Kore Potash (LON: KP2) announced on Tuesday that it has agreed full financing for the construction of its Kola potash project in the Republic of Congo.
The company has 97% ownership of the Kola and DX potash projects, both located in the Republic of Congo’s (“RoC”) Sintoukola Basin.
A non-binding memorandum of understanding (“MoU”) was signed between Kore and Summit Africa, on behalf of a consortium of engineering companies and investors. This MOU is to arrange all of the financing needed to construct the project.
This MoU outlines the roadmap for optimising, financing, and ultimately constructing Kola through a combination of debt and royalty financing.
Summit and its technical partners - SEPCO Electric Power Construction and China ENFI Engineering – are set to work with Kore on an optimisation study seeking to cut the capital cost for Kola to below $1.65 billion.
On top of which, Summit and possible financing partner BRP Global will present a financing proposal on behalf of the Summit consortium – which includes Summit and all three partners. This is subject to a due diligence and success in keeping the cost below $1.65 billion.
This proposed financing structure would mean Kore did not have to contribute to the capital required for building the project. The company would, however, separately contribute around $900,000 to costs of the optimisation study.
At the same time, Kore would also keep a 90% equity interest in Kola. The RoC government would keep its 10% shareholding in the Kola project.
In response to this splendid news, Kore’s stock shot up more than 30% to 1.86p on Tuesday afternoon, with an almost £44 million market cap. This puts the company’s shares up 111% year-to-date from 0.88p.
Kola is among “the world's standout potash projects”, a high-grade and high-quality shallow sylvanite potash deposit located on an existing mining licence just 35 kilometres from the coast. It is also just 65 kilometres to the north of Pointe Noire, a harbour city.
Already, permitting and agreements for building Kola are in place. This includes environmental and trans-shipment permits as well as a mining convention with the government.
According to Kore, Kola is expected to be among the “lowest cost potash producers globally” and is in an ideal location for supplying both African and South American markets.
Chief Executive Brad Sampson said the company was “pleased” Kola’s funding was proceeding at a time of rising potash process and strong potash demand despite a difficult global economy. He said this underpinned Kore’s “belief in continued potash demand growth”.
Potash describes the group of minerals that provide potassium for plant growth. It is one of the three key plant nutrients, along with nitrogen and phosphorus. Between 90% and 95% of potash is used as fertiliser for agriculture.
Potassium helps plants resist disease and is also key to higher crop yield and quality. The element also helps protect plants from cold or dry weather, strengthening the root system and preventing wilt.
As mentioned, Kore is also developing the DX potash project, also in the ROC. The first phase of a definitive feasibility study for DX, which is separate from Kola, began in August 2020.
With the Summit MoU, and a request from the RoC’s minister of mines to focus on Kola, Kore said it needs to reshape its priorities towards optimising and financing Kola in the next 12 months.
With this in mind, the company is currently reviewing the allocation of its resources to Kola and DX, with plans for an update on the DX project “in the coming weeks”.
Author: Anna Farley
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