Kore Potash, LON:KP2, the AIM-listed, London-based mineral exploration and production company operating primarily in Congo-Brazzaville, prospecting for potash recently released an update on its Kola project.
The Kola Project is one of three projects that Kore Potash has in the Sintoukola Potash district, which include the DX sylvinite deposit, the Kola sylvinite and carnallite deposits and the Dougou carnallite deposit.
Potash is a strategic mineral that includes various mined and manufactured salts that contain potassium in water-soluble form. Over 90 million tonnes of potash are produced a year, with Canada being the largest producer, and is mostly used in fertilizers. Potash was historically derived from wood ash, but in the nineteenth century it started to be processed from mineral salts in Germany.
Most of the current deposits were from ancient inland oceans that when they evaporated left the minerals in place, which is where most of the mining operations happen in the world today. Most potash mines today are deep shaft mines up to 1,400m underground. Others are mined as strip mines, having been laid down in horizontal layers as sedimentary rock. The minerals that are mined are then refined into potassium fertilizer.
Fertilizer mineral
Potassium is the third ‘fertilizer mineral’ alongside Nitrogen and Phosphorus, improving water retention, yield, nutrient value, taste, colour, texture, and disease resistance of food crops. Potassium is also used for aluminium recycling in industrial processes.
Kore Potash is developing its Sintoukola basin projects with an eye to supplying mineral potassium to the agricultural markets of Brazil – the other side of the Atlantic Ocean from the Republic of Congo – and West Africa.
Kore has a 97% interest in Kola, and in April 2021 signed a Memorandum of Understanding with Summit Consortium, a group of strategic partners, to work together to optimise the Kola project. The MoU included an EPC Contract (Engineering, Procurement and Construction) as well as a proposal to provide capital through project finance debt and royalties, that would underpin the construction of Kola.
Once operational Kola is anticipated to be one of the lowest cost potassium producers globally, said the company with an operating cost of USD102 per tonne inclusive of carriage and freight due to its direct shipping access to markets in Brazil and Africa. The company said Kore will provide the cheapest viable source of potash to Brazil.
Low-Cost Mining
Moreover, said Kore, the Kola deposit has a low dollar-mine cost due to the shallow nature of the deposit, only 260m to the bottom of the mine shaft and due to the mineralogy – the insoluble composition of the ore body – has low mining and processing cost, and low transportation costs, being only 35km from a port. The proximity of the sea also favours the project, as Kore can pipe waste brines directly into the ocean as opposed to constructing storage and processing facilities
The project has a production target of 2.2 million tonnes a year (Mtpa) over a 33-year life-of-mine.
In June Kola signed an agreement with SEPCO Electric Power Construction Corporation to submit an EPC contract. SEPCO, an international engineering and construction business from China, subcontracted China ENFI Engineering Corporation, an engineering group with specific mining, processing, and potash experience, to provide technical services for the design and construction of the mine which will be part-financed by BRP Global, a royalty-finance provider from Abu Dhabi in the UAE. Other partners include the Oman Investment Authority and Sociedad Química y Minera de Chile, a Chilean lithium and potash producer.
Subsequent to the MoU, Summit Construction reported back with an optimisation study that reduced capital costs by USD520m to USD1.8bn, compared to the USD2.4bn construction costs outlined in the project’s definitive feasibility study. The optimisation study also found ways to reduce the mine construction time by six months to 40-months.
Optimised value
This update saw Kola’s net present value appreciate to USD1.6bn and improved the Internal rate of Return for the project to 20% on an ungeared post-tax basis. On completion – given a potash price of USD1000/tonne (the current potash price is around USD1100/tonne) the completed project’s metrics improve to a post-tax NPV of USD9.4bn with an IRR of 49%.
The optimisation study recommended the development of a conventional underground mine with shallow shaft access, with a 25km conveyor belt exporting the raw minerals to a processing plant, and then another 11km shipping the finished product to port, where it will be conveyed by barge to ocean-going tankers.
The EPC contract has been presented to Kore by SEPCO and the two companies are now discussing details pertaining to contractual terms and financing. This is a major move forwards for Kore, which is getting closer to turning its exploration project into a producing mine at a time when the world’s focus is on food security as food inflation continues to rise as a result of the disruption caused by the War in Ukraine. Not only is Ukraine a significant supplier of grains to the world markets, Russia and its ally, Belarus, control 40% of world potash stocks.
However, these “further discussions” which will require approvals from SEPCO’s board may delay the project further, which has already experienced Covid-19 related delays with its Chinese partners.Kore is continuing its exploratory drill work on its DX project, also in the Sintoukola district. Kore said it is aiming to move quickly to cash generation from the DX project, which has a modest capital cost and planned production of 400,000Tpa of Potash and its adjacent potash projects provide the potential for long-term potash production district from the area.
Kore opened trading today at 0.99p, and has offered a year-to-date return of 9.99% with a one-year return of -13.7%. The company has a market capitalisation of GBP33.3m and its shares have ranged between 0.75p and 1.88p over a 52-week period. The company originally listed on AIM in March 2018 and is also listed on the ASX in Australia and JSE in South Africa.
