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Emmerson hits record high as transport cost at Khemisset undercuts rivals (EML)

Fertiliser firm Emmerson (LSE:EML) rose 5.7pc to a record 4.9p today after revealing that logistics costs at its flagship Khemisset potash project are expected to be 99pc cheaper than rival developments

The business has budgeted £1.3m for the construction of access roads to allow the shipment of potash from Khemisset. The proposed location of the site requires just 1.2km of paved roads to be built to provide a connection to an existing high-quality highway. The company has included an additional 3km of gravel internal roads in Khemisset’s design estimate.

In today’s update, Emmerson said the logistics budget backs up its belief in Khemisset’s potential to become a low capital potash mine development. It added that the average cost for a similar work package at its rival Canadian potash mine developments comes in at more than $130m.

Hayden Locke, chief executive of Emmerson, said the update marks yet another positive step in the firm’s delivery of a scoping study for Khemisset. The studyis expected in early Q1 2019 and will be used to assess the project’s economic viability. Beforeits completion and release, the business will release expenditure estimates for electrical infrastructure, gas infrastructure and port facilities. Last month, the company said Khemisset’s cost of mine access should be c.95pc lower than many of its peers.

On today’s news, which saw Emmerson’s market cap hit £28m,  Locke added: ‘In the development of a potash mine, low capital cost to production is integral in demonstrating economic viability in any commodity price environment. The Khemisset Project benefits from its proximity to outstandinginfrastructure including existing, high quality, highways and ports. Access to this infrastructure results in significant capital cost savings in construction, especially when compared to other development stage potash projects globally, which typically require significantinvestment in roads and rail connections to transport their product to an export port.

‘The design and cost estimates for the access to mineralisation, via decline, highlighted significant cost savings already available to the Khemisset Project. This announcement further enhances our belief that the Scoping Study for Khemisset will present a low capital cost, high margin proposition which should result in compelling economic metrics.’

Khemisset houses a relatively shallow deposit containing a JORC resource of 311.4Mt at 10.2pc K20, likely giving it a 20-plus year life of mine, with plenty of exploration potential on the horizon. The upside was evidenced by the recent publication of an exploration target, covering an area of approximately 87km2that sits within the recently-granted research permit area. With a range of 264-616MMts, this target could house more than double the current JORC Resource.

Author: Daniel Flynn

Disclosure: The author does not own shares in the company mentioned above

 

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