Re-Admission to the London Stock Exchange

RNS Number : 0863Q

Emmerson PLC

04 June 2018

 

Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining

4 June 2018

Emmerson Plc ("Emmerson" or the "Company") 

Re-Admission to the London Stock Exchange

Emmerson Plc is pleased to announce it has raised gross proceeds of £6 million by way of a placing of 200 million new shares at a price of 3p and has today been readmitted to the Official List of the UK Listing Authority by way of a Standard Listing following its acquisition of 100% of the share capital of Moroccan Salts Limited ("MSL") as originally announced on 17 October 2017 ("the Acquisition").  As a result of the Acquisition, Emmerson now owns 100% of the Khemisset Potash Project in Northern Morocco ("Khemisset" or "the Project").  

Trading in the Company's shares will recommence trading at 8.00 a.m. on the London Stock Exchange's ("LSE") Main Market for listed securities under the ticker 'EML'.

Highlights

·     Significantly over-subscribed placing which raised gross proceeds of £6 million

·     Re-admission to the LSE following acquisition of the Khemisset Potash Project in Morocco:

o  Large potash JORC compliant Resource of 311Mt at 10.2% K₂0 with significant
 exploration upside

o  Accelerated pathway targeting the development of a low-capex, high-margin
 mine - targeted delivery of Scoping Study by end of Q1 2019

o  De-risked development following estimated historical spend (if conducted at
 2018 costings) of US$20 million

o  Located in one of the fastest growing potash consuming countries worldwide
 and on the doorstep of European markets

o  Established infrastructure including a network of toll roads, electricity distribution and deep-water ports

·     Positive market dynamics for potash due to potassium-based fertilizers being critical to improved crop quality as demand for food increases in correlation with the world population

·     Proven Board and management team with extensive potash and international capital market experience

Hayden Locke, CEO of Emmerson, commented: 

"Now is the perfect time to be developing what we believe is an outstanding potash project.  Food reserves are at a 50-year low and as the World's population continues to rapidly grow, potash fertiliser becomes increasingly critical to increase crop yields and improve the quality of plants.  It is estimated that by 2050, the World will need to produce 70% more food from ever reducing per capita amounts of arable land, to feed its growing population.  Put simply, global food security goals cannot be achieved without the significant use of fertilisers.

"In Khemisset we have a project that ticks all the boxes: a large resource, significant exploration upside, an outstanding location - with Morocco being named as one of the fastest growing potash consuming countries in the world.  Coupled with a shallow deposit and excellent local and export infrastructure, we are confident that we have a project which will benefit from low capital and operating costs.

"With £6 million raised in an oversubscribed placing we have the funds in place to deliver our near-term value drivers and, as a result, anticipate being able to hit the ground running with high impact newsflow post-listing as we move towards the delivery of a Scoping Study by the end of Q1 2019.

"We are delighted to have successfully brought London's newest potash company to the market at a time where there is record potash demand against rebalancing, disciplined, supply.  With an excellent project and a proven Board and management team in place, we now have the wheels in motion to meet our objectives and move towards becoming a producing potash fertiliser company."

Ed McDermott, Emmerson's Non-Executive Chairman commented:

"On behalf of the shareholders of Emmerson I am very pleased to welcome Hayden Locke (CEO) and Rob Wrixon (COO) to the Board.  We are extremely happy with the acquisition of Moroccan Salts Ltd and look forward to developing the assets further and delivering value to our shareholders.  I would like to thank Cameron Pearce and Sam Quinn for their service to Emmerson and wish them well in their next endeavours."

