TIDMEML
RNS Number : 2586W
Emmerson PLC
10 December 2019
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
10 December 2019
Emmerson Plc ("Emmerson" or the "Company")
Potential for Government Subsidies to Cover Up to 10% of Total
Project Capital Cost
Emmerson Plc, the Moroccan focused potash development company,
is pleased to announce that it has received confirmation that
direct cash subsidies and further tax concessions are available to
it, via negotiation, under a formal investment convention agreed
with the Moroccan Government for its 100% owned Khemisset Potash
Project in Northern Morocco ("Khemisset" or "the Project").
Highlights
-- Moroccan Government incentives could contribute up to 10% of
the Project's total capital expenditure
o Covers several potential areas including investment in
external infrastructure, land acquisition and training costs
o Potential for up to US$40 million[1] provided by the
Government in the form of direct subsidies
-- The Project is eligible for several additional fiscal
concessions and tax breaks, which are expected to enhance its
post-tax cash margins
-- Emmerson will also benefit from invaluable formal support
from Government agencies in all project implementation processes in
Morocco
-- Negotiations with the Government for an investment convention
to start once the full feasibility study is complete by the end of
H1 2020
-- Formal convention to be signed pursuant to obtaining a mining licence
Hayden Locke, CEO of Emmerson, commented: "As we progress in
delivering the technical de-risking milestones for Khemisset, we
have initiated discussions with Moroccan Government bodies to gain
an understanding of the policies in place, which will support the
Project's development. Based on initial discussions, we have
concluded that the Project is eligible for an investment convention
with the Moroccan Government; this provides for potential
Government contributions towards up to 10% of total Project capital
expenditure in the form of subsidies and additional tax
concessions.
"These incentives are expected to further enhance the already
outstanding economics of the Project. They follow the recent
Preliminary Economic Assessment for our Sulphate of Potash project,
which will also lift margins significantly, taking the average
potential EBITDA across our portfolio of assets to over US$300
million per annum and the total post tax NPV(10) to in excess of
US$1.8 billion[2].
"We continue to examine various options to optimise the industry
leading capital cost Khemisset Potash Project's potential as we
advance it towards completion of full feasibility, which we are
confident will be delivered in the first half of 2020."
Details
Emmerson continues to advance its Khemisset Potash Project
located in Northern Morocco, which it aims to develop into a low
capex, high margin mine. To this end, the Company is exploring all
opportunities aimed at further enhancing the Project's already
robust economics.
The Moroccan Government has an incentives programme established
to promote national and foreign investments as well as the export
of goods and services; this is in addition to the five-year tax
holiday already provided under the Moroccan fiscal regime for
companies exporting product from Morocco. The programme includes a
detailed investment convention between the investor and the
Government, which is available for projects with a total investment
profile greater than 100 million Moroccan Dirhams (c. EUR10
million), and covers key areas for potential contributions by the
Government including:
-- Up to 10% of the total project investment value, on eligible
items, can be funded as subsidies by the Moroccan Government
including:
o Up to 5% of total investment for external infrastructure (e.g.
power connection, road access, water intake, used water treatment
and port upgrades)
o Up to 20% of land acquisition cost; and
o Up to 20% of employee approved training costs
-- Level of funding by the Government and its agencies to be
negotiated with reference to a project's scale and its expected
socio-economic impacts
-- Tax concessions including:
o Exemption of import tax duties on plant, equipment, and mining
machinery
o A three-year VAT exemption on equipment and plant
purchases
o Reduced Corporate Tax Rate of 17.5%, down from 31%.
Accordingly, having held a series of meetings with several
Moroccan Government bodies, the Company has received confirmation
that direct cash subsidies and further tax concessions may be
available to it, via negotiation, under a formal investment
convention. An investment convention will be negotiated between the
Moroccan Government Agencies and Emmerson prior to being presented
for approval by cabinet of the Prime Minister; negotiations with
Government for an investment convention will commence once the full
feasibility study is complete H1 2020.
Under the investment convention, the Company would also benefit
from invaluable formal support from Government agencies in all
project implementation processes in Morocco.
Any reduction in the Project's already industry leading, low
capital cost potash project would further simplify the financing of
Khemisset and provide a substantial improvement to its already
world class project economics, which includes a life of mine
average annual EBITDA of US$236 million and a post-tax NPV(10) of
US$1.14 billion(2) . It also reaffirms the strong administrative
support and financial assistance available from Moroccan Government
agencies for development of major projects, such as Khemisset, and
their associated infrastructure.
For further information,
please visit
www.emmersonplc.com,
follow us on
Twitter (@emmerson_plc),
or contact: Emmerson Plc Tel: +44 (0) 20 7236
Hayden Locke 1177
Edward McDermott
Damon Heath Shard Capital Partners Tel: +44 (0) 20 7186
Isabella Pierre 9950
Isabel de Salis St Brides Partners Ltd Tel: +44 (0) 20 7236
Megan Dennison 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 537Mt @ 9.24% 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 Scoping Study capital cost of US$406m (refer
announcement 20 November 2018)
[2] Based on industry expert Argus FMB price forecasts
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END
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