Emmerson Scoping Study Confirms Unique Potash Opportunity
, has released the much anticipated Scoping Study for the company’s Khemisset Potash Project in northern Morocco, months ahead of schedule.
Hayden Locke commenting on the release said: "The Scoping Study has confirmed our belief as a team that Khemisset has the potential to be a low capital cost, high margin potash mine, which is a very rare asset in the industry.”
The study for the project revealed a Post Tax NPV10 of $795 million and an IRR of 29.8% over a 20 year mine life, however with forecasted prices from Independent Market Consultant Argus Media, NPV10 is calculated to be $1.14 billion.
Projected cash margins are 50%, EBITDA margins were calculated at nearly 64%, and post-tax cash flow was projected to be $184 million per annum, all with a considerably conservative assumption that current potash prices remain flat.
Hayden Locke, CEO of Emmerson said: “Assuming a flat US$240/tonne CFR Brazil potash price, which is close to the lowest price seen in the Brazilian market in last twelve to fifteen years - and a price which industry performance has shown is not sustainable - the Khemisset Project is still forecast to deliver average annual, post-tax, cashflows of nearly US$80 million per annum over the life of mine.”
The total pre-production capital cost of the project is projected to be $405m, including a $90m contingency: less than half the global peer average capital intensity per tonne. The project is expected to deliver c.800,000 tonnes of K60 Muriate of Potash (MOP) per annum, and have less than a 3.25yr capital payback.
Mr. Locke mentioned: “Potash is controlled by a small handful of companies and is an industry with high barriers to entry, predominantly in the form of extremely high capital cost. This means that few new players, if any, can ever enter the market.”
Earlier in the year, BHP Billiton reported that it was delaying the decision to approve its Jansen potash project in Saskatchewan until it could “enhance project economics”, looking for a partner to acquire a stake. It has already committed $3.8 billion to date on the project, with production still years away.
Hayden Locke explained: “Khemisset, which has an estimated capital intensity less than half of the global peer average, and less than a third of the average Canadian development, gives Emmerson a clear opportunity to be one of the few junior companies in the space.”
By way of background, the company’s wholly owned asset has a JORC compliant Resource Estimate of 311 million tonnes at an average grade of 10.2% K2O, with significant exploration potential.
The project benefits from a favourable location located close to existing infrastructure - high quality highways and ports that don’t usually exist close to a development of this nature and size. Furthermore, Morocco was voted the number one overall jurisdiction for mining in Africa the Mining Journal Risk Report 2018.
The UN has estimated the world needs to produce 70% more food by 2050 to meet the demands of a fast-growing population and a burgeoning middle class seeking a higher protein diet. Yet at the same time it expects arable land available per capita will fall by 15% in that same time frame.
The resource, Muriate of Potash, is the most widely used and cheapest source of potassium, and is seen as vital in improving the efficiency of farming. According to Align Research, there is a huge unrealised market for fertiliser in Africa which remains the most underfertilised continent in the world.
The next step for Emmerson is to complete drilling, deliver a bankable metallurgical testwork programme. The company stated it had a cash balance of £3.8 million, enough to fund them through until Q1 2020 and meet the de-risking milestones ahead.
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