**ENDS**

For further information, please visit www.emmersonplc.com, follow us on Twitter (@emmerson_plc), or contact:  Hayden Locke Emmerson Plc Tel: [phone] Edward McDermott James Biddle Roland Cornish Beaumont Cornish Limited Financial Adviser Tel: [phone] Jeremy King Optiva Securities Limited Broker Tel: [phone] Lottie Wadham Susie Geliher St Brides Partners Ltd Financial PR/IR Tel: [phone]

Notes to Editors

Emmerson's primary focus is on developing the Khemisset Potash Project located in Northern Morocco.  The project has a large JORC Resource Estimate (2012) of 311.4Mt @ 10.2% K₂O and significant exploration potential with an accelerated development pathway targeting a low capex, high margin mine.  Khemisset is perfectly located to capitalise on the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. This unique positioning means the project will receive a premium netback price compared to existing potash producers. The need to feed the world's rapidly increasing population is driving demand for potash and Emmerson is well placed to benefit from the opportunities this presents.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

Further Information (as per Re-Admission document which can be found on the Company's website)

Introduction

The Company was incorporated on 1 March 2016 in accordance with the laws of the Isle of Man with an indefinite life and with company number 013301V under the name Emmerson Plc.

The Company was admitted to the standard listing segment of the Official List with trading becoming effective on the London Stock Exchange's main market on 15 February 2017 ("Initial Admission"). Concurrent with the Initial Admission the Company raised approximately £913,000 before expenses and adopted an investment policy to undertake one or more acquisitions of target companies, businesses or assets initially focussing on exploration and/or production companies in the natural resources sector in South East Asia, Africa, and the Middle East.

On 16 October 2017 the Company executed a binding agreement with MSL and the shareholders of MSL at such date (each a "Vendor" and together the "Vendors") under the terms of which the Company agreed, subject to due diligence and regulatory approvals, to acquire 100 per cent. of the issued share capital of MSL (the "Acquisition") to be satisfied in full by the issue of 333,333,333 new shares of the Company each at an implied price of £0.03 per share. As the Acquisition would result in a fundamental change in the business of the Company and would constitute a "Reverse Takeover" under the Listing Rules, on 17 October 2017, the Company requested the Financial Conduct Authority ("FCA") suspend trading in its shares pending an application for the Company to have the Enlarged Ordinary Share Capital admitted to the Official List and to trading on the main market for listed securities of the London Stock Exchange.

On 9 May 2018 the Company and the Vendors executed the Implementation Agreement, under the terms of which both parties confirmed their satisfaction with respective due diligence, and approved the terms of the Acquisition subject only to Re-Admission.

MSL is the holding company for a group of Moroccan companies which are developing the Khemisset potash project located near Rabat in northern Morocco (the "Khemisset Project" or the "Project"). The Directors believe the Khemisset Project has the potential to become a producing potash operation and intend to complete the various exploration work and technical studies required to assess its technical and economic viability. The Directors believe the Project's fundamentals, based upon the current resource (as contained in the CPR) and a favourable Scoping Study in due course, support the potential for a mine life greater than 20 years and a low capital cost and high operating margin potash mine in Morocco.

Reasons for the Acquisition

The Directors of the Company have been seeking to identify opportunities within the resources sector to acquire a natural resource asset in a stable jurisdiction that has the potential to transform the Company into a significant international mining and exploration group focused on investing in and acquiring and developing resource projects.

MSL has a substantial ground position in, and extensive technical information on the Khemisset potash basin, and has recently conducted confirmatory drilling on the project area. Both the recent and historic drilling results inform the view of MSL, shared by the Company, that the Khemisset Project could emerge as a highly competitive global potash mine with potential to return substantial gains for new and existing shareholders.

The Directors believe that the following are the key features which make this an attractive project:

·     the current MSL management team have an existing track record developing and advancing potash projects;

·     taking into account the value of the Consideration Shares and the CLN Shares and the potential exploration and development opportunities offered by the Khemisset Project, the Acquisition has the potential to generate significant value for Shareholders;

·     the Acquisition is in line with the Company's stated investing policy;

·     the Khemisset Project has reported a large Mineral Resource Estimate under the JORC 2012 code;

·     the Khemisset Project is targeting the production of 60 per cent. K2O muriate of potash (MOP) (known as K60), the most common and saleable grade of MOP;

·     the Khemisset Project has been under-developed due to a lack of investment and, with investment, and based upon the current resource (as contained in the CPR) and a favourable Scoping Study in due course, the Directors believe that there is potential for a mine life greater than 20 years;

·     the Khemisset Project benefits from the shallow nature of the ore body (relative to existing potash producers) and its strategic location (relative to existing infrastructure and markets); and

The above is a statement of belief by the Directors and, as such, the Competent Person has not covered this statement in the CPR and accordingly cannot opine on this and therefore it should be treated with caution but none the less are the beliefs of the Directors.

