Analysts at Liberum Capital have reiterated a 'buy' rating on Emmerson PLC (AIM:EML, OTC:EMSNF) following news the firm has signed a 10-year ‘take-or-pay’ offtake agreement.
The Memoranda of Understanding (MOUs) with traders Keytrade and Hexagon Group is over 65% of MOP (muriate of potash) and 50% of salt production from Emmerson’s best in-class Khemisset potash project in Morocco.
The Liberum analysts said this is an "important endorsement, the non-binding MOUs set out key terms for subsequent formal bankable agreements, and de-risk the project for debt and other financiers."
"Importantly, the MOUs reportedly contemplate ‘take-or-pay’ provisions, whereby Emmerson will be compensated for any quantities committed to, but not sold, by the offtakers.
"In our view, such proposed terms are important in representing strong endorsement of project and company, which should provide substantial comfort for potential debt and other financiers," they concluded.
The Liberum analysts have a 12.9p target price on Emmerson shares, which in late afternoon trading on Tuesday were changing hands for 5.35p.