viewEmmerson PLC

Emmerson PLC poised to deliver world-class potash project

Emmerson's feasibility study for Khemisset improved significantly on the scoping study

Emmerson PLC -
  • High margin, low cost potash project
  • Strategically located
  • Experienced management team


What it does

Emmerson PLC (LON:EML) is a mining and development company with assets in Morocco. It’s run by a team of experienced executives who have a track record of success in the mining industry.

What it owns

The key asset is the Khemisset project, a low capital cost potash mine with potential for high margins.

The project has a large JORC resource of 537mln tonnes of 9.24% K2O. There’s also significant exploration potential.

How’s it doing?

The recently completed feasibility study completed by Golder Associates 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 industry.

The study demonstrated robust economics for Khemisset with a post-tax NPV8 of US$1.4bn and an internal rate of return of 38.5%, on the basis of production of approximately 810,000 tonnes of K60 MOP per annum during steady state operations over the initial 19 year mine life.

Khemisset has demonstrated an incredibly low pre-production capital cost of US$387 million, less than half of its global peer average capital intensity.

Meanwhile, Emmerson reported having £1.2m of cash as of 31st April 2020, as a result of which the company believes is fully funded to deliver key permitting work streams, including the Environmental & Social Impact Assessment.

What’s the opportunity?

Khemisset is ideally located to benefit from the expected high growth in demand for NPK fertilisers on the African Continent. Its location, close to a number of potential export ports, on the doorstep of European, Brazilian and US markets, means that the project will receive a premium netback price relative to many of its peers. The need to feed the world’s rapidly increasing population is driving demand for potash and Emmerson is well placed to take full advantage of the opportunities this presents.

From the chief executive

"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 chief executive Hayden Locke.

“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. 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.

What the broker says

“We remind readers that Emmerson has previously investigated the value-add potential of SOP (Sulphate of Potash) production from Khemisset’s MOP production,” says broker Shore Capital.

“A preliminary economic assessment completed in November 2019 envisaged the production of 240,000 tonnes per year of SOP, converted from 205,000 tonnes per year of MOP (using a nominal internal transfer price of US$345/t MOP). On these bases, assuming a flat real SOP price of US$525/t FOB, the nominal incremental NPV10% from production of SOP was calculated at US$129m (c.US$100m real, we estimate). This would imply a value for Khemisset of c.US$440m at US$340-350/t MOP and US$525/t FOB. Clearly, this value could be still higher if a larger proportion of MOP production were converted to SOP.”

Quick facts: Emmerson PLC

Price: 4.95 GBX

Market: LSE
Market Cap: £35.97 m

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