Emmerson PLC / Ticker: EML / Index: AIM / Sector: Mining
24 May 2024
Emmerson PLC ("Emmerson" or the "Company")
2023 Financial Results
Emmerson, the Moroccan-focused potash development company, is pleased to announce its 2023 audited results.
2023 Highlights:
- Publication of a Scoping Study for a novel processing route developed by the Company, which has transformed the environmental and economic credentials of the Khemisset Project
- Obtaining approval of Environmental and Social Impact Assessment ("ESIA") remains the priority - updated study incorporating latest optimisations submitted in
Morocco - · Fundraise in April 2024 (including oversubscribed retail offer) raised
US$2.5 million , providing the Company with additional funds to continue progressing work at Khemisset while waiting for the ESIA approval
Graham Clarke, CEO, commented:
"Throughout 2023, our primary focus was on obtaining environmental approval, and this remains our priority at the present time.
"Work undertaken during 2023 also enabled us to announce, in February 2024, the results of our Scoping Study into a new processing route which we called the Khemisset Multi-mineral Process. As previously announced, this enhancement reduces the Khemisset Project's environmental impact by cutting water consumption by 50% and by eliminating the need to dispose of brines (as well as transforming the economics of the project).
"We updated our environmental assessment to incorporate these optimisations and submitted the document during April 2024. We are currently awaiting the outcome of the latest review, following the upholding of the Company's referral which resulted in the matter being returned to the Commission Régionale Unifiée d'Investissement for reconsideration, and will provide an update as soon as we hear news."
**ENDS**
For further information, please visit www.emmersonplc.com, follow us on Twitter (@emmerson_plc), or contact:
Emmerson PLC Graham Clarke / Jim Wynn / Charles Vaughan
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+44 (0) 207 138 3204
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Liberum Capital Limited (Nominated Advisor and Joint Broker) Scott Mathieson / Matthew Hogg
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+44 (0)20 3100 2000 |
Shard Capital LLP (Joint Broker) Damon Heath / Isabella Pierre
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+44 (0)20 7186 9927
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BlytheRay (Financial PR and IR) Tim Blythe / Megan Ray / Said Izagaren
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+44 (0) 207 138 3204
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Notes to Editors
Emmerson is focused on advancing the Khemisset project ("Khemisset" or the "Project") in
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. Updated financial estimates published in February 2024 indicated a net present value of US$2.2 billion , with an internal rate of return of approximately 40%.
CHAIRMAN'S STATEMENT
It gives me great pleasure to present the 2023 financial results for Emmerson PLC ("Emmerson" or "the Company").
During 2023 and into 2024, our key priority has remained securing the approval of the Environmental and Social Impact Assessment ("ESIA") for Khemisset. Whilst we have not yet received this critical approval, Graham and his team have used this extended period of time constructively, most notably with the development of the innovative Khemisset Multi-mineral Process ("KMP"). It is my belief that this will be seen as a seminal period for the Company, once the true environmental, commercial, and financial benefits of KMP are more widely recognised.
In early April 2024, we submitted the latest, and we hope final, version of the ESIA to the Commission Régionale Unifiée de l'Investissement (the "CRUI"), the body responsible for granting environmental approval.
We very much hope that we are now at the final stages of the approval process, which has taken far longer than initially envisaged, and involved considerable additional work and iterations.
Environmental approvals in the mining sector have become more demanding in recent years, with an increasing focus on Environmental, Social, and Governance ("ESG") issues from both investors and regulators. We have never shied away from our obligations in this area, incorporating the highest possible standards of ESG into our design, and into our culture, from the outset.
In
In the context of this challenge, during 2023 our technical teams developed an innovative new processing method which we have called the KMP. We announced the results of our scoping study into KMP on 1 February 2024, and we have now included KMP in our updated ESIA, along with various other optimisations made in the past three years to the original design.
KMP arose from the investigation into a means of cleaning and recycling brines as an alternative to Deep Well Injection ("DWI") and resulted in a solution that not only eliminates DWI entirely, but in so doing reduces water consumption by 50%. We believe that the KMP can unlock significant value in other potash deposits and have filed a patent over the process.
The KMP brings more than environmental benefits, considerable though these are. It also transforms the Project's economics, by producing two new saleable fertiliser products: struvite and vivianite. The existing market for these is relatively small, as current production levels are modest. However, there is a huge potential demand for both products, as they are essentially slow-release multi-nutrient fertilisers, containing macro-nutrients phosphates and ammonia, and the micro-nutrients magnesium and iron in the case of struvite and vivianite respectively.
