Emmerson PLC (LON:EML) has completed a feasibility study which confirms its Khemisset project, in northern Morocco, as a low capex, high margin potash mine with outstanding economic metrics.
The study values the project at US$1.4bn (post-tax NPV) and it estimates an internal rate of return (IRR) of 38.5% over an initial 19-year mine life.
Khemisset’s pre-production capital cost (for potash production only) is estimated at US$387mln, down around US$19mln versus a prior scoping study.
Significantly, that marks the project among the lowest cost - Bottom decile capital intensity per tonne - and puts it at less than half of the global peer average for capital intensity.
It noted that for an additional US$24mln of capital it can develop a salt plant designed to produce de-icing specification salt, for sale into the US east coast de-icing salt market.
The study envisages peak production at 810,000 tonne per annum operation, producing agriculture sales grade (k60) Muriate of Potash (MOP) plus 1mln tonnes a year of de-icing salt. The average steady-state production rate is anticipated at 735,000 tonnes per year of K60 MOP and 1mln tonnes of de-icing salt.
It also projects improved metallurgical recoveries, bottom quartile projected all-in-sustaining delivered cost, and top quartile projected cash margins (with cash margin of 47.1% and EBITDA earnings margins of 61.5%).
Steady-state average EBITDA is estimated at US$307mln per year, which suggests less than 2.6-year capital payback.
Notably, the initial 19-year mine life is based on a mine plan that so far addresses only 43% of the project’s total mineral resource – which comprises a total of 537mln tonnes with an average grade of 9.24% K2O.
"The Feasibility Study has 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,” said Hayden Locke, Emmerson chief executive in a statement.
“The strong agricultural investment thematic remains firmly in place driven by ever increasing global population and shrinking arable land, which necessitates the need for fertiliser and, in particular, potash.”
Locke added that he is particularly pleased with the US$19mln reduction in pre-production capital costs, which he highlights as unusual when projects move to higher levels of engineering detail.
“As expected, the forecast all-in-sustaining cash costs, delivered to customer, place this project in the bottom quartile of all potash projects to Emmerson's target markets.
“When we include the offsetting salt by-product credits, as is the typical convention in the mining industry, Khemisset becomes one of the lowest cost producers to these markets.
“This is a powerful competitive position and that will continue to attract interest from numerous potential strategic partners.”
Emmerson now intends to continue the project’s advance through permitting whilst at the same time progress forward with financing talks to enable the next phase in Khemisset’s development.