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Dougou Extension Solution Mining Project Scoping Study
Kore Potash plc
(Incorporated in England and Wales)
Registration number 10933682
ASX share code: KP2
AIM share code: KP2
JSE share code:KP2
ISIN: GB00BYP2QJ94
(“Kore Potash” or the “Company”)
This Announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No.
596/2014 ("MAR"). Upon the publication of this Announcement, this inside information is now considered to
be in the public domain.
Dougou Extension Solution Mining Project Scoping Study
Kore Potash, the potash development company whose flagship asset is the 97%-owned Sintoukola
Potash Project in the Republic of Congo, is pleased to announce the results of a Scoping Study
undertaken to assess the viability of producing 400 thousand tonnes per annum (ktpa) of Muriate of
Potash (MoP) from a portion of the sylvinite in the Dougou Extension (DX) Deposit by a solution
mining method (all together the “Scoping Study”). The Scoping Study supports a low opex and strong
cash generative operation with attractive estimated base case up-front capital costs of US$327
million. The DX Deposit is located within the Company’s Dougou mining permit, southwest of the
Company’s flagship Kola sylvinite Deposit, which would be a separate development.
Highlights
- Scoping Study demonstrates low technical risk and attractive economics for DX Project
- Utilises a highly efficient potash extraction method that is well understood and is in use
across multiple potash operations globally
- Attractive life-of-mine cost of sales, free on board (FOB) of approximately US$82.74/t MoP
- Mine life of approximately 17 years based on solution mining of 52 million tonnes of
Indicated Mineral Resource @ 43.1% KCl from a total Indicated Mineral Resource base of
111 million tonnes @ 37.2% KCl
- Estimated base case initial capital cost of approximately US$327 million (real 2019) to
produce approximately 400 ktpa white granular MoP
- Estimated two-year construction period provides the company with near term production
options
- Base case real ungeared IRR of approximately 19.3% and base case post-tax ungeared NPV10
(real) of approximately US$221 million on an attributable basis at life-of-mine average MoP
price for granular product of US$360/t
- Average base case annual post construction, post-tax, free cash flow of approximately US$74
million and approximately 4.25 years post-tax payback period from first production
- Infrastructure overlaps with the Kola sylvinite and Dougou carnallite projects will have a
positive impact on the future development costs and construction timeframes of those two
projects
- Several areas of the Scoping Study were completed to a higher level of confidence than is
normal for a scoping study. As a result, the work required to complete a PFS, once
commenced, is estimated to require only 9 months, with the drilling of an additional 4
diamond drill holes being the item currently controlling the overall timeframe
Table 1: Key Project Metric Estimates (real 2019 basis):
Approximate project physicals Units
Total MoP production Mt 7,074
MoP granular product grade (K60) %KCl 95%
Average annual MoP production ktpa 400
Average annual mining rate ktpa 404
Approximate capital cost
Pre-production capital cost (-15-+30%) $M 278-425
Capital intensity $/tpa 695-1063
Approximate operating costs
Operating Cost (CFR Africa) $/t 108
Approximate project financials Units
Total revenue US$M 2,547
Average annual revenue US$M 134
Average annual EBIDTA US$M 90
EBITDA margin % 67.1%
Ave. post tax annual free cash flow US$M 74-75
Free cashflow margin % 55.4-55.7%
Total post tax free cash flow US$M 993-1132
Post tax, un-geared NPV (10% real) US$M 128-267
Post tax, un-geared IRR % 14.3-22.9%
Payback period from first production years 3.35-5.25
Average forecast MoP granular price $/t $360
Brad Sampson, CEO of Kore, commented:
“The completion of the Dougou Extension Solution Mining Project Scoping Study confirms the district
scale development potential of this world-class potash basin. We are incredibly excited at the
prospect of accelerating the Company into production and cashflow generation via the DX project
while we continue to optimise the flagship Tier-1 Kola sylvinite project.
“We believe that the US$327 million capital cost estimate to construct the DX Project makes the
project attractive from a capital perspective and the successful completion of the Scoping Study
allows the Company to rapidly progress to pre-feasibility study, which will further define and de-risk
the project.
“The development of the DX Project will give advantages in terms of overlapping infrastructure
reducing the future capital cost of Kola.”
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
29 April 2019
JSE Sponsor: Rencap Securities (Pty) Limited
For further information, please visit www.korepotash.com or contact:
Kore Potash Tel: +27 11 469 9140
Brad Sampson – CEO info@korepotash.com
Tavistock Communications Tel: +44 (0) 20 7920 3150
Jos Simson kore@tavistock.co.uk
Edward Lee
Canaccord Genuity – Nomad and Broker Tel: +44 (0) 20 7523 4600
Martin Davison korepotash@canaccordgenuity.com
James Asensio
Renaissance Capital – JSE Sponsor Tel: +27 (11) 750 1448
Yvette Labuschagne
Cautionary Statement
- The Scoping Study referred to in this announcement has been undertaken to investigate
the potential for a new potash development in the Republic of Congo.
- The Scoping Study is a preliminary technical and economic study of the potential viability
of the DX project and is based on low level technical and economic assessments (-15% and
+30% accuracy) that are not sufficient to support the estimation of Ore Reserves. Further
evaluation work and appropriate studies are required before the Company will be in a
position to estimate any Ore Reserves or to provide any assurance of an economic
development case.
- The Scoping Study is based on the material assumptions outlined in this announcement and
Appendix B. These include assumptions on availability of funding. While the Company
considers all of the material assumptions to be based on reasonable grounds, there is no
certainty that they will prove to be correct or that the range of outcomes indicated by the
Scoping Study will be achieved.
- To achieve the range of outcomes indicated in the Scoping Study, base case funding in the
order of US$327 million will likely be required. Investors should note that there is no
certainty that the Company will be able to raise that amount of funding when needed. It is
also possible that such funding may only be available on terms that may be dilutive to or
otherwise affect the value of the Company’s existing shares.
- It is also possible that the Company could pursue other ‘value realisation’
strategies such as a sale, partial sale or joint venture of the project. If it does, this
could materially reduce the Company’s proportionate ownership of the project.
- Given the uncertainties involved, investors should not make any investment decisions based
solely on the results of the Scoping Study.
- Of the Mineral Resources scheduled for extraction in the Scoping Study production plan,
100% are Indicated Mineral Resources. While modifying factors were sufficiently advanced
and applied to the Indicated Mineral Resources, there is no certainty of eventual conversion
to Ore Reserves or that the production target itself will be realised.
- The Mineral Resources underpinning the production targets and forecast financial
information in this combined AIM/JSE/ASX Release were prepared by a competent person in
accordance with the requirements of the JORC Code (2012).
Forward-Looking Statements
- This release contains a series of forward-looking statements. Generally, the words "expect,"
“potential”, "intend," "estimate," "will" and similar expressions identify forward-looking
statements. By their very nature forward-looking statements are subject to known and
unknown risks and uncertainties that may cause our actual results, performance or
achievements, to differ materially from those expressed or implied in any of our forward-
looking statements, which are not guarantees of future performance. Statements in this
release regarding the Company's business or proposed business, which are not historical
facts, are forward-looking statements that involve risks and uncertainties, such as Mineral
Resource estimates, market prices of potash, capital and operating costs, changes in project
parametres as plans continue to be evaluated, continued availability of capital and financing
and general economic, market or business conditions, and statements that describe the
Company's future plans, objectives or goals, including words to the effect that the Company
or management expects a stated condition or result to occur. Since forward-looking
statements address future events and conditions, by their very nature, they involve inherent
risks and uncertainties. Actual results in each case could differ materially from those
currently anticipated in such statements. Investors are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date they are made.