As part of the scoping study into KMP, we updated our financial estimates for the Project, based on the original design, as well as based on a design incorporating the new process route. Cost inflation since the 2020 Feasibility Study was mitigated by some efficiency savings, and the revised estimates for the original design held up well. However, the design incorporating KMP has far superior economics, with a Net Present Value at 8% ("NPV8") of
In what have been challenging financial markets, with modest potash prices, it is important that new greenfield projects stand out. Khemisset incorporates an innovative, patent-pending processing method, which allows mixed potash ore types to be processed in a highly efficient manner, creating multi-nutrient fertilisers as by-products. No other potash project in the world can make such a claim, nor be as efficient with freshwater usage.
Furthermore, Khemisset has an advantageous geographical location, being located close to the Atlantic ports of
Obtaining our environmental approval has taken time, and we are extremely grateful to our shareholders for their patience. I was delighted that Global Sustainable Minerals and Gold Quay Capital supported our recent fundraise so strongly and that we continue to enjoy a constructive partnership.
Khemisset is an outstanding potash development project and the benefits of KMP leave Emmerson well positioned to become a uniquely sustainable source of multi-nutrient fertiliser products, in a country which is already a major global fertiliser hub, and a gateway to the continent with the most identifiable growth over the medium term.
I look forward to updating you on our progress in 2024, which we hope will be a transformational year for Emmerson.
James Kelly
Chairman
23 May 2024
CHIEF EXECUTIVE OFFICER'S STATEMENT
During 2023, the Company faced challenges, notably in respect of the progress towards obtaining the environmental approval, but was also able to develop a new, innovative processing route that not only dramatically improves the environmental credentials of the Khemisset Project, but also transforms its economics. We believe Khemisset is a genuinely unique project that will produce, from one processing plant, fertilisers containing potash, phosphates, and ammonia, as well as magnesium and iron.
The ESIA Approval
The primary focus for the Company in 2023 remained obtaining the approval of its ESIA.
Some of
Taking into account these concerns, the Company has invested significant efforts in this area, engaging in iterative consultations with authorities. The work has led in many cases to concrete improvements such as switching to dry stack tailings instead of wet, and sourcing grey water from the Khemisset Waste Water Treatment Plant, rather than drawing from nearby rivers or reservoirs as had previously been discussed, in addition to the substantial improvements by the KMP.
In July 2023, we announced that the CRUI had been unable to approve our ESIA, and the matter was referred up to the national level for review by the Commission Ministérielle de Pilotage (The "Ministerial Committee"). This Committee is a national body chaired by the Head of Government and is composed of a number of ministers in government.
The Ministerial Committee was unable to sit before late January 2024; government priorities were impacted in the intervening period by more pressing matters such as the tragic earthquake in September 2023.
Emmerson has always maintained that the Khemisset Project has adhered to the highest international standards in terms of environmental compliance, including its water use, and the responsible management of waste brines and tailings. However the Company has continued to explore optimisations to reduce further the Project's environmental footprint, and the KMP arose from this work.
In March 2024, the Company was informed that the Ministerial Committee had upheld its appeal and referred the matter back to the CRUI for reconsideration, inviting the Company to include optimisations into its latest ESIA submission.
In April 2024, the Company submitted an updated ESIA, including the optimisations from the KMP related to water usage and waste management. Although the environmental and economic benefits of the KMP are considerable (as outlined below), the changes to the processing plant are relatively modest. The elimination of equipment and infrastructure related to DWI means that the KMP results in a net reduction in capex and the overall footprint of the Project, and therefore the modifications to the ESIA were straightforward.
Khemisset Multi-mineral Process ("KMP")
During 2023, the Company began to explore innovative solutions to the management of waste brines, which, under the original design set out in the 2020 Feasibility Study (the "2020 FS"), were proposed to be safely disposed of deep underground in porous/permeable rock structures in a process known as DWI. DWI is an established process in many other projects, but was new to
In February 2024, the Company was able to announce the results of a Scoping Study which outlined a process enhancement, whereby magnesium and iron chlorides in the brines would be precipitated out as struvite and vivianite respectively, after reaction with phosphates and ammonia.
This process would then allow the brines to be recycled back into the plant, instead of disposed of through DWI. The recirculation of brines yields a number of benefits, notably a reduction in the overall consumption of raw water by 50% compared with the 2020 FS, and an improvement in potash recoveries from 85% to around 91%.
Both struvite and vivianite are slow-release multi-nutrient fertilisers, that are expected to attract a premium price above their nutrient value. Updated financial estimates completed as part of the KMP Scoping Study pointed to these new products more than doubling the NPV of the Project compared to the original design, based on relatively conservative pricing estimates from third party market consultants.
