Shareholder Newsletter

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

11 March 2021

Emmerson Plc ("Emmerson" or the "Company")

Shareholder Newsletter

Dear Shareholder

Q1 2021 has been an exceptionally productive time for Emmerson, and the coming months are expected to be similarly constructive.  Across the various dimensions of our business including operations, corporate positioning and commercial opportunity, we have made significant strides over the past few weeks and this forward momentum is expected to continue as we look to commence construction of Africa's first potash mine by the end of 2021.

Operations Review

The backbone of our business is of course the Khemisset Potash Project in Morocco (the "Project"), a low capital cost, and high margin potash asset which is being advanced towards production in 2023.

The Company recently announced a key deliverable in the approval of the Mining Licence ('ML') which provides Emmerson with the exclusive right to develop and mine the potash deposit, within the specific perimeter of the licence area, in the Khemisset basin. The grant of the Mining Licence followed a successful application process including the submission of a proven, JORC compliant, Mineral Resource Estimate ("MRE") and the confirmed technical and economic viability of the Project, which was satisfied by the Feasibility Study.  In fact, the Feasibility Study highlighted Khemisset's outstanding attributes including industry leading capital and operating costs and delivered an initial mine life of 19 years, based on less than 50% of the global resource base for the Project.  Importantly, the ML encompasses the full resource base allowing simple expansion of the operations in the future without the requirement to re-permit.

Noting the robust fundamentals which were demonstrated in the June 2020 Feasibility Study, the Company announced in February 2021 its intention to examine the opportunity for phased development and expansion projects at Khemisset, aimed at potentially reducing upfront capital costs whilst increasing the ultimate production output and capturing more of the margin, improving on what is already a world class project. The key objectives of the phased development approach include:

·    Minimise upfront capital cost of the flagship Khemisset Potash Project Development

·    Increase salt sales to up to 4Mtpa;

·    Incorporate SOP as part of the larger project development schedule;

·    Increase MOP production by up to 50%; and

·    Increase mine life by including additional resources not currently captured in the mine plan.

The Company intends to complete a concept study examining the potential to develop Khemisset along this alternative route and will share with shareholders in due course.  It is the Company's ultimate intention to realise the enormous potential of Khemisset whilst reducing funding and execution risk, with the intention of minimising shareholder dilution.

Corporate Positioning

In late February, Emmerson successfully completed a £5.5 million fundraising which was led by several new institutional investors as well as a number of our existing shareholders.  The purpose of the fundraising was to finance the final critical path components of development work at Khemisset, so that the timeline was not delayed as we move to towards securing project finance through debt and equity for the mine construction in H2 2021. 

These components will refine our final route to production and are also expected to present growth opportunities, particularly in relation to our SOP project, salt strategy and production capacity expansions. 

Shareholders were also advised at this time about the Company's intention to move its exchange listing to AIM.  This decision was prompted by a review by the board and advisers relating to the ongoing suitability of an Official List (standard segment) on the London Stock Exchange's main market.  AIM has long been recognised as the market for ambitious, growth companies and it has attracted a strong following amongst private investors and institutional backers.  The Board believes that AIM is a market and environment better suited to the Company's current size and strategy and will support the Company and its shareholders during the rapid growth phase expected in the coming months and years.

As such, the Company's admission to AIM will occur concurrently with the proposed cancellation from the Official List (standard segment) on the London Stock Exchange's main market so that shareholders will continue to be able to trade their positions with no interruption.

The proposed move to AIM will be put to shareholders at a General Meeting which is scheduled for 11:00 a.m. on 25 March 2021, and an announcement relating the results to shareholders will be made during the next business day.  Although shareholder approval is not a requirement of the proposals put forward by the Board, we believe that as a matter of good corporate governance our shareholders should be consulted on this matter in order for them to be aligned with our business as it moves forward on its new home on AIM.

Commercial Opportunity

We are fortunate that we now have a tailwind in the potash market, with increasing demand tightening up the pricing that producers can set.  Clearly this is a helpful situation as we look to negotiate the strategic financing options to construct our mine.  In the last four weeks several of the producers have reported improving prices as strengthening fundamentals from 2020 start showing their effect. They mention a combination of diminished inventories, rising commodity prices, compelling farm economics, and a cyclical recovery being underway.

The leading fertilizer industry analysts at Argus were forecasting monthly price increases from the lows of mid 2020 for the short and medium term time horizons.  This is what has been seen so far and in fact the price in Brazil, which is where Emmerson demonstrates its logistics advantage, was already about 10% higher in January than was being forecast early last year.

The more encouraging market outlook for potash will clearly assist in the ongoing strategic and debt financing discussions for Khemisset.

Outlook for 2021

2021 has opened with a steady flow of high impact news for Emmerson and we see that this momentum is set to continue with a pipeline of operational and corporate updates due in the coming weeks, alongside an improving pricing environment the potash market.

There is significant latent value in this project and I truly believe that all of our stakeholders are unanimous in their support of delivering Khemisset to market.  Our deep-rooted values of "doing the right things in the right way" permeates through every decision we make on the ground in Morocco and in the boardroom and it is this philosophy which will ensure that this exceptional asset continues to generate the widespread support we have enjoyed thus far.

I would like to extend my gratitude once again to our shareholders, both new and old, for their support of Emmerson and I look forward to delivering on our strategy to bring our low capex and high margin potash asset in construction before the end of 2021.

Graham Clarke

CEO

**ENDS**

Notes to Editors

Emmerson's primary focus is on developing the Project located in Northern Morocco.  The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K₂O and significant exploration potential with an accelerated development pathway targeting a low capex, high margin mine. Khemisset is perfectly located to capitalise on the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. This unique positioning means the Project will receive a premium netback price compared to existing potash producers. The need to feed the world's rapidly increasing population is driving demand for potash and Emmerson is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated Khemisset has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. This delivered outstanding economics including a post-tax NPV₁₀ of approximately US$1.4 billion using industry expert, Argus', price forecasts.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.