·     due to its location and proximity to infrastructure and customers in Morocco, the Khemisset Project has, subject to the conclusions of the planned Scoping Study, the Director's believe the potential to be a low Capital expenditure ("Cap-ex"), high-margin potash project.

The Khemisset Potash project

The Khemisset Project comprises 39 research permits and 1 mining licence (the "Khemisset Licences") in the Rabat-Salé-Zemmour region of, Morocco. The 39 research permits are held by MSL Minerals SARL and the one mining licence (the "Mining Licence") by Mine de Centre SARL. A summary of the Khemisset Licences is set out below:

39 Research Permits, held by MSL Minerals SARL

Licence Number	Date Granted	Last Renewed (in compliance with Law n° 33-13)	Date of Expiry
3437967	02/08/2015	17/05/2016	01/08/2019*
3437968	02/08/2015	17/05/2016	01/08/2019*
3437969	02/08/2015	17/05/2016	01/08/2019*
3438011	10/10/2016	06/10/2017	09/10/2020*
3438012	10/10/2016	06/10/2017	09/10/2020*
3438013	10/10/2016	06/10/2017	09/10/2020*
3438014	10/10/2016	06/10/2017	09/10/2020*
3438015	10/10/2016	06/10/2017	09/10/2020*
3438016	10/10/2016	06/10/2017	09/10/2020*
3438017	10/10/2016	06/10/2017	09/10/2020*
3438018	10/10/2016	06/10/2017	09/10/2020*
3438019	10/10/2016	06/10/2017	09/10/2020*
3438041	19/12/2016	06/10/2017	18/12/2020*
3438042	19/12/2016	06/10/2017	18/12/2020*
3438043	19/12/2016	06/10/2017	18/12/2020*
3438044	19/12/2016	06/10/2017	18/12/2020*
3438045	19/12/2016	06/10/2017	18/12/2020*
3438046	19/12/2016	06/10/2017	18/12/2020*
3438047	19/12/2016	06/10/2017	18/12/2020*
3438059	26/09/2017	06/10/2017	25/09/2021*
3438060	26/09/2017	06/10/2017	25/09/2021*
3438061	26/09/2017	06/10/2017	25/09/2021*
3438062	26/09/2017	06/10/2017	25/09/2021*
3438063	26/09/2017	06/10/2017	25/09/2021*
3438064	26/09/2017	06/10/2017	25/09/2021*
3438065	26/09/2017	06/10/2017	25/09/2021*
3438171	18/01/2018	18/01/2018	17/01/2021
2138109	11/08/2015	11/08/2015	10/08/2018
2138137	28/12/2015	28/12/2015	27/12/2018
3438068	01/12/2017	06/10/2017	30/11/2021
2138139	09/02/2016	09/02/2016	08/02/2019
2138140	09/02/2016	09/02/2016	08/02/2019
2138141	09/02/2016	09/02/2016	08/02/2019
3438152	31/08/2017	31/08/2017	30/08/2020
3438153	31/08/2017	31/08/2017	30/08/2020
3438154	31/08/2017	31/08/2017	30/08/2020
3438155	31/08/2017	31/08/2017	30/08/2020
3438156	31/08/2017	31/08/2017	30/08/2020
3438157	03/11/2017	03/11/2017	02/11/2020

Mining Licence held by Mine de Centre SARL

Licence Number	Last Renewed (in compliance with Law n° 33-13)	Date Granted	Date of Expiry
343166	20/05/2016	17/09/2015	16/09/2019

* All these permits have already been renewed for a four year period and are not renewable beyond the date stated. Under the New Mining Code upon the discovery of a workable deposit within the area covered by a research permit, the Group has a right to apply for a mining licence in respect of the relevant area.

