TIDMEML
RNS Number : 1087X
Emmerson PLC
31 December 2021
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
31 December 2021
Emmerson Plc ("Emmerson" or the "Company")
End of Year Newsletter
Emmerson Plc ("Emmerson" or "the Company"), the Moroccan focused
potash development company, is pleased to announce that a
Shareholder Newsletter has been uploaded to the Company's website
at www.emmersonplc.com. The letter, which reflects on the major
developments for the Company and the potash industry during 2021,
can be found using the following link
http://www.rns-pdf.londonstockexchange.com/rns/1087X_1-2021-12-30.pdf
, and also below.
Dear Shareholder,
2021 has been a successful year for Emmerson and major strides
have been made towards achieving our target of first production at
the Khemisset Potash Project ('Khemisset' or 'the Project') in
Morocco. The icing on the cake came in the form of a strategic
financing deal of up to $46.75 million in November 2021 and
accordingly, we look forward to 2022 with confidence as we
fast-track the development of Khemisset into a low cost, high
margin supplier of potash - the first primary producer on the
African continent.
2021 Key Milestones
-- In February, we received the Mining Licence ('ML') for
Khemisset from the Moroccan Ministry of Energy, Mines and the
Environment, providing the exclusive right to develop and mine the
potash deposit.
-- In April, we were delighted to join AIM to provide access to
a larger and more entrepreneurial market with an environment more
suited to our size and strategy.
-- In September, our Interim Results highlighted the strength of
the global potash market, which clearly improve the Project's
already outstanding economics: using current spot price
assumptions, our post-tax NPV is pushed from a very respectable
US$1.4 billion to US$3.9 billion and IRR of over 85.4%, while
average life of mine post tax cashflow increases to US$558 million
per annum for an initial 19-year life of mine(1) .
-- A major step to unlocking the full potential value of
Khemisset was achieved in November, when we announced a Strategic
Investment of up to US$46.75 million - the upfront cash injection
enables us to advance the next stage of the Project's development,
the basic engineering and operational developments, while the
remaining $40m is available for drawdown as necessary, potentially
as part of the project finance.
-- Finally, in December, the Project moved into the
pre-construction phase of development with the award of the primary
Basic Engineering contract to Barr Engineering for the Mineral
Processing Facility. We have also received bids for the balance of
the Basic Engineering packages of the Project, comprising highways
connection and site access; portal and declines; mine site
infrastructure; tailings storage facility; electrical power; and
water.
(1) Using the Dec 2021 spot price for granular MOP in Brazil,
with all other inputs the same as the 2020 Feasibility Study.
Strategic Investment
The strategic investment by Singaporean fund Global Sustainable
Minerals ("GSM") and Gold Quay Capital (the "Investors") is of
great value to the Company because of the significant financial and
strategic support it confers. GSM is funded by entities controlled
by Mr. Indra Widjaja and he, and his family, are among the
wealthiest people in South-East Asia, with significant investments
across many industries including, most importantly for Emmerson,
agriculture and mining. The Widjaja Family are best known as the
owners of the Sinar Mas Group ("Sinar Mas"), which is a very
well-known South-East Asian conglomerate and one of the largest
companies in Indonesia. Sinar Mas operates large, geographically
diverse, businesses across numerous verticals including real estate
and construction, financial services, telecoms and technology, food
and agribusiness and mining, with estimated group annual revenues
of more than US$30 billion in 2018.
The investment has been structured by way of an initial equity
investment and a second investment via a mandatory convertible
note. The mandatory convertible note can be drawn upon satisfaction
of certain conditions, most notably the completion of the project
financing for the Project. The mandatory convertible nature of the
investment means once the instrument is drawn it will always
convert to equity. Therefore, investors should consider this as a
form of deferred equity, at a significant premium to the current
share price, to support the development of Khemisset.
Having the backing of such a powerful investor group puts the
Company in a strong position as we move to the development of
Khemisset, in particular with the ongoing project finance
negotiations with a syndicate of banks. We welcome the Investors to
the register and look forward to continuing to strengthen our
partnership with them as we move to become the first MOP producer
in Africa.
Ongoing Work
The Environmental and Social Impact Assessment ('ESIA')
submission is awaiting the final approval and the Company has
completed various submissions to government agencies including the
water authority, l'Agence du Bassin Hydraulique de Sebou, Regional
Department of Environment, Regional Department of Forestry, and
Regional Centre of Investment, as well as the public enquiry
process with no objections and full support from local
stakeholders.
Work relating to the technical aspects of the design and
engineering to take the Project towards construction readiness such
as additional geophysical surveys and shallow drilling to further
characterise the near surface geology, decline alignment drilling
and further deep drilling for detailed mine design are underway.
