.4 years to 30 years at a production rate of 400,000 ktpa MOP based on Probable Ore Reserves, Indicated Mineral Resources and a portion of Inferred Mineral Resources (the "Production Target"). The scheduled extraction includes 34.5% of the Inferred Mineral Resources which contributes 20% of the life of project MoP productionThe life of mine production schedule is shown in Figure 9.

 

Appendix A Figure 9: Life-of-Mine Production Summary of the DX Mine - Production Target

(available at www.korepotash.com)

 

Solution mining caverns have been laid out to schedule production from the Indicated Mineral Resources outside the Ore Reserves and are shown in Figure 10. There is no change to the layout of caverns for the Ore Reserve, as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020. At present no caverns have been laid out for production relating to Inferred Resources.

 

Appendix A Figure 10: Mine Plan on Indicated Mineral Resource areas

outside of PFS Mine Plan Boundaries

(available at www.korepotash.com)

 

8.    Metallurgy and Process

 

No change to the Metallurgy and Process as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

Plant and Flowsheet: The process plant will be located east of the Dougou Extension mine plan area, (Figure 11) with a buffer distance of 500m away from the Mineral Resources boundary. The process plant building is 30m wide x 145m long, and 32m high and can be seen in Figure 12. The process plant building will house all processing equipment, along with associated electrical and instrumentation. The building will have no exterior walls, and a simple roof will be installed to keep rain off the personnel and equipment.

 

Appendix A Figure 9: Process Plant Location

(available at www.korepotash.com)

 

Appendix A Figure 10: Process plant 3D schematic

(available at www.korepotash.com)

 

Other site buildings include:

·    52m x 45m Utilities Building

·    18m x 10m Operation Center

·    44m x 40m Warehouse (fabric building)

·    44m x 40m covered Maintenance area

·    30m x 20m Administration Building

 

The long, narrow plant design makes it possible to position the mechanical equipment more densely than usual plant designs. Maintenance access is convenient from both sides of the building, so no service aisles will be included in the building interior. All removal of equipment will be through the open walls of the building. Elevated grated floors will be constructed for personnel access to all equipment, and several maintenance access lanes will be created for removal of some large components.

The potash production process shown in Figure 13 below consists of the following industry standard process steps and the expected plant recovery is 98.5% for this process:

 

o  Injection and solution recovery: Return brine from processing will be heated to 100°C and pumped to the wellfield for re-injection into the mine caverns for dissolution and recovery of potassium chloride (KCl) from the underground Sylvinite deposit containing both potassium chloride (KCl) and sodium chloride (NaCl) minerals. The KCl mineral will be selectively dissolved from the ore due to the almost saturated NaCl and under saturated KCl in the return brine.

o  Cooling and crystallisation: From the crystalliser feed tank, the brine will be pumped to the vacuum crystalliser for pre-cooling to approximately 28°C and then pumped to the surface crystallisers. In the four-stage surface cooled crystallisers, the mother liquor will be cooled to an end point of 2°C resulting in KCl solids precipitation. Spent brine from the 4th stage crystalliser will be pumped to the concentrate tank for return to the wellfield.

o  KCl de-brining: Slurry containing KCl solids from the surface crystallisers will be pumped to the centrifuge, where brine will be removed.  KCl product exiting the centrifuges will contain less than 5% moisture (by weight). 

o  KCl drying: A rotary drum dryer will be used to further reduce the residual moisture in the potash product to 0.2% (by weight) or less.  Combustion air will be heated to 800°C and mixed with incoming feed material. Heat will be provided by burning natural gas. The exit temperature for dried solids is expected to be 146°C.

o  Compaction: Two compaction circuits will operate in parallel to properly size the product. Each circuit will be comprised of a compactor, flake breaker, hammer mill, sizing screen and associated conveyance system. The sizing screen oversize streams will jointly feed another hammer mill and the crushed product will be returned to the main elevator feeding the compactors. The sizing screens fine fraction will be re-introduced back to the compactor. The screen middling fraction will constitute the final product, which will have a PSD typical for granular potash product. 

o  Product Glazing:  The glazing process will harden the particle surfaces and smoothen sharp particle edges to avoid product degradation during transportation.  The glazing process will consist of spraying a small volume of water over the compaction circuit hot product allowing the KCl crystal surface to slightly dissolve in a conditioning drum. The moist material will enter a fluidized bed dryer/cooler where hot air will be used to evaporate excess water in the first section of the unit. In the second section, ambient air will be blown to cool the product prior to shipping.

o  Product Load Out: Granular MoP product from the Glazing circuit will be treated with anti-caking and de-dusting reagents and discharged into a 150t storage bin. 40 tonne multi-axle trailers will continuously transport finished MoP product from the Processing Plant to the Marine Facility located at Pointe Noire. One trailer will be loaded approximately every 45 minutes.

 

Appendix A Figure 11 : Potash production schematic

(available at www.korepotash.com)

 

Although no specific crystallisation testing has been carried out to verify the expected process plant production capacity for the Dougou Extension resource, Kore believes it has a reasonable basis for a production target of 400,000 tpa to be achieved with this method for the following reasons:

 

o  During the PFS, a potash process technology specialist, Whiting Equipment Canada, provided the Swenson process design, equipment list and estimated equipment costs relating to the crystallisation process. The same Swenson process technology is successfully used at other global potash operations over a large range of plant capacities.

o  The proposed methods are commonly used in potash solution mining operations, including large scale production facilities.  Although these methods can be more energy-intensive than the conventional flotation methods commonly used in conjunction with conventional underground mining, they are known to typically yield higher KCl process recovery and higher product KCl grade.

o  Kore conducted dissolution tests on samples of the DX core and the resulting data was used to inform the estimation of brine grades and chemistry feeding into the processing plant

 

It is possible that pockets of carnallite may be encountered during mining that could introduce magnesium chloride (MgCl2) into the brine. The risk of this occurring, including its effect on KCl recovery, has been considered in the PFS. Magnesium (Mg) content in brine can be controlled operationally by bleeding out brine from the process stream without material impact on plant performance.

 

9.    Marine Facilities

No change to the Marine facilities as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

Trade-off studies into the marine loading options were undertaken during the PFS considering initial capital cost, operating cost, road hauling costs and risk.

The PFS design is for export of MoP from an existing marine berth within the Pointe Noire port, already accessible by ship, where only the construction of a storage building and movable conveyor/ship loading equipment would be required.  The MoP produced at DX will be trucked to the planned storage facility at the Pointe Noire port.

Preliminary negotiations around this option have resulted in a proposal from the owner of the site, an established logistical company based in Pointe Noire.  Under the potential agreement, they will construct a suitably designed and sized product storage building for the MoP and will provide all ship loading activities.  In this arrangement, Kore will not be required to contribute capital and will pay fees for use of the space, the use of facilities, and activities required for ship loading.

