TIDMEML
RNS Number : 1791F
Emmerson PLC
06 July 2023
06 July 2023
Emmerson PLC ("Emmerson" or the "Company")
Emmerson Q2 Update
Emmerson PLC, the Moroccan-focused potash development company,
is pleased to provide an update on its corporate and operational
activities at the Khemisset Project for Q2 2023.
Highlights
-- Environmental approval for the project referred from regional
level to the national Commission Ministérielle de Pilotage
("Committee" or "Ministerial Committee")
-- Basic Engineering studies reaching completion with final reports and designs due shortly
-- Project finance due diligence to run in parallel with updated
Bankable Feasibility Study ("BFS") following environmental
approval
Environmental approval
The Environmental and Social Impact Assessment ("ESIA") approval
process remains the key priority for the Company, and hinges on the
impact of the project on water resources for the region, a
sensitive issue in the context of climate change and recent
droughts. In particular, the issues raised have centred around the
disposal of brines through deep well injection; the storage of salt
tailings at surface; the use of water from local sources; and the
impact of the project on local highways and land users.
The Company has invested considerable time and resources into
developing robust solutions in all these areas, reflecting
international best practice, including using dry stack tailings,
and sourcing waste water rather than fresh water from nearby
reservoirs. In addition, the Company has committed to completing
in-situ injectivity testwork before construction to confirm
definitively the feasibility of deep well injection as a means of
disposing of brines, while examining alternative means to process
brines in order to minimise, or even eliminate, the requirement for
brine disposal.
Following a recent evaluation meeting, the Commission Régionale
Unifiée d'Investissement ("CRUI"), the regional investment
authority, was unable to approve the application, and consequently
the Company has exercised its right to refer approval to the
Ministerial Committee, which is chaired by the Head of Government
and includes several Government ministers. The Company believes the
measures taken to address all concerns raised, combined with the
project's significant economic benefits and contribution towards
addressing food security, are compelling and underline its
strategic importance to the Kingdom of Morocco. On this basis, the
Company remains confident it will receive approval for its
proposals.
Technical Workstreams
The work on the seven technical packages that make up the Basic
Engineering workstream is now largely complete, with final drawings
and reports only remaining in respect of power supply, highway
junction, mine-site infrastructure and portal and decline
designs.
Once completed, this information will be available for
incorporation into an updated BFS, which will be commenced once
environmental approval has been received, and is likely to take
approximately six months to complete.
The BFS will include a detailed financial model based on the
latest design of the plant and mine workings, as well as reflecting
cost inflation since the Feasibility Study completed in 2020.
Project financing
Following environmental approval, the Company will proceed with
the process of fundraising for the Khemisset Project. Due diligence
and legal work will be required in respect of the bank debt, with
the BFS a key part of this review. As far as possible, due
diligence and the BFS work programmes will proceed in parallel in
order to minimise the time between receiving environmental approval
and reaching financial close.
Graham Clarke, CEO, commented:
"Our primary focus has been obtaining the environmental approval
for the project, and a considerable amount of rigorous and detailed
work has gone into addressing all of the issues raised by the
relevant authorities, which have mainly related to water. The
environmental approval has recently been referred from the regional
level up to the national Ministerial Committee.
"In reaching their decision, we remain confident that senior
government officials on that Committee will take into account the
significant amount of time and investment that has gone into
minimising the environmental impact of the project, which we
believe aligns closely with the Government strategy regarding
sustainable development. Emmerson is firmly committed to
maintaining the highest environmental standards in Morocco at every
stage, from construction through to production.
"As soon as the permit has been granted, we will move to
complete a BFS, which will include updated numbers for the market.
We expect this study, which is a requirement of banks and other
financiers, to take approximately six months.
"Thankfully, we are now seeing softening of inflation in capital
costs along with commodity and particularly energy prices. Energy
forms the largest single part of the operating costs. The
improvements we have identified during the basic engineering will
also need to be quantified and used as updated inputs for the
financial model. We believe cost inflation will apply to all potash
projects, and we expect Khemisset to remain in a competitive
position on the cost curve not least due to its favourable geology
and location.
"Morocco plays an important role in the global fertiliser
market, building on the kingdom's large phosphate product exports.
The fast-growing market in Africa, on top of established demand
from Europe and Brazil, makes this an exciting moment for potash.
Once the environmental plan approval process is completed, we look
forward to moving towards the finance and construction of this
nationally important project."
**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 / Jim Wynn / Charles Vaughan 1177
Liberum Capital Limited (Nominated Advisor
and Joint Broker) +44 (0)20 3100
Scott Mathieson / Kane Collings / Will King 2000
Shard Capital (Joint Broker) +44 (0)20 7186
Damon Heath / Isabella Pierre 9927
BlytheRay (Financial PR and IR) +44 (0) 207 138
Tim Blythe / Megan Ray / Said Izagaren 3204
Notes to Editors
Emmerson is focused on advancing the Khemisset project
("Khemisset" or the "Project") in Morocco into a low cost, high
margin supplier of potash, and the first primary producer on the
African continent. With an initial 19-year life of mine, the
development of Khemisset is expected to deliver long-term
investment and financial contributions to Morocco including the
creation of permanent employment, taxation, and a plethora of
ancillary benefits. As a UK-Moroccan partnership, the Company is
committed to bringing in significant international investment over
the life of the mine.
Morocco is widely recognised as one of the leading phosphate
producers globally, ranking third in the world in terms of tonnes
produced annually, and the development of this mine is set to
consolidate its position as the most important fertiliser producer
in Africa. The Project has a large JORC Resource Estimate (2012) of
537Mt @ 9.24% K2O, with significant exploration potential, and is
perfectly located to support the expected growth of African
fertiliser consumption whilst also being located on the doorstep of
European markets. The need to feed the world's rapidly increasing
population is driving demand for potash and Khemisset is well
placed to benefit from the opportunities this presents. The
Feasibility Study released in June 2020 indicated the Project 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 2020 Feasibility Study
delivered compelling economics, including a post-tax NPV8 of
approximately US$1.4 billion.
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END
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