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

4 January 2021

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

Shareholder Newsletter

Dear Shareholder,

Whilst many companies have floundered in the wake of COVID-19, Emmerson has continued to flourish safely.  Its experienced and driven team is to thank for this; a team which I am delighted to be part of now, having joined the Company as CEO in July.  Key milestones were achieved during 2020, which I have summarised below. The coming year is looking no less busy as we advance our exciting Khemisset Potash Project ('Khemisset' or the 'Project') towards construction and production. 

2020 Key Milestones

The first half of 2020 was focused on the delivery of the Feasibility Study ('FS') and its various workstreams to assess and select a "go-forward" case to take into the more detailed engineering work.

·    In January, Emmerson selected its preferred Project Site and finalised the FS components for the connection to road networks, including design and cost. To have a site which connects to a highway so readily and with such low capital cost will deliver a significant reduction in pre-production spend.

·    In February, the electrical and gas supply capex estimates for Khemisset, completed by independent engineers Golder Associates, confirmed that the capital cost requirement to ensure electricity and gas availability will be far lower than the equivalent connections for most other potash development projects in other countries.

·    In April, Emmerson finalised the FS components for the mine access design and costing. Mine access, typically via a shaft, is one of the single largest determinants of overall capital cost of new potash mine, and can be hundreds of millions, and in many cases billions, of dollars.  We have a project where this major capital component can be achieved for less than $50m, a huge cost advantage.

The FS was announced 1 June 2020, and confirmed the findings from the Scoping Study, which showed that Khemisset has the potential to be a world class, low capital cost, high margin potash mine, which is a very rare asset in the global fertiliser industry.  The FS is conservatively based on just 43% of the JORC compliant Mineral Resource Estimate of 537Mt at an average grade of 9.24% K2O, delivering an initial mine life of 19 years.  Significant potential remains to increase the mine life by including additional resources, notably in the south west of the Project area, and through further exploration work.

Throughout the year, we continued constructive discussions with several potential strategic partners, debt providers and anchor investors for the future development of the Project. These discussions covered potential financing options as well as potential technical partnerships including EPC contractors. Given its industry leading low capital costs and strong margins regardless of the potash price, we believe Khemisset is one of the most strategically valuable potash projects globally.

Team Development

The Company is indebted to Hayden Locke, who was extremely instrumental in guiding Emmerson to its current stage and who continues to provide invaluable support to us as a Board Director.  I was introduced to the team in Q3 2020, and with my experience of taking a large, highly complex, underground mine all the way from a concept through to construction, I was delighted to join the team at Emmerson and take the reins as we move into development in earnest. 

As I mentioned in my opening paragraph, the existing team has achieved astounding results.  However, as the Project moves towards construction, new and additional skills will be required to ensure the speed of progress is maintained; this team building process is ongoing. 

Location

Its location is one of the key factors differentiating Khemisset from its peers. We have great respect for our host country, Morocco, which has welcomed significant foreign direct investment in recent years and is demonstrating a policy of encouraging independent operators in the mining industry with generous fiscal terms and a clear permitting system. The country itself is supporting a successful push into increasing agricultural production with its Green Morocco agenda. The annually increasing imports of potash required mean that Emmerson is well positioned to play an important role in this area of economic development.

The Company vision remains in "being the first and leading potash producer in Africa".  Africa is the continent expected to benefit most from increased food production in the medium term, both as an engine of export and to keep track with the needs of its fast-rising population. 

Social Economic Study

Given our company values are summarised by the phrase "doing the right things in the right way", we were delighted to announce the result of the socio-economic study in August, which highlighted the benefits that the Project will deliver on a local, regional, and national level.  This suggests that once fully operational, the Project will create 760 direct jobs, increase Moroccan mineral exports by 8% and generate up to $63 million a year for the Moroccan government in taxes (see RNS dated 26 August 2020).

Environmental and Social Impact Assessment ('ESIA')

In November, we completed the baseline and all the workstreams required for ESIA for the Project, which has now been submitted to the relevant governmental bodies for approval.  The ESIA package comes as a capstone to two concurrent phases: an extensive baseline programme, which commenced in the early stages of the Project development; and the ESIA study, which commenced in early 2020 (see RNS dated 20 January 2020).

The environmental and social impact of a new major project is of real importance to any company that concerns itself with maintaining a record of sustainability. We are confident that the results of our work will demonstrate that Khemisset will be accepted as an important new potash mine to the benefit of Morocco and the shareholders of Emmerson.

Plan for 2021

Once again, it is full steam ahead as we move Khemisset towards "shovel ready" status with a view to commencing construction by the end of Q4 2021. To this end, we anticipate being granted our mining licence in H1 2021 along with the environmental permit.  Furthermore, several workstreams are underway including operational capability build-out, additional technical work and project de-risking, Front End Engineering and Design ("FEED") and financing, which we are confident to have in place by Q3 2021.

Whilst we remain cognisant that we are operating in an unusual time in history with COVID-19 playing a major role in the way businesses are run, we believe that targets can still be met and look forward to 2021 with confidence.  I would like to thank all our shareholders for their continued support of Emmerson and its ambitious plans and wish you all a very healthy and prosperous New Year. 

Graham Clarke

CEO

**ENDS**

Notes to Editors

Emmerson's primary focus is on developing the 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 Feasibility Study released in June 2020 indicated Khemisset 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 NPV₁₀ of approximately US$1.4 billion using industry expert, Argus', price forecasts.