KP2 Kore Potash Plc

6.    Hydrogeology

The DFS hydrogeological investigations have been used in the Optimised DFS and there are no changes to the information or assumptions related to hydrogeology. The hydrogeology test work that was carried out, is summarised below:

1.   Identify sources of fresh water supply for construction and operations.

These tests concluded that process plant area water supply is available at required rate of 150 m³/hr utilising 5 wells at a depth of 120 m. Similarly, the required water supply at the mine site of 30 m³/hr can be supplied via 2 wells sunk to 120 m depth. Hydrogeological modelling indicates that extraction of these quantities of water over the project life will not adversely impact the aquifers and minor drawdown in the aquifers is expected over the life of the project.

2.   Understand the risk that aquifer system poses to mining operations and how        to mitigate this risk.

The risk of water ingress to the mining areas is a common risk in almost all salt and potash mines. These mines are typically overlain by water-bearing sediments. At operating potash mines in Canada and Europe, the hydrogeological risk is considered higher in areas of disturbance of the stratigraphy, referred to as geological or subsidence anomalies. At Kola, a detailed understanding of the aquifers overlying the evaporite rocks, as well as of the aquitards (or barriers to water flow), has been developed over a number of years. The conclusions drawn following hydrogeological testing were:

o  A problematic water ingress is considered a low probability as no linear faults have been identified and all potential subsidence features can be accurately delineated using (proposed 50 m spaced line) 3D seismic surveying, to add to the existing 186 km of seismic survey data over the Deposit.

o  No mining or shaft sinking is planned within areas of subsidence. In addition, horizontal 'cover drilling' and ground penetrating radar ("GPR") will be employed as forward-looking actions to improve understanding of ground conditions in advance of mining and further mitigate the risk of intersecting a structure or area of disturbance.

o  The mine design incorporates a 10-15 m minimum 'salt-back' barrier between the mining area and the anhydrite aquitard, effectively reinforcing the anhydrite member aquitard layer.

3.   Understand the impacts of groundwater composition and the aquifers on the shaft  

      sinking operation.  

The results of this testing confirmed:

o  That ground freezing during shaft sinking will not be impacted by hydraulic flow or high salinity in the deep aquifer. In fact, low permeability, and low total dissolve solids ("TDS") and salinity in both aquifers is to be expected, supporting the planned freeze-hole spacing and comparatively low energy consumption for the ground freezing operation.

o  The presence of a thick Anhydrite Member (12 m) overlying the salt member which acts as an aquitard and reduces risk of water inflow into the salt member.

7.    Metallurgy and Process

Ore from underground is transported to the process plant via an overland conveyor approximately 24 kilometers long.

A conventional potash flotation plant with a maximum designed production of 2.2 million tonnes per annum of MoP has been designed for the Kola Project. As a result of the low Insolubles content, no separate process circuit is required to remove Insoluble material.

The final MoP product is then transported 11 km by conveyor belt from process plant to the marine export facility at the coast.

A schematic of the full process to extract ore and produce MoP product is shown in Figure 3.

Figure 3: Process flow from mine to ship

The design strategy adopted delivers a Process Plant designed to produce 2.2 Mtpa of MoP at a KCl grade of 95.3 %w and that will accommodate the variety of ROM feedstock characteristics expected to be encountered during the Life of the project.

The optimised process design references the DFS metallurgical test work in 2017 and 2018. The description of the test work used in the Optimised DFS is summarised below.

Characterisation tests were performed on pure seam samples (USS, LSS and HWS) expected to be mined as part of the mine schedule. Composite samples of multiple seams, prepared to be as representative as possible of the expected range of Run of Mine Ore characteristics foreseen in the mine schedule, were prepared from the seam samples.

The insoluble content of the samples was less than 0.5%w and close to 0.1%w in the composite from the USS and LSS. The characterisation of both the composite samples and the pure seam samples established that the KCl content in the composite was 32.2%w.

A process plant KCl recovery rate of 89.9% has been used in the economic evaluation. 

8.    Marine Facilities

The marine facility used in the Optimised DFS was based on the DFS design. A summary of the design is given below.

A trans-shipment arrangement has been designed whereby MoP for export is loaded from a dedicated Jetty into self-propelled shuttle Barges (two units), which then travel to the Ocean-Going Vessels ("OGVs") anchored 11 nautical miles (20 km) offshore at a dedicated transshipment zone. The MoP is transferred from the Barges to the OGVs using a Floating Crane Transhipper Unit ("FCTU").

Transshipping was selected over direct ship loading from the export jetty. The ocean depth along the coastline is shallow and it was not considered feasible to construct the length of jetty required to facilitate direct ship loading.

To ensure sufficient year-round operational availability of the Jetty, a breakwater structure has been designed to shelter the berthing area for Barge loading operations.

The Jetty has been widened to accommodate both a Seawater Intake ("SWI") and a Seawater Outfall ("SWO") system.