History of Exploration and Technical Work

The Khemisset Project is a potash exploration property located some 80 km east of Rabat and covering an area about 60 km by 20 km. No potash mining has taken place to date.

Three previous drilling campaigns have been performed in the Khemisset Basin, targeting potash; two historical exploration campaigns and one recent verification program. The first, carried out by the association Bureau de Recherches et de Participations Minieres ("BRPM") and Mines Domaniales des Potasses d'Alsace ("MDPA") between 1955 and 1958, consisted of 9 drillholes, totalling 7,518 drilled metres. The second one was performed by BRPM between 1962 and 1969 and included 124 new drillholes. The drilled metres in both historical campaigns totalled 85,315 m. The most recent drilling was conducted by MSL in 2016 and consisted of a three-hole verification program, drilling 1,543 m. Based on the cost per metre of MSL's 2016 drilling campaign, MSL has estimated the 133 historic drill holes, plus the 1974 PFS, would (if conducted at 2018 costings) have a cost of greater than US$20 million.

JORC Resource Estimate

The SRK Classified Mineral Resource Statement is shown below. The Mineral Resource is contained entirely within the exploration and mining licences displayed in figures 5-2 and 5-3 of the CPR.

SRK Mineral Resource Statement for the Khemisset Potash Deposit, effective date February 2018

Classification                                                                                  Deposit  Tonnage (Mt)         % K₂O        Thickness

Inferred                                                                East Central                                  253.2              10.3                2.3
                                                                              Southwest                                      58.2                9.5                2.6

    ------------               ------------                   ---------

Total                                                                                                   311.4              10.2                2.4
                                                                                                                                 -----------        -----------         -----------

*           Reported above a cut-off grade of 8.5 per cent. K2O and a minimum thickness of 1.5m

Summary of Work Programme following Re-Admission

The Company has outlined a work programme for 2018/2019 ("2018/2019 Work Programme and Budget"), which includes:

•           Geology desktop work;

•           Topographical and seismic survey;

•           Drilling works;

•           Scoping study (including baseline environmental studies and permitting work); and

•           Metallurgical testing is planned to be undertaken early in 2019.

The principal aims of the 2018 exploration are to gain further geological information to understand the potential faulting, verify the potash grade and continuity, and further understand the mineralogy within the most prospective parts of the basin. The programme also aims to understand the presence of rinneite within the north-eastern part of the basin. The drilling will also aim to infill the initial mining area to a denser sample grid which may enable parts of the Mineral Resource to have sufficient confidence to be reported as Indicated.

Further details regarding the Khemisset Project is set out in the Competent Person's Report at Part IV of the Re-Admission Document.

The Potash Market

Potash

The term potash refers to a group of potassium bearing minerals and chemicals. Potash is a fertiliser used in potassium deficient soil, to increase crop yields and improve the quality of the plant. It may be used in combination with nitrogen and phosphate, to increase the yields of important crops such as corn, soybeans, grains, and rice. Potassium protects plants from extreme temperatures, helps plants to fight stress and disease, reduces wilting, strengthens roots and stems, and assists in transferring food. It activates plant enzymes to ensure plants use water efficiently.

Potassium chloride ("KCl"), or muriate of potash ("MOP"), is the most globally important source of potash. Sulphate of potash ("SOP") is less common and sells for a premium price.

Potash plays a central role in helping feed the world's growing population. Approximately 95 per cent. of world potash production is used as fertiliser, the rest is used in a variety of chemical and manufactured products. There is no substitute for potash.

Existing Commercial Potash Operations

The key global producing countries are Canada, Russia, Belarus and China, accounting for some 75 per cent. of world production (2015). Nutrien (the result of the PotashCorp and Agrium merger), Mosaic, Uralkali, Belaruskali are the largest producers.

