TIDMEML
RNS Number : 8142E
Emmerson PLC
23 October 2018
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
23 October 2018
Emmerson Plc ("Emmerson" or the "Company")
Potential for Very Low Capital Cost Electrical and Gas Supply at
Khemisset Potash Project
Emmerson Plc, the Moroccan focused potash development company,
is pleased to announce that it has completed the preliminary cost
estimates for the capex required to ensure electricity and gas
supply at its 100% owned Khemisset Potash Project located in
northern Morocco ("Khemisset" or "the Project"). This work has been
completed by independent consultant Golder Associates ("Golder"),
as part of the forthcoming Scoping Study, which the Company expects
to be completed in early Q1 2019. These estimates have confirmed
the potential for significant capital cost savings for the Project
due to its proximity to excellent infrastructure. To view the press
release with the illustrative maps and diagrams please use the
following link:
http://www.rns-pdf.londonstockexchange.com/rns/8142E_1-2018-10-22.pdf
Highlights
-- Total budgeted cost for construction of connection to
existing electrical infrastructure is approximately US$5.7 million
including a 30% contingency
-- Discussions with largest gas provider in Morocco confirms
Company's expectation that onsite gas (LPG) storage facility can be
constructed at supplier's expense, with zero capex required by
Emmerson
-- Estimated capital cost saving for similar work package of
approximately 93%, or over US$75 million, relative to estimates for
average Canadian potash mine development[1]
-- Proposed site location is only 5.5km from the expected
connection point to 60kV electricity lines, and 7km from nearest
electrical substation
-- Design and estimate completed by Golder according to AusIMM
guidelines for capital cost estimates
-- Further enhances Management's strong belief in potential for
Khemisset to be a low capital cost potash mine development,
following the announcements of low capex mine access and low capex
logistics solution, which have the potential to save Emmerson over
US$1.1 billion when compared to benchmark projects (refer RNS dated
18 September and 08 October 2018)
Hayden Locke, CEO of Emmerson, commented:
"The Khemisset Project benefits from access to outstanding
infrastructure and this manifests itself in significant capital
cost savings for the Project. Morocco has invested heavily in
electrical generation and transmission capacity throughout the
country. As a result, the Project is within close proximity of
numerous sites to connect to the electrical grid.
"Our discussions with one of the largest gas suppliers in
Morocco confirm that it is willing to design, build and maintain
the gas storage infrastructure required for the mine and
processing. This saves us considerable capex which would otherwise
be required to construct either a pipeline or onsite storage, at
our own expense.
"The design and cost estimates for the access to mineralisation
and connection to logistics 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."
Comparison to Peers
The electrical and gas supply capex estimates for the Khemisset
Project, completed by independent engineers Golder as a part of the
Scoping Study, indicates that the capital cost requirement to
ensure electricity and gas availability should be far lower than
the equivalent connections for the majority of potash development
projects globally. A comparison to other development stage potash
projects is shown in Figure 1 below.
Figure 1. Capital costs to connect to logistics solution in
selected potash projects
Electrical Connection Overview
Golder, which was appointed by the Company to manage the
delivery of its Scoping Study, has completed basic design and cost
estimates for the electrical connection at Khemisset. Designs and
estimates have been prepared in line with Scoping Study guidelines
provided by the Australasian Institute of Mining and Metallurgy
("AusIMM").
Electrical Grid Connection
There is an existing 60 kV network in the area, with two
transmission lines running to the north and west of the proposed
process plant site. The nearest connection point to that line is
5.5 kilometres due west of the site. The nearest substation is the
60/22 kV Khemisset substation approximately 7 kilometres north west
of the site. Figure 2 below indicates the proposed location for
connection to site.
Figure 2. Approximate distances to nearest point on 60 kV line
and Khemisset Substation
There are multiple possible connection points to the electricity
grid, of which the Khemisset substation, and its transmission
lines, are the closest. A detailed power study, to confirm
availability of the full 40MW estimated peak power requirement has
not yet been completed, but initial discussions with the Moroccan
electricity network, and work completed by local consultants,
indicate that there is sufficient capacity both on the 60 kV
network and at the Khemisset substation for the Project's
needs.