- The Company has concluded that it has a reasonable basis for providing these forward-
looking statements and the forecast financial information included in this release. This
includes a reasonable basis to expect that it will be able to fund the development of the DX
project upon successful delivery of key development milestones and when required. The
detailed reasons for these conclusions are outlined throughout this release (including
Section 16) and in Appendix B.
- No Ore Reserve has been declared. This combined AIM/JSE/ASX Release has been prepared
in compliance with the current JORC Code (2012) and the ASX Listing Rules. All material
assumptions, including enough progression of all JORC modifying factors, on which the
production target and forecast financial information are based have been included in this
release.
1. Introduction and Project Overview
Kore remains committed to the development of its flagship Kola project and is concurrently
investigating the potential for a new reduced-scale potash development in the Republic of Congo.
The Company anticipates being in position to update investors on its review of the Kola EPC proposal
within the next two months.
Following a review of the strategic options within the Sintoukola District, the Company has formed
the view that a reduced-scale potash development has strong potential to expedite the Company’s
path to cash flow generation and consequently, accelerate the development of the Kola project.
The DX Solution Mining Project (the Project) provides a more rapid path to production with a
significantly smaller capital cost than required for the Kola project. Development of this project will
establish Kore Potash as the first potash producer in the Republic of Congo in over 40 years. The
smaller scale of the Project comes with relatively low operational and financial risks.
Development of the Project is expected to create a very low-cost potash operation producing
approximately 400,000 tonnes of K60 MoP annually. The mining target is the Dougou Extension
Sylvinite Mineral Resource, where current geological data suggests a continuous sylvinite deposit
with exceptionally high KCl grade. Selective solution mining and processing technology will be
employed, resulting in minimal waste brine which will be disposed underground. Solution mining is
the most effective means of exploiting an underground potash resource at a reduced scale, and the
method is proven across other operations globally.
The Project is located (Figure 1) within 20km of the Company’s flagship Kola project and closer to the
coast; it will have some infrastructure overlap with the Kola project, and the development of the
Project is expected to have a positive impact on the costs and timeline associated with the
development of Kola.
Figure 1: Location Map showing Dougou Extension Deposit
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
2. Study Team
The Scoping Study was conducted by a team composed of Kore Potash staff, contractors to Kore
Potash and Innovare Technologies, a specialist solution mining technology consultancy.
Innovare Technologies was responsible for the mining, drilling methodology and process design. The
solution mine design and trade-offs were carried out by Max Ramey, a qualified and experienced
solution mining expert with almost 30 years of experience in solution mining around the world. The
drilling methodology work was done by Sandy Debusschere, an experienced driller in both the
energy and potash sectors, with experience covering over 400 potash wells. The process design was
undertaken by John McEwan, a chemical engineer with over 40 years of experience in chemical
plants, including 13 years specifically in potash projects. The infrastructure design and trade-offs
were executed by Kore through the consulting services of Ryan Leland, an independent consulting
project manager and mechanical engineer with 20 years of experience in the potash industry gained
in both process and mining operational roles.
3. Production Capacity
The Scoping Study considered a range of project capacities from 200 ktpa up to 400 ktpa. To test the
flexibility and scalability of the project, capital and operational cost estimates were completed for all
options and then tested in the economic evaluation. Based on the economic evaluation (Table1), this
document talks to the selected option of 400 ktpa.
A summary of the outcomes for a capacity of 250 ktpa are presented in comparison to the selected
400 ktpa case in Table 1.
Table 1: Economic Evaluation of Plant Capacities
Capacity Initial Capex Opex NPV(10) IRR (%)
ktpa US$'000 US$/t MoP US$'000 %
250 242,755 121.27 108,069 15.19%
400 326,724 107.74 220,875 19.32%
4. Geology and Mineral Resource Estimate
The “Maiden Sylvinite Mineral Resource at Dougou Extension” announcement by Kore Potash dated
20th August 2018 provides a description of the geology and Mineral Resource Estimate (Table 2) for
Dougou Extension (prepared in accordance with the JORC 2012 Code).
The sylvinite at Dougou Extension is hosted by two flat-lying or gently dipping ‘seams’ at a depth of
approximately 400-450 metres below surface and separated by 8 to 15 metres of rock-salt. The
uppermost seam is the Top Seam (TS) and the lowermost is the Hanging Wall Seam (HWS). These
seams may be of sylvinite or carnallitite. However, these potash types are never mixed in the same
location and carnallitite, if present, always occurs below the sylvinite. The Dougou Extension Mineral
Resource Estimate was for the sylvinite only and is the basis of this Scoping Study.
The Scoping Study considers the exploitation of a portion of the Indicated Mineral Resource, where
sylvinite of the HWS and TS is best developed, comprising 52.5 Mt of sylvinite at an average grade of
43.1% KCl. The average thickness and grade of sylvinite modelled for the seams is:
- TS: thickness 5.2m grading 31.7% KCl
- HWS: thickness 3.6m grading 60.1% KCl.
In some areas, both seams are present as sylvinite, in other areas only one is present as sylvinite.
Table 2: Mineral Resource Estimate for Dougou Extension
Gross Net Attributable (97%)
Contained Contained
Million Grade Million Grade
Mineral Resource Category KCl million KCl million
Tonnes KCl % Tonnes KCl %
tonnes tonnes
Measured - - - - - -
Indicated 111 37.2 41 108 37.2 40
Sub-Total Measured + Indicated 111 37.2 41 108 37.2 40
Inferred 121 38.9 47 117 38.9 46
TOTAL 232 38.1 88 225 38.1 86
Notes: First reported 20 August 2018, in an announcement titled “Maiden Sylvinite Mineral Resource
at Dougou Extension” in accordance with the JORC Code, using a minimum cut-off-grade of 15% KCl.
Rounding errors may occur. Average density of the TS of 2.11 t/m3 and HWS of 2.03 t/m3 .
The seams are overlain and underlain by massive halite (rock-salt). The interval of rock-salt above
the seams and the overlying Anhydrite Member (an Aquitard) is between 5 and 80 metres.
The Scoping Study considers exploitation of 52 Mt of Indicated Mineral Resource only. The
remaining 179.5 Mt of sylvinite Mineral Resource at Dougou Extension present potential to increase
the life of the project or the scale or both.
5. Geotechnical and Hydrogeology
For the Scoping Study, a minimum 5 metre ‘salt-back’ (rock-salt between the cavern and the top of
the Salt Member) is planned, and in most areas, this will be between 10 and 30 metres thick. In
addition to this, there is a 10 to 16-metre-thick Anhydrite Member (comprised mostly anhydrite and
clay) above the salt-back, separating it from the water-bearing sediments of the ‘cover rocks’. This
unit has been shown by test work at the nearby Kola deposit to be a very effective aquitard, having
extremely low permeability.
