Emmerson PLC (“Emmerson” or the “Company”)

Q2 Update

Emmerson PLC, the Moroccan-focused potash development company, is pleased to provide an update on its corporate and operational activities at the Khemisset Project for Q2 2023.

Highlights

• Environmental approval for the project referred from regional level to the national Commission Ministérielle de Pilotage (”Committee” or ”Ministerial Committee”)
• Basic Engineering studies reaching completion with final reports and designs due shortly
• Project finance due diligence to run in parallel with updated Bankable Feasibility Study (“BFS”) following environmental approval

Environmental approval

The Environmental and Social Impact Assessment (”ESIA”) approval process remains the key priority for the Company, and hinges on the impact of the project on water resources for the region, a sensitive issue in the context of climate change and recent droughts. In particular, the issues raised have centred around the disposal of brines through deep well injection; the storage of salt tailings at surface; the use of water from local sources; and the impact of the project on local highways and land users.

The Company has invested considerable time and resources into developing robust solutions in all these areas, reflecting international best practice, including using dry stack tailings, and sourcing waste water rather than fresh water from nearby reservoirs. In addition, the Company has committed to completing in-situ injectivity testwork before construction to confirm definitively the feasibility of deep well injection as a means of disposing of brines, while examining alternative means to process brines in order to minimise, or even eliminate, the requirement for brine disposal.

Following a recent evaluation meeting, the Commission Régionale Unifiée d’Investissement (“CRUI”), the regional investment authority, was unable to approve the application, and consequently the Company has exercised its right to refer approval to the Ministerial Committee, which is chaired by the Head of Government and includes several Government ministers. The Company believes the measures taken to address all concerns raised, combined with the project’s significant economic benefits and contribution towards addressing food security, are compelling and underline its strategic importance to the Kingdom of Morocco. On this basis, the Company remains confident it will receive approval for its proposals.

Technical Workstreams

The work on the seven technical packages that make up the Basic Engineering workstream is now largely complete, with final drawings and reports only remaining in respect of power supply, highway junction, mine-site infrastructure and portal and decline designs.

Once completed, this information will be available for incorporation into an updated BFS, which will be commenced once environmental approval has been received, and is likely to take approximately six months to complete.

The BFS will include a detailed financial model based on the latest design of the plant and mine workings, as well as reflecting cost inflation since the Feasibility Study completed in 2020.

Project financing

Following environmental approval, the Company will proceed with the process of fundraising for the Khemisset Project. Due diligence and legal work will be required in respect of the bank debt, with the BFS a key part of this review. As far as possible, due diligence and the BFS work programmes will proceed in parallel in order to minimise the time between receiving environmental approval and reaching financial close.

Graham Clarke, CEO, commented:

“Our primary focus has been obtaining the environmental approval for the project, and a considerable amount of rigorous and detailed work has gone into addressing all of the issues raised by the relevant authorities, which have mainly related to water. The environmental approval has recently been referred from the regional level up to the national Ministerial Committee.

“In reaching their decision, we remain confident that senior government officials on that Committee will take into account the significant amount of time and investment that has gone into minimising the environmental impact of the project, which we believe aligns closely with the Government strategy regarding sustainable development. Emmerson is firmly committed to maintaining the highest environmental standards in Morocco at every stage, from construction through to production.

“As soon as the permit has been granted, we will move to complete a BFS, which will include updated numbers for the market. We expect this study, which is a requirement of banks and other financiers, to take approximately six months.

“Thankfully, we are now seeing softening of inflation in capital costs along with commodity and particularly energy prices. Energy forms the largest single part of the operating costs. The improvements we have identified during the basic engineering will also need to be quantified and used as updated inputs for the financial model. We believe cost inflation will apply to all potash projects, and we expect Khemisset to remain in a competitive position on the cost curve not least due to its favourable geology and location.

“Morocco plays an important role in the global fertiliser market, building on the kingdom’s large phosphate product exports. The fast-growing market in Africa, on top of established demand from Europe and Brazil, makes this an exciting moment for potash. Once the environmental plan approval process is completed, we look forward to moving towards the finance and construction of this nationally important project.”