 

10.  Land based transport

No change to the Land based transport as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

Trade-off studies into road haulage of DX MoP to port were undertaken during the PFS considering initial capital cost, operating cost and risk.

The PFS assumed contracting land transport of MoP to a local transport provider.  Quotations from various third-party sources were obtained to transport the MoP from the process plant site to the planned marine facility at the Pointe Noire port.  The PFS assumes the use of trucks with 40 tonne trailers.

The DX Project will require the regular use of existing highway RN5 for transport during construction and operations.  RN5 includes 25 km of unpaved sand road between Madingo-Kayes and the process plant.  Although the sand portion of the road is currently used for logging transport, some upgrades are expected to be required to support the construction and operating traffic for DX.

The PFS capital cost includes an allowance for road upgrades on the unpaved portion of highway RN5, shown in Figure 14.  Recent quotations for similar road upgrades in Congo were used to support the cost allowance for this work.

The current load limit for RN5 is 30 tonnes per load, and Kore Potash and the Minister of Mines are in discussions toward a concession to allow 40 tonne loads (or higher if required) for both construction and operations.

 

 

Appendix A Figure 12 : Proposed RN5 Upgrades

(available at www.korepotash.com)

 

11.  Water Supply and Brine Disposal

No change to the Water Supply and Brine Disposal as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

 

The DX scoping study assumed multiple water bores into local aquifers would supply water for the process operation and mine development.  The scoping study also assumed that disposal of waste brine would be by deep well disposal into a deep-seated aquifer.

Further evaluation of peak water requirement during sump and cavern development during the PFS determined that water bores would be suitable only for supplying the utility water requirements in the process plant, and that a source of sea water would be required to meet the peak water demand during cavern development.

The PFS includes provision for a permanent sea water intake, pumping station, and water supply pipeline to the production wellfield.  Waste brine is planned to be placed in the sea via a pipeline.

Dedicated pipelines will be used to transport raw water to the process plant area and return waste brine to the sea. The proposed route of the pipelines is shown below. Potential impacts of brine discharge to the ocean was assessed and approved in the Kola Project ESIA. This assessment demonstrated that the impact of the planned discharge will meet or exceed internationally accepted standards for brine disposal at sea. 

The proposed location of the ocean water pumping station location is approximately 13.8 km from the DX processing plant, and approximately 500 m from the coastline. The pipeline is designed to be buried below surface however trestles may be required to support the pipe in areas of rough terrain. Figure 15 shows the selected pipeline route.

 

Appendix A Figure 13 : Proposed route for brine discharge and sea water supply pipelines

(available at www.korepotash.com)

 

12.  Bulk Infrastructure

No change to the Bulk Infrastructure as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

a.    Natural Gas Supply

The overall natural gas requirement for the PFS dropped to 1.30M GJ/year from the scoping study requirement of 1.95M GJ/year. This reduction was due to an increase in the expected brine KCl concentration from the mine, resulting in a significant reduction in required brine flow through the process plant.  The PFS is based on the supply of compressed natural gas via transport trucks, requiring a compression station near the supply point, and a decompression station at the process plant.  This method is known as a Natural Gas Virtual Pipeline (NGVP), and there are numerous examples of this system in operation in areas without natural gas pipeline infrastructure.

This solution was investigated in detail by Change Energy Services, a specialist consultant with design and operation experience with NGVP facilities. The report from Change Energy Services made a recommendation on design, as well as an estimate of capital and operational costs for the compressor station, the decompression station, the purchase of the compressed gas transport trailers and the operations and maintenance.  The PFS assumes that Kore Potash will contract out the NGVP trucking operations.  Figure 16 below shows the proposed route for natural gas transport, a distance of 115 km.

The RoC has not developed regulations covering the transport of compressed natural gas yet. Kore plans to work proactively with the Regulator to develop a set of regulations, in line with international best practices, to facilitate Kore's planned use of compressed natural gas.

 

Appendix A Figure 14 : Proposed Natural Gas Transport Route

(available at www.korepotash.com)

 

b.    Power Supply

The PFS assumes construction of power lines and purchase of electrical power from local generators and distributor of electrical energy. Sufficient surplus gas turbine generated electrical energy is already available close to Pointe Noire, and the power station operator, CEC, is in the process of installing additional generating capacity.

The overall power requirement for the DX Project has reduced to 12.7 MW from the scoping study assumption of 13.5 MW.  This reduction was due to an increase in the expected brine KCl concentration from the mine, resulting in a significant reduction in required brine flow through the mine and process plant.  

The scoping study assumed a similar route to that used for the Kola DFS where power was supplied from the MKII sub-station. During the PFS, Kore Potash was advised by CEC that a better location to tie in power would be at the electrical sub-station at M'Boundi.

The PFS includes construction of an overhead high-voltage power transmission line from M'Boundi to the DX process plant site, a distance of 85 km. The capital cost for the overhead power line was estimated for the proposed route as shown below in Figure 17. The cost structure for electricity was obtained from CEC, the local operator of the gas turbine power station and additional operating costs for transmission of electrical power were obtained from E²C the local electrical transmission company.

 

Appendix A Figure 15 : Overhead power line route

(available at www.korepotash.com)

 

13.  Environmental and Social Impact Assessment (ESIA)

No change to the Environmental and Social Impact Assessment as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 and in the "Government approval to drill at DX Project" on 14 October 2020 have occurred.

The existing ESIA for Dougou Licence area was approved in 2017 and a Certificate of environmental compliance was granted in July 2018 by the Ministry of Tourism and Environment for a 1 year period, which was recently extended to 25 year validity. The Company believes that a revised ESIA incorporating the DX Project requirements for the sylvinite process plant and solution mine wellfield will be required. The ESIA revision is planned to be undertaken concurrently with a DFS for DX.

The revised ESIA will utilise existing baseline information from both the Dougou ESIA and the Kola ESIA completed in 2018. The existing baseline information on the DX area is believed to be adequate for the revised ESIA to be prepared and submitted for approval within 12 months.

A Decree D'Utilité Publique (DUP) and a Resettlement Action Plan (RAP) will be required to be developed for Longo-Bondi and possibly Youngou villages and surrounding land affected by project land-take. The DUP is the Government-mandated and led process that identifies affected parties, establishes their access and ownership rights and values their properties.  The DUP then establishes the quantum to be paid in compensation for loss of access to the affected land parcels. On completion of the DUP process, the government issues a decree transferring the affected land to the company.  The RAP is a re-settlement plan based on the International Finance Corporation Performance Standards that ensures that disruption to the livelihoods of affected communities is minimised and that affected parties are assisted to be in an equivalent state of productivity to what they were prior to the land acquisition.  While the DUP compensates for loss of crops and structures, the RAP provides additional support as required by good international industry practice (such as transport, access to markets, agricultural extension services).  Both procedures were followed on the Kola Project and are well known to the Kore team. It is unlikely that physical resettlement of any people from these villages will be required.

