Wednesday, December 6th 2023

Emmerson Plc – Unlocke’s Khemisset

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Emmerson’s Locke talks next steps as firm secure potash offtake at Khemisset

Emmerson shares perked up last Monday after revealing that it had signed terms with a leading global fertiliser player for 100pc offtake of the production from its Khemisset potash development project in Morocco. Here, the organisation’s chief executive Hayden Locke talks us through the significance of the deal and outlines what investors can expect over the coming months.

Milestone development

In the recent update, Emmerson announced that it had signed heads of agreement for up to 800,000 metric tonnes of K60 muriate of potash (MOP) a year from Khemisset over an initial five-year period. The terms were signed with an un-named counterparty that the company called a leading global fertiliser trading, distribution, and marketing company.


Emmerson noted that the counterparty has a strong position in Brazil, Africa, and north-western Europe – all areas where Khemisset has a strong transport and logistics advantage thanks to being based in Morocco. Indeed, the company said that – once the project is in production – it will be the closest producing potash mine to each of these critical markets.

It added that this geographical advantage reinforces the project’s potential to be among the lowest capital cost, highest-margin potash projects in the world.  This potential was confirmed in a scoping study last November, which forecasted EBITDA margins of more than 60pc for Khemisset. Meanwhile, the study put the project’s post-tax NPV10 at more than £1.1bn, based on industry expert price forecasts. In comparison, Emmerson’s market cap is currently just £26.3m. The study was based around Khemisset’s large JORC Resource Estimate of 311.4Mt at 10.2pc K2O with significant exploration potential and an accelerated development pathway.

Brazil opportunity

Speaking to TMS, Locke said that, while all of the counterparty’s market focuses offer vast potential customer bases, he is particularly excited about entering Brazil.

‘The Brazilian market is a really big one for us as it offers a huge premium netback,’ he said. ‘Because Brazil is so far away from the Canadian and Russian centres of potash production, the price paid for potash in the country tends to be significantly higher than in agricultural centres in countries like China or India.

‘The benefit for us comes because we are so close to Brazil. Indeed, when our mine is up and running, it will be the closest producing potash mine to the country. As a result, we capture all of that distance advantage in the form of our margin. We have much lower transport and logistics cost to that market, and therefore our margins versus other markets globally will be much higher.’


Meanwhile, he says that recent deal displays the true level of demand for producing potash projects. He believes this will prove particularly handy in financing discussions for the project, which are already in motion.

‘Showing that we have the potential to secure an offtake of this scale so early in Khemisset’s life-cycle is a major plus for our financing discussions. One of the key question marks from a banking syndicate will be ‘are you able to sell your product?’. We have basically just shown that we can sell 100pc of our product with one agreement. This will de-risk the project enormously in their mind.’

Moving forward

Finally, Locke told us that investors can expect plenty of news flow over the coming months following our latest positive development. Since the beginning of the year, the company has been regularly updating the market on the progress it has made in advancing Khemisset towards the project feasibility stage, ahead of eventual production.

Developments have included metallurgical testing, an environmental baseline study, and the appointment of leading potash expert Don Larmour of Global Potash Solutions as an adviser. Locke tells us that outstanding work that needs to be completed ahead of feasibility is progressing steadily:

‘Over the next few months, we will have hopefully secured MoUs with local strategic partners and service providers. These will cover areas like electricity, gas, and logistics. We have several discussions ongoing in that sphere. Meanwhile, drilling is progressing very well, and we expect a resource upgrade in Q3. Critically, we hope to commence the final feasibility study in this quarter. We are very excited about all the progress we have made so far, and we look forward to updating investors on our progress moving forward.’

John Meyer and Hayden Locke talk about potash at Indaba

Friend of the show Zak Mir caught up with CEO Hayden Locke here

The author was remunerated but holds no shares