There is currently insufficient data to accurately quantify the expected subsidence and cavern
stability, and further geotechnical study is required in pre-feasibility study to provide a basis for
cavern design and layout. 3D Seismic data is not available, so the presence of fractures or faults is
not currently understood. For the Scoping Study, it was assumed that the anhydrite member has
adequate inherent rock strength to remain intact during solution mining.
Cavern extraction ratio is limited to 30% for the Scoping Study. This is considered a conservative
assumption as existing solution mining operations routinely extract 35% or more. It is assumed that
caverns can be operated to balance brine inflows and outflows, as is common industry practice. For
this Scoping Study no modelling of subsidence has been done. Subsidence assumptions have been
based on depth, grade, total extraction, and subsidence data from past projects and operations.
6. Mining Method and Schedule
A trade-off of mining and drilling methods was completed by Innovare and the decision made to
proceed with a selective dissolution mining method utilising vertically drilled dual well caverns.
The dual well method is simply two single well caverns that are solution mined until the caverns
merge. Figure 2 and Figure 3 illustrate the method.
Figure 2: Sump development Phase
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
Figure 3: Cavern Connection and roof development Phase
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
The solution mining plan for the dual well method is to create a sump in the NaCl under the HWS,
with the top of the sump at the base of the HWS, for two wells located about 80 m apart. It is
estimated that it will take approximately 6 months to solution mine the sumps to connection.
Upon connection of the two sumps, brine is injected down one well and produced from the other.
This process is continued for another 6 months to develop extended surface area for the solution
mining. Upon completion of the cavern development, the HWS is then selectively mined with a
nearly saturated NaCl injection fluid. As the solution mining of the HWS is complete, the process is
repeated for the TS.
The sylvinite HWS is uniformly between 50 and 65% sylvite (KCl) throughout with the remainder
comprised of rock-salt (halite with minor anhydrite and insoluble material). The selective solution
mining method will use a brine saturated with halite (NaCl) so that only the sylvite is dissolved; the
undissolved interstitial rock-salt will ‘settle’ out so that the cavern is expected to develop laterally
very effectively. The uniformly high KCl grade is advantageous in this regard. The sylvinite TS is lower
grade being comprised of sub-layers of sylvinite of 30 to 67% sylvite content, separated by halite
‘inter-layers’ of between 0.5 and 2.5 m thickness. Cavern development may deploy a roof blanket
and use of freshwater to selectively dissolve the halite layers first, then switch to an NaCl saturated
brine to dissolve the remaining sylvite. As per the HWS, the purity of the individual sylvinite sub-
layers is an advantage. It is likely that the rock-salt and then sylvinite dissolution will lead to collapse
of the remaining layers, increasing permeability of the remaining material and further aiding the
selective dissolution of the last of the sylvite.
Successful application of the selective dissolution method requires maintenance of adequate
permeability through the potash zone during operation. Our experts have advised that a rule of
thumb is a minimum grade of 30% KCl are sufficient to create adequate permeability for the
economic selective solution mining process to be sustained. The average grade of the Dougou
Extension mine plan is 43.1% KCl, and the lowest grade in the top seam 31.3% both of which meet
this criterion.
Approximately 43% of the Indicated Mineral Resource was utilised for the Scoping Study, with the
grade and tonnes of each of the two seams planned for extraction shown in Table 3. Within the
planned extraction area, additional drilling and seismic survey information is required to improve
confidence, and to delineate features that may impact on the solution mining.
Table 3: Sylvinite Resource Distribution
KCl
Sylvinite
Cavern type KCl Contained production
Area Seam tonnage
(seams extracted) (%) KCl (Mt) target
(Mt)
(Mt)
HWS 58.5 16.8
1 HWS and TS 16.1 4.83
TS 31.3 20.1
2 HWS only HWS 58.7 5.8 3.4 1.02
3 TS only TS 31.4 9.8 3.1 0.93
Average/Total --- --- 43.1 52.5 22.6 6.78
Current potash solution mining operations and projects in Canada that are deeper than the Dougou
Extension and thus operate in higher stress regimes, are managed such that approximately 65% of
the Mineral Resource are left in place to provide pillar support for stabilization of the solution
mining caverns and to reduce the surface subsidence rate. The Scoping Study assumes a
conservative estimate of 70% of the KCl Mineral Resource (Table 4) is to be left in place.
Allowance has been made for areas of the deposit affected by localised negative geological features
such as structures, areas of undulation of the seam and areas with basal carnallitite. Surface
topographical features such as drainage and steep sided valleys which affect positioning of wells on
surface have also been considered in the mine layout.
Table 4: Dougou Extension Production plan
Estimated
Estimated Number of
Required Annual Operating Estimated Estimated
Annual KCL per Caverns KCl per Total KCl Life of Total Average
From To KCl Cavern (at one Cavern production caverns Caverns Caverns
Seams (yr) (yr) (tpa) (tpa) time) (t) (t) (yrs) (#) per Year
HWS 4,830,00
and TS 0 11.5 404,000 25,250 16 151,333 0 6.0 32 2.8
1,020,00
HWS 11.5 14 404,000 25,250 16 79,749 0 3.2 13 5.4
TS 14 17 404,000 25,250 16 71,584 930,000 2.8 13 5.9
To achieve a 30% extraction ratio, the solution mining cavern density is designed at approximately
15 solution caverns per square kilometre.
The solution mining operation requires 16 dual-well caverns to achieve design capacity, for a total of
32 vertical wells. Therefore, initially 32 well pads will be constructed, along with associated access.
Once the planned drilling is complete at each well, a wellhead will be established consisting of
piping, valving, and instrumentation to properly control each well.
The wellheads will be connected into the wellfield pipeline system, which will run from the wellfield
to the process plant. A series of pipes is used to carry brine, water, and blanket fluid to each
wellhead. The wellfield pipeline loops back to the process plant, where mine brine is introduced to
the plant for KCl extraction, and then recirculated back to the wellfield for reuse. All wellfield pumps
are located near the wellfield, and all instrumentation from the wellfield will be fed back to the plant
control system.
The make-up water for the process plant is planned to be sourced from boreholes to be drilled into
the upper aquifer.
During the development of the sumps, the brine contains primarily NaCl. A portion of this brine is
used as process brine for mining of the caverns. The remainder will be disposed of through a
disposal well into a local saline aquifer.
Although no specific testing has been carried out to verify the expected solution mining production
for the Dougou Extension resource, K2P believes it has a reasonable basis for believing that the
production target of 400,000 tpa can be achieved with the selected method, for the following
reasons:
- Innovare as potash solution mining experts have assessed and recommended the proposed
mining method based on their combined years of experience including experience with the
application of this method in similar styles of potash deposits.
- The assumed rate of dissolution was selected by Innovare based on past operational
experience, and dissolution testing in other sylvinite projects. The rate of dissolution is one
factor determining the number of caverns required to achieve the targeted production rate.
The number of caverns required will be further investigated during feasibility studies and
following dissolution test work.
7. Processing
Plant and Flowsheet: The process plant will be located east of the Dougou Extension resource,
(Figure 4) with a minimum buffer distance of 500m. The site perimetre fencing will be 400m x 250m,
and the process plant platform will be 230m x 150m. The process plant building is 20m wide x 160m
long, and 36m high. The process plant building will house all processing equipment, along with
associated electrical and instrumentation. The control room will be located in the process plant
building. The building will have no exterior walls, and a simple roof will be installed to keep rain off
the personnel and equipment.