The Dougou mining exploitation Licence for potash on a surface area of 451 km2 in the Kouilou district was approved on 9th May 2017 and is valid for 25 years, with an option to extend it by 15 years at that point.  The DX Project lies within the Dougou mining exploitation license.

 

14.  Potash Marketing

No change to Potash Marketing as published in the "Dougou Extension (DX) Pre-feasibility Study" 13^th May 2020 have occurred.

MoP produced from the DX Project is planned to be marketed predominantly into select African markets. Any excess product will be sold into the large Brazilian market or other South American markets. The key targeted destination countries and their current demand for MoP are set out below. Based on discussions with Argus Media and WABCO, the granular MoP demand in each of these markets is approximately 60% of total MoP demand. Table 7 shows the current consumption for Africa.

Appendix A Table 7: African MoP Consumption

Region	Total 2019 Consumption (tMoP)	Estimated Granular1 (tMoP)
Morocco	347,000	242,900
South Africa	350,000	245,000
Nigeria2	116,000	81,200
Other West Africa3	171,000	119,700
Other North Africa	201,000	140,700
East Africa	116,000	81,200
Other Africa	8,000	5,600
Total Africa	1,309,000	916,300

Source: Argus Media (Jan 2020)

 

Notes to Table 7:

1      Based on an assumed 70% (granular) / 30% (standard) split per discussions with Argus Media

2      Following Nigeria's regulation banning import of blended product, WABCO estimates that the granular consumption is expected to be approximately 400,000 tpa

3      Additional market information obtained from WABCO indicates that Other West African markets could be as high as 310,000 tpa based on Ghana, Burkina Faso, Mali and Ivory Coast

 

The PFS price forecast is based on the weighted average of leading potash market consultant Argus Media's granular MoP CFR price forecast (in real 2019 terms) for South Africa, Nigeria and Morocco from 2020 to 2033 The weightings applied are based on total imported MoP volumes for each of these markets. The price assumption is based on a real price profile which steadily declines from 2022 to a low in 2027 and then steadily rises to a maximum of $474/t MoP in 2033 with a flat real profile from 2033 until the end of mine life. The price forecast graph used is shown in Figure 18 below.

 

Appendix A Figure 16 : African Price forecast

(available at www.korepotash.com)

 

Notes to Figure 18: Argus Media Ltd is the source of the confidential proprietary data which Kore Potash has aggregated and republished above. Kore Potash obtains data from Argus under licence. Argus makes no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of its data or Kore Potash's presentation of that data, or its fitness for any particular purpose. Argus shall not be liable for any loss or damage arising from any party's reliance on Argus' data, and disclaims any and all liability related to or arising out of use of the data to the full extent permissible by law.

 

A key point to note with regards to pricing is the forecast potash price remains beneath the scoping study assumption of US$360/t MoP for the first 6 years of production, at an average price of $US 344/t MoP, until 2029. With the remaining life of mine for the project price, at average of US$ 456/t MoP, only rising above the scoping study assumption of a flat US$ 360/t MoP. The overall impact of this pricing assumption adds 1% to the IRR of the DX Project when compared to the scoping study pricing assumption.

 

15.  Capital and Operating Costs

No change to the Capital and Operating Costs as published in the "Dougou Extension (DX) Pre-feasibility Study" 13^th May 2020 have occurred.

 

The PFS Capital Cost estimate qualifies as an AACE Class IV capital cost estimate, having an approximate accuracy of +/- 25%.  The estimate captures all project costs from various contributors as follows:

Design and estimation of direct costs for Solution Mining & Drilling was performed by Innovare Technologies (Innovare), based on Turnkey quotations from drilling suppliers.  Engcomp provided the design and Estimate for the electrical infrastructure in the wellfield.

Design and estimation of direct costs for the Process Plant was completed by Engcomp with support from Innovare. Equipment vendors were issued procurement packages and budgetary quotations were obtained.

Design and estimation of direct costs for off-site infrastructure was performed by Kore and its third-party service providers.

Indirect and contingency costs were estimated by Engcomp, with Kore providing inputs related to construction execution strategies.  Engcomp consolidated the overall estimate, and the summary of the capital cost estimate (CAPEX) is shown in Table 8.

 

Appendix A Table 8: Capital Cost estimate (real Q4 2019)

Description	Initial Capex
	(kUSD)
Solution mining and wellfield	33,645
Process Plant	93,657
Offsite infrastructure	12,719
Sub-total Direct Costs	140,021
Field Construction Indirect	24,987
Other Indirect Costs	28,141
Owner's Costs	15,827
Engineering and project management	22,656
Sub-total Direct + Indirect Costs	231,632
Contingency	50,060
Escalation	4,210
Total Capital Costs	285,902

 

 

The pre-production capital cost of US$286 million equates to a pre-production capital intensity of US$715/t MoP annual capacity. This is very competitive in relation to MoP industry peers.

Sustaining capital costs total US$403 million over the 30 years life of mine and mostly relate to ongoing drilling, piping relocation and cavern development.  Deferred capital costs total US$0.3 million in the first year of operation.  Reclamation costs total US$21 million after operations are complete.

The sustaining capital, deferred capital and reclamation costs are summarized in Table 9.

 

Sustaining capital cost/tonne have been adjusted for production from the Indicated and Inferred Mineral Resource, since mining costs will change according to the expected grade and thickness. 

Overall average sustaining capital has increased from $33.54/t for the Ore Reserves to $36.16/t for Production Target.

 

Appendix A Table 9: Summary of Sustaining, Deferred and Reclamation costs

Description	Category	kUSD LOM	US$/t MoP
Sustaining Capital	Debottlenecking	2.0	0.27
Sustaining Capital	Mining	403	33.31
Sustaining Capital	Fixed Equipment	4.1	0.34
Sustaining Capital	Process equipment	28.4	2.35
Subtotal: Sustaining Capital		437.54	36.16
Deferred Capital	ALL	0.3	0.02
Reclamation Costs	All	21.1	1.74
Total Costs		458.94	37.93

 

Operating Cost

The PFS confirms that the Operating Cost of the DX Project is highly competitive for supply into the African and South American markets. The mine gate operating cost is estimated at US$65.26/t MoP and the export (FOB) cost is estimated at US$86.61/t MoP, excluding royalty and sustaining capital.

