Emmerson, the Moroccan focused potash development company, is pleased to announce it has secured a strategic investment of up to US$46.75 million* ** from a group of investors to support the development of the Khemisset Potash Project (“Khemisset” or “the Project”). The primary investor is Global Sustainable Minerals Pte Ltd, a Singapore domiciled investment vehicle backed by a significant south-east Asian investor. Defined terms used in this Announcement are set out at the end of this Announcement.

Highlights

• Strategic investment of up to US$46.75m* ** *** structured in two tranches comprising:
  • An immediate direct equity investment of US$6.75m at 6p per share*, an 8% premium to the 30-day VWAP, under the Company’s existing authority to issue shares.
  • Subscription for up to US$40m of convertible loan notes, principal and interest with a conversion price of 8.2p per share* *** a 48% premium to the 30-day VWAP, (“Convertible Loan Notes” or “CLN”). The Convertible Loan Notes are designed to contribute directly to the construction funding for Khemisset and are accessible by the Company once the overall funding package for the Project is in place.
  • Grant of 82,391,714 warrants pro rata to CLN subscribers, each warrant with a 12-month term and an exercise of 8.2p per share. Exercise of all warrants could secure additional c. US$9.3 million investment in the Company* **.
• On conversion of the CLN, the Strategic Investors, including GSM, will own up to a maximum of 29.9% of Emmerson Plc
• The US$6.75m* equity investment allows Emmerson to accelerate pre-construction activities at Khemisset:
  • Move into the execution phase on Project Financing discussions for debt to support project development with the aim to close in the middle of 2022
  • Immediately commence basic design and engineering for the project to prepare to commence full construction during 2022
• The Convertible Loan Notes allow Emmerson to further discussions with other providers of funding including project finance banks, sovereign wealth funds and royalty and streaming providers as the Company seeks the optimal overall funding solution for the Project
• Emmerson is well positioned to take advantage of the strongest fertiliser market in more than a decade and Morocco’s emerging position as gateway to Africa
• General Meeting of shareholders on 6 December 2021 to approve terms of Convertible Loan Note and issue of conversion shares and warrants

* Using a USD:GBP exchange rate of 1.375

** Assumes further issue of ordinary shares to maintain the Strategic Investors holding at 29.9%

*** Subject to shareholder approval and various conditions precedent including closing the remaining finance to construct the Khemisset Potash Project

**** Based on the Feasibility Study financial model assumptions per announcement on 1 June 2020 with current Brazil spot prices

 

 

Graham Clarke, CEO of Emmerson commented:

“A major investment, at a premium to our current valuation, and long-term strategic commitment by an investment group of this calibre, is a major endorsement of the Khemisset Project. We have already formed a strong partnership with the investors who share our vision of creating a new, independent, and highly profitable and environmentally sustainable potash company. We look forward to working closely with them to achieve our shared vision.

 

“The whole Emmerson team and I have worked tirelessly, through an extremely rigorous due diligence process, over several months, to secure this strategic investment for the Company. It is a transformational investment for Emmerson, and it is a major step to unlocking the full potential value of the world class Khemisset Potash Project.

 

“The Project will be important for Morocco and will bring substantial social and economic benefits to the region of Khemisset. Our Moroccan stakeholders continue to be incredibly supportive of us as we move the Project into the execution phase and develop it for the benefit of all of our stakeholders. Emmerson expects to invest well over US$500 million over the Project’s initial 19-year life of mine, creating over 2,000 direct and indirect jobs, and establishing a long-term beneficial partnership with Morocco.

 

“Potash markets have strengthened considerably since we released our Feasibility Study, with prices in Brazil now over US$800/tonne, effectively double the base case assumptions from our previous studies. The strength in potash clearly improves its already outstanding economics and, using current spot price assumptions, it would push our post-tax NPV8 from a very respectable US$1.4 billion to US$3.9 billion4 and IRR of over 85.4%, while average life of mine post tax cashflow increases to US$558 million per annum for an initial 19-year life of mine.

 

“Our attention now moves quickly to the task at hand, which is to get the project into production as quickly as possible. Our advisors are well advanced in their engagement with numerous potential banking partners, and we will move to mandating banks as quickly as possible. We have also engaged with our established engineering partners and will commence the basic design of the key components of the Project while, in parallel, preparing work packages for eventual tender with our EPCM partners. We have already made substantial progress in pre-qualifying the groups who will eventually partner with us in building Khemisset.

 

“We would like to thank our shareholders for their ongoing support through this process.”

 

Mark Zhou, Director of GSM commented:

 

“The Khemisset Potash Project is clearly a standout in the development MOP space and we are excited to be partnering in its development with Emmerson Plc.

 

“We have been very impressed with the technical work completed by Graham and his team to date and the detailed execution plan they have presented to us, which is the basis for this significant investment.

 

“We look forward to being a part of the development of what will be the only producing MOP potash asset in Africa, in the dynamic Kingdom of Morocco, a global leader in fertiliser that is playing a growing role in the development of African agriculture. We believe this strategic location with developed infrastructure within close proximity makes the asset all the more valuable as Africa’s importance for food production, and global food security, continues to grow in the coming decades.”