Figure 4: Plant Location in Relation to Wellfield
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
The process design shown in Figure 5 below consists of the following industry standard process
steps:
- Injection and solution recovery: Return brine from processing will be heated to 100°C and
pumped to the wellfield for re-injection into the mine caverns for dissolution and recovery
of potassium chloride (KCl) from the underground Sylvinite ore deposit containing both KCl
and sodium chloride (NaCl) minerals. The KCl mineral will be selectively dissolved from the
ore due to the almost saturated NaCl and under saturated KCl in the return brine.
- Cooling and crystallisation: From the crystalliser feed tank, the brine will be pumped to the
vacuum crystalliser for pre-cooling to approximately 47°C and then pumped to the surface
crystallizers. In the four-stage surface cooled crystallisers, the mother liquor will be cooled to
an end point of 10°C resulting in KCl solids precipitation. Spent brine from the 4th stage
crystallizer will be pumped to the concentrate tank for return to the wellfield.
- KCl de-brining: Slurry containing KCl solids from the surface crystallizers will be pumped to
the drum filter. A liquid ring vacuum pump will pull through the filter cake to promote water
removal from the filter cake.
- KCl drying: A rotary drum dryer will be used to dry most of the residual moisture from the
potash product.
- Compaction: Dried product will be conveyed to a twin-screw feeder for feed to a double-roll
compactor where it will be compacted. The flakes exiting the compactor will be broken by a
flake breaker followed by a cage mill for further size reduction. Granular product will be sent
for post-processing, while oversize and undersize material will be recirculated through
compaction. Post-processing for product includes drying, cooling and glazing to harden the
granular material.
- Product Load Out: Anti-caking agent and de-dusting oil will be added to the final cooled
granular potash product.
Figure 5: Process Flow Diagram
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
The long, narrow plant design, (Figure 6) makes it possible to position the mechanical equipment
more densely than usual plant designs. Maintenance access is convenient from both sides of the
building, so no service aisles will be included in the building interior. All removal of equipment will
either be through the sides, or through the roof of the building. Elevated grated floors will be
constructed for personnel access to all equipment, and several maintenance access lanes will be
created for removal of some large components.
A covered loadout area 20m x 24m x 20m high will be located at the end of the process plant, where
trailers will be directly loaded with product. A 50m x 50m x 28m high Utilities Building will be
positioned adjacent to the process plant, housing the boiler, power infrastructure, and other
utilities. The maintenance and warehouse facility will be 24m x 40m x 28m high, and also close to
the process plant. The Administration Building will contain the security area, office space, and lab
facilities for the operation.
Although no specific testing has been carried out to verify the expected process plant production for
the Dougou Extension resource, K2P believes it has a reasonable basis for a production target of
400,000 tpa to be achieved with this method for the following reasons:
- During the Scoping Study, a potash process technology specialist, Whiting Equipment
Canada, provided the Swenson process design, equipment list and estimated equipment
costs relating to the crystallization process. The same Swenson process technology is
successfully used at other global potash operations over a large range of plant capacities.
- The proposed methods are commonly used in potash solution mining operations, including
large scale production facilities. Although these methods can be more energy-intensive than
the conventional flotation methods commonly used in conjunction with conventional
underground mining, they are known to typically yield higher KCl recovery and higher
recovered KCl grade.
- It is possible that pockets of carnalite within the sylvinite may be encountered during mining
that will input MgCl2 into the brine. The risk of this occurring including its effect on KCl
recovery has been considered in the Scoping Study. Mg content in brine is planned to be
managed by bleeding out brine from the process stream without material impact on plant
performance.
Figure 6: Process Plant Layout
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
8. Infrastructure
This Scoping Study included investigation of the options available for location and methodology of
the various infrastructure requirements, including:
- Method of Natural Gas Supply
- Process Plant location
- Method of MoP ground transport and storage
- Method of ship loading
- Location of marine infrastructure
- Road requirements
Based on the trade-off analysis, a combination of new and re-habilitated roads will be used for the
hauling of gas (Figure 7) and product (Figure 8).
Figure 7: Gas Transport Route
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
Figure 8: Product Transport Route
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
Upgrading of sections existing roadway to improve access to site for a product transport route has
been planned. Road maintenance equipment has been included in the capital cost estimate to allow
maintenance of roadways to be done by Kore. A marine trestle to facilitate trans-shipment of
product will be used to load ships off the economic development zone near Pointe Indienne, utilising
trucks to transport (Figure 8) product from site to a storage facility at the economic development
zone.
9. Water, Gas and Power Supply
All process water requirements for processing and mining will be supplied from new water wells.
Pump testing of aquifers was carried out at both the process plant and mine site in the Kola
Definitive Feasibility Study and these indicated capacity in the aquifers to supply water at the
required rate.
Gas will be trucked in using pressurised gas transport trailers. Power will be supplied from the CEC
power station at Pointe Noire via an overhead power line.
10. Social and Environmental
The existing ESIA for the Dougou license area was approved in 2016. The company believes that a
revised ESIA incorporating the Dougou Extension requirements for the sylvinite process plant and
solution mine wellfield will be required.
The revised ESIA will utilise existing baseline documentation of both the Dougou ESIA and the Kola
ESIA completed in 2018. The existing baseline information on the Dougou Extension area is believed
to be adequate for the revised ESIA to be prepared and submitted for approval within 12 months.
A Decree D’Utilité Publique (DUP) and a Resettlement Action Plan (RAP) will be required to be
developed for Longo-Bondi and possibly Youngou villages. It is unlikely that physical resettlement of
any people from these villages will be required.
The mining licence for Dougou was approved on 9th May 2017 and is valid for 25 years, with an
option to extend it by 15 years at that point. This mining licence covers the DX project area.
11. Operating Costs
The operating cost forecast for the Project (Table 5) has been estimated to an accuracy of
approximately -15% +30%.
Table 5: Dougou Extension Project Operating Cost Estimates (CFR Africa)
Total unit Cost
Cost Category (real 2019)
(US$/t)
Opex
Solution mining and wellfield 5.25
Process Plant 53.79
Maintenance 4.04
Offsite 13.57
Land Transport 3.89
General and Admin 2.21
FOB 82.74
Marine Transport 25.00
Total Operating cost (CFR Africa) 107.74
The Scoping Study confirms that the operating cost of DX is highly competitive. The mine gate
operating cost is estimated at US$78.85/t and the export (FOB) cost is estimated at US$82.74/t. This
ranks DX costs in the lowest quartile of producers when compared to existing producers and
‘committed’ projects. The forecast CFR operating cost of $107.74 is based on shipping to African
destinations. The operating cost estimates excludes sustaining capital.
12. Capital Costs
A capital cost estimate was factored from recent Innovare Technologies in-house data escalated to
2019, with an accuracy of -15% +30%.
The summary of the capital cost estimate (CAPEX) is shown in Table 6.
