Member Info for Ideas

Interesting parallel in Sound Energy’s progress, different markets but a notable difference in tie ins with the country’s leaders (none in our case):

- Sound Energy Plc got its EIA approval for gas wells around six months after meeting with the ministry and presenting its EIA for scrutiny. ??- It did an offtake agreement with Afriquia Gas, a national leader that also took a 9.8% equity stake in SOU and sits in a group of companies run by the ex-Minister of Agriculture, and current President of Morocco.

Today it’s announced a 12 month exclusivity for a bank in which the King of Morocco reportedly has a large stake (credit: @Emmerson_Potash).

Our initial approach seemed to be to go to the best globally, we’ve now seemed to twig that we need to appoint local suppliers to oil the wheels but there is still a lot of talk about UK trade partnerships and coming and interacting with our UK reps.

I wonder if we were at some stage naïve, perhaps engage less in Jubilee celebrations and go straight to the Moroccans and ask what deals are needed to unlock the path forward.

Clearly the business is best placed to know this already and what to do but I wonder if initially we might have been standoffish towards the authorities and thought we’d go our own way, and what (if any) significance there is in Graham saying 18m ago or so that OCP weren’t interested (then) and what was that back story.

If any parallels can be drawn, and perhaps none properly can, it seems to be that the value needs to flow through the government, etc. to get things moving.

Defo the tone of the slide decks has changed a lot recently to be far more about what Morocco gets, so there must be something underlying that when a lot of these are pitch/funding decks rather than PR.

PR and funding slides seem to have merged. Also they talked about Rupert not being in the ESIA discussion (ages ago) but on something else ‘which would be very good for the company’ (or similar), so I think you’re right there could be something in that.

A while back, they started saying that it was a ‘trump card’ because a lot of people would be interested in the offtake and, by doing the ‘strategic’ deal without offtake still in hand they had that to attract presumably an industry player for future funding rounds.

Interesting it’s gone, could be coincidence, and also could be that it’s in a live deal being negotiated now. I’m working on the assumption that they must have these things largely sown up on paper. People have been in the ‘data room’ note for ages. Could be the state is withholding the ESIA as its ‘trump card’ to avoid being pipped at the post and stave off a deal with someone like BHP instead of some state actor.

Yep, as you say, they could let the investment slide if they have a better offer. I can’t recall, but don’t think they gave up a board seat, in which case will have good flexibility to think freely.

Story remains VERY good, they just need to get it out the door.

Purpose below is no more than to keep in touch with where things are.

If we cheerlead so hard that we separate from reality then its impossible (for me) to keep in touch with where things are sitting in the business. GLA (MI also).

Adding from the RNS:

https://www.lse.co.uk/rns/EML/strategic-investment-of-up-to-us4675m-5myehg1p7cpqz7k.html

“How about getting the £46 million a few weeks ago, I would say that was rather good, and certainly a 'de-risk'.”

What we ‘got’:
*************

We ‘got’ $6.75m / circa £5.5m, before expenses of probably a few hundred thousands.

That was 33 weeks ago.

‘getting £46 million’:
********************

We’ve got an agreement for $40m (roughly £32m) more, if by 30 Sept:

- we’ve RNS’d that we have all government licences and approvals for construction;

- ALL of the debt, equity and any other components of the project finance for construction is signed (not heads of terms) AND we’ve satisfied all of any conditions precedent for draw-down for each of those;

- we’ve delivered the strategic investor a full "Definitive Feasibility Study" already signed off by the banking syndicate providing the Project Finance; and

- the special investor has satisfied themselves that the capital assumptions are correct (i.e. the get out clause).

So coming back to the overall statement, “How about getting the £46 million a few weeks ago, I would say that was rather good, and certainly a 'de-risk'.”

What we’ve had so far is effectively a placing.

It’s great, and it is a de-risk because the £5m kept us moving forward and shows backing, but its not a true or complete picture to talk about “getting the £46 million a few weeks ago”.

