| Wed 13 May 2020, 12:00 | | *KORE POTASH PLC - Dougou Extension (DX) Project Pre-Feasibility Study |
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Dougou Extension (DX) Project Pre-Feasibility Study
Kore Potash plc
(Incorporated in England and Wales)
Registration number 10933682
ASX share code: KP2
AIM share code: KP2
JSE share code:KP2
ISIN: GB00BYP2QJ94
(“Kore Potash” or the “Company”)
Dougou Extension (DX) Project Pre-Feasibility Study
Kore Potash, the potash exploration and development company whose flagship asset is the 97%-
owned Sintoukola Potash Project (“Sintoukola” or the “Project”), located within the Republic of Congo
(“RoC”), is pleased to announce outcomes of the Dougou Extension (”DX”) Potash Solution Mining
Project Pre-Feasibility Study (“PFS”). A summary of the results is presented herein.
Highlights:
Strong Financial Outcomes
• Nameplate production target of 400,000 tpa MoP over an initial 18-year life based on Probable
Ore Reserves.
• Free on Board (“FOB”) Pointe Noire costs of US$86.61/t MoP.
• Average annual EBITDA of US$118 million.
• Average annual post construction, post-tax, free cash flow of approximately US$95 million.
• Approximately 4.3 years post-tax payback period from first production.
• Real ungeared post tax IRR of approximately 22.9% and NPV10 (real) of approximately US$319
million on an attributable basis at life-of-mine average MoP price for granular product of
US$422/t MoP (Argus Media’s price forecast for DX Project’s target markets).
• PFS confirms low technical risk utilising selective solution mining, an efficient potash
extraction method in use at multiple potash operations globally.
• PFS outcomes reinforce Kore’s broader development strategy for its deposits in the Sintoukola
Potash Basin containing 6.1 Bt of potash Mineral Resources.
Low capital cost and short construction period improve financing options
• Initial pre-production capital cost of approximately US$286 million (real 2019), including
contingency.
• Low pre-production capital intensity of US$715/t MoP produced.
• Short construction period of 21 months.
• Combination of modest initial capital cost and short construction period improve
attractiveness of DX Project to potential financiers.
Competitive costs to supply MoP to target markets
• Low average mine gate operating costs of US$65.26/t MoP.
• Free on board (FOB Pointe Noire) costs of US$86.61/t MoP.
• Average cost of MoP delivered to target markets of approximately US$114.61/t MoP.
• Close proximity to deep water port at Pointe Noire creates competitive advantage of reduced
shipping distance compared to northern hemisphere producers, which tend to be well inland.
• Higher grade and shallower deposits than majority of existing potash producers contributes
to competitive cost structure.
• Significant competitive advantage via low FOB costs and short shipping distance to target
markets in Africa and South America.
High quality Ore Reserves and Mineral Resources
• Sylvinite Ore Reserves of 17.7 Mt at a grade of 41.7% KCl.
• Grade of the Ore Reserves is in the top quartile of all operating potash mines and potash
development projects globally.
• Total sylvinite Mineral Resources of 145 Mt at a grade of 39.7% KCl.
Further upside potential
• Ore Reserves tonnage represent 22% of the Indicated Mineral Resources tonnage.
• Inferred Mineral Resources of 66 Mt at a grade of 40.4% KCl not included in the study.
• Additional exploration drilling and/ or seismic surveys in the future may support classification
of portions of the additional Mineral Resources of 127.3 tonnes at 39.4% KCl as Ore Reserves.
Next steps and Definitive Feasibility Study
• Planning for the Definitive Feasibility Study (DFS) is progressing well and will be communicated
to shareholders once the detailed scope and costing is completed.
• The DFS planning stage includes consultation with potential debt financiers for the
construction of the DX Project.
Cautionary Statement
• The PFS referred to in this announcement has been undertaken to investigate the potential
for a new potash development in the Republic of Congo.
• The PFS is a preliminary technical and economic study of the potential viability of the DX
project and is based on low level technical and economic assessments (AACE Class IV
estimate).
• The PFS Production plan is based on Probable Ore Reserves 17.7 Mt of sylvinite at an average
grade of 41.7% KCl.
• The PFS is based on the material assumptions outlined in this announcement and Appendix B.
These include assumptions on availability of funding. While the Company considers all the
material assumptions to be based on reasonable grounds, there is no certainty that they will
prove to be correct or that the range of outcomes indicated by the PFS will be achieved.
• To achieve the range of outcomes indicated in the PFS, base case funding in the order of
US$286 million will likely be required. Investors should note that there is no certainty that the
Company will be able to raise that amount of funding when needed. It is also possible that
such funding may only be available on terms that may be dilutive to or otherwise affect the
value of the Company’s existing shares.
