Emmerson has received a formal indication of significant debt financing for its Khemisset potash project from a major European commercial bank.
The indicative sizing shows debt capacity of up to US$230 million would be feasible assuming standard project finance terms and conditions.
It is expected the syndicate will comprise of commercial banks and Export Credit Agencies.
Hayden Locke, CEO of Emmerson, comments:
“To be approached by a major commercial bank with an early indication of debt financing capacity of such significant size, despite using very low potash price assumptions, is a huge endorsement of the economic strength of the Project.
“The Scoping Study, which was delivered in November 2018, highlighted Khemisset’s industry leading capital intensity, but also showed that, even in the downside price scenarios, the potash project exhibited very robust cashflow generation.
"The Board and Management believed this would underpin a significant debt financing package from credible institutions, a view that has been strongly endorsed by this indicative proposal.
“We continue to engage in early stage discussions with a number of significant strategic and financing partners with the capacity to provide both debt and equity for Khemisset potash project, and the indication of significant debt support will enhance these discussions.
“We will continue to update our investors on the various operational and corporate activities we have underway as Emmerson continues to scale up the development of this exceptional project.”
- Indication of potential project finance debt of up to US$230 million for construction of the project has resulted from ongoing discussions with major global commercial bank
- Expected syndicate would consist of major commercial banks and Export Credit Agencies
- Debt sizing based on very conservative, bank case, pricing assumption of US$235/tonne (delivered to Brazil) Muriate of potash price flat over the life of the project
- This price represents c. 35% discount to current spot prices
- Strong potential to increase debt capacity if customer floor prices above base case can be negotiated
- Indicative terms in line with market norms for mine construction project finance including standard covenants, cash sweeps and security packages
- Initial due diligence and financial modelling completed by major global commercial bank
- Final debt sizing and terms subject to using conditions including the completion of satisfactory technical, legal and environmental due diligence and finalisation of offtake agreements.
Emmerson is assessing multiple options for financing the required capital expenditure of the Khemisset potash project.
Emmerson will continue to assess all financing options as project development progresses, in order to ultimately allow an optimal decision to be made regarding the final financing structure.
Traditional project finance is considered one of the most attractive financing solutions for new mining projects but is often not available for a variety of reasons.
To have received an indication of significant debt capacity from a major financial institution, following initial technical and financial due diligence, is a significant positive for Emmerson and an endorsement of the quality of the Khemisset Project.