For that reason, there’s a lot to do in roughly 9 weeks weeks to secure that investment, with no ‘todos’ yet ticked off. Strategic investor can, if they want, extend 30 Sept - Graham probably knows if they will or won’t but we can’t bank on that on this board.

Trying to be factual here and nothing more intended. Everyone here is looking forward to that RNS and the closer time gets the more it would look like that would need to have fewer parties involved to all get done by end of Sept. Hopefully, we get a cure-all OCP and Royal family RNS or the papers across multiple parties are being signed off now.

P.s. I don’t see talk of a ‘definitive’ feasibility study in the Annual Report RNS, so if anyone knows about that it would be helpful to hear. It must be additional to the 2020 feasibility study because that was already available when the condition for a ‘definitive’ feasibility study was written out.

Alright, maybe my geography’s a bit broad. Ha ha. Yeah, do agree he’s very on it and not much gets past.

The business case is absolutely bang on, especially with OCP’s expansion plans

https://www.mei.edu/publications/morocco-counters-russias-weaponization-food-energy-nexus

How can the Chairman be left saying it’s taken longer than expected in a global food crisis. Taking Graham at his word that ministers are on board then that only leaves the King if I’m right.

If he thinks it’s a strategic asset and shouldn’t lie at least in majority in foreign hands, does that leave us with a buy out?! [75]p in august would be pretty okay!

What you say is true that there is too much bickering.

I’m not sure there is or is not too much moaning because people will have own views on that and it will vary with risk tolerance - we’re in the dark for a while on milestones moving bac, the price growth has come from external factors (war and paid for marketing reports) - there are fair minded reasons to grumble if people feel concerned. Even the strategic investment was said to be opportunistic and not what they originally had in mind - these things just happen.

What I can say is that the hyperlink you posted to the paywalled practical law website on mining laws, is conspicuously the same hyperlink shared by the Peter (@emmerson_potash) twitter account, the Lloyd twitter account before it and before that by Lloyd Philips on Twitter and under the pseudonym ‘Makes’ on here.

I’ll just say that the Peter account does a fair bit of ramping, which is no problem and adds good value so long we understand and appreciate that’s the editorial context.

Is “Graham … a superb CEO”? I don’t know. I don’t know that he’s not, I just haven’t seen that he is. It’s genuinely a while since we’ve passed a milestone (and strategic investment looks like it came from the Far East where Hayden is more so than Graham, if we had to call it).

Ultimately, it’s all speculation until we get the next steps complete so we can’t make too much 'click bait' either up or down.

Khemisset is to get a new dam. No express links to Emmerson, the potash process requiring water or any timeline affecting us, but FYI because water was one of the ESIA discussion points (no suggestion this dam affects or solves any water concerns for us.

The article is French and runs through Google translate okay; doesn’t say much more than that a dam is proposed.

https://lematin.ma/express/2022/barrages-projet-khemisset-marrakech/377010.html

In the summary below, the £ numbers are estimated from today and past share prices; there are no permissions to issue shares up to a given £ amount; all the permissions are in numbers of shares.

I’ve just priced up the value to add content of what I understand it means, like for like.

For info:

- AGM is earlier this year, coming forward from coming from November 21 to July 22 (after 9 mths);

- The AGM includes a new resolution to authorise the business to allot up to ~£24.6m in shares;

- Fewer shares are needed to do that comparing 400m shares (Nov 21), to 275m shares (June 22); this means that the business has stuck to its equity amount of ~£24.6m, rather than the number of 400m shares, which would allow it to allow £35.8m or an additional ~£11m new pre-authorised equity.

Current shares in issue: 915m
Power to allot further shares: 275m

We could at any time get an extra-ordinary resolution asking for power to allot more shares before the next AGM, but it seems positive for now that the Board has adjusted their power to allot down to track the share price, rather than carrying forward the same power and talking the extra wiggle room, which investors will clearly try to get as much of as they can get.