• It is also possible that the Company could pursue other ‘value realisation’ strategies such as a
sale, partial sale or joint venture of the project. If it does, this could materially reduce the
Company’s proportionate ownership of the project.
• Given the uncertainties involved, investors should not make any investment decisions based
solely on the results of the PFS.
• The Mineral Resources and Ore Reserves underpinning the production targets and forecast
financial information in this combined AIM/JSE/ASX Release were prepared by Competent
Persons in accordance with the requirements of the JORC Code 2012 edition (JORC).
Brad Sampson, CEO of Kore, commented: “The completion of the DX PFS confirms the district scale
development potential of this world-class potash basin and the standalone commercial viability of the
DX Project.
“The estimated US$286 million capital cost to construct the DX Project in just 21 months makes it
attractive from a capital and near-term cashflow perspective, and low operating costs will allow Kore
to profitably deliver MoP to our target markets.
“Building on the PFS and previously published positive Scoping Study for the DX Project, we can rapidly
progress to conducting a definitive feasibility study, which will continue to improve Kore’s
understanding of the asset and de-risk the DX Project even further.
“Accelerating the Company into production and early cashflow generation via the DX Project will
provide a strong platform to continue to optimise the Tier-1 Kola project and the wider potash basin,
and a significantly improved commercial position to undertake its development. In addition,
construction of the DX Project will give advantages in terms of overlapping infrastructure, thereby
reducing the future capital cost at Kola.
“Developing the DX Project first is the best way forward for all of the Company’s stakeholders: our local
communities; the Government of the Republic of Congo; and our shareholders. We look forward to
working with all these parties as we progress the DX Project into production and look to unlock the
significant value within Kore’s portfolio.”
SGRF commented: “We are pleased with the completion of the DX PFS on time and underbudget and
with the quality of the PFS outcomes. The results of the DX PFS indicate attractive economics and
simplicity in project design which lends itself to comparatively lower risk in the subsequent construction
and operating phases. We are supportive of Kore progressing to a Definitive Feasibility Study on DX.”
Table 1: Key Project Metrics (100% basis unless otherwise stated)
Project physicals Units Project financials Units
Total MoP production kt 7 372 Total revenue US$M 3,113
MoP granular product
%KCl 98.5% Average annual revenue US$M 169
grade
Average MoP
ktpa 393 Average annual EBITDA US$M 118
production
Capital cost EBITDA margin % 69.8%
Pre-production capital Average post-construction, post
$M 285.9 US$M 95
cost tax annual free cash flow
Capital intensity
(at nameplate 400,000 US$/tpa 715 Free cashflow margin % 56.4%
tpa MoP)
Operating costs Total post tax free cash flow2 US$M 1,469
Attributable3 post tax, un-geared
Mine Gate Cost $/t 65.26 US$M 319
NPV (10% real)
FOB (Pointe Noire) Attributable3 post tax, un-geared
$/t 86.61 % 22.9%
Cost1 IRR
Payback period from date of first
CFR (Africa) Cost1 $/t 114.61 years 4.3
production
Scheduled LOM years 18.4
Average forecast MoP granular
US$/t MoP 422
price
Notes to Table 1:
1: Excludes Royalty and Sustaining Capex
2: Free cash flow defined as EBITDA minus tax, minus capex
3: Attributable to Kore’s interest (i.e. 90% basis)
Table 2: Summary of changes between Scoping and PFS Studies
Financial Drivers Scoping PFS
Capital Cost Estimate US$327 million US$285.9 million
Operating Cost: Mine Gate US$78.85/t MoP US$65.26/t MoP
Operating Cost: FOB (Pointe Noire) US$82.74/t MoP US$86.61/t MoP
Operating Cost: CFR (Africa) US$107.74/t MoP US$114.61/t MoP
Life of Project 17 years 18.4 years
Potash Price US$360/t flat US$344 /t Ave for first 6 years
US$456 /t Ave for remaining years
US$422/t LOM average
MoP Produced over life 7,074 Mt 7,372 Mt
Mineral Resource 232Mt @ 38.1% KCl 145 Mt @ 39.7% KCl
Ore Reserve Nil 17.7 Mt sylvinite @ 41.7% KCl
NPV10 US$221 million US$319 million
IRR 19.3% 22.9%
Average annual free cash flow US$74 million US$95 million
Mining Method Dual well selective dissolution Single well selective dissolution
Ship loading Purpose built Kore facility BOO at existing Pointe Noire Port
Notes to Table 2: A key point to note with regards to pricing is the forecast potash price remains beneath the
scoping study assumption of US$360/t MoP for the first 6 years of production, at an average price of $US 344/t
MoP, until 2029. The average potash price for the remaining life of mine is US$ 456/t MoP. The overall impact
of this pricing assumption adds 1% to the IRR of the DX Project when compared to the scoping study pricing
assumption
Figure 1: Contributions to Change in IRR from Scoping Study to PFS – IRR Waterfall
(available at www.korepotash.com)
Ore Reserves and Mineral Resources
Ore Reserves (Table 3) were determined from a portion of the Indicated Mineral Resource Estimate
which was updated for the PFS. The Sylvinite is hosted by two layers (‘seams’) referred to as the HWSS
and the TSS, separated by 8 to 15 m of rock-salt. Table 4 provides the Mineral Resource Estimate.
