Emmerson PLC (AIM:EML) Interim Results


Interim Results for the six-month period to 30 June 2018

Emmerson Plc, the Moroccan focused potash development company, is pleased to announce its interim results for the six-month period ended 30 June 2018.


· Re-admitted to trading on the London Stock Exchange Standard Market having raised gross proceeds of £6 million in an oversubscribed placing following the successful acquisition of 100% of the share capital of Moroccan Salts Limited (“MSL”)

· Obtained full ownership of the Khemisset Potash Project in northern Morocco (“Khemisset”):

o Large potash JORC compliant Resource of 311Mt at 10.2% K20

o Expediated development pathway targeting the construction of a low capex, high-margin mine – targeted delivery of Scoping Study in Q1 2019 with globally-recognised mining engineering firm Golder Associates appointed to oversee its delivery

o Located in one of the fastest growing potash consuming countries and continents worldwide, and close to premium end markets

o Proximate to established infrastructure including a network of high-quality toll roads, electricity distribution and deep-water ports

· Proven Board and management team with extensive experience in the potash sector – strengthened further by the appointment of mining veteran Mark Connelly in July 2018

· Undertook a 60-line kilometre seismic survey over 10 lines at the Khemisset Project, with the interpretation of the collected data (reported post period end) indicating that no major faulting exists in the area, which is positive for underground mining

Post-Period End

· Significant exploration upside confirmed by the definition of a significant JORC-compliant Exploration Target of 264-616 million tonnes at an average grade of 5.0-14.0% K2O covering 87km2, potentially doubling existing mine life

· Preliminary design and cost estimates for the mine access component of the Scoping Study completed:

o Mining horizon proposed to be accessed by twin declines constructed using underground mining machinery, which can later be used in mining production

o Direct capital cost estimate of mine access approximately US$35 million including 30% contingency which equates to an estimated capital cost saving of over US$1 billion relative to average Canadian potash mine development


Hayden Locke, CEO of Emmerson, commented:

“Since re-admitting to trading in June, we have been focused on the rapid development of the Khemisset potash project. Work completed to date has supported the Board’s confidence in the potential of Khemisset to be a low-cost, high-margin mining operation. The completed seismic survey has demonstrated the project’s favourable geology and the recently completed mine design and cost estimate has confirmed that access to mineralisation can be achieved at an extremely low-cost relative to our peers. I look forward to updating shareholders further as we continue to progress towards the delivery of the Scoping Study in Q1 2019.”


Chairman’s Statement

It is the opinion of the Board that there are two vital factors to consider in potash development: the capital cost to get to production; and the location of the asset relative to high-priced customer markets. These two factors are what attracted us to the Khemisset Project and are why we believe that we have provided our shareholders with exposure to a company-making asset following Emmerson’s successful reverse takeover of Moroccan Salts Limited which is the 100% owner of the highly prospective Khemisset potash project. Khemisset already has a large JORC compliant resource and significant exploration upside, which we believe is capable of supporting a mine with greater than 20 years’ life. Most importantly, we believe Khemisset has the potential to become a low capital cost and high margin potash mine.

Potash is a bulk commodity, like coal or iron ore, and therefore project location and access to end markets is key in determining total operational costs. Khemisset’s location in Northern Morocco gives Emmerson a sustainable competitive advantage over its producing peers. Morocco is favourably located to service four key markets for potash in the Atlantic corridor including Europe, Brazil and the US as well as the rapidly growing African markets. Morocco currently has no potash production in-country but is also one of the fastest growing potash consuming countries in the world, a trend which is expected to continue.

While nearly 70% of global potash is produced in locations very remote from end markets with limited infrastructure, Khemisset is approximately 90km from Morocco’s capital Rabat, and is close to the significant regional town of Khemisset, meaning the project benefits from high quality established infrastructure including a network of toll roads, ports and an easily accessible electricity distribution grid. Looking ahead, the project’s close proximity to deep-water ports will significantly reduce transportation costs of the potash product, further improving the project’s economics, especially when comparing to Emmerson’s Canadian peers.

In line with our low capex expectations for Khemisset, we recently announced the completion of the design and capital cost estimates for the mine access portion of the Scoping Study. This showed an estimated capital cost saving, relative to our Canadian peers, of over US$1bn. Following the completion of a seismic programme, we have also been able to confirm that the project is likely to be amenable to simple, conventional, underground mining methods. These points further enhance our view that Khemisset has the potential to be a low capital cost development. The indication of limited faulting will also positively impact the overall mine design, resulting in lowered overall mining costs per tonne of ore and lower general design risk.

The project itself already boasts a large JORC Resource Estimate (2012) of 311.4 million tonnes at 10.2% K2O inherited when we acquired the asset in June. Since then we have been able to demonstrate the even larger-scale potential of this project having defined a significant JORC-compliant Exploration Target, which ranges from 264-616 million tonnes. We are looking forward to commencing drilling in 2019 with a view to unlocking this substantial potential and extending the expected mine life well beyond 20 years.

Having raised £6 million on our re-admission to the LSE in June, with a significantly oversubscribed placing which saw us add a number of high net worth investors to our register, we were able to hit the ground running in terms of development of the project. The Company is now focused on delivering a scoping study in Q1 2019 that we hope will be able to confirm the compelling technical and economic potential of the Khemisset project. We have appointed globally-recognised independent mining engineering firm, Golder Associates, to oversee this process. The completion of the various technical components of the study promises a high volume of quality news flow in the upcoming months as we release them ahead of the completion of the Scoping Study.

We believe that we are in the right location with the right project and, crucially, we are developing Khemisset at the right time. With a rapidly increasing global population, the United Nations forecasts that by 2050 our planet will have to feed an additional 2.4 billion people. To keep pace with this rapid growth, worldwide food production will have to increase by an estimated 60-70% and this will be impossible without the utilisation of fertilisers. We are targeting the production of muriate of potash (“MOP”), which is the most important potassium bearing fertiliser product in the world, accounting for roughly 95% of global demand. As demand increases it is anticipated that this will continue to place positive pressure on the potash price which has seen a significant improvement in the last 12 months. Regardless of this positive momentum, the Board is confident that Khemisset has the potential to be economically viable even if potash prices defy expectations and return to recent low levels.

Not only do we have a project that ticks the boxes and has garnered strong local support, demonstrated at the very well attended stakeholder day we hosted in Khemisset, but we also have a fantastic team in place to deliver on our objectives. In July, we bolstered our already strong Board of Directors with the appointment of mining industry veteran Mark Connelly as Chairman of Emmerson. He has been instrumental in the development, construction, delivery and commissioning of multiple large-scale mines in Africa and has worked with our CEO Hayden Locke at Papillion Resources, taking it from a small cap company right through to its sale to B2Gold in 2014 for over US$600 million. We are delighted to have him on board and look forward to working with him as we progress Emmerson up the development curve and accelerate towards production.

I would like to take this opportunity to welcome our new shareholders and thank them, as well as our existing shareholders, for their support of Emmerson. This has been a transformational period for your Company, and with an exciting project in tow with high-impact newsflow expected in the near-term ahead of the delivery of our Scoping Study I look forward to updating you further in the coming months as we deliver on our defined development path at Khemisset.



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