Morocco-based fertiliser developer Emmerson (LSE:EML) sat at 3p this morning after that it has found no signs of major faulting that could disrupt the development of its flagship Khemisset mining project. After interpreting data gathered from a seismic study completed last month, the firm only found limited faulting at the project- a ‘significant positive’ for its underground mining potential.
Emmerson is targeting low capital cost development and high margins at Khemisset so it can build and operate even low potash prices. Potash is a product mostly used as a fertiliser due to its ability to protect plants from disease, extreme temperatures and increase the efficiency of their water usage, in turn increasing crop yields. Khemisset houses a relatively shallow deposit containing a JORC resource of 311.4Mt at 10.2pc K2O, likely giving it a 20-plus year life of mine, with plenty of exploration potential on which to expand in the future.
Today’s results will be used to inform an ongoing scoping survey at the project, slated for completing in Q1 next year. This survey will be used to assess its technical and economic viability. In today’s update, Emmerson said it has made ‘strong progress’ on the scoping study, adding that it plans to release numerous updates to the market between now and November. A timeline of these can be seen below:
Hayden Locke, CEO of Emmerson, said: ‘We continue to be pleased by developments which confirm our view that the Khemisset ore body will likely be amenable to simple, conventional, underground mining methods. The indication of limited faulting will positively impact the overall mine design, resulting in lowered overallmining costs per tonne of ore and lower general design risk. Coupling this with the excellent infrastructure proximal to our project strengthens our belief that Khemisset has the potential to be a low capital cost, high margin mine which can deliver outstanding returns regardless of the potash price.
‘In addition, we continue to progress all of the major workstreams vital to our ongoing Scoping Study including capital cost estimates for various technical components and connections to infrastructure surrounding the Project. Each of these sections will be released ahead of the complete study and will allow us to talk, with real numbers, about the potential of Khemisset to be a low capital cost potash project. We expect this news flow to commence in the coming weeks and months ahead of the delivery of the final Scoping Study by the end of Q1 2019.’
Emmerson re-listed with a fresh focus on the fertiliser market. According to the UN, the world will need to produce 70pc more food by 2050 to feed its growing population despite the amount of arable land available per capita dropping by 15pc over the same period. Alongside this, the organisation believes that the global middle class will grow by 76pc between 2015 and 2030, leading to higher calorie diets and increasing yield demand from soil. The firm thinks these dynamics are likely to lead to a surge in fertiliser use going forward and, as such, is aiming to get early exposure to the commodity.
Speaking to ValueTheMarkets , Locke said: We like the potash and fertiliser space because there is a pretty well understood thematic- a growing population against a shrinking amount of arable land. It is pretty clear that this is going to put a strain on nutrient levels in the soil globally. Rather than being driven purely by economics, like metal markets, feeding the world’s population is non-discretionary, especially in places like China. Logically, this suggests there will be less volatility in demand as the market progresses.’
At 3p, Emmerson is now trading at its most recent placing price. The fact that it has plenty of news flow due over the coming months before beginning Khemisset’s development next year could make it worth a punt on the chance that something will soon spark a move forward in its share price.