TIDMEML
RNS Number : 0356B
Emmerson PLC
18 September 2018
Emmerson Plc / Ticker: EML / Index: LSE / Sector: Mining
18 September 2018
Emmerson Plc ("Emmerson" or the "Company")
Decline Design and Cost Estimates Indicates Potential for Very
Low Capital Cost
Access to Mineralisation
Emmerson Plc, the Moroccan focused potash development company,
is pleased to announce that it has completed the preliminary design
and cost estimates for the mine access component of the Scoping
Study, which is being completed for its 100% owned Khemisset Potash
Project, located in northern Morocco ("Khemisset" or "the
Project"). To view the press release with the illustrative maps and
diagrams please use the following link:
http://www.rns-pdf.londonstockexchange.com/rns/0356B_1-2018-9-17.pdf
Highlights
-- Mining horizon proposed to be accessed by twin declines
constructed using underground mining machinery, which will later be
used in mining production
-- Direct capital cost estimate of mine access component
approximately US$35m including 30% contingency, with potential to
save upfront capital by using contract miners to complete works
-- Estimated capital cost saving of over 95%, or over US$1bn,
relative to average Canadian potash mine development(1)
-- This cost would place the Khemisset Potash Project in the
lowest 10% for mine access cost for potash developments
globally
-- Design and estimate completed by independent engineering
group, Golder Associates ("Golder"), according to AusIMM guidelines
for capital cost estimates
-- Enhances Management's strong belief in potential for
Khemisset to be a low capital cost potash mine development
-- The preliminary design and cost estimates for the mine access
is the first Scoping Study deliverable for the Khemisset Potash
Project, which is set to be delivered in Q1 2019
Hayden Locke, CEO of Emmerson, commented:
"In the development of a potash mine the first capital
investment item on which significant cost savings can be made is
the method by which the underground mining horizon is accessed from
the surface facilities. For most potash projects, globally, this is
an extremely technically challenging and expensive investment. The
work completed by our independent engineer, Golder Associates,
indicates that the mining horizon at Khemisset can be accessed via
a simple decline, which involves significantly lower cost and
technical risk.
"The implications of these findings are important. It is
estimated that the cost of accessing the mining horizon in a
typical Canadian potash mine is over US$1.1bn(1) . The estimated
cost for Khemisset, at US$35m including a 30% contingency, would
represent a comparative capital cost saving of over 95% and is due
to both the relatively shallow nature of the ore body as well as
the lack of evidence of any aquifer units. The work on the
preliminary decline design and cost estimates enhances our belief
that Khemisset has the potential to be a very low capital cost
potash development.
"We will continue to keep the market informed of the progress of
our engineering works and we will release key components of the
Scoping Study (as outlined in our 6 September 2018 RNS), which we
are confident of delivering to the market by early Q1 2019."
Comparison to Peers
The Scoping Study decline design and costing for the Khemisset
Project, completed by independent engineers Golder, indicates that
the capital cost requirement to reach mineralisation should be far
lower than the majority of potash development projects globally. A
comparison to other development stage potash projects is shown in
Figure 1 below.
Summary Overview
Golder, which was appointed by the Company to manage the
delivery of its Scoping Study, has completed basic design and cost
estimates for decline access at Khemisset. Designs and estimates
have been prepared in line with Scoping Study guidelines provided
by the Australasian Institute of Mining and Metallurgy
("AusIMM").
The proposed access to the main potash seam will be achieved via
twin declines which will be constructed using continuous miners
("CMs"), machines which will eventually be responsible for mine
production. The declines have been designed to access the primary
horizon in the higher-grade eastern edge of the deposit, at a depth
of approximately 610m below surface. The decline position and
orientation has been selected to access the highest-grade part of
the deposit at the shallowest depth while also allowing the plant
site to be located as close as possible to the existing local
infrastructure (roads, power, water). The initial portal location
can be seen in Figure 2 below.
Geology and Stratigraphy
The decline will be driven through four key lithologies:
Quaternary and Mio-Pliocene sediments (30m thick); minor clay
formation (30m thick); primary massive salt horizon (520m thick);
and an overlying basalt unit (60m thick).
Decline Design
The decline design has been sub-divided into four key zones
based on the lithologies above, with specific geotechnical support
requirements and advanced rates provided for each zone. One decline
will be used for production of ore and air intake to the mine,
while the other will be used for services, personnel movement and
as ventilation exhaust from the mine.
