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Emmerson PLC - Half-year Report

RNS Number : 3646Z
Emmerson PLC
18 September 2020
 

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

18 September 2020

Emmerson Plc ('Emmerson' or 'the Company')

Interim Results for the six-month period to 30 June 2020

 

Emmerson Plc, the Moroccan focused potash development company, is pleased to announce its interim results for the six-month period ended 30 June 2020.

 

Highlights During & Post Period End

·    Announced Feasibility Study confirming Khemisset Potash Project's ('Khemisset' or 'the Project') potential to be a world class, low capital cost, high margin potash mine:

EBITDA margins in excess of 61% over a minimum mine life of 19 years

Outstanding project economics including a Post Tax NPV8 of US$1.4 billion₁ and IRR of 38.5%  

·    Shifted focus to moving Khemisset towards "shovel ready" status including operational capability build-out, further technical work and project de-risking, Front End Engineering and Design ("FEED") and financing

·    Appointed Mr. Graham Clarke as CEO effective from 1 July 2020 - a highly experienced fertiliser industry executive with 26 years' experience in underground potash mining

·    Raised £1.72 million through an oversubscribed placing to rapidly develop the Project through the delivery of key work streams

·    Appointed Shore Capital Stockbrokers Limited ("Shore Capital") to act as Corporate Broker to the Company

·    Published Socio-economic Study results, which showed that the economic impact of the Project will increase the local GDP per capita by an estimated 40%

·    Currently progressing multiple workstreams to further de-risk the Project and provide confidence in the ongoing project finance and due diligence processes

Advancing permitting processes - on track for main permits to be in place in H1 2021

Investigating options for staged development to reduce upfront capital costs and provide financing flexibility

Engaging positively with potential strategic partners, debt providers and anchor investors

 

Graham Clarke, CEO of Emmerson, commented, "This key period for Emmerson has resulted in a number of significant developments that have moved us ever closer to production while enhancing shareholder value.  The Feasibility Study announced in early June was the highlight of the period, confirming Khemisset's potential to be a world-class, low capital cost, high margin potash mine, which is a very rare asset in the global fertiliser industry.

 

"I joined Emmerson shortly after this study was released and have hit the ground running as the Company's focus shifted to moving Khemisset towards "shovel ready" status.  To this end, we are progressing permitting activities, technical reviews and optimisation of the declines and mine planning, further process work in parallel with working with our advisors on multiple potential funding routes.

 

"I am delighted to be part of Emmerson's journey at such a critical stage in its history and look forward to providing regular updates on its progress."

 

 

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

Hayden Locke

Emmerson Plc

Tel: +44 (0) 207 236 1177

Edward McDermott

 

 

 

Jerry Keen

Toby Gibbs

John More

 

Shore Capital

Tel: +44 (0)20 7408 4090

Damon Heath

Shard Capital Partners

Tel: +44 (0) 20 7186 9950

Isabella Pierre

 

 

 

 

 

Megan Dennison

Susie Geliher

St Brides Partners Ltd

Financial PR/IR

Tel: +44 (0) 20 7236 1177

 

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

 

 

Chairman's Statement

 

The period under review was dominated by the Feasibility Study ('FS') announced towards the end of the period in early June.  This confirmed the compelling investment case that Khemisset represents: a post-tax NPV8 of US$1.4 billion and robust financials including over US$300 million in annual EBITDA and IRR of 38.5%. The project is robust enough to weather all foreseeable commodity cycles with IRRs remaining over 15% even at potash prices well below the current contracted potash price in its target markets of Brazil, North West Europe, the USA, central America and Morocco.

 

With numbers such as these, we are keen to realise the Project's potential to become a leading supplier of potash to the agricultural industry at the earliest opportunity.  Accordingly, we are now working to secure strategic financing partners to develop the Project as well as actively advance other workstreams to help achieve our aim.

 

Obtaining the various permits, including mining, environmental, water, occupation, and construction, for Khemisset is naturally key to the process and, accordingly, several major workstreams have been undertaken or are underway.   The ESIA is the next box to tick ahead of submitting our application for a Mining Permit; this is on track to complete early in Q4 2020.   

 

In tandem, we are examining a variety of options to ensure the optimal financing structure for the Project.  In line with this, we are in discussions and/or in more detailed due diligence phases with a diverse range of potential longer-term financing partners including banks, other debt funds, non-traditional financing partners and strategic partners.