The Operating Costs are expressed in US dollars on a real Q4 2019 basis and are based on average annual production of 400,000 tpa of MoP over the life of mine. All costs have been prepared on an owner operated basis and are shown in Table 10.

Electricity represents 64% of annual utility costs, while natural gas represents 36%.

 

Appendix A Table 10: Summary of Operating Costs

Cost Category (real Q4 2019)		Total unit Cost
		(US$/t)
Labour		9.02
Utilities		27.74
Operations & Consumables		5.59
Maintenance		6.10
General and Admin		2.87
Offsite		13.94
Mine Gate Cost		65.26
Ground MoP Transport		13.57
Export Facility		7.78
FOB		86.61
Marine Transport		28.00
Total Operating cost (CFR Africa)1		114.61

 

Note to Table 10: Excludes Royalty and Sustaining Capex 

 

16.  Economic Evaluation

 

a.    Summary Economics

The republic of the Congo Government's 10% free carried equity interest is deducted from Post Tax Free Cash Flow to derive the Net Project Cash Flow (on a 90% attributable basis), which is used to calculate the attributable NPV and IRR of the DX Project.

The Updated PFS economic evaluation delivers a real post-tax, ungeared IRR of 23.4% and NPV_10(real) of US$412M on attributable basis. The evaluation is based on Argus International's forecast granular MoP price for DX's target markets which results in an average life-of-mine granular MoP price of US$422/t MoP CFR Africa (real 2019).

Table 11 summarises the financial outcomes.

 

Appendix A Table 11: Summary of Updated PFS Financials

Financials	Units	Amount
Total revenue	US$M	5 358
Average annual revenue	US$M	181
Average annual EBITDA	US$M	129
EBITDA margin	%	71.0%
Average post-construction, post tax annual free cash flow	US$M	94
Free cashflow margin	%	51.8%
Total post tax free cash flow1	US$M	2 722
Attributable2 post tax, un-geared NPV (10% real)	US$M	412
Attributable2 post tax, un-geared IRR	%	23.4%
Payback period from date of first production	years	4.28
Scheduled LOM	years	30
Average forecast MOP granular price	US$/t MoP	114.70

Notes to Table 11

1.     Free cash flow defined as EBITDA minus tax, minus capex

2.     Attributable to Kore's interest (i.e. 90% basis)

The key assumptions underpinning the economic evaluation are as follows:

·    30 year initial project life from first production;

·    Approximately 400,000 tpa average production of MoP;

·    Granular MoP represents 100% of total MoP production and sales;

·    All cashflows are on a real Q4 2019 basis;

·    NPVs are ungeared and calculated after-tax applying a real discount rate of 10% (based on a review of 7 recent potash projects, 4 of which were in Africa).

 

Fiscal regime assumptions aligned with the recently finalised Mining Convention:

·    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);

·    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);

·    Exemption from withholding taxes during the term of the Mining Convention;

·    Exemption from VAT and import duty during construction; and

·    Government receives a 10% free carried equity interest in the DX Project company until the initial construction phase is completed.

 

The forecast net attributable project cash flow for 30 years of production is illustrated in Figure 19.

 

Appendix A Figure 19: DX Project Cash Flow Forecast (real Q4 2019)

(available at www.korepotash.com)

 

b.    Sensitivity Analysis

The Updated PFS economic evaluation demonstrates that the DX Project economics are most sensitive to potash price and to project capital costs.

Sensitivity of the NPV to key input assumptions, on a -20%/+20% range is illustrated in Figure 20.

 

Appendix A Figure 20: NPV₁₀ Sensitivity to key inputs

(available at www.korepotash.com)

 

c.     Price Sensitivity

Table 12 below shows the sensitivity of the DX Project Updated PFS NPV₍₁₀₎ to Potash Price.

 

Appendix A Table 12: Sensitivity to potash price

 

Granular MoP  (US$/t CFR Brazil)	NPV(10) (US$ million)
247.67 (flat real)2	25
310 (flat real)	167
360 (flat real)	302
Argus Media Price Forecast1	412
400 (flat real)	410
450 (flat real)	544

Notes to Table 12:

1.     The Argus Media price assumption is based on a real price profile which steadily declines from 2022 to a low in 2027 and then steadily rises to a maximum of $474/t MoP in 2033 with a flat real profile from 2033 until the end of mine life.

2.     Flat real pricing assuming a fixed price from start to end of production has been applied in other sensitivity calculations.

 

17.  Differences between Original PFS and the Updated PFS

The key differences between the Original DX PFS published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 and this Updated PFS which is inclusive of the Production Target as detailed in this announcement are highlighted in Table 13.

 

Appendix Table 13: Summary of changes between PFS dated 13^th May 2020 and Updated PFS

Financial Drivers	Original PFS 13Th May 2020	Updated PFS
Life of Project	18.4 years	30 years
MoP Produced over life	7.372 Mt	12.1 Mt
NPV10	US$319 million	US$412 million
IRR	22.9%	23.4%

 

18.  Project Ownership and transfer of 10% to the RoC Government 

No change to the project ownership as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

The DX Project lies within the Dougou mining licence area. The Dougou Mining Licence will be held by Dougou Potash Mining SA, a 100% owned subsidiary of SPSA. In turn, SPSA is owned by the Kore Group (97%) and a RoC entity (Les Etablissements Congolais MGM) (3%).  An existing Share Purchase Agreement enables Kore to purchase the remaining 3% of the shares in SPSA, with Kore shares to form the consideration. 

 

In accordance with the Mining Convention, the RoC Government will be transferred 10% of the shares in Dougou Potash Mining SA.

 

An existing contract with the current 3% shareholder of SPSA, provides for Kore to become the 100% owner of SPSA in advance of transferring the 10% interest in DX Potash Mining S.A. to the RoC Government.

 

19.  Risks and Opportunities

 

The scoping of the DFS Phase 1 work program has been structured to address both the risks and opportunities. Specific risks identified for focus during the DX DFS Phase 1 are:

·    TSS brine grade variability: If lower brine grade concentrations are achieved than determined in the PFS, higher flow rates may be required to achieve production capacity, or there may be reduced MoP production. This risk has been mitigated in the PFS via commencement of mining in the TSS being delayed until Year 4.  Moreover, only 21% of the initial 7 years of scheduled MoP production is drawn from the TSS. Further drilling in the DFS Phase 1 will be focussed on achieving a Measured Mineral Resource in the initial mining period which will further assist in reducing this risk.