9.    Residue and Brine Disposal

The Kola Project's process residue is combined into a single waste stream composed of the NaCl (the brine from product and salt de-brining - bulk of the effluent) and the residue stream which originates from the insoluble de-brining circuit within the Process Plant. The residue is collected in onshore dissolution/dilution tanks and then discharged at sea via the SWO pipe and diffuser. The discharge stream's dispersion characteristics comply with the applicable environmental criteria.

Ecotoxicological test work of the expected discharge confirms that the discharge at sea of the combined salt and insoluble tails stream does not place undue stress on the marine environment.

No onshore tails storage facility is therefore required for the Kola Project.

10.  General Infrastructure

There have been no material changes to the mining, processing, export and marine facility locations since the Optimisation Study in 2022.

a.    Mine Site - Infrastructure

The Mine Site is located near the village of Koutou and the current KP2 Exploration Camp. It is 24 km north and inland of the Project Process Plant Site.

The sites can be accessed from Pointe Noire through the existing National Road (Route Nationale) RN5 which crossses Madingo Kayes and then by driving into RN6 as from Kilounga village.

The Mine Site surface facilities and infrastructure provides access and support facilities for the Underground Mining operations. 

No permanent living accommodation is planned at the Mine Site for the Operational phase of the Project.

b.    Process Plant Site - Infrastructure

The Process Plant Site is located 11 km inland from the marine facilities, next to the village of Tchizalamou, approximately 60 km northwest of Pointe Noire. ROM ore is transferred from the Mine Site via the Overland Long Conveyor ("OLC").

The Process Plant Site facilities and infrastructure produces granular MoP, which is transferred to the Marine Facilities for export. The main administration, control and support functions (Maintenance, Storage, Logistics, Training, etc.) are also located within the Process Plant Site.

c.     Mining Complex & Off-Site - Infrastructure

The operation of the Kola Project's Mine and Process Plant sites are supported by ancillary sites (Accommodation Camp and Solid Waste Management Centre) and interconnecting infrastructures (Roads, Power, Water and Gas supply, and Communications).

The permanent accommodation camp will be located approximately 3 km from the Process Plant and will accommodate up to 950 people.

d.    Power

Operational electrical power is guaranteed from the RoC national grid. This would require a 57 km long 220 kV transmission line to be built from the Mongo Kamba II substation, situated north of Pointe Noire, to the Process Plant. The power demand is estimated to be 25 MVA at the Mine Site and 50 MVA at the Process Plant.

To reduce the Kola Project's environmental footprint, the Company initiated discussions with a new local oil and gas producer in RoC. This potential new supplier's project includes both gas and electricity. As a result of preliminary negotiations, the Company received competitive rates, which were used in the revised economics.

e.    Natural Gas

Initially, the natural gas needed for product drying was to be supplied by a 73-kilometer pipeline from the M'Boundi gas treatment plant. However, a recent marketing decision by this potential supplier has reduced availability in the country, as the supplier now plans to export at higher prices.

In the above context, the new local oil and gas producer (cited in the Power paragraph above) stepped in to propose gas from the oilfield they are developing. This potential supplier plans to start production before Kola does.

f.     Water

Raw water will be supplied from wells located at the Mine Site (2 wells), the process plant site (5 wells) and at the Accommodation Camp (4 wells).

11.  Environmental and Social Impact Assessment

The ESIA was prepared managed by SRK Consulting (UK) Limited's environmental and social (E&S) team. SRK partnered with "Cabinet Management & Etudes Environnementales S.A.R.L." ("CM2E"), which acted as the Congolese-registered consultancy.

The Kola ESIA, initially approved on 10 October 2013, was amended to reflect the design changes made to the Kola Project as part of the DFS and has been amended to include the service corridors for a gas pipeline and overhead power line. The application and terms of reference for amending the ESIA were approved on 12 April 2018 by the Minister of Tourism and Environment.

The ESIA for the Kola Mining License was approved on 31 March 2020 granting a 25-year approval.

The change of location of the process plant, accommodation camp and some other minor OLC track changes which occurred prior to the 2022 Optimization Study require an ESIA update which shall be effected in the first half of the 2025 calendar year.

There have also been conflicting reports as to whether part of the transshipment route between the proposed jetty and the offshore transshipment location being converted into a marine reserve. If confirmed during the ESIA update, this might require a small diversion of the route to be taken by barges transporting the finished product to ocean-going vessels. 

The Company shall carry out their construction operations In compliance with the environmental and social management plan as part of the approved ESIA and will be subject to Regulator's environmental management compliance audits.

12.  Potash Marketing

Kore's potash marketing strategy recognises the supply opportunities arising from MoP market growth in Brazil, the project's proximity to Brazil and African markets and the cost competitiveness of the Kola Project. The DFS, Optimisation Study and Optimised DFS demonstrate that the Kola project can deliver MoP into Brazilian and ports on the west coast of Africa at lower cost than all other international suppliers. Figure 4 shows a comparison of delivered MoP costs to Brazil.

Figure 4 - Brazil delivered MoP cost comparison

Source: August 2024 Argus Media Marketing Report. Kore Potash CFR Cost Brazil calculated per Table 8.

