Emmerson has signed an MoU with Morocco’s largest gas distributor for the supply of gas for its low cost, high margin Khemisset potash project in the country.
The MoU states that the groups will work together to assess various methods of gas delivery to the project, with both a gas pipeline and truck delivery under consideration, as well as the most appropriate source of gas from existing and proposed Moroccan gas fields.
Afriquia Gaz will work with the company to review the technical specifications of the drying and steam generation facility to deliver an optimal solution in terms of gas characteristics and the required infrastructure at site.
The Khemisset scoping study demonstrated that the project will have sector leading capital cost to production, supported by onsite gas storage, provided by its gas supply partner at very low cost to Emmerson.
The projected economics for Khemisset are outstanding with an initial 20-year life of mine, average EBITDA of approximately US$240 million per annum, and a post-tax NPV10 of $1.14 billion using industry expert potash price forecasts.
Under the current proposal, Afriquia would design, supply, install, and maintain onsite storage facility at its cost, while Emmerson would provide civil works, electricity and other support services required for the facility’s operation.
While this option remains viable, the company is committed to optimising the economics of the project wherever possible and is optimistic that other options may be available that significantly reduce operating cost with only limited capital cost increases.
In particular, Emmerson will examine the potential to act as a cornerstone customer to allow Afriquia to expand its growing pipeline distribution business, which could allow for a cheaper long-term gas price with an equally low-cost capital solution.
This possibility will be explored in detail as part of the upcoming feasibility study.
Hayden Locke, CEO of Emmerson, comments:
“Energy is a major operating cost for the project and, as a result, even slight improvements in this key area can result in significant improvements for the project overall.”
“We believe that our energy needs will be supplied via low capital cost solutions at competitive long-term operational prices, further supporting Emmerson’s potential to become one of the world’s lowest cost and highest margin potash producer.”
“Strong in-country partners will be fundamental to underpinning the capital and operating costs of our upcoming feasibility study, and this MoU demonstrates the willingness of leading companies in Morocco to work with Emmerson. The comprehensive metallurgical test work programme is progressing well in addition to ongoing discussions with potential strategic partners.”