All FYI for those asking about dilution, etc.

Good to see people still moving in to take material positions, and not in the run up to annual results but on the fundamentals.

£100k+ so far today across 4-5 trades - can’t be 100% it’s the same buyer but shows conviction and the pattern of buys is there.

Yeah, all a reasonable view of the world.

We should see some movement in 3-6 weeks whatever, to account for September and, even though it’s flippant, as simple as UK/EU/US banks will want to get deal flow through before summer slow downs, etc. GLA!

….price really opens up (follow ins on from below).

Hi GW62

Yes that's right:

"Didn't the authorities ask for more information on the water consumption side of the ESIA and more work was required since?"

They asked for more info and we produced an additional study reported Sept 2021:

"The water authority discussions necessitated the production of an additional study, adding time to the permitting process that was not envisaged earlier in the year. We are pleased to say that all parties are currently satisfied with the thorough supplementary work and the final meeting with the Environmental Evaluation Committee ("EEC") (referred to in Morocco as the "Commission Regionale Unifiée de l'Investissement"), should take place in due course."

Source - RNS 30th Sep 2021

https://www.lse.co.uk/rns/EML/operational-update-khemisset-potash-project-3irvg7ss03aspyi.html

The land acquisition programme is interesting me at the moment, because it has resurfaced with new language - nine months ago it was in final stages and, 1 week ago, it will soon start with a second phase ending October.

I'm looking at how these sit together, as they seem conflicting. For example, if if they do contradict, is that a competence or comms issue within in business, or is the business goinga legitimate estimate and being run around in regulatory approvals? Who knows but it’s interesting to work through.

References to ‘habitats’ have now appeared - could that mean the ESIA depends on the land being acquired, or plan being finalised in October because it will then be what is being 'signed off'? (I.e. without that plan, they don’t know the full treatment plan and therefore cannot sign off - conceptually that would be reasonable).

If the scope of land acquisition has increased, who’s the money going to (is it state linked as with some of the contractors) and does it tell any wider picture of the business being strung out.

Fully support BristolBlue’s view that we will likely have to scratch backs, so the question for me is have ‘we budgeted time and money for that?’ and, with possible signs we may not have fully factored this in (e.g. multiple retrenched milestones), whether we have a plan to keep our strategic investor on board past September if we miss our funding and permit conditions precedent? (Reason being that the deal by default falls away if those conditions precedent aren’t met)

Hopefully, that plan is kicking off, the investor clearly knows the deal and its simply not in the business’ interests to share all that with us.

However, I can see some advantage to the state in that scenario, allowing OCP to then swoop in. We'd presumably have to do another equity raise if we miss all that and have to start paying out on the CLNs do that would be the impact for us, here I think.

Any positives we can announce - especially debt with access to an early draw down would be amazing.

A serious one, but the hopefully that last really tricky hurdle for the business to navigate before the share pri

Why do you say it’s coming “any day now” Dshox?

I saw similar on twitter and may have missed it but haven’t see anything like that from the company??

“Looking forward to "any day now" catalysts - final env permit / ESIA, OCP offtake and financing”

Are you saying the RNS says that the last permit will land in June DShox?

Anyone keen to make a prediction to spice things up in the last hour before RNS?!

Maybe good business to lock in a 50% uplift from, let’s say, 6p.

I do agree it looks more like individual moves than a market view and, tbh, speaks to where we are; that someone either buying in or going out can move things.

Also work both ways. Some of the 6-9p gains seemed to come in the same way, so was positive from that side.

News now due within three business days. Interesting that people should sell into that.

I can’t say that people didn’t sell on account of crypto margin calls but I can say that the same Twitter poster has said the same on previous occasions.

https://twitter.com/Emmerson_Potash/status/1523658361199378434

Very much hope the business is racing to get something signed to announce with final results.