In August 2024, the Company commissioned a MoP market study and specification marketing report ("Argus Media Marketing Report") from one of the leading global consultancy firms, Argus Media Group. According to this report, Kore Potash is ideally located for exports to Brazil from an inland and seaborne freight perspective. The Argus Media Marketing Report indicates that the Company has the shortest distance to the Paranagua port in Brazil and that, in 2023, 59% of Brazil MoP imports entered via three key ports: Santos, Paranagua and Rio Grande. The total estimated approximate 4,600km transportation distance from the Kola mine is the shortest distance among all key exporting mines globally to Paranagua, Brazil. While Canpotex is the largest exporter to Brazil in the year 2023 and K+S fifth largest importer in 2023 via Vancouver, Canada, to Paranagua, port total transportation distance is approximately 12,000km, which is almost triple the distance from the Kola Project mine.

The design of the processing plant allows Kore to produce red MoP granular for the Brazil market.

Potash market research specialist Argus Media provided the Company with historical and forecast pricing trends for the MoP CFR Brazil benchmarks over the period up to 2047 (see Figure 5 below). The Argus Media Marketing Report's estimates are provided in MoP CFR Brazil Real US$/t 2023 values for calendar years 2024 to 2047. The Company considers that it is reasonable to apply Argus Media's estimates over that period given Argus Media is independent and reputable international market research group which has deep knowledge of the current potash market and its trends. After 2047, prices are indexed by the Company using a US$2/t incremental annual increase to the 2047 price as in the Argus Media Marketing Report. As a result, the estimated forecast average granular MoP price is US$449/t (see Appendix A, section 12) for the life of the mine operations (with the US$449/t being the simple average of the forecast price in each year of production over the 23 years of scheduled production, where the forecast price in each year to 2047 is that in the Argus Media Marketing Report and for each year after 2047, is the forecast 2047 price with a US$2/t incremental annual increase applied in each year, as discussed above).

It should be noted that current red granular MoP CFR Brazil prices are around c.US$300/t, which is less than the average of the granular MoP prices used in the Optimised DFS (being US$449/t). There is no guarantee that the forecast annual granular MoP prices used in the Optimised DFS will be realised and lower realised prices will adversely affect the financial performance of the Kola Project as demonstrated in the sensitivity analysis in section 14(b) below. The price at which Kola Project NPV_10% is greater than zero is flat c.US$271/t MoP CFR  for the life of the mine operations. Please also refer to the Cautionary Statement on page 3 of this announcement.

Figure 5 - Historical and forecast MoP CFR Brazil Real US$/t 2023. Extract from Argus Media Marketing Report

As stated in the Argus Media Marketing Report MoP prices are currently reaching their lowest levels over the past 5 years. Short-term pricing in the next 12 months is based on the current market developments, such as weather events, planned or unplanned plant outages and market participant sentiment. Argus Media sees limited upside in medium-term (5 - 7 years) as the market reaches floor around the year 2028 with the ramp-up of BHP's Jansen project in Canada. The potash market is facing transition to supply surplus with recovering Russian and Belarusian and new capacity in Canada and Laos. Argus Media believes that the long-term price of MoP is dictated by the industry's Long-Run Marginal Cost ("LRMC") for adding new potash supply.

Total LRMC is the sum of:

·    Mine capital costs, adjusted for location and the weighted average cost of capital, amortised over the mine's life span;

·    Mine operating costs, including fuel, labour, materials, sustaining capital and royalties; and

·    Value-in-use considerations, crediting or debiting total cost to consider access to target markets.

The LRMC base year is then inflated by Argus Media over the forecast period to provide their long-term price forecast. Each LRMC element is inflated using the appropriate inflator from Argus Media's forecasts of fuel, energy and macro inflators. The LRMC is a long-term trend forecast, meaning Argus Media expects short-term oscillations around the calculated LRMC, driven by factors such as weather and supply disruptions that cannot be predicted this far in advance. Russian MoP development is no longer included in the LRMC set. As the war in Ukraine continues, Argus Media assumes the impact on Russia as a destination for investment will be more prolonged and this is reflected in a higher-risk premium. Argus Media's view is that incremental tonnage from Canada and Israel are expected to dictate long-run LRMC.

13.  Capital and Operating Costs

a.    Capital Cost

The pre-production capital cost for the Kola Project is now estimated at US$2.07 billion (nominal basis), which includes a fixed price EPC contract of US$1.929 billion and US$141 million owner's costs. The breakdown of the EPC capital cost is presented in Table 7 below.

The EPC fixed price is of significant benefit to the Company, as it minimises the risk of cost overruns. Of the total Contract Price, approximately US$708.9 million is allocated for building transportation links and utility pipelines, which will make the Kola Project self-reliant without depending on state infrastructure except for the RoC national grid. The Company considers this to be a significant advantage compared to other potash projects worldwide. To accelerate progress during the financing process, Kore Potash and PowerChina have committed to an Early Works Agreement ("EWA"), which forms part of the EPC and is targeted to be completed by the end of June 2025.

The owner's costs during the 43-month construction period are projected to be approximately US$141 million. The EPC also includes provisions for penalties in the event of delayed completion and non-compliance to performance metrics.