 

Key opportunities identified for the DX Project which will be further addressed in DX DFS Phase 1 are:

·    Project Life: Multiple potential opportunities exist to extend the DX Project life. Some of these areas have been addressed in this report while others will be addressed during the DFS Phase 1:

o  The PFS only schedules 22% of Indicated Mineral Resources for extraction in the scheduled life of 18 years, has been addressed through the compilation of a Production Target inclusive of the Indicated Mineral Resource not included in the Ore Reserves.

o  The Inferred Mineral Resources at DX are 66 Mt at 40.4% KCl. No Inferred Mineral Resources are scheduled within the PFS, has been addressed through the compilation of a Production Target, where production from Inferred Resources is added, but totals no more than 20% of LOM production.

o  No secondary potash recovery modes have been scheduled following initial cavern operation and prior to ultimate cavern closure. These secondary recovery modes are a normal approach within the potash solution mining industry. These methods will be further addressed in the DFS Phase 1 work program

 

20.  Permit progress

 

No change to the Permit Progress as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

The majority of permits and agreements required to facilitate commencement of construction and operations of the DX Project are in place. An amendment to the ESIA for the Dougou mining exploitation licence is required and will be applied for during the execution of the DFS.

 

·    The Dougou Mining Licence was granted on 9^th May 2017 for a period of 25 years.

·    The ESIA for the Dougou Mining Licence was approved for 25 years on 31 March 2020

·    The Mining Convention was gazetted into law on 7 December 2018 and is renewable after for 25 years

 

21.  Project Funding

 

Reasonable Basis for Funding Assumption

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

 

There are several grounds on which this reasonable basis is held:

·    Kore Potash has two large strategic shareholders:

o  OIA (c.23.29%): the sovereign wealth fund of Oman, which holds a range of natural resource investments, including on the African continent.

o  SQM (c.20.20%): a large Chilean public company listed on NYSE (USA) that is an integrated producer and distributor of specialty plant nutrients, including having an established business in the global potash market; and 

These two groups initially invested a total of c.US$40 million into Kore Potash in late 2016. They have subsequently invested further in the Company including recent fundraise in August 2020 to continue developing the DX Project. They collectively bring a considerable and highly relevant combination of substantial financial capacity, specific potash experience, Latin American, Middle Eastern and African operating experience, and financing expertise.

·    Kore has ongoing dialogue with a number of interested financial institutions including commercial banks, Development Finance Institutions (DFI) and private equity funds:

·    The Company's modelling indicates the DX Project has a debt carrying capacity of c.50% of the capital cost. Kore's management team has identified a pool of interested commercial banks with capability and indicated interest to provide debt financing for the DX Project.

·    Kore's structure facilitates financing options for DX via the parent Company Kore Potash PLC, or through joint venture at the DX Project level.

·    Kore's management continues advanced discussions with multiple international trading groups with expressed interest in procuring the DX MoP production.

·    DX PFS has been completed by a team of world-class solution mining experts in Innovare Technologies and Agapito. The study meets the expected level of detail required for a PFS.

·    The technical and financial parameters detailed in the DX Project PFS are robust and economically attractive. Further opportunities to de-risk and improve the investment case are planned in the DFS phase of the DX Project.

·    Financing for the construction of the DX Project would be required in the future after completion of the DFS.

·    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 and around the world. 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.

 

22.  Execution Strategy

No change to the Execution Strategy as published in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020 have occurred.

Kore Potash currently foresees debt forming part of the financing mix. It expects lenders will require execution of the DX Project via EPC contracts and is planning on this basis. 

Preliminary discussions with potential EPC partners indicate significant interest for construction of all project components.  Drilling of production holes forms material part of the initial capital spend on the DX Project. Opportunity may exist to complete drilling of these holes via non-EPC models and Kore will investigate these options further in consultation with potential lenders during the DFS phase.

The storage facilities and the ship loading conveyor facilities are planned to be constructed as part of a Build-Own-Operate (BOO) contract financed by the BOO service provider.   

Kore will have control over BOO infrastructure designs to ensure they will meet operational requirements.

Table 14 shows a list of the anticipated major construction contracts.

 

Appendix A Table 14:  Major Construction Contracts

 

#	Contract Title	Type
C1	Drilling	EPC/Target Price
C2	Pipelines (Wellfield, Water, Disposal)	EPC
C3	Process Plant	EPC
C4	Power Supply	EPC
C5	Product Transport & Storage	Build-Own-Operate

 

During construction, Kore will have a Project Management team operating from the DX Project construction site, with support from the Kore office in Pointe Noire.

Camp accommodation will be provided for up to 250 people during construction, with any excess temporary requirements handled in the surrounding communities.  Camp capacity will be reduced to approximately 100 during operations. 

The DX Project construction effort is expected to create significant employment opportunities for people in the surrounding communities, including Pointe Noire.  EPC contractors will draw from the local labour force where available and will also subcontract to local contractors.  Kore expects most construction skills to be available in-country.

 

Project Execution Schedule

After a final investment decision is made, year 1 of construction will be focused on drilling and construction of the wellheads, wellfield piping, instrumentation and controls and wellfield pump station. In tandem, water supply and disposal pipelines will be constructed to the coastal pump station.  Brine outfall and water intake structures will be installed in the ocean.  Permanent power will be established with an overhead power line from a connection point near M'Boundi. Temporary electrical power generators will be installed for construction activities and replaced with permanent power as early as possible in the construction schedule.

During year 2 of construction, the process plant construction, natural gas infrastructure, site buildings and all other aspects of construction will be completed.  Development of caverns will be performed during year 2 of construction and caverns are scheduled to be ready for mining at the end of construction.

The process plant is expected to start up after a 21-month construction period. Figure 21 shows an indicative schedule.

 

Appendix A Figure 21: Indicative Execution Schedule

(available at www.korepotash.com)

 

Commissioning and Handover

As the final phase of construction, project commissioning will be executed over a three-month period before startup.  A standard five-phase project commissioning process will be followed, including:

·    Phase 1 - Construction and mechanical completion;

·    Phase 2 - Cold commissioning or pre-operational testing;

·    Phase 3 - Wet commissioning or operational testing;

·    Phase 4 - Product commissioning and

·    Phase 5 - Completion certificate (Handover from project to operations).

Operations

During commissioning and first potash production the operational workforce will be onsite working in parallel with the commissioning team.  The project capital cost includes provision for commissioning through to process plant handover.

The operational headcount totals 85.  A summary of headcount by organisational area is shown in Table 15.

Appendix A Table 15:  Summary of Operational Headcount

 

Function	Headcount
Operations	34
Maintenance	17
Health, Safety and Environment	10
General & Administration	24
Total	85

 

 

Employees will be located in both Pointe Noire and at the DX Project site.  Some site employees will be on continuous shift work and will work an average of 56 hours/week.  All other employees will be on dayshift at 40 hours/week.

