Emmerson : Indication of Significant Debt Financing Capacity

RNS Number : 5986B

Emmerson PLC

10 June 2019

Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining

10 June 2019

Indication of Significant Debt Financing Capacity to Support Development of Khemisset Potash Project

Emmerson Plc ("Emmerson" or "the Company"), which is focused on developing the low cost, high margin Khemisset Potash Project ("Khemisset" or "the Project"), is pleased to announce it has received a formal indication of significant debt financing for Khemisset from a major European commercial bank. The indicative sizing shows debt capacity of up to US$230 million would be feasible assuming standard project finance terms and conditions. It is expected the syndicate will comprise of commercial banks and Export Credit Agencies.

Highlights

• Indication of potential project finance debt of up to US$230m for construction of the Project has resulted from ongoing discussions with major global commercial bank
• Expected syndicate would consist of major commercial banks and Export Credit Agencies ("ECAs")
• Debt sizing based on very conservative, bank case, pricing assumption of US$235/tonne (delivered to Brazil) Muriate of Potash price flat over the life of the project

• • This price represents c. 35% discount to current spot prices
  • Strong potential to increase debt capacity if customer floor prices above base case can be negotiated
• Indicative terms in line with market norms for mine construction project finance including standard covenants, cash sweeps and security packages
• Initial due diligence and financial modelling completed by major global commercial bank
• Final debt sizing and terms subject to using conditions including the completion of satisfactory technical, legal and environmental due diligence and finalisation of offtake agreements.

Hayden Locke, CEO of Emmerson, commented: "To be approached by a major commercial bank with an early indication of debt financing capacity of such significant size, despite using very low potash price assumptions, is a huge endorsement of the economic strength of the Project.

"The Scoping Study, which was delivered in November 2018, highlighted Khemisset's industry leading capital intensity, but also showed that, even in the downside price scenarios, the Project exhibited very robust cashflow generation. The Board and Management believed this would underpin a significant debt financing package from credible institutions, a view that has been strongly endorsed by this indicative proposal.

"We continue to engage in early stage discussions with a number of significant strategic and financing partners with the capacity to provide both debt and equity for Khemisset Project, and the indication of significant debt support will enhance these discussions.

"We will continue to update our investors on the various operational and corporate activities we have underway as Emmerson continues to scale up the development of this exceptional project."

Financing Overview

Emmerson is assessing multiple options for financing the required capital expenditure of the Khemisset Potash Project. The Company will continue to assess all financing options as project development progresses, in order to ultimately allow an optimal decision to be made regarding the final financing structure. Traditional project finance is considered one of the most attractive financing solutions for new mining projects but is often not available for a variety of reasons. To have received an indication of significant debt capacity from a major financial institution, following initial technical and financial due diligence, is a significant positive for the Company and an endorsement of the quality of the Khemisset Project. The key terms of the detailed indicative debt financing include:

• Debt sizing of up to US$230m, representing more than 50% of estimated capital expenditure

o Debt sizing is strongly influenced by the assumed potash price. Initial potash prices used are flat US$235/tonne CFR Brazil.

o Potential to increase size of financing package if favourable conditions can be negotiated, primarily in offtake discussions

• Expected syndicate of 3-4 major commercial banks alongside ECAs would be required
• 10-yearterm including 3-year grace period prior to first repayments, assuming involvement of ECAs
• Standard terms including equity investment before debt drawdown, cost overrun facilities, standard covenants, cash sweep and security packages
• Interest rates calculated at a margin of up to 5% above an agreed base rate, such as Euribor or Libor

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• Initial technical due diligence and financial modelling has been completed
• Indication is subject to standard conditions precedent including satisfactory technical, legal and environmental due diligence, finalisation of security packages and offtake agreements.

The Company looks forward to updating shareholders as progress is made on various workstreams underway within the Company.

**ENDS**

For further information, please visit www.emmersonplc.com, follow us on Twitter

(@emmerson_plc), or contact:
Hayden Locke	Emmerson Plc	Tel: [phone]
Edward
McDermott
Jeremy King	Optiva Securities Limited	Tel: [phone]
	Broker
Gaby Jenner	St Brides Partners Ltd	Tel: [phone]
Melissa Hancock	Financial PR/IR

Notes to Editors

Emmerson's primary focus is on developing the Khemisset Potash Project located in Northern Morocco. The project has a large JORC Resource Estimate (2012) of 311.4Mt @ 10.2% K 2O 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.

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