Table 6: Capital Cost estimate (real 2019)
Initial Capex Deferred Capex LoM Capex
Description
(kUSD) (kUSD)
(kUSD)
Solution mining and wellfield 53,963 10,884 64,847
Process Plant 122,404 18,870 141,274
Offsite infrastructure 35,649 6,196 41,844
Sub-total Direct Costs 212,016 35,950 247,966
Field Construction Indirect 11,914 11,914
Other Indirect Costs 8,051 8,051
Owner's Costs 8,481 8,481
EPCM 22,677 22,677
Contingency 58,421 58,421
Escalation 5,164 5,164
Total Capital Costs 326,724 35,950 362,674
The pre-production capital cost of US$326 million equates to a pre-production capital intensity of
US$815/t MoP annual capacity.
Sustaining capital of US$153 million over the 17 years life of mine, and deferred capital of US$36
million relating to road construction, transport equipment and drill equipment, have also been
allowed.
13. Financial Analysis
The base case economic evaluation delivers a real post-tax, ungeared IRR of approximately 19.3%
and NPV10(real) of approximately US$221M on an attributable basis. The evaluation is based on a
granular MoP price of US$360/t MoP CFR Africa (real 2019).
The key assumptions underpinning the base case economic evaluation are as follows:
- 17-year initial project life from first production based on depletion of the sylvinite;
- Approximately 400 ktpa average production of MoP;
- Granular MoP represents 100% of total MoP production and sales;
- All cashflows (Figure 9) are on a real 2019 basis;
NPVs are ungeared and calculated after-tax applying a real discount rate of 10% (based on a review
of 7 recent potash projects, 4 of which were in Africa).
Figure 9: Estimated Annual Cash Flow over life of project (real 2019)
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
Table 7: NPV 10 real Sensitivities
NPV 10 (real) USDm
Sensitivity Range -10% -5% 0% 5% 10%
Price 134 177 221 264 308
Sensitivity Range -30% -15% 0% 15% 30%
Opex 300 261 221 181 141
Initial Capex 312 266 221 175 130
Sustaining Capex 237 229 221 213 205
24
Sensitivity Range (months) -6 -3 +3 +6
(base)
Construction period 335 274 221 205 192
Table 8: Real IRR Sensitivities
IRR (%)
Sensitivity Range -10% -5% 0% 5% 10%
Price 15.8% 17.6% 19.3% 21.0% 22.7%
Sensitivity Range -30% -15% 0% 15% 30%
Opex 22.4% 20.9% 19.3% 17.7% 16.1%
Initial Capex 27.5% 22.8% 19.3% 16.6% 14.4%
Sustaining Capex 19.9% 19.6% 19.3% 19.0% 18.7%
Sensitivity Range (months) -6 -3 24 +3 +6
(base)
Construction period 29.4% 23.2% 19.3% 18.2% 17.4%
Further analysis to determine effect of gearing was done and is reflected in Table 9.
Table 9: Impact of Gearing Options on Financial Indicators
Gearing 0% 40% 50% 60%
NPV 10 real 221 225 227 228
IRR (Real) 19.3% 22.1% 23.1% 24.4%
14. Product Marketing
MoP produced from the Project is planned to be marketed into Africa to feed expected demand
growth and displace higher cost MoP. The key targeted destination countries and their current
demand for granular MoP are:
- South Africa 100,000 ktpa (100 GrMOP)
- Nigeria 400,000 ktpa (GrMOP/Blenders)
- Other West Africa 200,000 ktpa (GrMOP/ Blenders)
Note: Nigerian demand has been based on estimated demand supplied by our marketing consultant,
WABCO.
15. Development Schedule
The development schedule has been based on an EPCM execution strategy with an overall execution
schedule (Figure 10) of approximately 2 years from final investment decision.
Figure 10: Proposed Execution Schedule
A copy of this announcement including the diagrams and schematics referred to in this
announcement are available on the Company’s website at http://www.korepotash.com/wp-
content/uploads/2019/04/Dougou-Extension-Solution-Mining-Project-Scoping-Study.pdf
16. Reasonable Basis for Funding Assumption
The Directors of Kore Potash have formed the view that there is a reasonable basis to believe that
requisite future debt and equity funding for development of the DX Project will be available when
required. Kore shareholders should be aware of the risk that future funding for development of the
DX Project may dilute their ownership of the Company or Kore’s economic interest in the Project (or
the DX Project).
There are several grounds on which this reasonable basis is held:
- Kore Potash has two large strategic shareholders:
- SQM (18%): a Chilean company with a market capitalisation in excess of US$11B that
is an integrated producer and distributor of specialty plant nutrients, including having
an established business in the global potash market; and
- SGRF (19%): the sovereign wealth fund of Oman, which holds a range of natural
resource investments, including on the African continent.
- These two groups invested a total of US$40 million into Kore Potash in late 2016. They
collectively bring a considerable and highly relevant combination of substantial
financial capacity, specific potash experience, Latin American, Middle Eastern and
African operating experience, and financing expertise.
- The Scoping Study has been completed by a team of world-class solution mining experts in
Innovare Technologies. The Scoping Study meets the expected level of detail required for a
Scoping Study.
- The technical and financial parametres detailed in the Scoping Study are highly robust and
economically attractive. Further improvements will be investigated in the pre-feasibility study
phase of project.
- The funding for the construction of the Project would be required in approximately 2021 after
completion of a further drilling and seismic investigation, and pre-feasibility and feasibility
studies. The consensus around price forecasts for MoP in 2023 supports the use of a MoP
granular price of US$360/t MoP granular CFR.
- Kore’s options for raising the required funding may include selling down part of its interest in
the Dougou Extension Solution Mining Project to a third party to form a joint venture.
Introduction of a joint venture partner may also provide further comfort for potential debt
project financiers and could reduce Kore’s share of the equity funding requirements for the
project. Kore shareholders should be aware that any sale of a joint venture interest in the
project to a third party would most likely dilute Kore’s economic ownership of the project.
- The Kore Potash Board and management team is highly experienced in the broader resources
industry. They have played leading roles previously in the exploration and development of
several large and diverse mining projects in Africa. In this regard, key Kore personnel have a
demonstrated track record of success in identifying, acquiring, defining, funding, developing
and operating quality mineral assets of significant scale.
17. Key Risks and Opportunities
Some key risks in the Scoping Study, which will be areas of focus in the pre-feasibility study, are:
- Geology: Resource may contain lower KCl quantity or grade than expected or higher than
expected presence of carnallite. An additional drilling campaign and a 2D seismic investigation
to improve confidence in the resource and better define sylvinite/carnallitite interfaces will be
required in pre-feasibility study.
- Geotechnical: Cavern stability and surface subsidence will require geo-technical modelling in
pre-feasibility study.
- Mining: The mine design in the Scoping Study was based on assumptions around normal
dissolution rates applicable to the potash industry for selective dissolution and these will
require test work to confirm the assumptions in the pre-feasibility study.
- Execution: The current execution schedule is a Level 1 schedule and will need to be further
detailed in pre-feasibility study to ensure impacts and long lead items are detailed in the next
level of schedule.
18. Next Steps
Work on the optimisation of Kola continues with the French Consortium and the company expects to
update shareholders further within the next 2 months.
Kore also intends to progress work to define the technical and commercial feasibility of solution
mining of the DX deposit.
The next planned phases of work on the DX project which are expected to take place over a 9-month
duration from commencement include:
- A 2-dimensional seismic survey campaign primarily designed to improve delineation of the
sylvinite /carnallitite interface within the two seams.