 

Operationally, whilst we continue to adhere to Emmerson's operating philosophy of running a lean team with low overheads, we also recognise the need to build out a suitably skilled operations team as Emmerson moves closer towards production.   Our first appointee was Graham Clarke, a highly experienced fertiliser industry executive with 26 years' experience in underground potash mining, who joined at the end of the period under review.  With his proven ability to build operating teams with the capability to deliver large, complex projects in the fertiliser space, we look forward to further strengthening the team. 

 

Additionally, we continue to pursue other potentially value adding projects, which complement the core Khemisset Potash Project and deliver significant economic and strategic upside, whilst also reducing overall business risk through the diversification of future product mix.  Two key projects are particularly exciting:

·    The Sulphate of Potash ('SOP') project, for which we released a Scoping Study in November last year, is financially robust and could deliver strong NPVs and cashflows through a range of SOP prices.  We are now advancing the next phase of development for this project, comprising a PFS encompassing more detailed engineering and further site investigations in Jorf Lasfar. 

·    The FS confirmed both the technical and economic viability of the sale of 1Mtpa of salt by-product produced from Khemisset. The Project produces, on average, a total of approximately 4.5Mtpa of salt by-product over the life of the mine. As a result, there is clear potential for significant increases in the tonnages of salt which could be sold into the US de-icing salt market.  As the salt at Khemisset is a by-product of potash production, the operating cost associated with its production is very low and Emmerson is, therefore, expected to be a very competitive producer on a delivered cost basis to the US market.

 

Finally, continuing the theme of growth prospects, we anticipate extending the mine life of Khemisset.  The FS showed a 19-year life of mine, which was achieved using only 43% of the total Mineral Resource Estimate ("MRE") of 537 million tonnes with an average grade of 9.24% K2O and is concentrated in the north eastern extent of the current MRE.   Our aim is to access an additional deposit, the South West deposit, which is only 450m below surface and has a similar sized resource (190 million tonnes) to the current FS mine plan.  Additionally, we aim to undertake further work to understand the Central Area MRE, some of which may not be extractable, but contains nearly 150 million tonnes of additional resource.

 

Given we are operating in an unusual time in history with COVID-19 playing a major role in the way businesses are run, we are delighted with the Company's progress and anticipate an equally busy and successful second half of the year.  This half has already kicked off with the results of the socio-economic study, proving that Khemisset combines the appropriate attributes for sustainable development, namely its location, outstanding economic metrics, corporate policies and standards, and government support.  The bottom line is that Khemisset will have a significant positive impact on the Moroccan economy with a total of 2,385 direct and indirect jobs created during the construction of the project.  Once fully operational, a total of 1,500 jobs will be created with 760 being direct employees and the Company is targeting to fill 90% of roles at the mine with employees living within Khemisset and the surrounding communes.

 

Statement of Directors' Responsibilities

The Directors confirm that this condensed interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·    an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·    material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

 

Principal risks and uncertainties

The principal risks and uncertainties as at the date of this report are the same as those disclosed by the Company in its consolidated financial statements for the financial year to 31 December 2019.

 

Future developments

The board of Directors looks forward to keeping shareholders informed of further developments in what we believe is a very exciting period of transition from potash explorer to project developer.

 

 

 

Mark Connelly

Non-executive Chairman

17 September 2020

 

 

Condensed Consolidated Statement of Comprehensive Income for the six month period ended 30 June 2020

 

 

6 months ended

30 Jun 2020

6 months

ended

30 Jun 2019

12 months ended

31 Dec 2019

 

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

Notes

£'000

£'000

£'000

 

 

 

 

 

 

 

Administrative expenses

3

(375)

(524)

(985)

 

Net foreign exchange gain/(loss)

 

56

(12)

(161)

 

Operating loss

 

(319)

(536)

(1,146)

 

 

 

 

 

 

 

Finance income

 

4

9

14

 

Finance cost

 

-

-

-

 

Loss before tax

 

4

9

(1,132)

 

 

 

 

 

 

 

Income tax

 

 

-

-

 

Loss for the period attributable to equity owners

 

(315)

(527)

(1,132)

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss:

 

 

 

 

 

Exchange gain/(loss) on translating foreign operations

 

162

(6)

(32)

 

Total comprehensive income attributable to equity owners

 

(153)

(533)

(1,164)

 

 

 

 

 

 

 

Loss per share (pence)

4

(0.05)

(0.08)

(0.17)

 

 

 

 

 

 

 

Condensed Consolidated Statement of Financial Position
as at 30 June 2020

 

 

30 June 2020

30 June 2019

31 Dec 2019

 

 

(Unaudited)

