Emmerson reveals upgraded resource estimate for Khemisset

(Sharecast News) - Morocco-focussed potash development company Emmerson announced an upgraded JORC-compliant mineral resource estimate for its 100% owned Khemisset Potash Project in northern Morocco on Monday, delivering a 72% increase in total resource to 537 million tonnes of potash with an average grade of 9.24% potassium oxide.
The London-listed firm described Khemisset as a "world class development-stage potash project" which, based on its scoping study, has a minimum mine life of 20 years, "industry-leading" capital cost to production, bottom quartile delivered cost to customer, set to deliver average annual EBITDA of $236m and a post-tax net present value with a 10% discount of $1.14bn.

It said 70% of the resource was upgraded to a higher confidence indicated category, adding that the in situ value of the contained potash within the mineral resource estimate was approximately $30bn.

The board added that a "significant" resource upside remained, with the basin remaining open towards the northeast, and the economic breakeven cut-off grade "substantially below" the cut-off used to define the updated mineral resource estimate, which implied significant further upside potential to the estimate and the mine life.

Emmerson said the project's development was continuing to progress "exceptionally well", with feasibility on track for completion in the first half of 2020.

It added that it was examining the potential for a second phase expansion to increase production by 50%, which would "substantially improve" its economics, and added that it examining the potential to convert some muriate of potash (MoP) to sulphate of potash (SoP), which could "significantly enhance" economics for the company.

"Following a successful drilling campaign, it is pleasing to see the overall mineral resource estimate tonnages increased by over 70%, to more than half a billion tonnes," said chief executive officer Hayden Locke.

"The recalculation of the economic cut-off grade for Khemisset shows the project can be profitable to a grade as low as 5.2% potassium oxide and, as a result, we continue to believe there is strong potential to increase the mine life at Khemisset.

"The updated mineral resource estimate is a further validation of the world class prospects for the project."

Locke added that the company was continuing to make "exceptional progress" on the feasibility study, and remained confident it would be delivered within its target timeline of the first half of 2020.

"We expect to release Individual components of the feasibility study as they are completed over the coming months, which we believe will continue to support the view that Khemisset is among the lowest capital cost potash projects globally.

"The significant proportion of the mineral resource estimate within the higher confidence Indicated resource category will support our ongoing discussions with various potential debt financing institutions which included an indicative proposal for up to $230m of project finance debt from a major European commercial bank.

"The updated mineral resource estimate represents a significant milestone for the company, and I would personally like to take this opportunity to thank our entire team, and especially our independent consultants, Golder Associates UK, for their professional approach to the work completed on the Khemisset Project."

As at 1052 GMT, shares in Emmerson were down 1.3% at 3.8p.