Table 7 - Breakdown of Contract Price

* Total US$708.9 million for transportation and related utilities.

Sustaining Capital Costs of US$924 million have been included in the financial analysis, which is equivalent to US$13.06/t MoP and disclosed in Table 8 below.

Sustaining capital costs cover expenditures required to ensure the operation can sustain the production at nameplate capacity. These costs include overhaul parts and labour, replacement of equipment, maintenance of infrastructures (road, jetty etc.), shut down costs, additional continuous miner and additional underground conveyor costs, and the inspection and maintenance of the trans-shipment vessels

b.    Operating Cost

The Operating Costs are expressed in US dollars on a real basis and are based on average annual production of 2.2 Mtpa of MoP over the life of mine. All costs have been prepared on an owner operated basis and are shown in Table 8.

Table 8 - Summary of Operating Costs

14.  Economic Evaluation

a.     Summary Economics

The economic evaluation delivers a post-tax NPV_10% (real 2024) of US$1.7 billion and a real ungeared IRR of 18% on a 90% attributable basis. The evaluation is based on a forecast average MoP granular price of US$449/t MoP CFR Brazil (real 2024) as outlined in section 12 above.

The key assumptions underpinning the economic evaluation are as follows:

·      Construction start date: 1 January 2026.

·      23-year project life from first production based on depletion of Ore Reserves.

·      2.2 Mtpa average production of MoP.

·      Granulated MoP represents 100 % of total MOP production and sales.

·      All cashflows are on a real 2024 basis

·      NPVs are ungeared and calculated after-tax applying a real discount rate of 10%.

·      NPVs are calculated at a base date of 1 January 2026 prior to the potential dates for commencement of project construction

·      Fiscal regime assumptions are aligned with the recently finalised Mining Convention:

o   Corporate tax of 15% of taxable profit with concessions for the first 10 years of production (0% for the first 5 years and 7.5% for years 6 - 10).

o   Mining royalty of 3% of the Ex-Mine Market Value (defined as the value of the Product (determined by the export market price obtained for the Product when sold) less the cost of all Mining and Processing Operations, all costs of Transport (including any demurrage), and all insurance costs).

o   Exemption from withholding taxes during the term of the Mining Convention.

o   Exemption from VAT and import duty during construction; and

o   Congo Government receives 10% of the shares in KPM which owns the Kola Project.

The forecast project cash flow on a 90% attributable basis for 23 years of production is illustrated in Figure 6.

Figure 6 - Project Cash Flow Forecast (real 2024) on a 90% Attributable Basis

b.    Sensitivity Analysis

Kola Project returns have been calculated on a real 10% post-tax unleveraged basis with the key financial results and assumptions provided in Table 1. Figure 7 below shows the sensitivity to the four variables that have the most impact on the real post-tax NPV_10% and 90% attributable basis (reflecting Kore's future holding of 90% and the RoC government 10%) of the project, in descending order of most sensitive to least sensitive. No capital cost sensitivities were included as the EPC is a fixed price contract. The financial outcomes of the project are most sensitive to changes in revenue and, therefore, future MoP prices as well as KCl recovery in the process plant.

Figure 7 - NPV real 10% post-tax US$'000 movement sensitivities*.

* KCl recovery sensitivities are in incremental steps of 5%, 10% and 15% increases or decreases relative to the base of 89.9%; increases are: +5% = 94.9%, +10% = 99.9%, +15% = 100% maximum. All other sensitives are % changes on the base number.

15.    Project Funding

As announced on 6 April 2021, a non-binding memorandum of understanding was signed with Summit to arrange the full financing required for the construction of the Kola Project ("Summit MOU").

In line with this memorandum of understanding, following signing the EPC, Summit is expected to deliver a non-binding financing term sheet within three months. This term sheet will be subject to the completion of detailed and definitive legal documentation.

The Company confirms its confidence in the Summit Consortium as a financier for the construction of the Kola Project. This confidence is based on the Company having worked with the Summit Consortium for the past 10 years and their track record in assisting with financing for Kore Potash including sourcing the approximately US$40 million equity investment provided by the Oman Investment Authority ("OIA") and Sociedad Quimica y Minera de Chile S.A. ("SQM") in 2016. OIA and SQM are among top three largest shareholders of the Company who together hold 27.58% in the issued share capital of the Company.

The material terms of the Summit MOU were set out in the 6 April 2021 announcement and are reaffirmed as follows:

·    The Summit MOU outlines a roadmap to optimise the capital design to fully finance and construct Kola via a mix of debt and royalty financing.

·    Under the proposed financing arrangements, the RoC Government will retain their 10% shareholding in Kola.

·    Under the Summit's proposed financing structure, the Company will not contribute to the capital needed to build the Kola Project and will retain a 90% equity interest in Kola.

The Company retains the right not to accept any finance proposal presented by Summit and there is no guarantee that any proposal or legally binding agreement will be forthcoming. The Company provides no assurance to shareholders that the Summit Consortium will provide the financing required on terms which are acceptable to the Company. If the Summit Consortium does not provide an acceptable financing package leading to binding legal documents, the Company will need to explore other debt, equity and structured finance alternatives having regard to then prevailing capital market conditions.

