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LONDON (Alliance News) - Emmerson PLC on Tuesday said a scoping study of its Khemisset project in northern Morocco indicates potential for a low capital cost and high margin potash mine.
The scoping study gave a post tax net present value of USD795 million and an initial run rate of 30% over a 20 year mine life. The study assumes a flat real price of USD360 per tonne.
Including forecast figures from independent market consultant Argus Media, the net present value rises to USD1.14 billion over a 20 year mine life.
The study projects that all-in sustaining delivered cost to all Emmerson's target markets will be in the bottom quartile.
Projected cash margins are also expected to be in the top quartile, according to consultant Argus FMB.
Average, steady state post-tax cash margins are expected to be 50% based on current potash prices. Moreover, average, steady state earnings before interest, taxation, depreciation, and amortization margins are predicted to be nearly 64% at current prices.
Average steady state post-tax cash flow is expected at USD184 million a year assuming a flat, real potash price of USD360 per tonne.
Given this, the capital payback period for Khemisset is expected to be less than three and a quarter years.
Total pre-production cost for the project is forecast at USD405 million including USD90 million of contingency.
"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," said Emmerson Chief Executive Hayden Locke.
"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," Locke added.
The next steps for the potash mine include completing drilling, building a bankable testowrk programme, and commencing option and feasibility studies. At present, Emmerson's cash balance stands at GBP3.8 million, which is sufficient to fund the firm through to the first 2020 quarter.
Shares in Emmerson closed down 3.5% at 3.42 pence on Tuesday.