- A diamond drill hole programme to drill 4 holes to improve overall understanding of the
Deposit.
- Studies required to achieve pre-feasibility level assessment of:
- Marine loading and transport options.
- Cavern formation.
- Test work to improve understanding on the operational control of dissolution in the DX
seams.
Work is underway to prepare for commencement of the seismic surveys and drilling which will
account for the bulk of the spend in the planned work programme. The Company intends to
commence these works as soon as possible.
The Company believes that successful completion of these work streams will provide sufficient basis
for a pre-feasibility level assessment of DX solution mining.
– ENDS –
Jos Simson / Edward Martin Davison / James Asensio
Brad Sampson Lee
Tavistock (UK media Canaccord Genuity (Nomad &
Chief Executive Officer enquiries) Broker)
Tel: +44 (0) 207 920 Tel: +44 (0) 207 523 4600
Tel: +27 11 469 9144 3150
info@korepotash.com kore@tavistock.co.uk korepotash@canaccordgenuity.com
www.korepotash.com
Appendix A: Competent Persons Statement
The information relating to Exploration Results and Mineral Resources in this report is based on, or
extracted from previous reports referred to herein, and available to view on the Company’s website
www.korepotash.com. The Dougou Extension sylvinite Mineral Resource Estimate was reported on
20 August 2018 in an announcement titled ‘Maiden Sylvinite Mineral Resource at Dougou
Extension’. Kore Potash confirms that it is not aware of any new information or data that would
materially affect the information included in that announcement and that all material assumptions
and technical parametres underpinning the Mineral Resource estimates in that announcement
continue to apply and have not materially changed. The Company confirms that the form and
context in which the Competent Person’s findings are presented in this report have not been
materially modified from the original market announcement.
Innovare Technologies, John Mc Ewan, Sandy Debusschere, and Max Ramey are not associates or
affiliates of Kore Potash or any of its affiliates. Innovare Technologies will receive a fee for the
preparation of the Report in accordance with normal professional consulting practices. This fee is
not contingent on the conclusions of the Report and Innovare Technologies, John McEwan, Sandy
Debusschere, and Max Ramey will receive no other benefit for the preparation of the Report. John
McEwan, Sandy Debusschere, and Max Ramey do not have any pecuniary or other interests that
could reasonably be regarded as capable of affecting their ability to provide an unbiased opinion in
relation to the Dougou Extension Potash Project. Innovare Technologies does not have, at the date
of the Report, and has not had within the previous years, any shareholding in or other relationship
with Kore Potash or the Dougou Extension Potash Project and consequently considers itself to be
independent of Kore Potash.
Max Ramey is a registered member in good standing (Member # 2632850RM) of Society for Mining,
Metallurgy and Exploration (SME) which is recognised and accepted under the JORC Code. John
McEwan is a senior member in good standing (Member # 900062459) of American Institute of
Chemical Engineers (AIChE). John McEwan and Max Ramey both have sufficient experience that is
relevant to the style of mineralisation and type of deposit under consideration and to the activity
being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the JORC Code.
Sandy Debusschere has over 40 years of drilling experience. John McEwan, Sandy Debusschere, and
Max Ramey consent to the inclusion in the Report of the matters based on their information in the
form and context in which it appears.
Appendix B: Material Assumptions
No Ore Reserve has been declared. This combined AIM/JSE/ASX release has been prepared in
compliance with the current JORC Code (2012) and the ASX Listing Rules. All material assumptions,
including consideration of the “modifying factors” under the JORC Code, on which the Scoping Study
production target estimates and forecast financial information are based have been included in this
release and are disclosed in the table below.
Criteria JORC Code explanation Commentary
Mineral - Description of the Mineral - The production target is based
Resource Resource estimate used as a basis entirely on Indicated Mineral
estimate for for the conversion to an Ore Resource of 52.5 Mt with an
conversion to Reserve. average grade of 43.1% KCl, hosted
Ore Reserves by two seams. This is a portion of
- Clear statement as to whether the
the total Indicated Mineral
Mineral Resources are reported
Resource first announced on 20
additional to, or inclusive of, the
August 2018. Appendix 1 of that
Ore Reserves.
announcement provides the Table
1 checklist as required by the JORC
Code (2012 edition).
- No Ore Reserve has been
declared.
Site visits - Comment on any site visits - The Competent Person for the
undertaken by the Competent Mineral Resource Estimate has
Person and the outcome of those visited the site on several
visits. occasions to observe all
exploration procedures and found
Criteria JORC Code explanation Commentary
- If no site visits have been them to be acceptable.
undertaken indicate why this is
the case.
Study status - The type and level of study - The study is at scoping level. There
undertaken to enable Mineral has been insufficient work on the
Resources to be converted to Ore modifying factors to support an
Reserves. Ore Reserve Estimate.
- The Code requires that a study to
at least Pre-Feasibility Study level
has been undertaken to convert
Mineral Resources to Ore
Reserves. Such studies will have
been carried out and will have
determined a mine plan that is
technically achievable and
economically viable, and that
material Modifying Factors have
been considered.
Cut-off - The basis of the cut-off grade(s) or - For the Mineral Resource estimate
parametres quality parametres applied. a 15% cut-off-grade (COG) was
used. For the production plan this
was unchanged. Due to the high
grade of the sylvinite and the
abrupt contacts, all of the
considered material is well above
the COG.
Mining factors - The method and assumptions - No Ore Reserve has been
or used as reported in the Pre- declared.
assumptions Feasibility or Feasibility Study to
- For the Scoping Study, the planned
convert the Mineral Resource to
mining method is solution mining,
an Ore Reserve (i.e. either by
using ‘dual-well’ method and
application of appropriate factors
‘selective extraction’ of the KCl.
by optimisation or by preliminary
or detailed design). - Dissolution Testing will be
performed to assess the
- The choice, nature and
dissolution characteristics of the
appropriateness of the selected
resource by laboratory testing of
mining method(s) and other
core samples from the Dougou
mining parametres including
Extension resource.
associated design issues such as
pre-strip, access, etc. - The following preliminary
assessment of modifying factors
- The assumptions made regarding
was made for the production plan:
geotechnical parametres (e.g. pit
slopes, stope sizes, etc.), grade
Criteria JORC Code explanation Commentary
control and pre-production - Topographic exclusions such as
drilling. steep slopes and drainages
- The major assumptions made and - ‘pillars’ between caverns
Mineral Resource model used for
- Losses due to areas of
pit and stope optimisation (if
unfavorable geology; areas with
appropriate).
basal carnallitite, areas with
- The mining dilution factors used. structures, areas of steep dip
and/or undulation of the
- The mining recovery factors used.
sylvinite
- Any minimum mining widths used.
- The overall extraction ratio of
- The manner in which Inferred 30% also considers mining
Mineral Resources are utilised in recovery losses
mining studies and the sensitivity
- A minimum mining height was
of the outcome to their inclusion.
not applied as within the area of
- The infrastructure requirements of interest the thickness is
the selected mining methods. expected to be above the
minimum. For the Scoping
Study, an average of 5.2 m for
the TS and 3.6 m for the HWS
was used, based on the Mineral
Resource e
- estimate.
