Kore Potash: Dougou extension pre-feasibility study confirms commercial viability

Highlights

Financial outcomes

• Nameplate production target of 400 000 tpy MoP over an initial 18-year life based on Probable Ore Reserves.
• Free on Board (FOB) Pointe Noire costs of US$86.61/t MoP.
• Average annual EBITDA of US$118 million.
• Average annual post construction, post-tax, free cash flow of approximately US$95 million.
• Approximately 4.3 years post-tax payback period from first production.
• Real ungeared post tax IRR of approximately 22.9% and NPV10 (real) of approximately US$319 million on an attributable basis at life-of-mine average MoP price for granular product of US$422/t MoP (Argus Media’s price forecast for DX project’s target markets).
• PFS confirms low technical risk utilising selective solution mining, an efficient potash extraction method in use at multiple potash operations globally.
• PFS outcomes reinforce Kore’s broader development strategy for its deposits in the Sintoukola Potash Basin containing 6.1 Bt of potash Mineral Resources.

Low capital cost and short construction period improve financing options

• Initial pre-production capital cost of approximately US$286 million (real 2019), including contingency.
• Low pre-production capital intensity of US$715/t MoP produced.
• Short construction period of 21 months.
• Combination of modest initial capital cost and short construction period improve attractiveness of DX Project to potential financiers.

Competitive costs to supply MoP to target markets

• Low average mine gate operating costs of US$65.26/t MoP.
• Free on board (FOB Pointe Noire) costs of US$86.61/t MoP.
• Average cost of MoP delivered to target markets of approximately US$114.61/t MoP.
• Close proximity to deep water port at Pointe Noire creates competitive advantage of reduced shipping distance compared to northern hemisphere producers, which tend to be well inland.
• Higher grade and shallower deposits than majority of existing potash producers contributes to competitive cost structure.
• Significant competitive advantage via low FOB costs and short shipping distance to target markets in Africa and South America.

High quality ore reserves and mineral resources

• Sylvinite Ore Reserves of 17.7 Mt at a grade of 41.7% KCl.
• Grade of the Ore Reserves is in the top quartile of all operating potash mines and potash development projects globally.
• Total sylvinite Mineral Resources of 145 Mt at a grade of 39.7% KCl.

Further upside potential

• Ore Reserves tonnage represent 22% of the Indicated Mineral Resources tonnage.
• Inferred Mineral Resources of 66 Mt at a grade of 40.4% KCl not included in the study.
• Additional exploration drilling and/ or seismic surveys in the future may support classification of portions of the additional Mineral Resources of 127.3 tonnes at 39.4% KCl as Ore Reserves.

Next steps and definitive feasibility study

• Planning for the Definitive Feasibility Study (DFS) is progressing well and will be communicated to shareholders once the detailed scope and costing is completed.
• The DFS planning stage includes consultation with potential debt financiers for the construction of the DX Project.

Brad Sampson, CEO of Kore, commented, “The completion of the DX PFS confirms the district scale development potential of this world-class potash basin and the standalone commercial viability of the DX Project.

“The estimated US$286 million capital cost to construct the DX Project in just 21 months makes it attractive from a capital and near-term cashflow perspective, and low operating costs will allow Kore to profitably deliver MoP to our target markets.

“Building on the PFS and previously published positive Scoping Study for the DX Project, we can rapidly progress to conducting a definitive feasibility study, which will continue to improve Kore’s understanding of the asset and de-risk the DX Project even further.

“Accelerating the company into production and early cashflow generation via the DX Project will provide a strong platform to continue to optimise the Tier-1 Kola project and the wider potash basin, and a significantly improved commercial position to undertake its development. In addition, construction of the DX Project will give advantages in terms of overlapping infrastructure, thereby reducing the future capital cost at Kola.

“Developing the DX Project first is the best way forward for all of the company’s stakeholders: our local communities; the Government of the Republic of Congo; and our shareholders. We look forward to working with all these parties as we progress the DX Project into production and look to unlock the significant value within Kore’s portfolio.”

SGRF commented: “We are pleased with the completion of the DX PFS on time and underbudget and with the quality of the PFS outcomes. The results of the DX PFS indicate attractive economics and simplicity in project design which lends itself to comparatively lower risk in the subsequent construction and operating phases. We are supportive of Kore progressing to a Definitive Feasibility Study on DX.”

Read the article online at: https://www.worldfertilizer.com/project-news/14052020/kore-potash-dougou-extension-pre-feasibility-study-confirms-commercial-viability/