The Company expects any financing provided by the Summit Consortium to be subject to the Summit Consortium being granted full security over the Kola Project, however (as noted above) the full terms of any financing proposal from the Summit Consortium (including any security package) will be subject to further discussions.

As previously announced on 30 January 2025 the Summit Consortium was expected to deliver this financial proposal by the end of February 2025. Due to delay in publication of the Kola Project Optimised DFS update the new expected delivery date of the financial proposal is now before the end of March 2025.

The Company confirms the Summit Consortium is not a related party of the Company.

Further details about the financing arrangements will be notified to the market in accordance with the Company's continuous disclosure obligations

Appendix B: Summary of Information required under ASX Listing Rule 5.9.1 (Ore Reserves), Listing Rule 5.16.1 (production target) and Listing Rule 5.17.1 (forecast financial information derived from a production target).

Pursuant to ASX Listing Rules 5.9.1, 5.16.1 and 5.17.1, and in addition to the information contained in the body of this release, the Company provides the following summary information.

Kola Project Ore Reserves and related production target and forecast financial information derived from the production target

Summary of Material Assumptions

Material assumptions relating to the Kola Project are summarised below:

·      Production life - LoM of 23 years at an average annual production of 2.2 Mtpa MoP production. The production life fully depletes Ore Reserves and incorporates a portion of Inferred Mineral Resource into the production target.

·      Product pricing - Potash market research specialist Argus Media provided the Company with historical and forecast pricing trends for the MoP CFR Brazil benchmarks over the period up to 2047 (see Figure 5 above). Kola's proposed mine life covers the period from 2029 through to 2052 (23 years). The Argus Media Marketing Report's estimates are provided in MoP CFR Brazil Real US$/t 2023 values for calendar years 2024 to 2047. After 2047, prices are indexed by the Company using a US$2/t incremental annual increase to the 2047 price as in the Argus Media Marketing Report. As a result, the estimated forecast average red granular MoP price is US$449/t for the life of the mine operations. For more details on product pricing refer to Section 12.

·      MoP Product - The process design is based on a single product type, Red Granular MOP. (The MoP produced will comprise at least 95.3% KCl, with a maximum of 0.2% Mg and 0.3% Insolubles).

·      Project duration - A project execution duration of 43 months was specified in the EPC contract.

·      Project Capital - The total nominal Project Capital of US$2.07 billion includes both EPC costs and owner's cost.

·      Working capital assumptions - Working capital based on 30 days Debtors and Creditors, 60 days Stores.

·      Operating cost - mine gate operating cost of US$74.94/t and CFR cost of US$128.19/t were reported in the Kola Project Optimised DFS update.

·      Shipping costs - LoM Shipping costs (trans-shipment and sea freight) of US$24.38 /MoP t were based on updated ocean freight quotations received in 2024.

·      Fiscal parameters - The mining convention between the Company and the Republic of Congo specifies the fiscal parameters summarised below:

o  Company tax rate (15%),

o  Initial tax rates (5 years at 0% + 5 years at 7.5%)

o  Royalties (3% of revenue) (Mining Convention)

o  Government free carry (10%) (Mining Convention)

o  Other minor duties and taxes (Mining Convention)

Criteria for Mineral Resource and Ore Reserve Classification

The criteria for Mineral Resource and Ore Reserve Classification remain unchanged from the DFS.

The Ore Reserve estimate is based on the Kola Sylvinite Indicated and Measured Mineral Resources reported by Met-Chem DRA in accordance with the JORC Code (2012 edition) and confirmed by the Company on 27 Feb 2025.

Drill-hole and seismic data were relied upon in the geological modelling and grade estimation. Across the deposit the reliability of the geological and grade data is high. Grade variation is small within each domain reflecting the continuity of the depositional environment and 'all or nothing' style of Sylvinite formation.

Drill hole data spacing determines confidence in the interpretation of the seam continuity and therefore confidence and classification; the further away from seismic and drill-hole data the lower the confidence in the Mineral Resource classification. In the assigning confidence category, all relevant factors were considered, and the final assignment reflects the Competent Person's view of the deposit.

Table B1: Summary of Criteria used for the Classification of the Kola Mineral Resource

The Measured and Indicated Mineral Resources for sylvinite are hosted by 3 layers (or 'seams') which are from uppermost; the Hanging Wall Seam (HWS), the Upper Seam (US) and the Lower Seam (LS), each separated by rock-salt (a rock-type typically comprised of >95% halite).

Magnesium and insoluble content are considered deleterious but are present in only very small amounts in the ore (average of 0.07% and 0.14%respectively).

The Mineral Resource Estimate was delivered to the Ore Reserve consultants in the form of a standard block model, blocks having dimensions 250 x 250 x 1 m, each block having a KCl grade, a density, and magnesium and insoluble content.

The Mineral Resources are inclusive of the Ore Reserves i.e. the Ore Reserves are the mineable part of the Mineral Resources after the application of technical, economic and other modifying factors.