Metallurgical - The metallurgical process The selective mining process is
factors or proposed and the appropriateness expected to yield brine composed
assumptions of that process to the style of primarily of NaCl and KCl in solution,
mineralisation. and small amounts of Mg are also
possible due to the potential presence
- Whether the metallurgical process
of carnallite.
is well-tested technology or novel
in nature. The crystallization process is well-
established method for separation of
- The nature, amount and
KCl and NaCl and is well proven in
representativeness of
operations.
metallurgical test work
undertaken, the nature of the The process utilizes the solubility
metallurgical domaining applied characteristics of KCl: KCl solubility is
and the corresponding highly dependent on temperature,
metallurgical recovery factors where NaCl solubility has little
applied. dependency on temperature. Cooling
the hot brine from the mine results in
- Any assumptions or allowances
KCl crystallization, while NaCl remains
made for deleterious elements.
in solution.
- The existence of any bulk sample
In this process, Mg is considered a
Criteria JORC Code explanation Commentary
or pilot scale test work and the deleterious, since Mg is preferentially
degree to which such samples are soluble to both KCl and NaCl.
considered representative of the Therefore, levels of Mg in the brine
orebody as a whole. must be managed to prevent Mg from
displacing KCl.
- For minerals that are defined by a
specification, has the ore reserve - Therefore, a Mg purge stream is
estimation been based on the included in the design to manage
appropriate mineralogy to meet the Mg content in the brine. The
the specifications? purge stream is considered waste
and disposed using a disposal well.
The Mg purge stream maintains
the brine at a manageable Mg
content but causes a reduction of
KCl recovery. Based on work at the
nearby Kola deposit and
observations of the core from
holes at Dougou Extension, within
the sylvinite the only potash
mineral is sylvite. The gangue
minerals comprise halite (NaCl)
and minor (<2.5%) anhydrite and
insoluble phases (clays, organic
material, quartz) none of which are
problematic as they will not be
dissolved by the brine.
Environmental - The status of studies of potential - An amended ESIA will need to be
environmental impacts of the prepared in the feasibility study
mining and processing operation. that addresses areas that lack
Details of waste rock some detail from the approved
characterisation and the ESIA for Dougou. The baseline
consideration of potential sites, information from both the
status of design options completed Dougou and Kola ESIA’s
considered and, where applicable, will inform the amended ESIA. No
the status of approvals for process waste rock, process residue or
residue storage and waste dumps waste dumps will be required.
should be reported. Additional work will be required on
the NaCl brine disposal with two
options (aquifer and ocean
disposal) to be addressed in
feasibility phase.
Infrastructure - The existence of appropriate - Exclusive land acquisition rights
infrastructure: availability of land have been granted to the Project
for plant development, power, company for plant development
water, transportation (particularly through ministerial order gazetted
Criteria JORC Code explanation Commentary
for bulk commodities), labour, on 30 August 2018 (the
accommodation; or the ease with “Déclaration d’Utilité Publique” or
which the infrastructure can be “DUP”) valid for three years and
provided, or accessed. renewable once for a two-year
period.
- A infrastructure trade-off has been
completed and the findings of this
are, gas is available and will need
to be transported by road, product
transport to marine facility will be
via existing roads with an
allowance to upgrade some roads
included and an allowance to
upgrade roads has been made,
local contractors would be used for
construction, the existing
exploration camp can cater for
accommodation during
construction.
- Power can be supplied via
overhead lines from the power
station at Pointe Noire.
- Potable and process water will be
obtained through boreholes.
Results from pump tests on
aquifers in the area done on a
previous project indicate enough
water available in local aquifers.
Costs - The derivation of, or assumptions Capital Cost Estimate has been
made, regarding projected capital developed for each scope area,
costs in the study. expressed in United States dollars
(USD) and based on March 2019 prices.
- The methodology used to
estimate operating costs. Currency Exchange Rates are sourced
from Oanda (www.oanda.com) spot
- Allowances made for the content
rates (September 2017). Forecast
of deleterious elements.
exchange rates were based on World
- The derivation of assumptions Bank.
made for metal or commodity
Capital Cost estimate (+/- 15-30%) is
price(s), for the principal minerals
based on:
and co-products.
- Mechanical Equipment
- The source of exchange rates used
material costs
in the study.
benchmarked based on
Criteria JORC Code explanation Commentary
- Derivation of transportation Innovare’s in-house
charges. data.
- The basis for forecasting or source - Mechanical Labour was
of treatment and refining charges, applied as a ratio to
penalties for failure to meet materials,
specification, etc. benchmarked from
past projects, and
- The allowances made for royalties
based on Innovare’s in-
payable, both Government and
house data.
private.
- Material Costs and
Labour for other
disciplines were
factored at ratios from
past benchmarked
projects.
- Selected quotations
were obtained.
An annual escalation of 1.50% applied.
Contingency has been set to 22% for
the overall Capital cost estimate.
Contingency is an amount of costs
included to avoid the risk of cost over-
run to a pre-determined acceptable
level, since it aims to cover for
expected risks that may occur.
Capital Cost estimates are based on a
24 months’ execution schedule,
Revenue - The derivation of, or assumptions - Commodity prices were informed
factors made regarding revenue factors by the recent spot price for MoP
including head grade, metal or granular product, based on a K60
commodity price(s) exchange specification, which means the
rates, transportation and MoP product has a minimum K2O
treatment charges, penalties, net content of 60%, corresponding to a
smelter returns, etc. KCl content of 95%. Product will
be sampled regularly on site and
- The derivation of assumptions
tested in a site-based laboratory to
made of metal or commodity
ensure product grade is
price(s), for the principal metals,
consistently met. Product that
minerals and co-products.
does not satisfy grade will be
removed from the product stream
and reprocessed.
Criteria JORC Code explanation Commentary
Market - The demand, supply and stock The entire 400 ktpa of granular MoP
assessment situation for the particular will be marketed into Africa, where the
commodity, consumption trends market is growing faster than the rest
and factors likely to affect supply of the world. The targeted countries
and demand into the future. and their estimated consumptions are:
- A customer and competitor - South Africa 100,000
analysis along with the ktpa (100 GrMOP)
identification of likely market
- Nigeria 400,000 ktpa
windows for the product.
(GrMOP/Blenders)
- Price and volume forecasts and
- Other West Africa
the basis for these forecasts.
200,000 ktpa (GrMOP/
- For industrial minerals the Blenders)
customer specification, testing
and acceptance requirements
prior to a supply contract.
Economic - The inputs to the economic Base case key valuation assumptions
analysis to produce the net and sources:
present value (NPV) in the study,
Production - LoM of 17 years at
the source and confidence of
nominal 400 ktpa MoP production,
these economic inputs including
estimated inflation, discount rate, Single product type – Granular
etc.
Average LoM CFR price of USD360/MoP
- NPV ranges and sensitivity to t
variations in the significant
assumptions and inputs. On-mine LoM average operating cost
US$ 78.85/MoP t, Real (scoping
estimate)
LoM Shipping (trans-shipment and sea
freight) of US$25/MoP t (scoping
estimate) and UD$ 3.89 for road-based
transport (scoping estimate).