Key producers estimated that, in 2017, global demand for MOP would range between 62 Mt and 64 Mt up from approximately 60 Mt in 2016. Industry participants expect 2018 to be another year of strong demand growth, led by Latin America and China, with up to 65 Mt of global consumption. From 2001 to 2016, Potash grew with a compound average growth rate of 2.7 per cent.. Argus FMB expects similar growth for the future. MOP remains the cheapest source of potassium for agricultural purposes and so demand is expected to remain robust for the foreseeable future.

Potash Prices

The Canadian potash producers formed a consortium called the Canadian Potash Exporters ("Canpotex"), which is jointly owned by the three Canadian fertiliser producers. Its role is to market and export all potash produced in the province of Saskatchewan which is to be sold outside of North America. The Belarussian Potash Co was formerly the marketing agent for Belarussian and Russian potash, however, this consortium collapsed in July 2013 and has yet to be reformed. The prices agreed each year by the Russian and Belarussian producers as well as Canpotex typically acts as a benchmark for global spot prices. For many years, the free on board ("FOB") Vancouver potash prices were stable at just over US$100 a tonne. Growing consumption of food towards the end of the 20th century and early 21st century, as well as controlled marketing by the key producers, led to a demand/supply imbalance, which saw prices rise to almost US$900 a tonne in 2008 before dropping back as the world economy slipped into recession. Since 2011, spot potash prices at the Port of Vancouver have fallen from around US$490/t metric tonne to their current levels of approximately US$230 metric tonne in March 2018.

Potash Producers

According to PotashCorp, the largest Canadian producer, global potash shipments have risen from approximately 43 million metric tonnes in 2001 to around 61 million metric tonnes in 2016, representing a compound annual growth rate ("CAGR") of approximately 2.7 per cent. Many producers agree that 2017 was a record year for potash consumption with demand estimated to be in the range of 62 to 64 million metric tonnes. Key potash producers are forecasting 2018 to be another record with demand up to 65 million tonnes. Global growth in demand is currently being driven by increasing Latin American demand, particularly in Brazil, which is the largest seaborne market for potash; China and South-East Asia. Africa currently has low fertilizer application rates compared to other regions due to the lack of accessibility and affordability to smallholder farmers and there exists a great opportunity in Africa to transform agricultural productivity by improving its fertilizer supply chain. Africa has a rapidly growing food market that may be worth more than $1 trillion by 2030.

The Enlarged Group's trading strategy and prospects

Following Admission the Enlarged Group has approved the 2018/2019 Work Programme and Budget, which includes:

·     Geology desktop work;

·     Topographical and seismic survey;

·     Drilling works;

·     Scoping study (including baseline environmental studies and permitting work); and

·     Metallurgical testing is planned to be undertaken in 2019.

The principal aims of the 2018/2019 Work Programme and Budget are to gain further geological information to understand the potential faulting, verify the potash grade and continuity, and further understand the mineralogy within the most prospective parts of the Khemisset Project. The programme also aims to understand the presence of rinneite within the north-eastern part of the Khemisset Project. The drilling will also aim to infill the initial mining area to a denser sample grid which may enable parts of the Mineral Resource to have sufficient confidence to be reported as Indicated. SRK Consulting (UK) Limited ("SRK") has been requested by the Company to prepare a Competent Persons Report ("CPR") on the Khemisset Project and has confirmed that it considers the 2018/2019 Work Programme and Budget warranted. Furthermore, SRK believes that the information gained from this programme will address faulting and mineralogy risks associated with the Khemisset Project. SRK has confirmed that the 2018/2019 Work Programme and Budget, and accompanying budget presented for the required work, is reasonable and achievable over the Working Capital period following Admission. Further detail on the Work Programme is set out in the CPR.

