Kore Potash, [LON:KP2], the AIM-listed, London-based mineral exploration and production company operating primarily in Congo-Brazzaville prospecting for potash recently appointed a new chief executive, J. M. André Baya, who joins the mining company from Fraser Alexander the South African mining services company.
Baya consulted on the Fortescue Mining iron ore project in Gabon and has worked on the African continent for around 20-years. Baya’s appointment follows the re-hiring of Andrey Maruta, who rejoined Kore Potash in December. Maruta replaced Amanda Faris as chief financial officer, and was previously at Kore between 2019 and 2021. Maruta also had previous experience in the mining sector, having been CFO for Russian gold miner, Petropavlovsk that prior to the War in Ukraine had a premium listing on the London Stock Exchange.
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As previously reported, the mining company provides potash from mineral deposits which is an agricultural fertiliser that contains 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.
Kore has a 97% interest in three projects in the Sintoukola Potash district, which include the DX sylvinite deposit, the Kola sylvinite and carnallite deposits and the Dougou carnallite deposit. 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.
Fresh funding for the Kola Potash Project
The company recently completed a USD530,000 fundraising exercise. The Congolese company converted a series of Convertible Loan Notes into new ordinary shares of USD0.001 at 0.38p. The proceeds will be deployed on the Kola Potash Project, helping the company secure an EPC contractor for the project and provide working capital.
This conversion of loan notes is the latest transaction in a busy year for fundraising for Kore Potash with an October share subscription of USD2.5m which was again deployed on securing an EPC contractor for the Kola Potash Project, with strong support from Harlequin Investments a substantial (11.17%) shareholder of Kore.
In August Kore raised a further USD1m in subscriptions. PowerChina International and SEPCO Electric Power have been working with Kore on developing the Kola Potash Project, providing guarantees for the EPC contract. The company has also been improving its relationships with the Congo-Brazzaville government and has received support from the British Embassy in the country.
The DX Project is under strategic review, which following a drilling campaign is a smaller, but still financially attractive, low capital setup projects with a shorter construction phase than its flagship Kola project. However, Kore thinks that its hands are really full with getting Kola into construction, so is having a think about what it going to do with DX, especially since the Congo-Brazzaville government is really keen on getting one potash project off-the-ground and into production and Kore weighing up whether to go into joint venture with other partners to get the DX project up-and-running, or selling off the project and deploying the capital to expedite Kola.
Low cost potassium producer
Meanwhile, Kore is waiting on PowerChina and its parent company SEPCO to get back to them on the construction design of Kola and a costing from consultant, Summit Consortium on the final bill for construction and development of Kola. In June 2022 Summit completed its initial optimisation study, redesigning the plant to save USD520m in costs, assessing that to get the project into production would be USD1.83bn. The optimisation also shaved 40-months off the construction time, reducing it to 46-months from groundbreaking. The current net present value of the project is USD1.6bn, with an anticipated IRR of 20% on an ungeared post-tax basis.
However, should the price of potash increase from the USD360 per tonne, that was the pricing at optimisation, to an achievable USD500/tonne, the NPV improves to USD3.3bn with an IRR of 28%.
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.
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.
The project has a production target of 2.2 million tonnes a year (Mtpa) over a 33-year life-of-mine.
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.
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
Kore Potash still in loss making territory
The company hasn’t actually produced any potash yet, and is still in loss-making territory, which is to be expected. However, consolidated losses improved for the year to the end of December 2023 to USD1.09m against USD1.51m as at end-December 2022.
That said Kore has really chomped into its reserves in this phase of development, with total current assets falling from USD5.3m in December 2022 to USD1.8m at the end of last year.
Kore opened trading on 9th April at 0.49p, and its shares are down 30% over one-year, and down 18% year-to date. The company has a market capitalisation of GBP20.7m and its shares have ranged between 0.37p and 0.75p 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.
Sheldon Modeland, an analyst for Shore Capital, which has Kore under coverage said: “Whilst the process to conclude the Kola EPC contract discussions and subsequent financing proposals has taken longer than we expected, we highlight the complexities entailed for the construction and the significant financing required for a world-class potash project. That said, we look forward to the finalisation of the EPC terms followed shortly afterwards by the financing proposal.”
Modeland concluded: “Overall, we are encouraged with the appointment of a new CEO with substantial mining experience on the African continent. We continue to view Kore’s Kola and DX potash projects as having significant quality attributes and key competitive advantages over other projects, including but not limited to, relatively short shipping distances resulting in low-delivered costs to key markets like West Africa and Brazil.”
