Will Kore Potash be able to deliver at flagship Kola project?
After months of decline, fertiliser business Kore Potash has soared to 6p this month on the news that it has received a definitive feasibility study for its flagship Kola project in the Congo. With the results of this study now imminent and the outcome of two regulatory issues on the horizon, where is the company, which only listed in London in March, likely to be headed next?
Kore’s operations centre around the production of potash compound potassium chloride (KCl). In particular, it is interested in a type of potash called MoP, which makes up 91pc of the global fertiliser market.
The company is 97pc-owner of the Sintoukola Potash Project, based in the Republic of the Congo roughly 80km north of the city of Pointe Noire and within 30km of the Atlantic Coast. Kola, the project’s most advanced licence, is host to a large shallow deposit with a measured and indicated Sylvinite mineral resource of 508Mts grading 35.4pc KCl.
Sintoukola also contains a deposit called Dougou, which holds a measured and indicated potash mineral resource of 1.1bn tonnes grading 20.6pc KCl. A 2015 scoping study showed that the area could house a low capital cost, low operating cost, quick to production mine. Finally, it contains the Dougou Extension Deposit, which is found to the immediate West of Dougou and includes a sylvinite mineral resources of 232 Mt grading 38.1pc KCl.
Since February last year, Kore has been working to complete a definitive feasibility study (DFS) at Kola for a project designed to 2 million tonnes of MoP a year. After several delays, the business announced last week that it has now received the final volume of DFS documentation, giving it a complete set to review. It plans to update shareholders once it has finished reviewing the study.
This year has also seen Kore undergo several amendments to its environmental and social impact assessment (ESIA) for Kola. It had to do this after making ‘a number of value-adding design changes’ to the site’s DFS design since initial approval. It submitted this amended ESIA to the Minister of Environment for its authorisation in July.
Last month, Kore added that further restructuring to the ESIA was in progress following a request from the regulator. It said that once this work has completed, the ESIA will be resubmitted to the regulator for its review before being sent to the Minister of Environment for final approval.
Finally, the business added that it is awaiting feedback from the Ministry of Mines and Geology on whether further action is required to finalise the mining convention for Kola. Congo’s cabinet has already approved the convention, and the country’s parliament has reviewed it.
Elsewhere, in August, Kore received approval for an ESIA at Dougou. This was a prerequisite for the development of a mining project at the site, which could be extended in the future to include the Dougou Extension Deposit. In its update, Kore said the licence gives it the potential to utilise potash from these deposits to increase the production rate or extend the project life at its Kola project. It will look at how to unlock further value from the deposits once Kola reaches production.
Clearly, the completion of the DFS is a critical step for Kore’s narrative moving forward. This point seems to show in the firm’s share price, which drifted lower for several months when the study was delayed before soaring from 3.6p to 6p this month on the news of its completion.
Operationally, Kore has a healthy $11.7m in cash (as at 30 September) to cover ongoing expenses, and an experienced leader in the form of new CEO Brad Sampson, who came on board in May. As a result, the potential catalysts for the business over coming months are likely to be the results of Kola’s DFS and an update on the approval of either the ESIA or the mining convention.
Kore’s current share price may soon look cheap if these events go the right way. However, any adverse outcomes could be very harmful for the firm at this early stage, especially given that shares have already declined significantly since listing –they sat at 15p in April.
More generally, Kore represents yet another interesting opportunity in the potash space, an area where numerous companies have popped up recently. With demand increasing and world population growth accelerating, proponents of the sector argue that it represents a clear value opportunity. If this does turn out to be the case, then Kore’s claim to be ‘well placed to be among the world’s lowest cost MOP producers’ could be very interesting.