Emmerson Regulatory News (EML)

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

26 September 2022

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

Renewal of Strategic Investment Commitment and US$6.0 million Equity Placing & Retail Offering

Emmerson, the Moroccan focused potash development company, is pleased to announce it has reached agreement with Global Sustainable Minerals Pte Ltd ("GSM") and Gold Quay Capital Pte Ltd ("GQC") (together the "Strategic Investors") to extend the commitment period for the previously announced US$40.0 million convertible loan note subscription to 30 September 2023, providing continued cornerstone financing support for the development of the Khemisset Potash Project ("Khemisset" or the "Project").

In addition, the Company is pleased to announce that it has entered into a subscription agreement (the "Subscription Agreement") with GSM whereby GSM will make an immediate equity investment of US$6.0 million at a price of 6.0 pence per new ordinary share of nil par value in the capital of the Company ("Ordinary Shares") (the "GSM Subscription").

The Company is now funded to complete basic engineering work, remaining permitting and project financing processes through to a construction decision.

To enable the Company's existing shareholders to participate on the same terms as the GSM Subscription, the Company intends to make an offer of Ordinary Shares at a price of 6.0 pence per Ordinary Share available on the REX platform (the "Retail Offer"). A separate announcement will be made by the Company shortly regarding the Retail Offer.

Highlights

• US$40.0 million Convertible Loan Notes commitment from strategic investors GSM and GQC extended by 12 months to 30 September 2023, reconfirming a key component of Khemisset's construction financing plan

• In consideration for the extension of the Convertible Loan Notes commitment, the Company has issued 50,000,000 warrants to GSM, exercisable at a price of 8.2 pence per share until 23 September 2023 (the "New Warrants")

• Equity subscription for US$6.0 million (approximately £5.4 million) at a price of 6.0 pence per Ordinary Share, a discount of 8% to the 30-day VWAP and a premium of 9% to the share price at market close on 23 September 2022

• Retail Offer on the same terms as the GSM Subscription, open to the Company's existing shareholders

• Emmerson now funded for remaining technical and other workstreams to deliver Khemisset through to construction decision and finalisation of project financing, currently expected to be during H2 2023

• Khemisset represents a world class development project, technically de-risked and with strong cornerstone investor support, ready to deliver into strong global potash markets

• Strong expressions of interest received from international and Moroccan lending banks, as well as development financial institutions and other financing counterparties, expected to underpin attractive construction financing package

Graham Clarke, CEO of Emmerson commented: "I am very pleased with the progress that the Emmerson team have made at Khemisset in recent months, working with our Moroccan partners Reminex. I am particularly delighted to be able to announce the continued support from GSM and GQC. This further investment from our strategic investors demonstrates their continued commitment to the Khemisset project and their confidence in Morocco. Emmerson is funded for all anticipated technical and working capital requirements. This is a world-class potash project with huge potential and I look forward to working with a range of Moroccan partners to take it to the next stage. In view of the strong interest we have received from banks and other investors keen to invest in this exciting Moroccan venture, we expect to pull together the full financing package for the construction phase rapidly, once the remaining environmental approvals have been received."

Background

On 10 November 2021 the Company announced a strategic investment of up to US$46.75 million by GSM and GQC for the development of Khemisset, comprising an equity investment of US$6.75 million and a subscription for up to US$40.0 million of convertible loan notes with a conversion price of 8.2 pence per share and using a GBP: USD exchange rate of 1.375 (the "Convertible Loan Notes"). The subscription for the Convertible Loan Notes was subsequently approved by shareholders at a general meeting held on 6 December 2021.

In conjunction with the subscription for the Convertible Loan Notes, GSM and GQC were issued 82,391,714 warrants to subscribe for new Ordinary Shares at a price of 8.2 pence per share, expiring 6 December 2022 (the "CLN Warrants").

