(Alliance News) - Emmerson PLC on Monday said production from the Khemisset project could come at a significant lower cost than usual.
Unveiling a preliminary economic assessment for the potash project, Emmerson forecast an all-in sustaining cost to the US sulphate of potash market of USD411 per tonne, "significantly below" the dominant producer in the US market currently.
Khemisset, from which Emmerson wants to produce sulphate of potash for the fertiliser market, is in northern Morocco.
The project has a post-tax net present value of USD411 million with an internal rate of return of 52.1% over an initial 20-year project life. This assumes a flat real price of USD675 per tonne, a 10% discount to the average price in the last five years in the US.
London-based Emmerson's study, which looks at the use of a "very well understood" Mannheim facility, would give average annual production of 240,000 metric tonnes of sulphate of potash, generating average earnings before interest, tax, depreciation, and amortisation of USD74 million per year.
There would be a "very low" pre-production cost of USD97 million, based on three quotes given by companies providing Mannheim technology.
This study excludes any potential by-products from Khemisset, which could include de-icing salt, a product the company said in July could be produced from the project. Hydrochloric acid is another possibility, as is animal feed.
Chief Executive Hayden Locke said: "The preliminary economic assessment has shown the production of sulphate of potash via the Mannheim process, in the port of Jorf Lasfar in Morocco, has the potential to deliver a significant uplift in margins to Emmerson, taking the average, potential Ebitda across its portfolio of assets to over USD300 million per annum.
"Emmerson has engaged with multiple reputable Mannheim manufacturers to derive its capital and operating cost estimations giving a high degree of confidence in the numbers presented. This shows a very low capital cost and highly cash generative sulphate of potash project."
"Importantly, due to the locational advantages of operating in Morocco, the sulphate of potash project is projected to have an all-in-sustaining delivered cost to customer in the US sulphate of potash market of USD411 per tonne, which is approximately 35% lower than the incumbent US sulphate of potash producers operating costs, providing a strong and sustainable competitive advantage for the delivery of sulphate of potash into this market," Locke continued.
"The feasibility study for Khemisset continues to progress well, and we expect continuing news flow for the remainder of this year and early next year as we progress towards delivering the study in the first half of 2020."
Shares were 6.2% higher on Monday afternoon in London at 3.77 pence each.
By George Collard; georgecollard@alliancenews.com
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Emmerson (EML)