LSE-listed potash developer Emmerson intends to start construction of Africa’s first potash mine, its Khemisset project, in Morocco, by the end of this year.
The miner also intends to complete a concept study examining the potential to develop its flagship project to realise not just its potential, but also to reduce funding and execution risk, with the intention of minimising shareholder dilution.
The key objectives of the phased development approach include minimising the upfront capital cost of the project, while increasing salt sales to up to four-million tonnes a year and increase the mine life by including additional resources not currently captured in the mine plan, besides other aspects.
Khemisset is being advanced towards production in 2023.
Emmerson also recently announced a key deliverable in the approval of the mining licence which provides the miner with the exclusive right to develop and mine the potash deposit, within the specific perimeter of the licence area, in the Khemisset basin.
The licence encompasses the full resource base, allowing simple expansion of the operations in the future without the requirement to re-permit.
Additionally, in a statement on March 11, Emmerson referred to the first quarter of this year as “exceptionally productive”, with the coming months expected to be similarly constructive.
The progress bodes well for the company, as an increasing demand has tightened potash pricing, which the company said is “helpful” as it looks to negotiate the strategic financing options to build the mine.
“In the last four weeks, several of the [global potash] 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,” Emmerson CEO Graham Clarke says.
The leading fertiliser industry analysts at Argus are 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,” Clarke enthuses.
Additionally, Emmerson also successfully completed a £5.5-million fundraising which was led by several new institutional investors as well as a number of 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 the miner moves toward securing project finance through debt and equity for the mine construction in the second half of this year.
“These components will refine our final route to production and are also expected to present growth opportunities, particularly in relation to [the company’s] sulphate of potash (SoP) project, salt strategy and production capacity expansions.”
In relation to the company’s intention to move its exchange listing to the Aim market of the LSE, Emmerson confirmed on March 11 that the admission would occur concurrently with the proposed cancellation from the official list on the LSE’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 scheduled for later this month, and an announcement relating the results to shareholders will be made available soon thereafter.
Although shareholder approval is not a requirement of the proposals put forward by the board, Emmerson said it considers it “a matter of good corporate governance” for shareholders to be consulted on this matter.
Considering that this year has opened with a steady flow of high-impact news for Emmerson, the company believes this momentum is set to continue with a pipeline of operational and corporate updates due in the coming weeks, alongside an improving pricing environment in the potash market.