 

 

Appendix B

Summary of Information required for ASX

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

 

DX Project Ore Reserves and related production target and 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 and in Appendix C below, the Company provides the following summary information. The assessment of the modifying factors to prepare the Ore Reserves Statement occurred as the PFS was being finalised, with the production target and forecast financial information based on the information contained in the finalised PFS described in this report. Differences between the material assumptions for the Ore Reserve Statement and the production target and financial forecast (referred to below) are attributable to improvements in the material assumptions while finalising the PFS.

 

Summary of Material Assumptions - Ore Reserves

The material assumptions related to the Ore Reserves have not changed from these reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020". These material assumptions relating to the Ore Reserve Statement, for the DX Project are summarised below:

·    Production life (Appendix A p12-13 Appendix C, p22)- LoM of the Ore Reserves 18.4 years at nominal 400,000 tpa MoP production, this was determined during the execution of the PFS and from an aligned production schedule for both mining and processing.

·    Product Type (Appendix A, p15, Appendix C p2) - process design was based on one MoP product type- white granular. The marketed MoP will comprise at least 95% KCl, with a maximum of 0.2% Mg and 0.3% Insolubles.

·    Product pricing (Appendix A p22, Appendix C, p22) - MoP prices were based on forecasts from Argus Media specifically for select African markets. The Base Case sales price is forecast to decrease to a low in 2027 and then increase to a maximum of $474/t MoP in 2033. Post 2033 the price has been assumed to remain flat at $474/t MoP. The average CFR sales price over the LoM is forecast at US$422/t MoP.

·    Operating cost (Appendix A, p24 and Appendix C, p22) - ex-mine LoM average operating cost of US$65.26/t MoP, real and FOB LoM average operating cost of US$86.61/t MoP was calculated from first principles in the PFS

·    Shipping costs (Appendix C, p22) - LoM Shipping costs of US$28/t MoP were based on information and estimates from 3^rd party expert and reflects ocean going vessels with capacity in the range of the 10000-15000t DWT.

·    Project durations - A project capital period 21 months was estimated in the PFS and the deferred capital period defined 6 months, with sustaining capital estimated in the PFS as 216 months

·    Project Capital (Appendix A p22, Appendix C, p21) - A total nominal Project Capital of US$ 286 million was estimated in the PFS

·    Fiscal parameters (Appendix a, p25, Appendix C, p23) - The signed mining convention determined the relevant fiscal parameters as summarised below:

·    Company tax rate (15%),

·    Tax holidays (5 years at 0% + 5 years at 7.5%)

·    Royalties (3%) (Mining Convention)

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

·    Other minor duties and taxes (Mining Convention)

 

 

Summary of Material Assumptions - production target and forecast financial information

The material assumptions relating to the production target and forecast financial information for the DX Project which vary from the assumptions relating to the Ore Reserve Statement described above are summarised below:

 

·    Production life (Appendix A p12-13 Appendix C, p22) - LoM of 30 years at nominal 400,000 tpa MoP production, this was determined following the receipt of the PFS.

·    Product pricing (Appendix A p22, Appendix C, p22) - Average MoP price of US$422/t MoP CFR Africa (real 2019) for granular product (based on recent potash price movements, current market prices, a review of recent releases by Potash producers and potash development companies and potash market research from Argus Media).

 

The Mineral Resource Estimation

The Mineral Resource Estimate was reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and has not changed. It was reported in accordance with the JORC Code, pursuant to Listing Rules 5.6, 5.22 and 5.24. A full description of the methodology is provided in Appendix C.

 

The Mineral Resource Estimate used an interpretation based on drill-hole data and 2D seismic data to create 3D 'wireframes' for the sylvinite seams. The wireframes were then 'filled' with a block model, with individual block dimensions of 50 by 50 metres and variable height. The drill-hole intersection data for KCl (%), magnesium (%) and insoluble content (%) was estimated into the block model using Inverse Distance Weighting squared. The density of each block was calculated using a formula for the correlation between KCl content and density (by pycnometer) and has an average of 2.03 t/m³ and 2.11 t/m³ for the HWSS and TSS.

 

The block-model and thus the estimate was then reduced by the removal of two 'structural exclusion zones' and by cutting it on  the east and southeast by a boundary reflecting the 'maximum extent of sylvinite' interpreted from seismic and drill-hole data.in the tabulation (not in the block model). All blocks with a thickness of less than 1-metre were excluded from the estimate and a 15% KCl cut-off-grade was applied. A final step was the reduction of the resultant tonnages by 15% to account for unmodelled geological losses, to obtain the final estimated sylvinite tonnages. Two estimates were made; one for the HWSS and the full TSS and one for the HWSS and TSS-6-8, the latter being a higher-grade lower tonnage option and the base case for the Ore Reserve Estimate.

 

The classification of the Mineral Resource Estimate by the Competent Person was based on Area of Influence (AOI) around the drill-holes. No Measured Mineral Resources were estimated. Indicated Mineral Resources are limited to (sylvinite) blocks within an area guided by an AOI with a radius of 1.0 km around the drill-holes DX_01, K62, ED_03, ED_01. Inferred Mineral Resource are limited to sylvinite (blocks) within an area guided by an AOI with a radius of 2.5 km around inner holes, and a 1.5 km radius beyond 'outer' holes (DX_03 and DX_02) and exclude the Indicated Mineral Resource area.

 

The Ore Reserve Estimation

The Ore Reserve estimate was reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and has not changed. It was carried out by Agapito and reported in accordance with the JORC Code, pursuant to Listing Rules 5.9.1, 5.16.1 and 15.7.1.

 

Classification of Ore Reserve

The Ore Reserve estimate was reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and has not changed. The Ore Reserve is that portion of the Indicated Mineral Resource within the Preliminary Feasibility Study mine plan boundary. The mine plan boundary includes the Indicated Mineral Resource area within 1 kilometre from the four exploration cored boreholes ED-01, ED-03, DX-07 and DX-09. These 4 cored holes are within 2,000 meters of each other so that their Area of Influence (AOI) are interconnected. Mineral Resources were assigned to DX-01 which is not contiguous to the four interconnected core holes so was not considered to be included in the Ore Reserves.   

 

Mining Method and assumptions

The mining method and assumptions as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

The solution mining plan, single-well caverns were adopted. The decision to use single-well caverns was based on the need to locate caverns as close to each other as possible to maximize resource recovery and the Reserves for the Dougou Extension (DX). The 2D seismic and new drill holes completed as part of the PFS resulted in better definition of the extent, thickness and dip of the floor of the resource. Solution mining of large dual-well caverns, as proposed in the Scoping Study, resulted in reduced resource recovery in comparison to the single, smaller caverns.