By being slow-release, struvite and vivianite also address one of the environmental challenges facing farmers applying phosphates. Most sources of phosphate are highly soluble, and susceptible to being washed away by rainfall in a process known as phosphate run-off. Not only does this result in the loss of the nutrient benefits to farmers (who either reapply or suffer lower crop yields), but it causes eutrophication of water courses, and algal blooms, which can be damaging to aquatic life.
By contrast, struvite and vivianite are less soluble, releasing their nutrients in line with demand from plants. This allows less frequent application (a benefit for farmers), while keeping the nutrient in the fields where it is needed, and not in rivers and lakes where it is not.
The KMP is at a Scoping Study level, but the changes to the process plant are relatively simple and use well-established processes. It is therefore now being adopted as the assumed production route, and while further testwork remains (particularly around crop-specific agronomic trials), it will be included in the planned updated Bankable Feasibility Study ("BFS") which will be completed once environmental approval has been obtained.
Updated Financial Estimates
As part of the KMP Scoping Study, the financial estimates for the Project, which had been last calculated as part of the 2020 Feasibility Study, were updated on two bases: the "Original Design", assuming substantially the original design (without KMP but including various other optimisations); and incorporating KMP into the process route ("KMP Process Solution").
Cost inflation which has affected all capital projects inevitably led to an increase in the capex estimate for the Project, which rose by 31% for the Original Design, and 28% for the KMP Process Solution. Updated opex estimates, including revised pricing assumptions for costs such as electricity, staff costs, fuel, and transport were also factored in.
A summary of the key financial metrics of the Original Design and the KMP Process Solution, as compared with those in the 2020 Feasibility Study, is shown below. Further details can be found in the announcement of 1 February 2024.
Parameter (real unless stated) |
2020 Feasibility Study |
2023 Updates |
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Original Design updated |
KMP Process Solution |
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Capex |
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MOP Cash Cost FOB Casablanca |
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MOP Cash Cost CFR Brazil net of salt credit |
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All-in-Sustaining Cash Cost CFR Brazil net of salt credit |
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Annual EBITDA (nominal) |
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Post Tax Cash Flow (nominal) |
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Post Tax NPV8 (nominal) |
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Post Tax IRR (nominal) |
40% |
26% |
40% |
Khemisset Basic Engineering
The basic engineering work, which commenced in 2022, was largely completed during 2023. Two engineering firms, Barr Engineering of the US, and Reminex S.A of
Financing
In 2022, the Company announced that it had signed mandates with a syndicate of international and Moroccan banks for a debt facility initially expected to be
These mandates were renewed in December 2023 for a further year. This facility will be subject to the usual due diligence and credit committee approvals, and work will commence once the ESIA approval has been completed and the BFS updated.
Other discussions with equity and royalty/offtake financiers have continued but at a background level, awaiting the ESIA approvals before full engagement is expected.
In April 2024, we announced the results of a successful share placing, bringing in gross proceeds of
In addition, we also raised
These funds strengthen the Company's balance sheet and will be used to continue our work on the KMP, the ESIA process, and for general working capital. The funds are sufficient to meet all existing obligations for over 12 months.
The further contribution from our Strategic Investors underlines their ongoing confidence in the Project. We expect them to form a key part of the construction funding package in due course, once we have received EIA approval.
Potash Market
After increasing during 2021 on the back of transportation issues during the pandemic, potash prices rose sharply during 2022 following the invasion of
By April 2024, MOP prices had recovered to around
The longer-term demand story for potash remains compelling: global population growth, changing dietary habits, and pressure on arable land usage, are all expected to increase the demand for potash, as well as other nutrients.
New sources of potash, not least the BHP Jansen project, are expected to come online in the next 5-10 years, but the most advanced of these are located in the traditional production centres of central
Outlook for 2024
The priority for 2024 is to obtain approval for our updated ESIA, incorporating the KMP optimisations, which we submitted to the Moroccan authorities for approval in April 2024.
Depending on the outcome of the next reviews, we expect to hear from the CRUI shortly thereafter. In view of the level of optimisations now incorporated into the ESIA, we very much hope that approval will be forthcoming soon.
Upon receipt of this approval, we will move forwards with completing the remaining studies on the KMP, such that it can then be incorporated into an updated BFS, based on the original 2020 Feasibility Study, but including all optimisations and improvements, and revised estimates, completed in the intervening years including the workstreams completed under the Basic Engineering. Due diligence with financiers will commence in parallel as far as possible but will need to await the completion of the BFS, and review of its findings, before it can be concluded.
I look forward to providing updates in 2024.
Graham Clarke
Chief Executive Officer
23 May 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
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2023 |
2022 |
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Note |
US |