TIDMEML
RNS Number : 5636V
Emmerson PLC
15 April 2021
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
15 April 2021
Emmerson Plc ("Emmerson" or the "Company")
Update on Phased Development Strategy
Emmerson plc, the Moroccan focused potash development company,
is pleased to provide an important update on the assessment of a
conceptual, phased development plan for its 100% owned Khemisset
Potash Project ("Khemisset" or "the Project"), aimed at reducing
upfront capital costs and incorporating expansion options (RNS
dated 17 February 2021).
Highlights
-- Conceptual, phased development plan completed resulting in
major value enhancing opportunities:
o Significantly reduced up-front capex of US$254.6m
(pre-contingency)
o Potential for subsequent phases to be funded from internal
cash flows
o Estimated NPV(8) US$2.37 billion (assuming phase 4
production)
o Forecast EBITDA in first full year of phase 4 production of
US$491.4m
-- Demonstration of flexibility and additional potential of Khemisset
-- Emmerson to continue Project development utilising outputs of this phased approach study
Overview
Building on the Feasibility Study ('FS') (refer announcement 1
June 2020), the Company has completed a concept study to examine
the potential to develop Khemisset using a four-phased approach to
reduce upfront capital costs and execution risk, and plan
additional expansion stages to ensure that its economic value is
fully developed.
The intention of the Company remains to build the full-scale
project as identified in the FS, however, the report, undertaken to
scoping study levels, identifies the opportunity to commence with a
smaller scale start-up operation producing Muriate of Potash
("MOP"), which would be followed by a series of expansion phases to
increase the level of MOP produced, and add in the production of
de-icing salt in increasing quantities as well as premium potash
product, Sulphate of Potash ("SOP").
The upfront capex for this strategy, including contingency, is
estimated at US$287m. Subsequent phases through to full production
would likely be financed from internal cash flows. In full
production, the Khemisset Project could produce 800ktpa of MOP,
240ktpa of SOP and 4mtpa of de-icing salt, resulting in an annual
EBITDA in the first year of full production of US$491m. This
production rate is a significant increase to the existing FS, which
the Company believes is justified given the scale and quality of
the Khemisset orebody.
Key metrics of this phased approach are as follows:
Phase 1 Phase 2 Phase 3 Phase 4 Total
MOP Production
(t) 350,000 385,000 - 270,000 1,005,000
---------- ---------- ---------- ---------- ----------
MOP consumed
by SOP production
(t) - - (205,000) - (205,000)
---------- ---------- ---------- ---------- ----------
MOP Sold (t) 350,000 385,000 (205,000) 270,000 800,000
---------- ---------- ---------- ---------- ----------
SOP Production
(t) - - 240,000 - 240,000
---------- ---------- ---------- ---------- ----------
De-icing salt
(NaCl) Production
(t) - 1,000,000 1,000,000 2,000,000 4,000,000
---------- ---------- ---------- ---------- ----------
Capex US$286.9m US$140.0m US$143.7m US$130.4m US$701.0m
(incl. contingency)
---------- ---------- ---------- ---------- ----------
NPV(8) US$518.5m US$1.06bn US$1.71bn US$2.37bn US$2.37bn
---------- ---------- ---------- ---------- ----------
Annual EBITDA US$63.9m US$199.1m US$334.1m US$491.4m US$491.4m
---------- ---------- ---------- ---------- ----------
Graham Clarke, CEO, commented: "This work demonstrates that the
Project has the flexibility to be developed in phases, whilst
further proving the world class nature of Khemisset. With
significant expansion potential that adds huge value to the
Project, we are now confident that we could develop Khemisset using
a staged approach potentially reducing upfront capital costs and
equity requirements from the market and, therefore, dilution to our
existing shareholders as we grow to our full potential.
"2021 continues to be a pivotal year for Emmerson as we move
forward in the development of what is to become the first large
scale potash mine in Africa."
Further Detail
The aim of the study was to first identify and confirm whether
there is the potential for a lower capex phase of development and
then to demonstrate that additional development phases could follow
which would expand the Project both in terms of product offering
and overall capacity.
Four phases were identified, the construction requirements
assessed, and the associated costs analysed.
The first phase focuses on a reduced MOP output stage where the
development of the declines and mine would be similar to the FS
base case but with a reduced capacity process plant which would
result in lower upfront capex. The savings generated are not
proportional to the reduction in output as the benefits of scale
are not completely captured and the general infrastructure costs
remain the same.
The second phase expands MOP production to the same level as in
the FS with the addition of 1mpta of de-icing salt produced, as in
the FS. The additional capex required facilitates the expansion of
the process plant capacity along with the salt production plant and
additional costs in mine development.
Phase three brings in an SOP production facility, expected to be
located at the port of Jorf Lasfar, in addition to an increase of
de-icing salt production to the level of 2mtpa. The additional
capex required is for the construction of the SOP facility and the
expansion of the salt production plant.
The final phase includes the development of the south-west (SW)
area of the resource via two new declines with the ore being
transported to the existing process plant which is expanded to
increase the capacity to a total of over 1mtpa of MOP a portion of
which provides feed into the SOP facility. In addition, this phase
sees the further expansion of de-icing salt production to a total
of 4mtpa. The additional capex required for this phase covers the
establishment of the access and infrastructure for the SW mine and
also the expansion of the salt plant to double the capacity to
4mtpa.
**ENDS**
For further information, please visit www.emmersonplc.com
, follow us on Twitter (@emmerson_plc), or contact:
Graham Clarke +44 (0) 20 7236
Edward McDermott Emmerson plc 1177
Jerry Keen
Toby Gibbs
John More Shore Capital +44 (0)20 7408 4090
Damon Heath
Isabella Pierre Shard Capital +44 (0)20 7186 9927
St Brides Partners
Megan Denison Limited
Susie Geliher Financial PR/IR +44 (0)20 7236 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%
K(2) O 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 NPV(10) of approximately US$1.4 billion using
industry expert, Argus', price forecasts.
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