The larger Meknes substation which is located approximately 38
kilometres due east of the proposed mine, has confirmed capacity
for the mine and offers a viable alternative to the Khemisset
substation.
Figure 3: Approximate location of Meknes substation in relation
to other connection alternatives
Site Electrical Infrastructure
The 60kV overhead line will feed from the electricity grid into
the mine's 60/11 kV intake substation. Given the relatively large
size of the mine infrastructure area, it is considered impractical
to distribute to all infrastructure at 400V. It is therefore
proposed that a single 11 kV ring will feed all surface and
underground infrastructure, with 11 kV / 400 V step-down pole-mount
transformers or compact substations throughout the mine
infrastructure area. Compact substations with dry-type transformers
are recommended for underground operations.
In most cases, 11 kV and 400 V underground cables are proposed
for the mine infrastructure area. However, 11 kV overhead lines
will be considered for longer runs to reduce costs and transmission
losses.
Gas Supply Overview
Emmerson will require supply of gas, either Liquified Petroleum
Gas ("LPG") or Liquified Natural Gas ("LNG"), for the Khemisset
processing plant. In Morocco, the most common gas source is LPG,
which can be either propane, butane, or a mixture of the two. The
Company has been in discussions with multiple companies capable of
supplying this gas and is comfortable that a reliable supplier can
be contracted who will construct an on-site storage facility and
deliver all required gas at market rates. The storage contemplated
would be of sufficient size to allow 10 days' supply to be stored
at all times. The Company has received written offers which reflect
these terms.
In this scenario, there would be no capex required from Emmerson
with respect to ensuring supply of LPG. Gas prices in operation
would be floating, with reference to global market prices plus
freight and taxes to deliver to site in Morocco.
Cost Estimation
The total budgeted capital cost required to connect the
Khemisset site to the electrical grid and construct onsite gas
storage is US$5.74 million including a 30% contingency. Cost
estimation for the electrical grid connection has been conducted in
line with Scoping Study levels of accuracy of approximately
+/-30-50%.
A summary of the cost breakdown is presented in Table 1
below:
Item US$ millions
------------------------------------ ---------------------------------
Electrical Connection $4,416,000
------------------------------------ ---------------------------------
60 kV Departure Bay $300,000
------------------------------------ ---------------------------------
60 kV overhead lines, connection
to nearest line $116,000
------------------------------------ ---------------------------------
60/11 kV Intake Substation $4,000,000
------------------------------------ ---------------------------------
Gas Storage $0
------------------------------------ ---------------------------------
Contingency (30%) $1,325,000
------------------------------------ ---------------------------------
Total Direct Costs including
Contingency $5,741,000
------------------------------------ ---------------------------------
Table 1: Summary of Direct Costs for Electrical and Gas Supply
Capex
**S**
For further information, please visit www.emmersonplc.com, follow
us on Twitter (@emmerson_plc), or contact: Emmerson Plc Tel: +44 (0) 207 236
Hayden Locke 1177
Edward McDermott
James Biddle Beaumont Cornish Limited Tel: +44 (0) 207 628
Roland Cornish Financial Adviser 3396
Jeremy King Optiva Securities Limited Tel: +44 (0) 3137 1904
Broker
Lottie Wadham St Brides Partners Ltd Tel: +44 (0) 20 7236
Gaby Jenner Financial PR/IR 1177
Notes to Editors
Emmerson's primary focus is on developing the Khemisset Potash
Project located in Northern Morocco. The project has a large JORC
Resource Estimate (2012) of 311.4Mt @ 10.2% K(2) O and significant
exploration potential with an accelerated development pathway
targeting a low capex, high margin mine. Khemisset is perfectly
located to capitalise on the expected growth of African fertiliser
consumption whilst also being located on the doorstep of European
markets. This unique positioning means the project will receive a
premium netback price compared to existing potash producers. The
need to feed the world's rapidly increasing population is driving
demand for potash and Emmerson is well placed to benefit from the
opportunities this presents.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014.
[1] Based on Hatch Engineering Study, 2012
(http://publications.gov.sk.ca/documents/310/93667-PotashRequirementGuide%20Rev1.pdf)
with 30% contingency added.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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