 

This configuration resulted in additional wells, but higher resource recovery and mine life. The plant is designed to produce 400,000 tonnes per year of Muriate of Potash (MOP) with a purity of 98.5% KCl. Recovery of resource is planned in the HWSS and TSS where they exist. To meet this production goal, 25 caverns will need to be developed and put into operation at start-up and replaced over the 18-year mine life. The adopted method of solution mining will inject a hot brine with near saturation of NaCl and KCl content of approximately 90 to 100 g/l. The brine will selectively dissolve the KCl to produce a brine feed to the plant of up to 165 g/l KCl with the NaCl remaining in the cavern. Laboratory-scale dissolution rate testing has verified selective dissolution of KCl at a KCl concentration of 165 g/l.

The steps in solution mining are to first develop a sump in the salt below the lowest potash bed available, then to expand the top of the sump with both steps utilizing an oil or nitrogen cap to inhibit vertical cavern growth. When the roof is developed, the oil/gas cap will be removed and solution mining of the lowest beds (HWSS or the TSS) can be achieved.  If the HWSS and TSS are present, sump development in the TSS will follow completion of mining in the HWSS.

 

Other mining techniques were evaluated during the Scoping Study and these included dual-well caverns as practiced in Saskatchewan and horizontal wells as practiced by Intrepid, Natural Soda, and in Turkey (Eti Soda and Kazan). The dip of the beds and the variability of the dip favoured the single-well plan.

 

Cavern stability and size of the caverns was based on modelling of the larger dual-well caverns and geomechanical parameters from the Definitive Feasibility Study (DFS) of the nearby Kola Project that is owned by KORE Potash.

 

The selected areal extraction ratio is 63%, with the caverns approximately circular with a radius of 60 meters and pillars between caverns of 24 meters. The volumetric extraction ratio is 46.2%. This configuration is likely to be stable during operations when the pressure in the caverns will support the roof. Pillar degradation is possible, and subsidence or interconnection of caverns is not of concern.

 

The mining recovery factors used include losses due to geologic anomalies and the brine remaining in the cavern after completion of active mining. The geologic loss factor for the HWSS and TSS is 15%. There is greater uncertainty for resource recovery because of the banded nature of the TSS therefore a 15% factor related to TSS mining has been allowed. The HWSS is of uniform high-grade KCl, whereas the TSS has high-grade KCl seams interspersed with low-grade seams. The overall grade of the TSS seam is 29.3% KCl, whereas the grade of the HWSS is 57%. Hence, selective mining of the TSS is expected to be less reliable than for the HWS. The loss of resource to the remaining brine in the cavern is estimated to be 16-18%. Some of this can be recovered with the use of submersible pumps. No credit has been taken for the recovery of the residual brine in the cavern because for some caverns, deformation above the cavern may restrict the placement of the submersible pump and the suction pipe to the bottom of the cavern.

 

Mining dilution factors are not applicable to solution mining. Modelling completed for the PFS incorporates the transition from sump development with the production of brine of high NaCl content and no KCl to a high KCl concentration brine once solution mining is advanced to mine the HWSS or the TSS. During this transition from sump mining to potash mining, brine grades less than 90 g/l will be discarded or recirculated. Dilution factors generally associated with conventional mining involve reduction (dilution) of the ore grade delivered to the plant because of mining low-grade material, either above or below the economically viable ore zone.

 

The mining recovery factors include the areal extraction ratio of 63% (volumetric extraction of 46%) and the losses due to the geologic anomalies and the loss of brine remaining in the cavern. Plant losses are estimated to be 1.5%. The final product will be 98.5% pure KCl with 1.5% NaCl.

 

The infrastructure requirements for solution mining include piping for delivery of the solute and recovery of the pregnant brine, wellfield pumps, electrical, instrumentation and roads. Instrumentation at the well head includes flow, temperature and brine density. Sampling of brine at the well head will be done manually. Production piping will be insulated to minimize temperature losses in the solvent and product brine. Cavern development pipelines will not be insulated.        

 

Pertaining to the Production Target, the above information applies, except for the following adjustments:

·      The Indicated Mineral Resource not in the Ore Reserves have been included in the mining plan

·      34.5% Inferred Mineral Resources are included in the mining plan, with production from Inferred Resources totalling 20% of LOM production.

·      The geologic loss factor for the HWSS and TSS Production Target outside the Ore Reserves is 30%.

·      There is greater uncertainty for resource recovery because of the banded nature of the TSS therefore a 20% factor related to TSS mining has been allowed for Production Target outside the Ore Reserves.

Processing Method and Assumptions

The processing Method and assumptions as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" have not changed.

The selective solution mining process for DX is expected to deliver brine to the process plant containing (by weight) 66.8% water, 18.6% NaCl, 13.4% KCl, 1.1% MgCl₂, and 0.1% CaSO₄ at a temperature of 60°C. All the above elements will be fully dissolved within the brine.  Brine of this nature is well understood globally and can be readily processed.

Crystallisation is the processing method selected for the DX Project and is well established in the potash industry.  KCl crystallisation involves the gradual cooling of KCl-rich brine and relies on a strong relationship

between KCl solubility and brine temperature.  As the brine is cooled, the amount of KCl that can remain in solution decreases.  Therefore, KCl crystallises as brine is cooled, while most NaCl remains in solution.  KCl crystallisation is known to yield higher KCl recovery than conventional recovery methods used for separation of KCl solids from NaCl solids, such as flotation.

 

The estimated KCl losses are due to:

·    Purge stream (0.50%): A purge stream is required to control the level of MgCl₂ in the process brine.  MgCl₂ is preferentially soluble to KCl and will gradually displace KCl if it is not controlled.  A small portion of brine is bled off and disposed to manage the level of MgCl2 in the brine, and this also results in a loss of KCl.  The DX design includes a purge stream.

·    Boilout (0.15%): Crystallisation vessels are descaled with water using a process called 'boilout', which results in some loss of KCl from the walls of the vessels, directed to brine discharge.

·    Dust (0.29%):  Dust losses to the atmosphere occur in the process of drying, and also after KCl is dried.

·    Spills and washdowns (0.20%): The plant will occasionally have process upsets and cleaning procedures which may result in a loss of KCl to brine discharge.

·    Offsite transportation losses (0.35%): Some allowance is made for transportation losses during transport of MoP and during ship loading at the marine location.

 

The total losses are expected to be 1.49%, and therefore, the total process KCl recovery is expected to be 98.5%.

Some impurities are expected to accompany the final MoP product.  The minimum KCl content for K60 MoP is 95% KCl, however the DX process is expected to yield a product grade of 98.5% KCl.

The primary basis for the above assumptions was a detailed mass balance, produced by subject matter experts in the field of potash crystallisation and potash dry processing, with supplementary input from a world-renowned supplier of potash crystallisation equipment.