(Unaudited)

(Audited)

 

Notes

£'000

£'000

£'000

Non-current assets

 

 

 

 

Intangible assets

5

7,182

4,993

6,172

Property, plant and equipment

 

34

49

38

Total non-current assets

 

7,216

5,042

6,210

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

 

270

206

271

Cash and cash equivalents

 

793

1,636

2,071

Total current assets

 

1,063

1,842

2,342

 

 

 

 

 

Total assets

 

8,279

6,884

8,552

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

205

337

414

Total current liabilities

 

205

337

414

 

 

 

 

 

Net assets

 

8,074

6,547

8,138

 

 

 

 

 

Shareholders equity attributable to equity owners

 

 

 

 

Share capital

 

10,419

8,265

10,408

Share reserves

 

464

307

386

Reverse acquisition reserve

 

1,651

1,651

1,651

Translation reserve

 

74

(62)

(88)

Retained earnings

 

(4,534)

(3,614)

(4,219)

Total equity

 

8,074

6,547

8,138

 

 

 

 

 

 

Condensed Consolidated Statement of Changes in Equity
for the six month period ended 30 June 2020

 

Share Capital £'000

Share reserve £'000

Reverse Acquisition reserve £'000

Retained earnings £'000

Translation reserve £'000

Total equity £'000

Balance as at 31 December 2018

8,265

229

1,651

(3,087)

(56)

7,002

Share option and warrant issue

-

78

-

-

-

78

Other comprehensive loss

-

-

-

(527)

(6)

(533)

Balance as at 30 June 2019

8,265

307

1,651

(3,614)

(62)

6,547

 

 

 

 

 

 

 

Balance as at 31 December 2018

8,265

229

1,651

(3,087)

(56)

7,002

 

 

 

 

 

 

 

Loss for the year

-

-

-

(1,132)

-

(1,132)

Other comprehensive loss

-

-

-

-

(32)

(32)

Total comprehensive loss

-

-

-

(1,132)

(32)

(1,164)

Share option and warrant issue

-

157

-

-

-

157

Share issue - 3rd parties

2,250

-

-

-

-

2,250

Share issue costs

(107)

(107)

Balance as at 31 December 2019

10,408

386

1,651

(4,219)

(88)

8,138

 

 

 

 

 

 

 

Loss for the period

-

-

-

(315)

-

(198)

Other comprehensive loss

-

-

-

-

162

45

Total comprehensive loss

-

-

-

(315)

162

(153)

Share option and warrant issue

-

78

-

-

-

78

Share issue - 3rd parties

11

-

-

-

-

11

Balance as at 30 June 2020

10,419

464

1,651

(4,534)

74

8,074

 

 

 

Condensed Consolidated Statement of Cash Flows
for the six month period ended 30 June 2020

 

6 months ended

30 June 2020

6 months

ended

30 June 2019

12 months ended

31 Dec 2019

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

Loss before tax

(315)

(527)

(1,132)

Finance cost

-

-

-

Share based payment

78

78

157

Reverse acquisition expense

-

-

-

Changes in working capital

 

 

 

Decrease/(increase) in trade and other receivables

1

146

81

(Decrease)/increase in trade and other payables

(209)

(103)

(26)

Net cash flows used in operating activities

(445)

(406)

(920)

 

 

 

 

Cash flows from investing activities

 

 

 

Exploration expenditure

(1,006)

(1,294)

(2,473)

Cash acquired on acquisition

-

-

-

Property, plant and equipment purchase

4

(9)

2

Net cash flow (used in)/generated from investing activities

(1,002)

(1,303)

(2,471)

 

 

 

 

Cash flows from financing activities

 

 

 

Shares issued (net of issue costs)

11

-

2,143

Net cash flow generated from financing activities

11

-

2,143

 

 

 

 

(Decrease)/increase in cash and cash equivalents

(1,436)

(1,709)

(1,248)

Cash and cash equivalents at beginning of period

2,071

3,351

3,351

Foreign exchange on cash and cash equivalent

158

(6)

(32)

Cash and cash equivalents at end of period

793

1,636

2,071

 

 

 

 

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements for the six month period ended 30 June 2020

 

1.        General information

Emmerson Plc (the "Company") is a company incorporated and domiciled in the Isle of Man, whose shares were admitted to the Standard Listing segment of the Main market of the London Stock Exchange on 15 February 2017.

The principal activity of the Group is the exploration, development and exploitation of a potash development project in Morocco.