Further detail on the Ore Reserves Estimates and Mineral Resource Estimate is provided in Appendix
B: (Summary of Information required according to ASX listing Rule 5.9.1) and Appendix C (JORC Code
Table 1, Sections 1-4).
Table 3: DX Sylvinite Ore Reserves
Classification Ore Reserves KCl grade Mg Insolubles
(Mt) (% KCl) (% Mg) (% Insol.)
Probable 17.7 41.7 0.06 0.19
Total Ore Reserves 17.7 41.7 0.06 0.19
Notes to Table 3: The Ore Reserves in Table 3 are gross numbers and the attributable numbers are presented
in Appendix D: Kore Potash Mineral Resources and Ore Reserves as of 13 May 2020.
Table 4: DX Sylvinite Mineral Resources (inclusive of Ore Reserves)
Mineral Resources KCl Grade Mg Insolubles
Classification
(Mt) (% KCl) (% Mg) (% Insol.)
Indicated 79 39.1 0.06 0.20
Inferred 66 40.4 0.05 0.22
Total Mineral Resources 145 39.7 0.05 0.21
Notes to Table 4: The Sylvinite Mineral Resources in Table 4 are gross numbers and the attributable numbers
are presented in Appendix D: Kore Potash Mineral Resources and Ore Reserves as of 13 May 2020.
Reasonable Basis for Forward-Looking Statements (including production target and forecast
financial information) and Ore Reserves
This release, inclusive of Appendix A: Summary results of DX Project PFS, contains a series of forward-
looking statements. The Company has concluded that it has a reasonable basis for providing these
forward-looking statements and the forecast financial information included in this release. This
includes a reasonable basis to expect that it will be able to fund the development of the DX Project
when required.
The detailed reasons for these conclusions are outlined throughout this release, including in Section
19 of Appendix A. All material assumptions, including the modifying factors, upon which the
production target and forecast financial information is based are disclosed in this release (including
the summary information in Appendix B and Appendix C). This announcement has been prepared in
accordance with the requirements of the JORC and the ASX and AIM Rules.
The estimated Ore Reserves and Indicated Mineral Resources underpinning the production target
have been prepared by a Competent Person in accordance with the requirements of JORC. Details of
those Ore Reserves and Mineral Resources are set out in this release (including, in relation to the Ore
Reserves, the details in Appendix B and C).
The 400,000 tonnes per annum MoP production over an 18.4-year life is underpinned by scheduling
of Probable Ore Reserves. No Inferred Mineral Resources, exploration targets or qualifying foreign
estimates underpin the production target.
ENDS
13 May 2020
JSE Sponsor: Rencap Securities (Pty) Limited
For further information, please visit www.korepotash.com or contact:
Kore Potash Tel: +27 11 469 9140
Brad Sampson – CEO
Tavistock Communications Tel: +44 (0) 20 7920 3150
Jos Simson
Edward Lee
Canaccord Genuity – Nomad and Broker Tel: +44 (0) 20 7523 4600
James Asensio
Henry Fitzgerald-O’Connor
Shore Capital – Joint Broker Tel: +44 (0) 20 7408 4050
Jerry Keen
Toby Gibbs
James Thomas
Competent Persons Statement:
The estimated Ore Reserves and Mineral Resources underpinning the production target have been
prepared by a Competent Person in accordance with the requirements of the JORC Code.
All information in this report that relates to Mineral Resources is based on information compiled by
Ms. Vanessa Santos, P.Geo. of Agapito Associates Inc. Ms. Santos is a licensed professional geologist
in South Carolina (Member 2403) and Georgia (Member 1664), USA, and is a registered member (RM)
of the Society of Mining, Metallurgy and Exploration, Inc. (SME, Member 04058318), a Recognized
Professional Organization’ (RPO) included in a list that is posted on the ASX website from time to time.
