Emmerson making rapid progress on low-cost potash project

What does the company do?

Emmerson PLC (LON:EML) is developing the Khemisset potash project in northern Morocco.

A feasibility study this summer confirmed the project as a low capex, high margin potash mine with outstanding economic metrics.

The company has been led by chief executive Graham Clarke since the start of July.

Clarke, who has 26 years’ experience in underground potash mining, brings a wealth of experience in building and operating teams to deliver large, complex projects in the fertiliser industry.

Details on the Khemisset potash project

The feasibility study valued the Khemisset project at US$1.4bn on a post-tax net present value basis, and estimated an internal rate of return of 38.5% over an initial 19-year mine life.

This initial mine life is based on a mine plan that so far addresses only 43% of the total mineral resource, which comprises a total of 537mln tonnes with an average grade of 9.24% K2O.

Khemisset’s pre-production capital cost for potash production only is estimated at US$387mln.

Significantly, that marks the project among the lowest-cost projects in the fertiliser space and puts it at less than half of the global peer average for capital intensity.

The future economics estimate underlying profits (EBITDA) above US$300mln per year, which suggests less than 2.6-year capital payback.

For an additional US$24mln of capital, a salt plant could be added to the project to produce de-icing salt for sale into the US east coast market.

This envisages peak production at 810,000 tonnes per year for Khemisset as a whole, producing agriculture sales grade (k60) muriate of potash (MOP) plus 1mln tonnes a year of de-icing salt.

The average steady-state production rate is anticipated at 735,000 tonnes per year of K60 MOP and 1mln tonnes of de-icing salt.

What’s been happening

Emmerson’s interim results in September showed that it made a £315,000 loss in the first half of 2020 and ended June with £793,000 of cash and equivalents in the bank.

In July, the company raised £1.72mln via an oversubscribed share placing and in September said it was engaging with potential strategic partners, debt providers and anchor investors.

“This key period for Emmerson has resulted in a number of significant developments that have moved us ever closer to production while enhancing shareholder value,” Clarke said in September.

This phase involves building out operational capability, advancing additional technical work and further de-risking.

The company is making progress with the permitting process and said it is on-track for the main permits to be put in place during the first half of 2021.

Clarke added: “We are progressing permitting activities, technical reviews and optimisation of the declines and mine planning, further process work in parallel with working with our advisors on multiple potential funding routes.”

Other work streams are in progress to further de-risk the project and provide confidence in its finance and due diligence processes, including geological work to prepare for and finalise the scope of general site investigation as well as a further seismic survey and additional drilling to further prove out early mining blocks.