 

Furthermore, dissolution test work was performed on DX core samples from both the HWSS and TSS at Agapito Associates Inc. laboratory in Grand Junction, Colorado, USA.  The testing provided a basis for the predicted dissolution characteristics within the caverns, and the resulting brine KCl concentration and flow to the process plant.  These parameters were used in the design of the process plant and became the basis for the prediction of LOM production for the DX project.

 

Cut-off Grades

The Cut-off grades as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

For the MRE a 15% KCl cut-off-grade was applied though no blocks have a grade less than this. The deleterious components Mg and insolubles are so low and consistent at DX that these were not considered in the selection/exclusion of blocks from the model.

The cut-off grades and quality parameters applied in selecting the mine plan include presence of carnallite, thickness and in-situ KCl content. The high KCl grade for the HWSS is exceptional compared to other mined potash beds. The TSS is comprised of several narrow high-grade sylvinite layers separated by narrow layers of 'barren' rock-salt. TSS lower most layer 5 and the uppermost layer 9 were excluded from the Ore Reserve estimate and from the mine plan because they are separated from the 'inner' layers 6-8 by thick layers of rock-salt. The Reserve considers the TSS 6-8 only. A potash grade of 30% KCl is considered necessary for successful selective solution mining of potash. The mine plan involves selective dissolution of the KCl by injecting near-saturated NaCl brine and selectively dissolving the KCl. 

 

Estimation Methodology

 

·    Capital Cost:

The capital cost estimation method as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and has not changed.  

Capital Cost Estimate has been developed for each scope area, expressed in United States dollars (USD) and based on 4th Quarter 2019 prices.

Capital Cost Estimate is a full AACEI Class IV Estimate (-15 to 30%, +20 to 50%)), based on an equipment factored methodology where budget prices were obtained for all equipment with an expected value higher than $50,000 all other equipment was factored as a percentage of the total of the budget quotes received. 

Indirect costs were estimated by Kore Potash and included owner's costs and offsite infrastructure costs based on quotes received.

Escalation of 1.5% per annum has been considered, and a total Contingency of approximately 22.0% (of total direct and indirect costs) has been added.

Three capital periods have been defined: Initial (Construction and up to first barge loading, Month +21); Deferred (up to ramp-up completion, Month +27); Sustaining (after Month +27).

 

·    Operating Cost:

The operating cost estimation method as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and has not changed.

Operating costs were estimated from first principles using quoted rates, estimated consumption, forecast labour complements and remuneration estimates.

Operating Cost covering the Life of Mine (18 years) has been estimated in Q4 2019 US$ terms. They include costs for Electric power, Fuel, Gas, Labour, Maintenance parts, Operating Consumables, General and Administration costs and Contract for Employee Facilities.

Ocean freight transportation estimate was based on shipping costs for 10-12 kt ships specifically for the African market.

Mine Closure cost estimated in accordance with a Conceptual Rehabilitation and Closure Plan developed during the PFS

State mineral royalties of 3% of Gross Revenue applies.

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

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

 

Material Modifying Factors

 

·    Status of Environmental Approvals

The status of environmental approvals as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

The Dougou Extension project area falls within the Dougou mining licence which has a 25-year ESIA approval in place. The DX scope will require an amendment to the Dougou ESIA and this application would be prepared simultaneously with the execution of the DFS phase of the project. The base line studies for the Dougou ESIA and the Kola infrastructure corridors (power, gas and overland access) will provide required information for the amendment application.

Additional baseline studies required to complete the application will be centred around new areas that would be affected by the DX project.

There are no waste rock dumps or process residue storage facilities required for the scope of the DX project. Waste salt brine is planned to be disposed of back into the ocean. The disposal of waste brine into the ocean was investigated and included in the Kola ESIA which was approved by the regulator when the Kola ESIA was granted a 25-year approval in March 2020.

 

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.

 

·    Status of Mining Tenements and Approvals

The status of environmental approvals as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

Kore Potash Limited (which is 100% owned by Kore Potash Plc.) and formerly known as Elemental Minerals Limited (ELM), 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, Sintoukola Potash Mining SA and Dougou Potash Mining SA. The DX Deposit is within the Dougou Mining Licence which is 100% held by Dougou Potash Mining SA and was issued on the 9 May 2017 for a period of 25 years, under decree No. 2017-139.

 

Other Governmental Factors

The status of other governmental factors as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

A mining convention entered into between the RoC government and the Companies on 8 June 2017 and gazetted into law on 7 December 2018 concludes the framework envisaged in the 25-year renewable Dougou Mining Licence granted in August 2013. The Mining Convention provides certainty and enforceability of the key fiscal arrangements for the development and operation of Dougou Mining Licences, which amongst other items include 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 disputes by international arbitration.  The Mining Convention also provides for 10% of the shares in the subsidiary companies holding the Dougou and Kola Mining licences to be transferred to the Government of the Congo. This transfer of 10% to the Government has not yet occurred.

 

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

The infrastructure for selected mining, processing and product transport to market as reported in the "Dougou Extension (DX) Pre-feasibility Study" 13th May 2020" and have not changed.

The project infrastructure is comprised of a mine site (well field), a processing plant, a 13.8 km buried water line to the coast, an accommodation camp, an overhead powerline from Mboundi and overland truck transport on the national road system of both product and gas.

Land acquisition rights for the DX project area will have to be applied for during the DFS phase and a project specific area will need to be through a ministerial order. To achieve this a governmental process is followed that culminates in a "Declaration d'Utilite Publique" (DUP) being granted. This process was followed successfully on the Kola project and will only be required for new areas that are impacted by the DX project area.

The Process Plant Site is located approximately 65 km north west of Pointe Noire and 18 km inland from the coast. The Mine Site is located next to the Project Process Plant.

The DX Project will require the regular use of existing highway RN5 for transport during construction and operations.  RN5 includes 25 km of unpaved sand road between Madingo-Kayes and the process plant.  Although the sand portion of the road is currently used for logging transport, some upgrades may be required to support the construction and operating traffic for DX.

A High Voltage (HV) Overhead Transmission Line (OHL) will be run from a CEC tie-in point at M'Boundi. The OHL will supply electrical power to the DX mine and process plant

Water supply will be seawater and brine will be disposed to the ocean via two 14 km long pipes between the process plant and the coast. A water pumping station will be required near the coastline.

A Natural Gas Virtual Pipeline (NGVP) will be used for the DX Project, involving the delivery of compressed natural gas on trucks.  A compression (mother) station is installed adjacent to the existing natural gas pipeline. Natural gas is compressed at high pressure onto tube trailers. Tube trailers are transported to a decanting (daughter) station at the DX process plant. The tube trailer is connected to apparatus at the decanting station where the pressure is reduced to the correct pressure for use by the end use customer.