KRS Keras Resources Plc

I am pleased to provide an update on our progress since the last report and to set out our outlook for the business going forward. The first half of 2024 has been transformative for the Company with the conclusion of the PhoSul Utah LLC joint venture ("Phosul JV"), the acquisition of the property in Sutherland, 8 miles north of the town of Delta, Utah ("Delta Facility") on 22 January 2024 and the transfer of all our processing infrastructure from Spanish Fork to Delta.

The move to Delta has resulted in the Company running the business from a stand alone, wholly owned property which has the under roof space to house the newly constructed Integrated Granulator Plant ("Granulator Plant") and all ancillary equipment, feed material and processed product.  Prior to this move the Company rented property in Spanish Fork which was subject to urban encroachment and limited processing to day time operations.  The Delta Facility does not have such limitations and when at full production the Company will run a 24 hour, three shift operation.

Underpinning the move to Delta, the Phosul JV agreement comprises a five year 50:50 joint venture between the Company's wholly owned subsidiary, Falcon Isle Resources Corp ("FIR") and PhoSul LLC ("PhoSul"), a specialised organic soil enhancement fertilizer company with granulator operations in Idaho, United States ("US").  PhoSul and FIR have jointly funded the construction and commissioning of the Granulator Plant, which will produce a PhoSul® granulate comprising 80% of FIR's high grade organic rock phosphate from its Diamond Creek mine.  PhoSul® is currently being produced at the PhoSul LLC's processing facility in Sugar City, Idaho.  Current demand for the product outweighs PhoSul's Idaho processing capacity so the JV's product will be delivering into an established market with significant scope for growth in the south western states.  I firmly believe this transaction will prove to be one of the key inflection points in the Company's trajectory to becoming the premier, high grade, organic phosphate producer in North America.

Falcon Isle Resources Corp ("Falcon Isle")

Falcon Isle owns the fully permitted Diamond Creek phosphate mine ("Diamond Creek") located on an 840-acre Federal Lease located approximately 75 miles north-east of the recently acquired Delta Facility located in the farming town of Sutherland, 8 miles north of the town of Delta, Utah.  Historically Falcon Isle produced dry, sized phosphate rock products for the North American organic fertiliser market - with the Phosul JV now concluded and in operation, the Company can now produce into the granulator market with the PhoSul® formula as  a direct application product rather than being a component of a blended fertiliser.

On 28 June 2024 the Company announced that hot commissioning of the Granulator Plant had commenced.  Given the scale of what was required to transition from an outsourced production and ownership model operating from three rental facilities to the Company's wholly owned, fully integrated production facility at Delta in just five months has been an outstanding achievement by the project team as well as the Company's supportive funding partners.

FIR continues to produce organically certified 10 mesh and 50 mesh dry sized products with total sales for H1 2024 of 4,106 tons, a 28% increase relative to the 3,190 tons sold during the comparable period in 2023, and demonstrates evidence of the increased traction that the Company's high grade certified products are attracting in the organic market.  It's key to note that at full production, the JV is expected to increase FIR's quarterly sales of 50 mesh by approximately 2,280 tons per quarter (a further 115% increase on the Q1 2024 sales -i.e. traditional sales plus sales to the JV), with 100% of the revenue from 50 mesh sales to the JV attributable to FIR while also sharing 50% in of the profit from the PhoSul® product produced from this material.

In addition our mining season at Diamond Creek, which takes place during the summer season from May to November, is now well under way.  This is expected to be complete in late November and will provide sufficient feed material for both Falcon Isle and the JV's needs until the 2025 mining season commences.  

Nayéga Manganese Mine / Togo

Following the cooperation agreement signed with the Republic of Togo (the "State") on 17 May 2023 ("Agreement") related to the Nayéga Manganese mine ("Nayéga") in Northern Togo, the Company advised, on 9 May 2024 that activities have recommenced at Nayéga and the State, through its 100% owned investment company Société Togolaise de Manganèse ("STM"). 

As per the 2023 Agreement, Keras has advisory and brokerage agreements with the State where the Company will be paid an advisory fee of 1.5% of gross revenue generated from the Nayéga mine for the provision of advisory services for 3 years, and 6.0% of gross revenue generated from the Nayéga mine for the provision of brokerage services for the lesser of 3.5 years or 900,000 tonnes of beneficiated manganese ore produced and sold from Nayéga.

The Company continues to keep in close contact with the Togo Ministry of Mines in its advisory role it agreed with the State in May 2023 and we look forward to updating shareholders on progress in the near future.

Financial review

The results for the 6 months ended 30 June 2024 show a loss of £436,000 compared to loss of £255,000 in the six-month period ended 30 June 2023.  The increased loss was largely due to costs related to the transport of inventory and other non-capital items to the Delta Facility and the exclusion of extra-ordinary items (sale of intellectual property) in the comparable period in 2023.

In January 2024 and May 2024 the Company issued convertible loans of £300,000 (at a conversion price of £0.04) and £597,805 (at a conversion price £0.0275) respectively.  On the same dates Falcon Isle issued Promissory Notes of $350,000 (at a 7% per annum interest rate) and £597,805 (at an 8% per annum interest rate) respectively.

As part of the May capital raise, Graham Stacey and I capitalised US$100,000 (GBP78,401) of outstanding fees each due from the Company on the same basis (50% in the form of Convertible Loans and 50% in the form of Promissory Notes).

The proceeds of the January funding were used to acquire the 8.4-acre Delta Facility, now the hub of the US operations and the proceeds of the May funding were used to pay the third tranche of US$800,000 of the cost of acquiring the former minority interest in Falcon Isle plus $100,000 of the final severance payment payable to the previous CEO of Falcon Isle, and for general working capital.

The restructuring of the Company's short-term liabilities reduced the impact of a pure equity raise and ensures that the Company can meet its current obligations without negatively impacting the long-term growth profile at the high-grade organic phosphate business in Utah, USA.

Outlook

The Company believes that the move (and the associated costs) to Delta are key to the long-term success of the business, we remain very positive about both the future of Diamond Creek and the fertiliser market macro-economic conditions that underpin its future.  We are mining an essential resource that can create value, be part of the greener economy and contribute to a more sustainable future. As a mining company we remain ever conscious of our obligations and commitments in line with best environmental, social and governance ("ESG") practice and will continue to take the initiative within this area. Our JV with PhoSul LLC to produce granulated PhoSul® as a final product rather than relatively lower value fertilizer blend constituents which we have produced to date has further enhanced our position as an organic producer marketing directly to organic farmers.

I would like to thank our shareholders for their ongoing support and I look forward updating all stakeholders as we continue to build Keras and Diamond Creek into the premier organic phosphate producer in the US.

Russell Lamming

Chairman

26 September 2024