Kore Potash, the potash development company with 97%-ownership of the Kola and DX Potash Projects in the Sintoukola Basin, located within the Republic of Congo ("RoC"), is pleased to announce that it has signed a Heads of Agreement for the construction of the Kola Potash Project ("Kola").
• Construction Heads of Agreement ("HoA") signed with SEPCO Electric Power Construction Corporation ("SEPCO") to construct Kola.
• Agreement signed in the presence of the Minister of State and Minister of Mining, Industry and Geology of the Republic of Congo, Mr Pierre Oba.
• The HoA recognises the recent Kola optimisation study outcomes and confirms:
o Kola is designed with capability to produce 2.2 Mtpa of granular Muriate of Potash ("MoP") over an initial 31-year life;
o the Kola construction period will be 40 months;
o the capital cost to construct Kola will be US$1.83 billion;
o the capital cost of the underground works component of Kola may be reviewed following completion of additional investigations by SEPCO during the pre- construction engineering design phase;
o the Engineering, Procurement and Construction ("EPC") contract will be based on the Fédération Internationale Des Ingénieurs-Conseils ("FIDIC ") silver book 2017; and
o SEPCO will continue negotiations with Kore with a view to finalising all EPC terms and presenting the completed EPC construction proposal to Kore in August 2022.
• The Summit Consortium ("Consortium") have reaffirmed their commitment to provide Kore with a financing proposal for the full construction cost of Kola, and that the financing proposal will be provided after Kore has received the EPC proposal and has agreed with SEPCO on the key EPC terms.
Brad Sampson, Chief Executive Officer of Kore Potash, commented :
"The Heads of Agreement with SEPCO reconfirms their commitment to advance from the completed Kola optimisation phase, to construction contract formation and then into construction of Kola. We look forward now to receiving the EPC contract proposal."
Heads of Agreement
Kore Potash signed a Heads of Agreement for the construction of Kola in the presence of the Minister of State and Minister of Mining, Industry and Geology of Congo, Mr Pierre Oba. Following the signing of the HoA, the Minister of State commented that, the Kola project is of vital international interest and congratulated Kore Potash on the successful outcome of negotiations with SEPCO.
The HoA confirms the timeline for SEPCO to complete their discussions with Kore ahead of presenting the Company an EPC construction contract proposal for Kola. It also provides additional clarity on matters that SEPCO are required to finalise in advance of presenting Kore with the construction contract proposal.
The HoA provides for:
• Kola to be designed and constructed as a conventional underground potash mine and processing plant producing up to 2.2 million tonnes per annum of granular MoP over an initial 31 year life.
• The granular MoP produced by Kola will be at a minimum quality of 95.3 % KCl in line with international standards.
• The capital cost to construct Kola will be US$1.83 billion as detailed in the announcement "Kola Optimisation Study" on 27 June 2022 and the construction period will be 40 months.
• A breakdown of the Kola Capital Cost is show in the table below:
• During the preconstruction engineering design phase, the HoA provides SEPCO with an opportunity to adjust the costs related to the underground mine portion of the works. SEPCO's current capital cost is based in part upon information collected during the Definitive Feasibility Study phase, some of which SEPCO continue to review. Should the final agreed quantities of materials and labour or the underground construction period differ materially from the baseline, SEPCO will be able to adjust proportionately. The underground portion of the works (excluding equipment and infrastructure) is currently estimated as US$164 million, which represents 9% of the total Kola capital cost
• SEPCO will also be able to adjust the capital cost if Chinese RMB or Congolese FCFA currency exchange rates to the US dollar vary materially prior to commencement of the works. In such circumstance only the cost of affected works or components may be adjusted.
• SEPCO will provide Kore with a binding construction contract proposal based on FIDIC Silver book 2017 terms in August 2022.
This announcement has been approved for release by the Board of Kore Potash.
Kore continues to work with the Consortium on the financing of Kola. SEPCO are the engineering and construction partner of the Consortium. Under the Memorandum of Understanding signed with the Summit Consortium and announced 6 April 2021 the Consortium have agreed to provide a royalty and debt financing proposal for the complete construction cost of Kola.
The next key milestone in the financing process is the delivery of the EPC construction contract proposal to Kore.
The Consortium have advised that they will provide the financing proposal to Kore after Kore's receipt of the EPC proposal and Kore's agreement with SEPCO on key terms of the proposal.
Market Abuse Regulation
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.