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EML – CEO Hayden Locke

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Hayden Locke

Emmerson CEO Locke discusses next steps and macro conditions as Khemisset enters feasibility stage

May has been a particularly busy month for fertiliser firm Emmerson. The last few weeks have seen the business announce the beginning of a long-awaited feasibility study for its Khemisset potash project in Morocco as well as a critical permitting roadmap for the site. We caught up with Emmerson’s chief executive Hayden Locke to discuss the company’s next steps as well as conditions in the broader fertiliser market.

Feasibility study

Emmerson’s decision to begin its feasibility study at Khemisset follows the release of a scoping study for the asset last November. This work gave the project a market-leading EBITDA margin of more than 60pc and a post-tax NPV10 of more than £1.1bn, based on industry expert price forecasts. These figures were based around Khemisset’s large JORC Resource Estimate of 311.4Mt at 10.2pc K2O with significant exploration potential.

The feasibility study will be undertaken by Golder Associates – the engineering business that also completed Khemisset’s scoping study – and tendering is currently underway for a processing design expert. A decision in this area is expected to coincide with the conclusion of an ongoing metallurgical test programme at the project.

All-in-all, Emmerson believes the feasibility study will take between nine and 12 months to complete, with results targeted for release in the first half of next year. Based on this time-frame, Locke says the firm’s progress since listing last year is unlikely to be matched by many other firms in the potash sector.

The important thing we are showing is that we are still making rapid forward progress,’ he tells us. ‘Our timeframe for completing the feasibility study puts us in Q1 or early Q2 next year. That is a fairly tight deadline. It would mean that within 18 months, we have delivered both a scoping study and a feasibility study.’

Development milestone

The Khemisset feasibility study will be divided into discrete work streams funded by Emmerson’s existing cash balance, which sat at £2.3m as at the end of March. These milestones include early engagement with potential financing partners for project development and partnerships with in-country service providers and project partners. Locke says Emmerson is already making steady progress in the area, highlighting the head of terms recently signed between the firm and a leading global fertiliser player for the 100pc offtake of Khemisset’s production.

‘This offtake has been signed with a company that we know that project finance banks will be comfortable with,’ he says. ‘This is important for two reasons. Firstly, it shows that MoP is a straightforward project to sell. We don’t have any issues of trying to invent a market. Once Khemisset is up and running, there will be no problem at all selling our product at all. We are already in the sights of these big consumers of potash in the global market.

‘Secondly, it has helped us on our way to being taken seriously by some of the biggest companies in Morocco. They are seeing us as a very credible story in the country. We are getting good feedback from those groups; they are keen to work with us and help us find the best possible solutions for the project.’

Other feasibility milestones include the completion of resource drilling, an updated mineral resource estimate, and the commencement of an environmental and social impact assessment. With updates due on all of these, Locke says investors will have plenty to digest throughout the remainder of the year.

‘I think we are coming into a period of newsflow that will start over the next couple of months,’ he says. ‘The results of the metallurgical test work should be released by early July. That is a big de-risking milestone that will hopefully show that the scoping study was largely correct regarding the process flowsheet for Khemisset. Following this, our resource upgrade will then probably happen in the third quarter.’

Permitting programme

Moving on from Khemisset’s feasibility study, May also saw Emmerson release a ‘permitting roadmap’ after identifying all of the major authorisations required to construct and operate the project. This can be seen below:


Emmerson said its work here confirms its belief that it will be in a position to commence construction at Khemisset once engineering and financing have completed. Locke tells us that the company is about to begin work on an Environment and Social Impact Assessment (ESIA) for the project.

We have not commenced the final permitting, but we are about to commence the ESIA,’ he says. ‘So, we have done the baseline study and early engagement with the authorities. That raised no red flags in term of our ability to develop the project as we are currently envisaging it. So that’s a real positive for us. Then we laid out in detail what the next steps from a permitting perspective are and how we can go about approaching that. The next phase is to kick off the ESIA. That will run concurrently with the feasibility study. Once we deliver the feasibility study, we will go into the permitting phase. Following that, we will look to financing, and then we think there are very few obstacles for us to go straight into construction.’

Macro backdrop

Finally, Locke said that, unlike companies in many other sectors, Emmerson’s macro backdrop could be enjoying a boost from China and the US’s ongoing trade disputes. This is because sanctions between the two countries are forcing many areas of the global agricultural market towards Brazil – a country where Khemisset has a distinct advantage thanks to its geographical location.

‘What is interesting in terms of the market is that this trade war with the US has changed the global agricultural dynamic,’ he tells us. ‘China is by far the largest consumer of these abundant cash crops. If we use soybeans as an example, China has historically been the largest consumer of American soybeans. However, last November, China consumed no soybeans from the US for the first time since 1974.  The country had to replace that from somewhere because all of those soybeans go on to feed the hogs in the Chinese food industry. So, they sourced them from Brazil.

What we are seeing is a substantial agricultural shift towards Brazil. The country is one of the most essential potash markets in the world. Based on the first quarter and four months of this year, it is on track to have another record year of demand this year. So, all the demand drivers for our market that previously existed remain in place for Emmerson, with the added bonus that conditions are actually looking even better than three or four months ago in Brazil, one of our key markets.’

Hayden Locke recently presented his investment case for Emmerson Plc.

Last October we spoke to Hayden Locke CEO of Emmerson Plc.

The author was remunerated for this article but does not hold shares