Emmerson PLC / Ticker: EML / Index: AIM / Sector: Mining

11 July 2022

Emmerson PLC ("Emmerson" or the "Company")

Q2 Activities Update

Emmerson, which is developing the world class Khemisset Potash Project in Morocco ("Khemisset" or the "Project"), is pleased to provide an update on its corporate and operational activities for Q2 2022.

Q2 2022 Key Events and Deliverables:

·     Global potash market remains strong with spot prices of US$1,100/t in Brazil

·     Discussions with debt, equity financiers and potential strategic partners continue to progress well, with the tailwind of high potash prices and the accepted strategic importance of new sources of potash such as Khemisset

·     Project development work has continued in the quarter:

o   Exploration work has unlocked cost effective construction options - portal and decline location has been updated and is expected to deliver technical benefits and capex savings

o   All key infrastructure locations established following successful completion of geotechnical drilling and additional Electrical Resistance Tomography surveys

o   Improved and environmentally friendly water solution that increases security of supply for process water

o   All engineering packages advancing, including basic engineering with Reminex and process engineering with Barr Engineering

Global potash market

The potash market has remained extremely strong in the quarter, with supply issues exacerbated by the war in Ukraine. As of mid-June, reported Muriate of Potash ("MOP") sales prices were showing that the Brazil market had steadied at approximately US$1,100/t, while other markets around the world were also showing marked increases in pricing. Global shortages have led to a supply response from producers, and analysts are predicting increased production from Canada, specifically from BHP's Jansen project, and from the world's largest producer, Nutrien, although these developments will take, in some cases, several years to come online. At the same time, production from Belarus or Russia may not become widely available for some considerable time.

The price of all food crops has risen sharply, which has the potential to sustain the demand for potash even at current elevated prices. The world needs agricultural production to increase further to control food prices globally, and it remains critical that potash mines such as Khemisset, as well as other fertilizer projects are brought into production to support this.

Financing update

The Company has continued to make good progress towards securing the funding needed to bring the project into construction, with positive dialogues with banks, equity investors and potential strategic partners, in addition to the existing Singapore-based cornerstone investors Global Sustainable Minerals Pte Ltd and Gold Quay Capital Pte Ltd, who committed up to US$46.8m in November 2021.

Project Development Update

Environmental approvals

Environmental approval for the project remains outstanding. The Company has invested significant resources into meeting Moroccan requirements, including various important design optimisation steps since the submission of the Environmental and Social Impact Assessment in 2020. No specific environmental objections have been raised by the Moroccan authorities and the Company is not aware of any reason why the ESIA will not be granted in due course.

Geology

The geological programme continued during Q2 with the completion of further deep drill holes supplemented by directional drilling and four additional Electrical Resistance Tomography (ERT) surveys. The deeper drill holes had the dual purpose of further understanding the lithography around the declines to assist in finalising the precise siting of this key infrastructure to take advantage of the most competent ground conditions. One of the holes has been extended to provide detailed data to feed into the design of the DWI (Deep Well Injection) for some of the process tailings.  The 8km of ERT surveys have covered the tailings storage facility (TSF) area and the Mining Infrastructure Area (MIA), for best understanding of rock competence for foundations.

Engineering

Following the award of the Basic Engineering packages at the end of 2021 and in Q1 2022, the main focus has been on the seven packages covered in the Reminex contract and the key areas of progress are summarised below. In parallel, work is progressing well with the process engineering being undertaken by Barr Engineering.

Water Supply

In conjunction with Reminex, an improved solution for process plant water supply has been investigated in detail and now approved as the go forward case for further design work. Whereas in the 2020 Feasibility Study the mine site water supply was envisaged to be from the Ouljet Essoltane dam, it will now be taken either partially or fully from the Khemisset Waste Water Treatment Plant, with the ultimate goal of requiring no fresh water for the process. This is a scientifically robust and environmentally friendly approach that both reduces risks of water supply to the project, and further reduces environmental impacts with a shorter pipeline required.

Electrical Power

The power strategy has been more clearly defined with the main feed onto site, back up feed and substation now confirmed. Engagement will now move forward with the state grid owner, ONEE, to develop key design criteria.

Highway Connection

Having engaged with a specialist consultant to assist in the design of the highway connection, a baseline study was completed to understand local transport characteristics such as travel directions and distances, traffic, air pollution or quality of roads, as well as to assess the impact of the future mine. This work is currently ongoing, and options for the location of the road junction have been identified and are under discussion with the relevant government bodies to achieve the best outcome.

Portals and Declines

The mine site location has been adjusted following the geotechnical work that has been undertaken specifically for this purpose. Early results of the decline alignment drilling had demonstrated potentially disadvantageous geological conditions, from a constructability perspective, for the previously proposed portal location. Further to this, more recently completed decline alignment drilling evidenced better than anticipated ore conditions at the end of the decline, which would be potentially sterilised if the existing portal and decline philosophy was adopted.

Based on further geological information, developed from boreholes and ERT surveys, an area has been identified with more advantageous constructability conditions, and in a location which positions the decline in an appropriate area.  The new portal location was approved as the go forward case for more detailed engineering.

The remaining MIA infrastructure layout was proposed and approved. Engineering is well underway on each of the key infrastructure areas. Civil and structural work has now commenced following the decisions made with regards to mine site and portal locations, as outlined above.

The revised site location uses less private land plots and more 'collective land' (i.e., the land owned by the state, which produces a useful cost benefit in the land acquisition programme.

Tailings Storage Facility

The location of the TSF remains unchanged. The early basic engineering discussions were around the optimal solution for the transport of tailings from the mineral processing facility to the TSF (piped as a slurry or conveyed as a drier material). Although both systems are effective and can meet project requirements, the decision was made to progress with a dry tailings system. The key advantages of the dry tailings system are the environmental benefits of reduced footprint, reduced water consumption and also reduced risk in the event of any extreme weather events.

Process Plant

Basic engineering is well advanced with process flow diagrams, piping and instrumentation diagrams and function specifications now completed. Specifications have been chosen for the mechanical equipment and electrical and automation drawings are ongoing.

**ENDS**

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Notes to Editors

Emmerson is focused on advancing the Khemisset project ("Khemisset" or the "Project") in Morocco into a low cost, high margin supplier of potash, and the first primary producer on the African continent.  With an initial 19-year life of mine, the development of Khemisset is expected to deliver long-term investment and financial contributions to Morocco including the creation of permanent employment, taxation and a plethora of ancillary benefits.  As a UK-Moroccan partnership, the Company is committed to bringing in significant international investment over the life of the mine.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking third in the world in terms of tonnes produced annually, and the development of this mine is set to consolidate its position as the most important fertiliser producer in Africa. The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K2O, with significant exploration potential, and is perfectly located to support the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. The need to feed the world's rapidly increasing population is driving demand for potash and Khemisset is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated the Project has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. This delivered outstanding economics, including a post-tax NPV8 of approximately US$1.4 billion using industry expert Argus' price forecasts, and the spot price for granular MOP fertiliser has since risen, further enhancing the valuations.