The Directors believe that both the recent and historic drilling results inform the view of MSL, shared by the Company, that the Khemisset Project could emerge as a top tier global potash mine with potential to return substantial gains for new and existing shareholders.

The Directors believe that the current MSL management team have an existing track record developing and advancing potash projects and creating shareholder value and that the 2018/2019 Work Programme and Budget has the potential to increase the size of the Khemisset Project resource (detailed at 10 of Part I of the Re-Admission Document) and achieve near-term shareholder value that has not previously been unlocked due to a lack of investment.

Board of Directors and Key Management

Edward ("Ed") Peter McDermott, age 35, Non-Executive Chairman

Ed McDermott started his city career with credit derivative broking firm Creditex International Ltd. Ed's subsequent roles have been in corporate broking which has seen him involved with a number of small to medium sized companies. With over 10 years' experience in the management, financing and development of small companies he has broad experience in a number of sectors including natural resources, financial services, retail and leisure. He is currently a Non-Executive Director of AIM listed Fishing Republic Plc and FastForward Innovations Limited. Ed is part of the corporate broking/finance team at Optiva, an investment advisory firm with over 20 years in business. He has previously served as a Director of AIM listed Stellar Resources Plc and Noricum Gold Ltd.

Hayden Thomas Locke, age 36, Chief Executive Officer

Mr Locke has nearly 15 years' commercial experience in investment banking, private equity and junior resource company management. He initially studied engineering and commerce before completing a graduate degree in mineral exploration geosciences at the Western Australian School of Mines. He commenced his career in investment banking in London, initially with Deutsche Bank and then J.P. Morgan before returning to Australia in 2009. On his return to Australia, Mr Locke helped to set up and run the Australasian operations of Barclays Natural Resource Investment, a private equity investment vehicle focused on energy, renewables and metals and mining, with over US$2 billion in committed capital. In 2011, Mr Locke was recruited as Head of Corporate for Australian gold explorer Papillon Resources (ASX:PIR). Papillon discovered and fully permitted 5 million ounce Fekola Gold Project in Mali, West Africa, completing a number of technical studies and capital raisings, before eventually selling the company to Canada listed gold producer B2Gold for over $600 million in 2014. In 2014, Mr Locke joined ASX listed Spanish potash developer Highfield Resources as Head of Corporate and Sales & Marketing. As of mid-2017, he also assumed responsibility for Technical Services Department including geology (resource and reserve estimation), mining and metallurgy and processing.

Dr Robert Christopher Wrixon, age 46, Executive Director - Chief Operating Officer

Dr Wrixon has 18 years' commercial experience in corporate strategy, mining M&A and exploration management. He began his career in mining as head of strategy for Xstrata Coal in Sydney and later moved to a corporate strategy role for Xstrata plc in London. After leaving Xstrata, Dr Wrixon ran two ASX listed exploration companies, Manhattan Corporation Limited and Haranga Resources Limited. Dr Wrixon has been the Managing Director of Moroccan Salts Limited since its inception in 2013 and brings a wealth of knowledge on the project and the region. He is also currently a director of Starboard Global, a natural resource venture capital group based in Hong Kong. He holds an honours degree in chemical engineering and a Ph.D in mineral engineering from the University of California, Berkeley.

Jeffrey Lindhorst, Bsc. Geology, Grad Dip. GIS, MAIG, age 58, Exploration Manager

Jeffrey is a geologist with almost 30 years' international experience in the mining industry. He has worked in project evaluation and development throughout Alaska, Australia, PNG, Peru, Chile, Philippines, Thailand, Laos PDR, Morocco and Rwanda. His work in senior technical and management positions involved management of extensive drilling programs, selecting and building teams and working closely with local populations and government officials in a wide range of cultural settings. He was Exploration Manager for Kasbah Resources based in Morocco for six years from 2008. Since 2014 he has been working in Rwanda on developing and consolidating the domestic tin mining industry. Jeffrey is a member of the Australian Institute of Geoscientists and qualified as a Competent Person under JORC Code (2012).

 

END

 

 

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