Emmerson PLC (LON:EML) told investors it is now assessing a staged development for its Khemisset potash project, in Morocco, with a move that would reduce upfront costs whilst significantly expanding the envisaged life-of-mine production volumes.
The options presently on the table see salt production expanding by around four times, along with the introduction of ‘value-added’ SOP (sulfate of potash / Potassium Sulphate) production though the conversion of a portion of the project’s MOP (Muriate of potash / potassium chloride) resources.
It comes as the company is seeing relatively lower levels of fixed capital costs, higher demand for de-icing salt and rising SOP prices.
The initial phase of the project would see the rate of production approximately halved, yet over the life of the project the overall production volumes are expected to expand significantly to recover much more of the Khemisset’s mineral resources.
Materially reducing reduce upfront costs is expected to lower financing and execution risks.
“Khemisset is a project of enormous potential and we see several opportunities to improve upon the mine plan presented in the 2020 Feasibility Study,” said Graham Clarke, chief executive.
“The most obvious is the potential to expand the Project, given it is currently based on less than 50% of our total mineral resource estimate.”
Clarke added: “the capital cost benefits of our project mean that we believe we can develop our project using a staged approach, which reduces upfront capital costs and equity requirements from the market and, therefore, dilution to our existing shareholders as we grow to our full potential.
“With our mining licence in hand, we see 2021 as a pivotal year for our development as we aim to become the only potash producer in Africa and the only independent potash producer globally.”
Emmerson will complete a concept study examining potential to develop Khemisset using a stage approach, reducing upfront capital costs and execution risk, while also planning out additional stages of expansion for the Project to ensure that its economic value is fully developed. pic.twitter.com/nWexrVACXp
More salt, SOP and MOP
The feasibility study saw Khemisset producing significant quantities of de-icing salt, with 1mln tonnes per year earmarked for the US market.
Further market research has, however, indicated there is likely to be a much larger market opportunity for up to 4mln tonnes per year. It is now scoping the costs for such an operation.
Meanwhile, a November 2019 scoping study previously assessed the option of converting a quarter of the project’s MOP output, to yield around 240,000 tonnes of the premium-priced SOP fertiliser per year.
The company now intends to accelerate this aspect of the project, amidst a strengthening SOP market in the United States.
Additionally, the company highlighted that the mine’s feasibility study was based only on 43% of the project’s total mineral resource which had left room for future expansion.
With a phased development now being considered, Emmerson is looking at expanding its overall production by up to 50%. Such a move would is expected to materially boost life of mine cashflow and improve what the company described as “already outstanding economics”.