Emmerson Regulatory News (EML)

Emmerson PLC / Ticker: EML / Index: AIM / Sector: Mining

21 November 2022

Emmerson PLC ("Emmerson" or the "Company")

Potash and Salt Offtake MOUs with Keytrade AG and Hexagon Group AG

Emmerson, the Moroccan-focused potash development company, is pleased to announce the signing of non-binding Memoranda of Understanding ("MOUs") relating to the offtake of potash and salt to be produced at its Khemisset Mine in Morocco ("Khemisset"), as follows:

· With Keytrade AG for the sale of a minimum of 245,000 metric tonnes per year of Muriate of Potash ("MOP") for a period of 10 years; and

· With Hexagon Group AG for the sale of a minimum of 245,000 metric tonnes per year of MOP and a minimum of 500,000 metric tonnes per year of salt product ("NaCl"), both for a period of 10 years.

The MOUs are non-binding and set out the key terms for subsequent formal bankable offtake agreements.

The prices for MOP (minimum of 60% K2O) and NaCl are expected to be derived from the market or as quoted in independent expert reports, such as Argus Research, averaged to form a monthly price in the month prior to bill of lading, and after deducting a marketing fee. 

Importantly, the MOUs contemplate "take or pay" provisions whereby the offtakers will market the product to end users and compensate the Company for any quantities not taken by end users or otherwise sold by the offtakers. 

The MOUs envisage that all MOP and salt products sold will be delivered Free On Board (currently Casablanca), unless otherwise agreed by the parties. They are also non-exclusive, and Emmerson will continue to engage in ongoing offtake discussions with other wholesale customers, distributors, and global traders for the remaining production capacity from Khemisset.

Graham Clarke, CEO of Emmerson commented: "I am delighted to present our first offtake MOUs to the market as we continue our process of advancing towards construction readiness at Khemisset. These MOUs are an important milestone in this process and will account for more than 65% of MOP production and 50% of salt production.  Underpinning a significant proportion of future potash and salt sales on a take or pay basis is a strong endorsement for the project, de-risking the development for debt and other financiers. They are also a clear signal of the critical importance of potash in the context of international food security, and we look forward to advancing further negotiations as we continue to lay the foundations for establishing Africa's first commercial potash mine."

Keytrade AG is a large Swiss based agri-trader that was first established in 1997. Keytrade AG has substantial experience working with all types of suppliers, distributors, retailers, and end-users across all fertiliser products and is active in more than 115 countries across the globe with key offices in Zurich, Madrid, Tampa, São Paulo, New Delhi, and Beijing amongst others.

Hexagon Group AG is commodity trading company established in Switzerland in 2018. The company specialises in trading, marketing, and logistics in the area of bulk fertilizers and commodities for a wide range of different industries. Hexagon Group AG, together with its subsidiaries, has 19 offices worldwide and its core operations in fertilizers are concentrated in Asia, Europe, and the Mediterranean countries including North Africa.

**ENDS**

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Notes to Editors

Emmerson is focused on advancing the Khemisset project ("Khemisset" or the "Project") in Morocco into a low cost, high margin supplier of potash, and the first primary producer on the African continent. With an initial 19-year life of mine, the development of Khemisset is expected to deliver long-term investment and financial contributions to Morocco including the creation of permanent employment, taxation, and a plethora of ancillary benefits. As a UK-Moroccan partnership, the Company is committed to bringing in significant international investment over the life of the mine.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking second in the world in terms of tonnes produced annually, and the development of this mine is set to consolidate its position as the most important fertiliser producer in Africa. The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K2O, with significant exploration potential, and is perfectly located to support the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. The need to feed the world's rapidly increasing population is driving demand for potash and Khemisset is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated the Project has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. This delivered outstanding economics, including a post-tax NPV8 of approximately US$1.4 billion using industry expert Argus' price forecasts, and the spot price for granular MOP fertiliser has since risen, further enhancing the valuations.