Project capital period 24 months,
deferred capital period 84 months,
sustaining capital 204 months (Scoping
Study)
Total Real Project Capital USD327 Mn
(scoping estimate)
Deferred Capital USD36 million (scoping
estimate)
Sustaining Capital USD 21,59/MoP t,
Criteria JORC Code explanation Commentary
Real (scoping estimate)
Fiscal parametres: Company tax rate
(15%), tax holidays (5 years at 0% + 5
years at 7.5%) (Mining Convention)
Royalties 3% (Mining Convention)
Government free carry (10%) (Mining
Convention)
Other minor duties and taxes (Mining
Convention)
The base case DFS real NPV at real
discount rate of 10% is approximately
USD221 million (as at the date just prior
to construction in 2019 money terms),
and base case real IRR is approximately
19.3%
Social - The status of agreements with key The Dougou Mining License, which
stakeholders and matters leading includes the area of the Dougou
to social license to operate. Extension Project, is held within a
subsidiary which will be owned 10% by
the ROC government.
Socio-economic, cultural heritage,
archaeological and livelihood baseline
reports have been prepared and
approved as part of the ESIA baseline
process.
Sintoukola Potash has implemented a
Stakeholder Engagement Process and is
actively engaging with a wide range of
project stakeholders, including
conservation NGO's, adjacent National
Parks, the regulator and communities.
For each corridor a declaration d'utilite
publique (DUP) has been declared by
the Ministry of Land Affairs, a review of
each corridor will be required
A review of the Resettlement Action
Plan (RAP) for the Service Corridor will
be required
Physical displacement is minimal with
most actions requiring livelihood
Criteria JORC Code explanation Commentary
restoration
There are believed to be no social
related issues that do not have a
reasonable likelihood of being resolved.
Other - To the extent relevant, the impact Dougou Extension is currently
of the following on the project compliant with all legal and regulatory
and/or on the estimation and requirements. An amended ESIA will be
classification of the Ore Reserves: required.
- Any identified material naturally A mining convention entered into
occurring risks. between the RoC government and the
Companies on 8 June 2017 and
- The status of material legal
gazetted into law on 29 November
agreements and marketing
2018 concludes the framework
arrangements.
envisaged in the 25-year renewable
- The status of governmental Dougou Mining License granted in
agreements and approvals critical August 2013. The Mining Convention
to the viability of the project, such provides certainty and enforceability of
as mineral tenement status, and the key fiscal arrangements for the
government and statutory development and operation of Dougou
approvals. There must be Mining Licenses, which amongst other
reasonable grounds to expect that items include import duty and VAT
all necessary Government exemptions and agreed tax rates during
approvals will be received within mine operations. The Mining
the timeframes anticipated in the Convention provides strengthened legal
Pre-Feasibility or Feasibility study. protection of the Company’s
Highlight and discuss the investments in the Republic of Congo
materiality of any unresolved through the settlement of disputes by
matter that is dependent on a international arbitration.
third party on which extraction of
To the best of the Company’s
the reserve is contingent.
knowledge there is no reason to
assume any government permits and
licenses or statutory approvals will not
be granted. There are no unresolved
matters upon which extraction is
contingent.
Classification - The basis for the classification of - No Ore Reserve has been
the Ore Reserves into varying declared.
confidence categories.
- Whether the result appropriately
reflects the Competent Person’s
view of the deposit.
- The proportion of Probable Ore
Criteria JORC Code explanation Commentary
Reserves that have been derived
from Measured Mineral Resources
(if any).
Audits or - The results of any audits or - No Ore Reserve has been
reviews reviews of Ore Reserve estimates. declared.
Discussion of - Where appropriate a statement of - No Ore Reserve has been
relative the relative accuracy and declared.
accuracy/ confidence level in the Ore
- The production target is based on
confidence Reserve estimate using an
the preliminary application of
approach or procedure deemed
modifying factors and is consistent
appropriate by the Competent
with scoping level; that is +/- 30%
Person. For example, the
application of statistical or - Additional drilling and seismic
geostatistical procedures to surveying are required for the
quantify the relative accuracy of detailed assessment of modifying
the reserve within stated factors enough to support a PFS or
confidence limits, or, if such an FS, along with more detailed
approach is not deemed assessment of the following
appropriate, a qualitative including project specific test-
discussion of the factors which work:
could affect the relative accuracy
and confidence of the estimate. - Geotechnical modelling
- The statement should specify - Hydrogeological modelling
whether it relates to global or - Dissolution test work
local estimates, and, if local, state
the relevant tonnages, which - Mineralogical studies
should be relevant to technical - Cavern development/KCl
and economic evaluation. extraction modelling, process
Documentation should include test work.
assumptions made and the
procedures used.
- Accuracy and confidence
discussions should extend to
specific discussions of any applied
Modifying Factors that may have
a material impact on Ore Reserve
viability, or for which there are
remaining areas of uncertainty at
the current study stage.
- It is recognised that this may not
be possible or appropriate in all
circumstances. These statements
Criteria JORC Code explanation Commentary
of relative accuracy and
confidence of the estimate should
be compared with production
data, where available.
GLOSSARY
Acronym / Stands For / Meaning Definition and/or Additional Information
Term
$ Denotes USD or United States The USD is the functional and presentation
dollars. currency of the Company and the Group.
AIM Alternative Investment Market AIM (formerly the Alternative Investment
Market) is a sub-market of the LSE.
AACE American Association of Cost Association upon which the estimation
Engineers procedure of capital expenditure was based.
anhydrite Calcium sulphate mineral (CaSO4) Anhydrite Member refers here to a rock-
forming type comprised largely of anhydrite that
forms a layer at the top of the Salt Member.
ASX Australian Stock Exchange
aquifer A water bearing geological unit
Board The board of directors of Kore
Potash plc
brine A solution of salts and water Brine can be a solution of various salts
including normal salt (NaCl) and KCl.
Capex Capital cost estimate Estimated cost to construct facilities to mine
and process potash
Carnallite A hydrated potassium magnesium
chloride mineral (KMgCl3·6H2O)
Carnallitite A rock type comprised Carnallitite may be replaced by the word
predominantly of the potash carnallite for simplicity.
mineral carnallite (KMgCl3·6H2O)
and halite (NaCl).
CEO Chief Executive Officer As listed on page 18 of the 2018 Annual
Report.
CFR Cost and Freight "Cost and Freight" means that the seller
must pay the costs and freight necessary to
bring the goods to the named port of
destination but the risk of loss of or damage
to the goods, as well as any additional costs
due to events occurring after the time the
goods have been delivered on board the
vessel is transferred from the seller to the
buyer when the goods pass the ship's rail in
the port of shipment.
Compaction Refers to the compaction of the
MoP
Company Kore Potash plc Kore Potash plc is public company
incorporated and registered in England and
Wales (registered number 10933682).
Cut-off- The minimum grade of material (in Abbreviated to COG
grade this case sylvinite) that can be
mined without incurring losses
CRU Commodity Research Unit
DFS Definitive Feasibility Study The third and final study stage in the
evaluation lifecycle of a project
Dougou Denotes the Dougou Project The Dougou Project (including the Dougou
Extension Project) is part of the Sintoukola
Potash Project.
DUP Déclaration d'Utilité Publique A DUP, or, translated as a “declaration of
public utility”, is a formal recognition in
Congolese law that a proposed project has
public benefits.
EBITDA Earnings Before Interest, Taxes,
Depreciation and Amortization
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