Emmerson Plc · LSE:EML
Emmerson — Investor Presentation (February 2021)
37 slides from Emmerson's investor presentation, February 2021
Slide 1: Developing a low capex, high margin potash project in Morocco
Developing a low capex, high margin potash Corporate Presentation February 2021 project in Morocco
Slide 2: Disclaimer
DISCLAIMER Presentation on any matter, transaction or arrangement referred to in it. Neither of the Company nor any of its This presentation (“Presentation”) is being provided to you (the “Recipient”) by Emmerson PLC (the “Company”) for respective directors, officers or employees makes any represent
Slide 3: Corporate Development
Corporate Development Graham Clarke – CEO A highly experienced potash mining executive with extensive experience managing large multi-disciplinary teams for underground fertiliser mines. Graham was a key member of the senior executive team at Sirius Minerals, overseeing all technical aspects of the
Slide 4: Introduction
Introduction • Demand for potash continuously rising • Inevitable need for new well-located sources of supply • Potentially outstanding project economics • Key development expertise in place • Substantial equity discount to Net Asset Value compared to sector developers1 • Market Cap as % of NAV/NPV
Slide 5: Population growth requires ever higher yields
Population Growth Requires Ever Higher Yields Farmland per capita is shrinking as population rises Arable land (hectares per person) reduced by 33% in the 40 years to 2016 Total Productive arable land now reducing in absolute terms Fertilizer consumption Fertilizer consumption (kilograms per (kilogr
Slide 6: Our Vision
Doing the right things and doing Our Vision them in the right way LEADER To be the first and leading potash producer in Africa SUSTAINABLE Partnering with a global renewable energy company STAKEHOLDER Creating lasting employment, paying meaningful returns to Morocco SAFE No compromise on the safety
Slide 7: Bulk Commodities Depend On Logistics...
Bulk Commodities Depend On Logistics... Canadian giants are swing producers (supply restraints ongoing) Nearly 70% of global potash supply is very remote from end Saskatchewan Royalties markets ~US$25/tonne 1,700km by Rail Saskatoon ~US$45/tonne 135km Truck to Nominal Royalties Port US$0.10/tonne US
Slide 8: ...To Keep All In Sustaining Costs Competitive
...To Keep All In Sustaining Costs Competitive AISC to CFR Brazil, by operation 300 Khemisset (EML) Khemisset (EML) Inc. By Product 250 Credits 200 $US/Tonne 150 100 50 0 Mining Processing Royalties, Sustaining Capital, and S,G&A Freight Net of Salt By Product Credit Source: Argus, November 2018 - N
Slide 9: The Geology and Location are Unique Advantages
The Geology and Location are Unique Advantages Corporate Presentation 8
Slide 10: Low Upfront Capex
Low Upfront Capex Conservative Case Base Case Mine life 19 years 19 years Extraction rate (Mt/annum) 6.0 6.0 MOP price per tonne (USD) 280 360 Average Annual MOP production (tonnes/annum) 735,000 735,000 Average Salt Production (tonnes/annum) 1,000,000 1,000,000 AISC FOB Casablanca ($/tonne) 158.0 1
Slide 11: Potash is a Steady Market
Potash is a Steady Market • Current supply restraint signals the potash price has bottomed, likely to rise from here • The major potash producers trade at decent multiples – around 10x EV/EBITDA • Oligopoly market can dampen the boom and bust of other commodities. 16.00 14.00 12.00 10.00 EV/EBITDA 8
Slide 12: Significant Equity Discount to Net Asset Value
Significant Equity Discount to Net Asset Value Junior resource companies can be expected to trade around 35% of NAV if • The project economics are top quality • The capex is much lower than the NAV • The management team is credible • Strong shareholders join the register Market Cap USD Flagship Proj
Slide 13: ...In Comparison to Peers
…In Comparison to Peers Market Cap as Percentage of NPV8 for other Potash Developers Average 80% 70% 75% 60% 50% 40% 30% 27% 30% 20% 23% 18% 10% 5% 7% 0% Emmerson Highfield Agrimin Ltd Danakali American Pacific Kalium Lakes Salt Lake Potash Resources Borates Sources: Company websites and Bloomberg C
Slide 14: The Value Of Independence
The Value Of Independence • High margin standalone business • Ability to finance as a new independent • Maximise profit selling into best markets Corporate Presentation 13
Slide 15: A Strategic Asset
A Strategic Asset Green Morocco successfully developing better farmland Total MOP Imported to Morocco 2012 - 2019 (in Tonnes) 1,200,000 1,000,000 Africa is expected to experience faster population growth 800,000 600,000 African farmland could see the 400,000 strongest demand growth for fertilizer 20
Slide 16: Morocco is Open For Business
Morocco is Open For Business • Morocco ranks highly on the investment risk index • Welcomes FDI in the industrial sector • Competitive royalties and fiscal regime to develop mining sector • Khemisset will be a meaningful contributor to employment and GDP Corporate Presentation 15
Slide 17: Socio Economic Study
Socio Economic Study • 2,385 direct and indirect jobs to be created during construction • Once operational a total of 1,500 jobs will be created with 760 being direct employees • Targeting to fill 90% of roles at the mine with employees living within Khemisset region • Total investment over the life
Slide 18: On the Fast Track to Production