Progress is also being made with developing the Project's execution
plan with constructive engagement with potential engineering and
EPCM partners. A contract has now been signed for the basic
engineering of the process plant with Barr Engineering, a
multi-award-winning engineering firm based in Minneapolis, USA.
Negotiations for the contracts covering the engineering of all
other work packages for the project are now at an advanced stage
and should be awarded shortly.
The land acquisition programme is advancing with relevant owners
and stakeholders identified in addition to engagement with the
relevant authorities in relation to the water and power supply
routes to site and the highways connection.
Project Finance Update
During 2021 in the various webinars and investor updates it has
been explained that we have been able to advance the project
finance in parallel with the other workstreams. As mentioned above,
the whole debt process has benefitted substantially from the
strategic equity investment. I am pleased to report that we have
not only engaged with a number of international and Moroccan banks,
but also that the initial due diligence has now been completed.
This means that we move to the next stage where we confirm the
Managing Lead Arrangers ("MLAs") - we expect to be in position to
update the market on this in the first quarter of 2022.
Team Appointments
As the Project moves into the construction phase, we have
strengthened the team at every level to support this transition. We
have hired a Project Controller, Josh Mitchell, who has hit the
ground running with the identification, budgeting and now
negotiation of the basic engineering contracts who is being
supported by our new Project Engineering Manager Haitam Ennadif who
is based in Morocco.
At board level, James Kelly replaced Mark Connelly, who retired
in April 2021. James has over 20 years of experience in the mining
sector, particularly in the areas of corporate finance and
financing strategy. Additionally, Rupert Joy, who has high level
international experience including seven years as a diplomat in
Morocco, joined as a Non-Executive Director.
Morocco
The Company has worked hard during 2021 to build the foundations
of a long-term partnership with Morocco, one of the region's most
dynamic economies and a welcoming environment for foreign direct
investment. The Kingdom's expertise in fertiliser production and
emerging position as an African leader in agriculture, water
management and renewables make it an ideal partner for Emmerson.
The Project is anticipated to bring substantial social and economic
benefits to the region of Khemisset, as identified in the
socio-economic study and based on both the significant investment
over the life of the mine and the creation of over 2,000 direct and
indirect jobs.
Potash Industry
As shareholders will be aware, potash is a widely used
fertiliser and plays a central role in feeding the world's growing
population. Potash has many benefits including increased crop
quality and yield, improved uptake of nitrogen and more efficient
use of water.
Potash (MOP) accounts for 95% of global demand for the vitally
important potassium fertilisers. There is no substitute for potash,
with MOP continuing to be the cheapest and most utilised source of
potassium for agricultural processes globally.
Annually, global potash (MOP) consumption in 2017 was 64m
tonnes, growing to 71.6m tonnes in 2020, with this figure forecast
to further increase over the next decade to 84m tonnes in 2029.
This is an average increase of 2.6% per annum for the consumption
of MOP globally. Improving yields to feed the growing population
are just a few of the drivers in this growth in demand for potash,
and these drivers are only going to grow in decades to come. These
factors have seen prices of fertilisers grow significantly over the
past 12 months, with potash doubling or tripling in price depending
on buyer. Tightened supply alongside robust demand and increasing
crop prices will see prices for MOP to remain at strong levels over
the next decade.
As the first commercial potash mine in Africa, Emmerson is
expected to benefit from the high growth forecasted for fertilisers
across the African continent.
Looking Ahead
We have some major targets to hit in 2022, not least the
successful receipt of our ESIA permit, and the project finance
facility to be finalised. However, with a mining licence secured,
strong balance sheet, very robust market fundamentals, supportive
shareholders and stakeholders, and an exceptional team, we expect
2022 to be a transformational year for Emmerson.
I would like to take this opportunity to thank our shareholders
for their ongoing support and wish you all a very happy and healthy
New Year.
Graham Clarke
CEO
**ENDS**
For further information, please visit www.emmersonplc.com ,
follow us on Twitter (@emmerson_plc), or contact:
Emmerson Plc +44 (0) 20 7236
Graham Clarke 1177
Shore Capital (Nominated Adviser and Joint Broker) +44 (0)20 7408
Toby Gibbs / John More 4090
Shard Capital (Joint Broker) +44 (0)20 7186
Damon Heath / Isabella Pierre 9927
St Brides Partners (Financial PR/IR) +44 (0)20 7236
Susie Geliher / Isabel de Salis 1177
Notes to Editors
Emmerson's primary focus is on developing the Khemisset project
("Khemisset" or 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.
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END
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December 31, 2021 01:59 ET (06:59 GMT)
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