Areas of potential structural disturbance, referred to as geological anomalies were excluded from the Measured and Indicated Mineral Resource. They were identified from seismic data as is standard in potash mining districts elsewhere.

A 10% CoG was used in the Mineral Resource Estimate.

Mining Method and assumptions

The mining method and assumptions remain unchanged from the DFS.

Mining factors and assumptions have been derived from the historical information available for mature potash mines, and the current best mining practices. The Kola orebody will be mined using conventional underground ("UG") mining method consisting of room and pillar in a 'chevron' (or herringbone) pattern, with Continuous Miners ("CM") mining machines of the drum-cutting type.

Most of the mining will be on one level only where only the US will be extracted. In some areas, both the US and the LS will be mined, in which case the LS will only be mined after the US. In other areas only the HWS will be mined.

In determining the Ore Reserves, a minimum mining height of 2.5 m was selected based on capability of the selected CM which is also capable of mining up to 6 m. Areas of the Mineral Resource with a seam height of less than 2.5 m were excluded from the Ore Reserves.

The mine design is typical of potash mines, having 4 entries for accessing panels. Each drive will typically be 8 m wide and 3 m to 6 m high depending on the seam height. The typical configuration for the chevron pattern is an angle of 65 degrees from the middle entry, and length of 150 m approximately.

The Mine design relies on geotechnical modelling, carried out in FLAC 3D software. The modelling was based on geotechnical test-work carried out on representative core samples from the sylvinite seams and host rocks (rock-salt and lesser carnallitite). The geotechnical modelling established that the mine design is stable over the LoM and includes the following geotechnical parameters:

·      Where both the US and LS seams are to be mined, the support interval between the US and LS must be at least 3 m thick.

·      An 8 m wide pillar between two consecutive production rooms (of 8 m each).

·      A 50 m wide pillar between two production panels. Similarly, a 50 m wide pillar will be left in place between the side of the production panel and the main haulage access drift.

·      The interval of rock-salt between the mine openings and the floor of the overlying anhydrite member is referred to as the 'salt back'. This is typically over 30 m but is less in some areas. The DFS design allows that it may be a minimum of 15 m unless the Anhydrite Member is well developed where it may be 10 m. This is based on the results of the geotechnical model.

·      A stand-off distance of 20 m radius from the exploration holes.

·      A stand-off distance of 30 m radius from class 2 geological anomalies and 60 m radius from class 3 geological anomalies.

·      A pillar of 300 m in radius around the exhaust and intake shafts.

Based on the selected CMs, it is anticipated that a good cutting selectivity would be achieved, and that a maximum of 0.2 m of dilution material above and/or below the potash seam is likely. Carnallitite is present in the floor of the seam in some areas. The roof is always of rock-salt.

On average, the dilution material is equivalent to approximately 10% of the tonnage of the Ore Reserves. Dilution material was assigned a grade of 3% KCl if rock-salt and 0% KCl if Carnallitite.

Based on the configuration of the proposed mining layout, and the anticipated fleet of mining equipment, it is assumed that the mining recovery in the different extraction chambers will be 90% on average (i.e. mining losses will be 10%). This considers the mining action which will lead to some losses such as material being excavated and left in the production chamber, or mineralized material left in the floor or roof, etc.

The Global extraction ratio is 30% (25% in the LS, 33% in the US and 28% in the HWS). This is after the removal from Ore Reserves of all pillars (pillars around the geological anomalies, the barrier pillars, the shaft pillar, the pillars between chevrons and main access drifts), the stand-off distance around boreholes, mining losses and the exclusion of sylvinite <2.5 m thick.

Two vertical shafts, each of 8 m internal diameter, will be sunk at a central location in the Ore Reserves, to provide access to the underground. The intake shaft will be equipped with a hoist and cage system for transportation of persons and material, while the exhaust shaft will be equipped with a vertical conveyor system to convey the mined-out ore to the surface. Both shafts are approximately 270 m deep.

Ore haulage from the CMs to the feeder breaker apron feeder will be done using electrically-powered Shuttle Cars.

Underground conveyor belts will be used for ore transportation in all the areas of the mine. The belts are distributed in the mains and submains and ultimately in the working panels near the CM working face. The ore will be placed on the belts from the feeder breakers that were fed by the shuttle cars.

The belt conveyors will carry the ore loaded by the feeder breakers to the ore bins. Then the ore is conveyed from the ore bins to the Pocket Lift system located in the exhaust shaft.

Processing Method and Assumptions

The changes to the processing method and assumptions arising from the Optimisation Study are as follows.

·      The product will be granular MoP K60, comprising at least 95.3% KCl. The Optimisation Study design allows for the production of a single product, red granular MOP.

·      The process flow sheets were optimised to produce a maximum of 2.2 Mtpa of MoP, at 95.3% KCl purity, with a minimum KCl recovery of 89.9% of the KCl content in the ROM fed to the Process Plant.