Ms. Santos has sufficient experience that is relevant to the style of mineralisation and type of Deposit
under consideration and to the activity she is undertaking to qualify as a Competent Person, as defined
in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves” (the JORC Code). Mrs. Santos consents to the inclusion in this report of the matters
based on the information in the form and context in which it appears.
All information in this report that relates to Ore Reserves is based on information compiled or
reviewed by, Dr. Michael Hardy, a Competent Person who is a registered member in good standing
(Member #01328850) of Society for Mining, Metallurgy and Exploration (SME) which is an RPO
included in a list that is posted on the ASX website from time to time.
Dr. Michael Hardy has sufficient experience that is relevant to the style of mineralization and type of
deposit under consideration and to the activity being undertaken to qualify as a Competent Person as
defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves” (the JORC Code).. Michael Hardy has verified that this report is based on
and fairly and accurately reflects in the form and context in which it appears, the information in the
supporting documentation relating to preparation of the Ore Reserves.
Dr. Michael Hardy president of Agapito Associates Inc is not associated or affiliated with Kore Potash
or any of its affiliates. Ms. Santos is full time employee of Agapito Associates Inc. and is not associated
or affiliated with Kore Potash or any of its affiliates. Agapito Associates Inc will receive a fee for the
preparation of the Report in accordance with normal professional consulting practices. This fee is not
contingent on the conclusions of the Report and Agapito Associates Inc. Michael Hardy will receive
no other benefit for the preparation of the Report. Michael Hardy does not have any pecuniary or
other interests that could reasonably be regarded as capable of affecting their ability to provide an
unbiased opinion in relation to the Dougou Extension Potash Project. Agapito Associates Inc does not
have, at the date of the Report, and has not had within the previous years, any shareholding in or
other relationship with Kore Potash or the Dougou Extension Potash Project and consequently
considers itself to be independent of Kore Potash.
Forward-Looking Statements
This release contains certain statements that are "forward-looking" with respect to the financial
condition, results of operations, projects and business of the Company and certain plans and
objectives of the management of the Company. Forward-looking statements include those containing
words such as: “anticipate”, “believe”, "expect," “forecast”, “potential”, "intends," "estimate," "will",
“plan”, “could”, “may”, “project”, “target”, “likely” and similar expressions identify forward-looking
statements. By their very nature forward-looking statements are subject to known and unknown risks
and uncertainties and other factors which are subject to change without notice and may involve
significant elements of subjective judgement and assumptions as to future events which may or may
not be correct, which may cause the Company’s actual results, performance or achievements, to differ
materially from those expressed or implied in any of our forward-looking statements, which are not
guarantees of future performance.
Neither the Company, nor any other person, gives any representation, warranty, assurance or
guarantee that the occurrence of the events expressed or implied in any forward-looking statement
will occur. Except as required by law, and only to the extent so required, none of the Company, its
subsidiaries or its or their directors, officers, employees, advisors or agents or any other person shall
in any way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of
whatever nature arising in any way out of, or in connection with, the information contained in this
document.
In particular, statements in this release regarding the Company's business or proposed business, which
are not historical facts, are "forward-looking" statements that involve risks and uncertainties, such as
Mineral Resource estimates market prices of potash, capital and operating costs, changes in project
parameters as plans continue to be evaluated, continued availability of capital and financing and
general economic, market or business conditions, and statements that describe the Company's future
plans, objectives or goals, including words to the effect that the Company or management expects a
stated condition or result to occur. Since forward-looking statements address future events and
conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each
case could differ materially from those currently anticipated in such statements. Shareholders are
cautioned not to place undue reliance on forward-looking statements, which speak only as of the date
they are made. The forward-looking statements are based on information available to the Company
as at the date of this release. Except as required by law or regulation (including the ASX Listing Rules),
the Company is under no obligation to provide any additional or updated information whether as a
result of new information, future events or results or otherwise.
Summary information
This announcement has been prepared by Kore Potash plc. This document contains general
background information about Kore Potash plc current at the date of this announcement and does
not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe
for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise
acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The announcement is in
summary form and does not purport to be all-inclusive or complete. It should be read in conjunction
with the Company’s other periodic and continuous disclosure announcements which are available to
view on the Company’s website www.korepotash.com.
The release, publication or distribution of this announcement in certain jurisdictions may be restricted
by law and therefore persons in such jurisdictions into which this announcement is released, published
or distributed should inform themselves about and observe such restrictions.
Not financial advice
This document is for information purposes only and is not financial product or investment advice, nor
a recommendation to acquire securities in Kore Potash plc. It has been prepared without considering
the objectives, financial situation or needs of individuals. Before making any investment decision,
prospective investors should consider the appropriateness of the information having regard to their
own objectives, financial situation and needs and seek legal and taxation advice appropriate to their
jurisdiction.
