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Scoping study confirms potential for potash mine in Morocco

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World Fertilizer,

Emmerson Plc, the Moroccan-focused potash development company, has released a summary of the results of its recently completed Scoping Study for the company’s 100% owned Khemisset Potash Project in northern Morocco.

The Scoping Study was managed by global independent mining and engineering consultant, Golder Associates (Golder) and designs and estimates have been prepared in line with guidelines provided by the Australasian Institute of Mining and Metallurgy (AusIMM). Economic metrics of the Project have been calculated by the company using the technical outputs of the Scoping Study: such metrics have been reviewed and approved by Golder.

Emmerson will be hosting an Analyst and Shareholder conference call on Thursday 22 November at 11:00am GMT to discuss the Scoping Study results.


  • Post Tax NPV10 of US$795 million and IRR of 29.8% over 20 year mine life
  • - Assumes flat real price of US$360/t CFR Brazil price (today’s price in Brazilian market)
  • Using forecast prices from Independent Market Consultant Argus Media, NPV10 increases to US$1.14 billion over 20 year mine life
  • Bottom quartile projected all-in-sustaining delivered cost to all Emmerson’s target markets including Brazil, NW Europe, Morocco, South Africa
  • Top quartile projected cash margins according to analysis conducted by Argus FMB
  • - Average, steady state post-tax cash margins of 50% at current potash prices
    - Average, steady state, EBITDA margins of nearly 64% at current potash prices
  • Robust cashflow generation at a broad range of potash price assumptions
  • - Average, steady state, post-tax cashflow of US$184 million/y assuming a flat, real, potash price of US$360/t CFR Brazil
    - Less than 3.25yr capital payback
  • Initial mine life of 20 years with significant potential to increase from existing in-situ resource (outside of Inferred Mineral Resource Estimate) and ongoing exploration in North East Khemisset
  • - 6Mtpa run of mine ore delivering nearly 800 000 t of K60 MOP per annum on average over life of mine
  • Total pre-production capital cost US$405 million including US$90 million of contingency
  • - Bottom quartile capital intensity per tonne of product produced, less than half of global peer average capital intensity
  • Design and estimates completed by independent engineers according to AusIMM guidelines for capital and operating cost estimates
  • Emmerson cash position, as at 31 October 2018, of £3.8 million
  • - Fully funded through until at least 1Q20 based on current planned work streams

Hayden Locke, CEO of Emmerson, commented: “The Scoping Study has confirmed our belief as a team that Khemisset has the potential to be a low capital cost, high margin potash mine, which is a very rare asset in the industry. Potash is controlled by a small handful of companies and is an industry with high barriers to entry, predominantly in the form of extremely high capital cost. This means that few new players, if any, can ever enter the market. Khemisset, which has an estimated capital intensity less than half of the global peer average, and less than a third of the average Canadian development, gives Emmerson a clear opportunity to be one of the few junior companies in the space.

“The economic sensitivity analysis we have conducted, based on the results of the Scoping Study, indicates that the Project will generate extremely robust returns, regardless of potash price, and supports our strong belief that it will be financeable in any market conditions. This is a hurdle that very few potash projects globally can clear.

“Assuming a flat US$240/t CFR Brazil potash price, which is close to the lowest price seen in the Brazilian market in last twelve to fifteen years – and a price which industry performance has shown is not sustainable – the Khemisset Project is still forecast to deliver average annual, post-tax, cashflows of nearly US$80 million/y over the life of mine. At today’s potash price, which is still too low to incentivise the financing and construction of any of the mega potash projects, including BHP’s Jansen Project, Khemisset is forecast to deliver post-tax cashflows of over US$180 million/y and deliver unlevered IRRs of nearly 30%.

“Since acquiring the Project in June we have made strong progress and, thanks to the dedication of our team, I am delighted to be delivering the Scoping Study months ahead of schedule. Our team of independent experts, led by Golder and Ercosplan, have done an outstanding job moving the Project quickly forward, addressing all the key workstreams and risks associated with a project like this. We believe there is further upside to the economics for Khemisset and we have already identified a number of areas where improvements can be made and where conservative assumptions have been used, which we will seek to refine in the coming studies.

“The next steps will include the completion of drilling, a bankable metallurgical testwork programme and then commencement of more detailed option and feasibility studies. The results of the Scoping Study give our team a clear path to continue to move the Khemisset Potash Project through the various de-risking milestones ahead and our cash balance of £3.8 million, which funds us through until at least 1Q20, puts us in an enviable position to execute on our strategy quickly.”

For the full report, click here.

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