 

2.        Basis of preparation

2.1    General

The Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.  The Condensed Consolidated Financial Statements for the six months ended 30 June 2020 are unaudited and have not been reviewed by the Group's auditor, and do not include all of the information required for full annual financial statements.

They should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2019.  The principal accounting policies applied in the preparation of the Condensed Consolidated Financial Statements are unchanged from those disclosed in those statements. These policies have been consistently applied to each of the periods presented.

The financial information of the Group is presented in UK Sterling, which is also the functional currency of the Company and has been prepared under the historical cost convention. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).

2.2    Basis of consolidation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss which are measured at fair value in the statement of financial position.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

The subsidiaries' financial statements have been translated in to Pound Sterling in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). The foreign exchange differences on translation are recognised in other comprehensive income.

 

2.3    Going concern

The Directors have reviewed the Group's ongoing activities and have a reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, they have adopted the going concern basis in preparing the Interim Financial Statements.

2.4    Future changes in accounting policies

The Directors have reviewed the IFRS standards in issue which are effective for annual accounting periods ending on or after the stated effective date. In their view, none of these standards would have a material impact on the financial reporting of the Group.

2.5    Segment reporting and cyclicality

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

The Directors are of the opinion that the Group is engaged in a single segment of business being the exploration activity of potash in one geographical area, being Morocco.

The interim results for the six months ended 30 June 2020 are not necessarily indicative of the results to be expected for the full year ending 31 December 2020. Due to the nature of the entity, the operations are not affected by seasonal variations at this stage.

3.      Administrative fee and other expenses

 

6 months ended

30 Jun 2020

6 months

ended

30 Jun 2019

12 months ended

31 Dec 2019

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Directors' fees

66

66

162

Share based payments

78

78

157

Travel and accommodation

12

54

128

Auditors remuneration

17

27

41

Professional and consultancy fees

202

299

497

Total

375

524

985

 

 

 

4.      Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 

 

6 months ended

30 Jun 2020

6 months

ended

30 Jun 2019

12 months ended

31 Dec 2019

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Earnings

 

 

 

Loss from continuing operations for the period attributable to the equity holders of the Company

(315)

(527)

(1,132)

Number of shares

 

 

 

Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share

 

 

 

686,132,385

626,132,385

654,484,033

Basic and diluted earnings per share (pence)

(0.05)

(0.08)

(0.17)

 

5.    Intangible assets

The intangible assets consist of capitalised exploration and evaluation expenditure, including the cost of acquiring the one mining license and 39 research permits held by the Company's subsidiaries. The potash properties are currently unproved reserves. Once properties have been classified as proved reserves, they will be transferred from intangible assets to tangible assets, and amortised over the life of the area according to the rate of depletion of the economically recoverable costs.

 

 

30 Jun 2020

30 Jun 2019

31 Dec 2019

 

(Unaudited)

(Unaudited)

(Audited)

 

£'000

£'000

£'000

Cost:

 

 

 

At the beginning of the period

6,172

3,699

3,699

Additions

1,010

1,294

2,473

As at end of period

7,182

4,993

6,172

 

6.   Related party transactions

Directors consultancy fees

Hayden Locke is a Director of the Company and is a director of Benson Capital Limited, which provide consulting services to the Company. During the period, Benson Capital Limited received total fees of £103,000 (year to 31 December 2019: £378,000). The amount outstanding as at period-end is £nil (31 December 2019: £103,416).

Robert Wrixon is a Director of the Company and also provides consulting services to the Company. During the period, Robert Wrixon received fees of £42,000 (year to 31 December 2019: £84,000). The amount outstanding as at period-end is £ nil (31 December 2019: £ nil).

Details of directors' remuneration during the period are given in note 3.  

Other key management personnel

Phil Cleggett is the only key management personnel other than the Directors.  Fees of £60,000 (year to 31 December 2019: £190,000) were paid during the period to Bremer Consulting Pty Ltd, a company Phil Cleggett controls and the amount outstanding as at period-end is £nil (31 December 2019: £45,500).

 

7.    Events after the reporting date

As announced on 29 June 2020, the Company appointed Graham Clarke as the CEO of the Company effective from 1 July 2020.

On 16 July 2020, the Company raised £1.72 million (before expenses) through a placing of 40,470,589 new ordinary shares of no-par value each at a price of 4.25 pence per share. The funds raised will primarily support the Company as it continues to rapidly develop the world class Khemisset Project through the delivery of key work streams. Following Admission, the enlarged issued share capital of the Company comprises of 726,602,974 ordinary shares of no-par value each.

There were no other significant subsequent events.

 

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