·      Eight key areas of process design were changed in the Optimisation Study

o  The crushing circuit was changed from 3 stage crushing to 2 stage crushing

o  The mixing tanks post crushing were replaced with a combination of screens and tanks

o  The scrubbing capacity has been reduced

o  The thickening capacity has been increased

o  Column cells have been replaced with floatation cells

o  Re-grind flows have been re-routed

o  Tailings centrifuges has been replaced with a belt filters

o  Compaction circuit has been simplified

A conventional flotation process will be utilised for potash concentration. This method is well established and is the most widely used method in the potash industry.

The metallurgical test work campaigns were based on representative core samples of the three seams, collected from the exploration drill hole cores. They comprised US (114.5 kg), LS (102.0 kg) and HWS (10.3 kg). All test work was carried out at the Saskatchewan Research Council ("SRC") laboratory in Saskatoon, Canada.

Two metallurgical test work campaigns were conducted during the DFS in 2017 and 2018. The main philosophy of the first DFS test work campaign was to prepare representative test feedstocks for each seam, confirm KCl liberation, characterize the feedstock, perform flotation tests, optimize the operating conditions, optimize reagent consumption for optimum KCl recovery and grade performance, perform a sensitivity test on flotation.

The objective of the second test work campaign was to optimize the flotation process and improve the plant recovery from the initial flow sheet. The results of this second test work campaign demonstrated that the new flotation process performed above the project performance minimum target.

Magnesium and insoluble material are considered deleterious. The extremely low content of these materials in the ore mean that their removal is relatively straightforward. Insoluble material is removed by attrition scrubbing and magnesium removed by brine purge.

Cut-off Grades

The cut off grades remain consistent with the original DFS Ore Reserves.

A CoG of 10% KCl has been calculated within the process to state Ore Reserves. The CoG calculation included all operating costs associated with the extraction, processing and marketing of ore material. The cut-offs are based on a MoP price of US$250 per tonne of MoP. Inputs to the calculation of CoG included:

o  Mining costs

o  Metallurgical recoveries

o  Processing costs

o  Shipping costs

o  General and administrative costs

All sylvinite of the Measured and Indicated Resource is above 9.9% KCl (the Ore Reserve calculated CoG), therefore all the Measured and Indicated Sylvinite Resources have been considered for the Ore Reserve Estimate by application of the other modifying factors.

The uniformly very low content of deleterious elements (magnesium and insoluble material) meant that these did not require consideration in the CoG determination.

Cost Estimation Methodology

Capital Cost:

·      The pre-production nominal capital cost for the Kola Project is now estimated at US$2.07 billion, which includes a fixed price EPC contract of US$1.929 billion and US$141 million owner's costs.  

Operating Cost:

·      Operating Cost covering the Life of Mine (23 years) was estimated in US dollars and reported in the Kola DFS in 2019. They include costs for Electric power, Fuel, Gas, Labour, Maintenance parts, Operating Consumables, General and Administration costs and Contract for Employee Facilities.

·      These 2019 Operating Costs were all revised to reflect current conditions, as follows:

o  Exchange rates (vs US$) for Euro, British Pound, Canadian Dollar, South African Rand, and Congolese Franc (Central African Franc) were updated;

o  Production split was updated to 100% red granular MOP;

o  Plant KCl recovery was reduced from 91.9% to 89.9%;

o  Plant operating hours were updated according to PC's assumption of 7,920 h/y;

o  Electricity costs were updated according to current budgetary pricing;

o  Natural gas costs were updated according to current budgetary pricing;

o  Labour costs were escalated a flat 10%, in consultation with third-party labour experts;

o  All other operating costs were escalated a flat 25% to simulate US CPI.

·      Transshipment costs were supplied by an experienced marine broker.

·      Ocean Freight Transportation estimate produced were based on work done by the marine brokers.

·      Mine Closure cost is estimated in accordance with the Conceptual Rehabilitation and Closure Plan developed by SRK Consulting during the DFS, assuming a Mine Closure duration of 24 months (2 years).

·      For the purpose of Operating Cost and Sustaining Capital, the quantities of equipment, materials and works were directly assessed from the Material Take-off prepared within the framework of the Kola DFS.

·      State mineral royalties of 3% of Net Revenue were applied

·      Measured Mineral Resources were used for the estimation of the Proved Ore Reserves. Indicated Mineral Resources were used for the estimation of Probable Ore Reserves.

·      The conversion of Measured and Indicated Mineral Resource to Proved and Probable Ore Reserve reflects the Competent Person's view of the deposit.

·      40.6% of the Ore Reserves are classified in the Proved category and 59.4% of the Ore Reserves are classified in the Probable category

Material Modifying Factors

·      Status of Environmental Approvals

The Kola ESIA, initially approved on 10 October 2013, was amended to reflect the design changes made to the Kola Project as part of the DFS and has been amended to include the service corridors for a gas pipeline and overhead power line. The application and terms of reference for amending the ESIA were approved on 12 April 2018 by the Minister of Tourism and Environment.

The ESIA for the Kola Mining License was approved on 31 March 2020 for 25 years.

The proposed new position of the process plant resulting from the Optimisation Study creates a requirement to issue an addendum to the ESIA. It is intended that work on this addendum will commence in the second half of 2025.