Draw-down of funds under the Convertible Loan Notes is subject to satisfaction of conditions precedent, to be satisfied by 30 September 2022 (the "Long Stop Date") including, inter alia:

(i) the Company obtaining all requisite Government licences and approvals for the construction of the Project; and

(ii) the Company having signed definitive agreements and satisfied all conditions precedent for the draw-down of all project finance (debt, equity and other components) for the funding of the Project.

As these conditions precedent and others (see 10 November 2021 announcement for full details) will not be satisfied by the Long Stop Date, the Company has engaged with the Strategic Investors to extend their financing commitment, which is seen as a key component of the expected financing package for the Project's construction financing.

Extension of Convertible Loan Note Financing Commitment

Pursuant to a deed of variation (the "Variation Deed"), the Company, GSM and GQC have agreed to:

(a) extend the Long Stop Date for the Convertible Loan Notes subscription by 12 months to 30 September 2023, maintaining the cornerstone financing commitment through the remaining permitting and project financing processes;

(b) extend the expiry date of the CLN Warrants by 12 months to 6 December 2023; and

(c) amend the GBP: USD rate for the Convertible Loan Notes conversion price from 1.375 to 1.227, reflecting the significant weakening of the GBP against the USD.

The Company considers the overall investment by GSM and GQC to be in the best interests of the Company and has therefore agreed to seek the approval of the UK Panel on Takeovers and Mergers and independent shareholders for a waiver of the requirement for GSM and/or GQC to make a mandatory offer for the shares of the Company as a result of GSM and/or GQC exercising their rights under the Convertible Loan Notes, CLN Warrants and the New Warrants (with such waiver limited to a maximum total combined shareholding of 40 per cent).

In consideration for the extension of the Convertible Loan Notes commitment, the Company has issued the New Warrants to GSM, exercisable at a price of 8.2 pence per share until 23 September 2023.

The GSM Subscription

Pursuant to the Subscription Agreement, GSM has agreed to subscribe for 89,285,714 shares (the "Subscription Shares") at a price of 6.0 pence per Ordinary share representing aggregate proceeds of US$6.0 million before expenses (based on an agreed exchange rate of 1.12). 

Completion of the GSM Subscription is conditional upon the admission of the Subscription Shares to trading on the AIM Market of the London Stock Exchange ("AIM") and the Subscription Agreement not having been ‎terminated. For the avoidance of doubt, the GSM Subscription is not conditional upon the completion of the Retail Offer.

Retail Offer

In addition to the GSM Subscription, the Company intends to make an offer of Ordinary Shares available on the REX platform at the Subscription Price, in which retail investors will be invited to participate. The Retail Offer is only being made available to existing shareholders of the Company. A separate announcement will be made by the Company shortly regarding the Retail Offer. The maximum aggregate size of the Retail Offer will be capped at £1 million. The Retail Offer is conditional upon, amongst other things, completion of the GSM Subscription and the admission to trading on AIM of the Ordinary Shares issued pursuant to the GSM Subscription and Retail Offer.

It is agreed that neither the Subscription Shares nor the Retail Offer will trigger the price protection clause in respect of the Convertible Loan Notes.

Admission of Shares

Application will be made for the Subscription Shares and those shares to be issued pursuant to the Retail Offer (together the "Fundraising Shares") to be admitted to trading on AIM ("Admission"). Admission is expected to occur at 8.00 a.m. on 10 October 2022. The Fundraising Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the Company's existing issued Ordinary Shares.

The Company will provide an update as to Total Voting Rights following the completion of the Retail Offer.

Use of proceeds

The net proceeds of the GSM Subscription and any proceeds from the Retail Offer, together with the Company's existing cash resources of approximately US$3.0 million as at 23 September 2022 will mean the Company is well funded to complete basic engineering and geological studies for the development of Khemisset, and to finalise the permitting and project financing processes.

The Company also announces its Interim Results for the six months to 30 June 2022 today, which includes a full update on project development, permitting and other corporate activities.

**ENDS**

For further information, please visit  www.emmersonplc.com , follow us on Twitter (@emmerson_plc), or contact:

Notes to Editors

Emmerson is focused on advancing the Khemisset 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 income 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 third 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.