Excavation of both declines will be undertaken concurrently with
a proposed cross-sectional area of approximately 28m(2) , which
will allow sufficient airflow to ventilate the underground mine
when in full operation. The current proposed decline design
comprises:
-- A portal constructed at the surface with the excavations
supported with shotcrete, mesh and soil nailing as required. A
buried steel or concrete liner will protect the entrance to the
portal;
-- Zone 1: through the soft soil/rock will be lined with
shotcrete and mesh, with excavation carried out using conventional
tunnelling techniques;
-- Zone 2: through the salt horizon, will be supported with patterned bolts;
-- Zone 3: through the basalt will excavated by drill and blast
methods and supported with patterned bolts and mesh. Minimal water
inflows are expected within the basalt strata; and
-- Zone 4: will be driven laterally with the CMs and supported in a similar manner to Zone 2
The declines will be driven at a gradient of around 1:7 with a
length of approximately 4,700m and will reach the potash horizon at
a depth of approximately 600m below surface. A long section of the
lithologies crossed by decline access is shown in Figure 3
below.
Schedule and Cost Estimation
The total programme duration of the decline construction
activities is anticipated to be approximately 17 months at a direct
capital cost of approximately US$35 million including a 30%
contingency. Cost estimation for the decline development and
construction has been conducted in line with Scoping Study levels
of accuracy of approximately +/-30-50%.
A summary of the cost breakdown is presented in Table 1
below:
Item US$ millions
--------------------------------------------- --------------------------
Direct Costs $26.7
--------------------------------------------- --------------------------
Portal Construction $0.4
--------------------------------------------- --------------------------
Zone 1 Development $5.4
--------------------------------------------- --------------------------
Zone 2 Development $9.5
--------------------------------------------- --------------------------
Zone 3 Development $2.5
--------------------------------------------- --------------------------
Zone 4 Development $0.2
--------------------------------------------- --------------------------
Power $3.1
--------------------------------------------- --------------------------
Equipment purchase (vent fans,
connection conveyor) $3.0
--------------------------------------------- --------------------------
Equipment Mobilisation / Demobilisation $2.6
--------------------------------------------- --------------------------
Contingency (30%) $8.0
--------------------------------------------- --------------------------
Total Direct Costs including
Contingency $34.7
--------------------------------------------- --------------------------
Table 1: Summary of Direct Costs for Decline Development
A number of machines, including the continuous miners, roof
bolters, decline conveyors, power infrastructure and associated
machinery, will be used in the construction of the decline. The
cost to purchase these items will be included as part of the
capital cost estimates for the underground mine.
An overview of capital equipment purchased for the decline
construction, and its relevant cost centre for the upcoming Scoping
Study, is outlined in Table 2 below.
Cost US$'000s
Equipment Used in Decline (Excluding Cost Centre for
Construction Number Contingency) Capital Cost Estimates
Continuous Miner 2 $9,362.76 Underground Mining
Feeder Breaker 1 $653.50 Underground Mining
Roofbolter 2 $1,914.77 Underground Mining
Scoop 1 $627.19 Underground Mining
Force Duct Fan, 45kW 2 $77.83 Decline construction
Exhaust Fan, 45kW 2 $77.83 Decline construction
Exhaust Duct Fan, 75kW 2 $97.85 Decline construction
Connection Conveyor 1 $2,779.70 Decline construction
Auxiliary Mining Equipment 1 $1,530.26 Underground Mining
Table 2: Summary of Capital Equipment Used in Decline
Construction
**ENDS**
For further information,
please visit
www.emmersonplc.com,
follow us on
Twitter (@emmerson_plc),
or contact: Emmerson Plc Tel: +44 (0) 207 236
Hayden Locke 1177
Edward McDermott
James Biddle Beaumont Cornish Limited Tel: +44 (0) 207 628
Roland Cornish Financial Adviser 3396
Jeremy King Optiva Securities Limited Tel: +44 (0) 3137 1904
Broker
Lottie Wadham St Brides Partners Ltd Tel: +44 (0) 20 7236
Gaby Jenner 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 311.4Mt @ 10.2% 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 Hatch Engineering Study, 2012
(http://publications.gov.sk.ca/documents/310/93667-PotashRequirementGuide%20Rev1.pdf)
with 30% contingency added.
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END
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