Emmerson Regulatory News (EML)

Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining

10 December 2019

Emmerson Plc ("Emmerson" or the "Company") 

Potential for Government Subsidies to Cover Up to 10% of Total Project Capital Cost

Emmerson Plc, the Moroccan focused potash development company, is pleased to announce that it has received confirmation that direct cash subsidies and further tax concessions are available to it, via negotiation, under a formal investment convention agreed with the Moroccan Government for its 100% owned Khemisset Potash Project in Northern Morocco ("Khemisset" or "the Project").

Highlights

·; Moroccan Government incentives could contribute up to 10% of the Project's total capital expenditure

o Covers several potential areas including investment in external infrastructure, land acquisition and training costs

o Potential for up to US$40 million[1] provided by the Government in the form of direct subsidies

·; The Project is eligible for several additional fiscal concessions and tax breaks, which are expected to enhance its post-tax cash margins

·; Emmerson will also benefit from invaluable formal support from Government agencies in all project implementation processes in Morocco

·; Negotiations with the Government for an investment convention to start once the full feasibility study is complete by the end of H1 2020

·; Formal convention to be signed pursuant to obtaining a mining licence

Hayden Locke, CEO of Emmerson, commented: "As we progress in delivering the technical de-risking milestones for Khemisset, we have initiated discussions with Moroccan Government bodies to gain an understanding of the policies in place, which will support the Project's development. Based on initial discussions, we have concluded that the Project is eligible for an investment convention with the Moroccan Government; this provides for potential Government contributions towards up to 10% of total Project capital expenditure in the form of subsidies and additional tax concessions.

"These incentives are expected to further enhance the already outstanding economics of the Project. They follow the recent Preliminary Economic Assessment for our Sulphate of Potash project, which will also lift margins significantly, taking the average potential EBITDA across our portfolio of assets to over US$300 million per annum and the total post tax NPV10 to in excess of US$1.8 billion[2].

"We continue to examine various options to optimise the industry leading capital cost Khemisset Potash Project's potential as we advance it towards completion of full feasibility, which we are confident will be delivered in the first half of 2020."

Details

Emmerson continues to advance its Khemisset Potash Project located in Northern Morocco, which it aims to develop into a low capex, high margin mine. To this end, the Company is exploring all opportunities aimed at further enhancing the Project's already robust economics.

The Moroccan Government has an incentives programme established to promote national and foreign investments as well as the export of goods and services; this is in addition to the five-year tax holiday already provided under the Moroccan fiscal regime for companies exporting product from Morocco. The programme includes a detailed investment convention between the investor and the Government, which is available for projects with a total investment profile greater than 100 million Moroccan Dirhams (c. €10 million), and covers key areas for potential contributions by the Government including:

·; Up to 10% of the total project investment value, on eligible items, can be funded as subsidies by the Moroccan Government including:

o Up to 5% of total investment for external infrastructure (e.g. power connection, road access, water intake, used water treatment and port upgrades)

o Up to 20% of land acquisition cost; and

o Up to 20% of employee approved training costs

·; Level of funding by the Government and its agencies to be negotiated with reference to a project's scale and its expected socio-economic impacts

·; Tax concessions including:

o Exemption of import tax duties on plant, equipment, and mining machinery

o A three-year VAT exemption on equipment and plant purchases

o Reduced Corporate Tax Rate of 17.5%, down from 31%.

Accordingly, having held a series of meetings with several Moroccan Government bodies, the Company has received confirmation that direct cash subsidies and further tax concessions may be available to it, via negotiation, under a formal investment convention. An investment convention will be negotiated between the Moroccan Government Agencies and Emmerson prior to being presented for approval by cabinet of the Prime Minister; negotiations with Government for an investment convention will commence once the full feasibility study is complete H1 2020.

Under the investment convention, the Company would also benefit from invaluable formal support from Government agencies in all project implementation processes in Morocco.

Any reduction in the Project's already industry leading, low capital cost potash project would further simplify the financing of Khemisset and provide a substantial improvement to its already world class project economics, which includes a life of mine average annual EBITDA of US$236 million and a post-tax NPV10 of US$1.14 billion2. It also reaffirms the strong administrative support and financial assistance available from Moroccan Government agencies for development of major projects, such as Khemisset, and their associated infrastructure.

Notes to Editors

Emmerson's primary focus is on developing the Khemisset Potash Project located in Northern Morocco. The project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K2O and significant exploration potential with an accelerated development pathway targeting a low capex, high margin mine. Khemisset is perfectly located to capitalise on the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. This unique positioning means the project will receive a premium netback price compared to existing potash producers. The need to feed the world's rapidly increasing population is driving demand for potash and Emmerson is well placed to benefit from the opportunities this presents.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.