Emmerson Plc · LSE:EML
Emmerson — Investor Presentation (November 2020)
32 slides from Emmerson's investor presentation, November 2020
Slide 1: Developing a low capex, high margin potash project in Morocco
Developing a low capex, high margin potash Corporate Presentation November 2020 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: Introduction
Introduction • Demand for Potash will continuously rising • Inevitable need for new well-located sources of supply • Outstanding project economics • Key development expertise in place • Massive equity upside compared to sector producers Corporate Presentation 2
Slide 4: 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 5: 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 6: 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 7: ...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 8: The Geology And Location Are Unique Advantages
The Geology And Location Are Unique Advantages Corporate Presentation 7
Slide 9: Low Upfront Capex - Mine Gets Built
Low Upfront Capex - Mine Gets Built Conservative Case Consensus Case Mine life 19 years 19 years Extraction rate (Mt/annum) 5.7 5.7 MOP price per tonne (USD) 280 360 Average Annual MOP production (tonnes/annum) 700,000 700,000 Average Salt Production (tonnes/annum) 1,000,000 1,000,000 AISC FOB Casab
Slide 10: Potash Is A Steady Market
Potash Is A Steady Market • Current supply restraint signals the potash price has bottomed, will rise from here • The major potash producers trade at decent multiples – around 10x EV/EBITDA • Oligopoly market dampens the boom and bust of other commodities 16.00 14.00 12.00 10.00 EV/EBITDA 8.00 6.00
Slide 11: Significant Equity Upside From Net Asset Value
Significant Equity Upside From Net Asset Value Junior resources companies can be expected to trade around 20-25% 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 Project N
Slide 12: ...In Comparison To Peers
…In Comparison To Peers Market Cap as Percentage of NPV8 for other Potash Developers 45% 42% 40% 35% 30% 25% 24% 20% 19% 15% 13% 10% 9% 5% 5% 3% 0% Salt Lake Potash Danakali Kalium Lakes Agrimin Ltd American Pacific Highfield Emmerson Borates Resources Corporate Presentation 11
Slide 13: The Value Of Independence
The Value Of Independence Inverse Payback • High margin standalone 80% 0% 10% 20% 30% 40% business • Ability to finance as a new KP2 Kola KP2 DX EML independent 60% +SOP Adj. Op. Profit Margin • Maximise profit selling into EML best markets KLL AMN APC 40% SO4 HFR SOP EPO RWD DNK CPM WRX GSP 20% KRN
Slide 14: A Strategic Asset
A Strategic Asset 748Kt Green Morocco successfully developing better farmland Africa is expected to experience faster population growth African farmland could see the strongest demand growth for fertilizer Average Global Potash Demand Growth – 2-3% per annum Corporate Presentation Source: www.oc.gov
Slide 15: Morocco Is Open For Business
Morocco Is Open For Business • Morocco ranks highly on the golbal investment 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 14
Slide 16: Socio Economic Study
Socio Economic Study • 2,385 direct and indirect jobs to be created during construction • Once operational a total of 1,212 jobs will be created with 760 being direct employee • Targeting to fill 90% of roles at the mine with employees living within Khemisset region • Total investment over the life
Slide 17: On The Fast Track To Production
ON THE FAST TRACK TO PRODUCTION Progress to date has been cost effective and quick Nov 2018 July 2019 Feb 2020 June 2020 Aug 2020 Low Capex Potential PEA for Sale of Salt By- Completion of Power and BFS– 5.20p Shore Capital Appointed Joint Confirmed by Scoping Product – 4.00p Gas Supply – 3.80p Brok
Slide 18: Financing Options
Financing Options • In talks with strategic equity investors • Preliminary discussions with lending banks and specialist funds • Unencumbered off-take is a trump card • Financial investors can take construction risk for producer multiple revaluation • Phased developments Corporate Presentation 17
Slide 19: 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 20: Investment Case
INVESTMENT CASE Well funded with a cash balance of £1.6m to execute 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 complian
Slide 21: Contacts
CONTACTS: Emmerson Plc We will strive to “Always do the right thing Graham Clarke – CEO and always do it in the right way” Graham.Clarke@emmersonplc.com Hayden Locke – Executive Director RESPECT Hayden.locke@emmersonplc.com We respect our environment, our stakeholders and each other. Shard Capital I
Slide 22: Appendix
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Slide 23: Overview
Overview Emmerson PLC (EML.L) has recently completed its Feasibility Study and is well funded with over £1.2m in the bank 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 i
Slide 24: 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 25: Feasibility Study
Feasibility Study 24
Slide 26: Outstanding Economics
Outstanding Economics Demonstrates a financially robust project that delivers strong NPVs & cashflows through a range of potash prices US$1.4bn** 19 years Post Tax NPV8 38.5%* Initial IRR Life of Mine Average, steady state post- Total pre-production capital cost Peak production of tax Cash margins U
Slide 27: Feasibility Study: Positive Economics
Feasibility Study: Positive Economics Key assumptions and results NPV (US$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 28: 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 29: Mining
Mining Conventional mining is lowest technical risk and most 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 • Lower upf
Slide 30: 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 31: 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 32: 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 infastructure • Short connections to existing roads (<1.0km) and electrical infrastructur