·      Status of Mining Tenements and Approvals

Kore has a 97%-holding in SPSA, a company registered in the RoC. The remaining 3% in SPSA is held by "Les Establissements Congolais MGM" (RoC). SPSA in turn has a 100% interest in its two ROC subsidiaries, Kola Potash Mining SA ("KPM") and Dougou Potash Mining SA ("DPM").  The Mining Convention includes a requirement for 10% of free-carry shares in KPM and DPM to be assigned to the Government of the Congo. The Company is currently awaiting Government instructions as to the share transfer process.

The Kola Deposit is within the Kola Mining Lease which is 100% owned by KPM

o  In May 2008, a non-exclusive Prospecting Authorisation was granted to Sintoukola Potash covering an area of 1,436.5 km². On 13 August 2009, this was changed to a "Permis de Recherches" (Exploration Permit) named 'Permis Sintoukola' under decree No. 2009-237 giving the Company exclusive rights to explore.

o  On 27 November 2012, the first renewal of the permit was made, by decree No. 2012-1193 and reduced in size to 1,408 km².

o  On the 9 August 2013, a Mining Lease for Kola issued under decree No. 2013-312, totaling 204.52 km² falling entirely within the Exploration Permit.

·      Déclaration d'Utilité Publique or "DUP" 

Exclusive land acquisition rights have been granted to the Project company for plant development through ministerial order gazetted on 30 August 2018 (the "Déclaration d'Utilité Publique" or "DUP") valid for three years and renewable once for a two-year period.

As a result of the optimization of the processing plant and camp location, a new DUP process needs to be initiated with the approval and support of the Government after receipt and acceptance of the financing proposal from Summit. A subcontractor with prior experience on the previous DUP is awaiting the greenlight of Kore to start the work.

·      Other Governmental Factors

The Company entered into a mining convention with RoC government on 8 June 2017 and it was gazetted into law on 7 December 2018. The Mining Convention provides certainty and enforceability of the key fiscal arrangements for the development and operation of the Kola Project. This includes clarifying import duty and VAT exemptions and agreed tax rates during mine operations. The Mining Convention provides strengthened legal protection of the Company's investments in the RoC through the settlement of any disputes by international arbitration.

Infrastructure Requirements for Selected Mining, Processing and Product Transportation to Market

The project infrastructure is comprised of the mine-site (shaft and offices), the process plant 24 km from the mine and a product and marine export facility at the coast (at Tchiboula), the 34 km infrastructure corridor between these (including the overland conveyor, service road and power line), the gas line from M'boundi gas field, overhead line from the MKII substation, the accommodation and administrative camp and the transshipment facilities.

Changes to the infrastructure requirements that arise from the Optimisation Study and Optimised DFS, and are thus different from the DFS are summarised below.

·      The process plant position has been moved 11 km inland which has allowed optimisation of the foundation design, the resultant infrastructure at the coast consists of the product storage building and marine export facilities. The design of the barge loading jetty has also been optimised.

·      Road access to the Kola Potash Project sites will be via the existing Route Nationale 5 (RN5). Two external access roads will be built, which are respectively connected from RN5 to the mining site and from RN5 to the mineral processing site and living quarter, with a length of 2.0 km and 4.3 km respectively. Two maintenance roads for long-distance belt conveyors will be built. One of the roads for RoM belt conveyor maintenance is about 24.0 km, connecting Koutou camp and the mineral processing site. The other road is for MOP belt conveyor maintenance,

·      Raw Water will be supplied from wells located at the Mine Site and at the Accommodation Camp close to the Process Plant Site.

·      The Accommodation Camp has been sized for a capacity of 950 beds and will be located about 2 km away from the Process Plant

·      Electrical Power will be sourced from the ROC national grid. A 57 km long 220 kV transmission line will be built from the Mongo Kamba II substation north of Pointe Noire to the Process Plant Site. A second 34 km long 220 kV transmission line will be built from the Process Plant Site to the Mine Site and the marine facility at the coast.

·      The Natural Gas needed for product drying will be supplied by a local Oil and Gas producer who has plans to build a gas treatment plant some 35 km away from the Kore processing plant. The same company is also planning to supply electricity to the Kola Project from the same offtake point. This will be an interesting option to the Mongo Kamba II substation as it has a lower environmental impact.  

The infrastructure requirements that have not been modified in the Optimisation Study or Optimised DFS, and thus remain the same as the DFS are summarised below.

·      Ongoing operational labour will be a combination of permanent employees, permanent contract services, and part-time contract services for intermittent needs.  The total requirement for permanent employees is expected to be 731.  Local labour resources will be used for the majority of labour requirements, while some selected positions are planned as expat roles.

·      The Kola Potash Project intends to export up to 2.2 Mt MoP to world markets each year. A transshipment solution has been developed, whereby MoP for export is loaded at a dedicated jetty onto self-propelled shuttle barges (two units), which will then travel to OGVs anchored 11 nautical miles (20 km) offshore in a dedicated transshipment area. The cargo will be transferred from the Barges to the OGVs using a Floating Crane Transhipper Unit ("FCTU").