On the Fast Track to Production Progress to date has been cost effective and quick Jun 2018 RTO £6m raised at 3p Low Capex Potential Confirmed by Scoping Nov 2018 Study – 3.35p Apr 2019 Heads of Agreement Signed for 100% Offtake – 4.10p PEA for Sale of Salt Completion of Comprehensive Jul 2019 By-Pr
Slide 19: Near Term Milestones
Near Term Milestones Mining Permit ESIA Approval Strategic Partner Debt Finance Commence Construction Corporate Presentation 18
Slide 20: Corporate Presentation
ri Re Morocco @ pen Potential Resource Expansion I Research Permits §S8 MSL-Emmerson Mining Licence 3,5 Km — Corporate Presentation 19
Slide 21: Goals for 2021
Goals for 2021 • ESIA approval • Debt Finance in place • Strategic Partner Construction Equity • FEED commenced • Moroccan Government Agencies (power, road, water) • Plant construction underway • Decline development Corporate Presentation 20
Slide 22: Financing Options
Financing Options • In talks with strategic equity investors • Preliminary discussions with lending banks and specialist funds for debt financing • Unencumbered off-take is a trump card • Financial investors can take construction risk for producer multiple revaluation • Phased developments Corporate
Slide 23: Upside Potential
Upside Potential SOP production facility • Low capex, high NPV addition – PFS ongoing Increase salt sales to the USA • Capacity to grow from 1Mtpa to 4.5Mtpa Potash Price Recovery • Argus consensus Long Term MOP price $412/t in the FS Increase Mine Life • Central & SW deposits accessible – potential
Slide 24: Investment Case
Investment Case We will be well funded with the ability to execute our strategy quickly Low capital cost, high margin Experienced Board and development confirmed by Management Feasibility Study Number 1 African investment Strong long-term jurisdiction in 2018 fundamentals for potash Large JORC compl
Slide 25: £5m Placing - Use of proceeds & Timetable
£5m Placing - Use of proceeds & Timetable • Decline & Deep Hole drilling £1.4m • Detailed design for mine, decline & infrastructure £1.1m • Test work, land optioning & SOP Feasibility Study £500k • Recruit technical personnel £400k • Working capital £1.6m • Roadshow Monday 22 February – Friday 26 Fe
Slide 26: Contacts
CONTACTS: Emmerson Plc We will strive to “Always do the right thing Graham Clarke – CEO and always do it in the right way” [email protected] Hayden Locke – Executive Director RESPECT [email protected] We respect our environment, our stakeholders and each other. Shard Capital I
Slide 27: Appendix
Appendix Corporate Presentation 26
Slide 28: Overview
Overview Emmerson PLC (EML.L) has recently completed its Feasibility Study. Feasibility Study Snapshot • Post Tax NPV8 of US$1.4 billion and IRR of 38.5% over an initial 19 year mine life • Total pre-production capital cost (potash only) US$387 million including contingency 72% increase in JORC Outs
Slide 29: Highly Experienced Team
Highly Experienced Team BOARD MANAGEMENT Mark Connelly – Non Executive Chairman An internationally experienced financial and commercial executive with 30 years’ experience in Phil Cleggett – Head of Corporate Development the financing and development of mining projects. He has worked with a number o
Slide 30: Feasibility Study
Feasibility Study Corporate Presentation 29
Slide 31: Outstanding Economics
Outstanding Economics Demonstrates a financially robust project that delivers strong NPVs & cashflows through a range of potash prices US$1.4bn** 19 years Post Tax NPV8 38.5%* Initial IRR Life of Mine Average, steady state post- Total pre-production capital cost Peak production of tax Cash margins U
Slide 32: Feasibility Study: Positive Economics
Feasibility Study: Positive Economics Key assumptions and results NPV (US$m) Sensitivity to Potash Price and Discount Rate Parameter Value NPV - US$ millions MOP Price - US$/tonne Initial Operating Life 19 years 288 350 412 474 536 (-30%) (-15%) (Base Case) (15%) (30%) Annual ROM Extraction Rate 6Mt
Slide 33: Resource Upgrade to Extended Mine Life
Resource Upgrade to Extended Mine Life 72% increase in resource tonnes with approximately 70% in the Indicated category Maiden Mineral Resource Estimate (May 2018) Million Tonnes (potash K2O (%) seam) Indicated Category 0.0 n/a Inferred Category 311.0 10.20 Total (Indicated & Inferred) 311.0 10.20 7
Slide 34: Mining
Mining Conventional mining carries low technical risk and is a more flexible extraction method • Potash to be mined by Conventional Room and Pillar Mining • Solution Mining and Longwall Mining were also evaluated, Room and Pillar selected because: • High production rate • Multiple working faces • Lo
Slide 35: Simple Processing
Simple Processing • Processing via Hot Leaching and KCI Crystallisation • Crystallisation selected due to: • Lower technical, metallurgical and operational risk • Well understood from a capital and operating cost perspective • Mass and energy balances, detailed equipment lists and process flow diagr
Slide 36: Metallurgical Testing Optimises Process
Metallurgical Testing Optimises Process • Comprehensive Metallurgical Testing program Brine Equilibria Showing Strong FeCl2 Decomposition commenced in April 2019 30.0 • First Phase testing completed in June 2019 • Result confirm the scoping study flowsheet can 25.0 produce saleable K60 MOP from Khem
Slide 37: Utilities and Infrastructure
Utilities and Infrastructure Khemmiset has a significant local infrastructure advantage • Preferred Mine Infrastructure Area (“MIA) selected considering optimal decline location and simplest connection to local infrastructure • Short connections to existing roads (<1.0km) and electrical infrastructu