TIDMKP2
RNS Number : 4239L
Kore Potash PLC
05 September 2019
6 September 2019
Kore Potash Plc
("Kore Potash" or the "Company")
FINANCIAL REPORT FOR THE HALF YEARED 30 JUNE 2019
Kore Potash, the potash exploration and development company
whose flagship asset is the Kola Project ("Kola" or the "Project"),
located within the Company's 97%-owned Sintoukola Potash Project in
the Republic of Congo, is pleased to provide its financial
statements for the half year ended 30 June 2019 (the "Period"). The
full report is available on the Company's website at
http://www.korepotash.com/wp-content/uploads/2019/09/Half-Year-Report-June-2019.pdf.
HIGHLIGHTS
-- A Scoping Study for a low capital cost, high cash margin
potash project at Dougou Extension ("DX") was completed and a
summary of results released on 29 April 2019. These results
indicated that following a 2-year construction period DX could
potentially produce 400 ktpa MoP for 17 years at an operating cost
of USD83/t FOB. In addition, the Company finalised planning for a
Pre-feasibility Study on the DX Project.
-- The Company has now commenced a Pre-feasibility Study on the
DX Project. More than 60km of seismic survey lines have been
cleared in advance of the 2D Seismic survey commencing before
mid-September and drill rigs are currently being assembled on site
ahead of the commencement of the PFS drilling programme. Key
technical studies have commenced, and dissolution test work being
undertaken in Agapito Laboratory in Grand Junction, USA
Saskatchewan, has been completed.
-- The Company completed its review of the Kola Definitive
Feasibility Study ("DFS") and released a summary of results to
Shareholders on 29 January 2019. This included the reporting
of:
o Proved and Probable Ore Reserves for the Kola Deposit
totalling 152.4Mt with an average grade of 32.5%KCl.
o Post-tax, NPV(10) (real) of USD 1,452 million and a real
ungeared Internal Rate of Return of 17% on an attributable basis at
life-of-mine average MoP prices for granular of USD 360 per tonne
CFR Brazil and standard of USD 350 per tonne CFR Brazil.
-- The Company received an Engineering, Procurement and
Construction ("EPC") proposal for its Kola Project from the
consortium of French engineering companies ("FC") on 23 March
2019.
-- Post period end, in July 2019, the Company received a
proposal from the FC that identifies opportunities to reduce the
capital cost of the Kola project by USD415 million below that
indicated in the Kola DFS and optimisation discussions are planned
to continue.
-- The Minister of Environment of the RoC reviewing the amended
Kola environmental and social impact assessment (the "ESIA")
requested the submission be reformatted into separate volumes and
resubmitted. The re-submission, which doesn't require significant
variations, is planned to occur during Q3 of 2019.
-- Cash and cash equivalents, including restricted cash, at 30
June 2019 was USD1,725,129. Post period end, on 19 July 2019, an
additional USD13,123,561 was raised through the placing and direct
subscription of new ordinary shares in the Company.
-- Loss for the period ended 30 June 2019 reduced by
USD3,394,007 from USD4,570,790 for the period ended 30 June 2018 to
USD1,176,783 driven primarily by lower administration expenses,
lower equity compensation benefits and listing and re-domicile
expenses incurred in H1 2018.
-- Exploration and evaluation asset at 30 June 2019 was
USD153,374,657 an increase of USD3,511,334 from USD149,863,323 at
31 December 2018.
For further information, please visit www.korepotash.com or
contact:
Kore Potash Tel: +27 11 469 9140
Brad Sampson - CEO
Tavistock Communications Tel: +44 (0) 20 7920
Jos Simson 3150
Edward Lee
Canaccord Genuity - Nomad and Tel: +44 (0) 20 7523
Broker 4600
James Asensio
Henry Fitzgerald-O'Connor
Shore Capital - Joint Broker Tel: +44 (0) 20 7408
Jerry Keen 4050
Toby Gibbs
James Thomas
OPERATIONAL ACTIVITIES
Dougou Extension Sylvinite Scoping Study
-- A Scoping Study on the potential for a low capital cost, high
cash margin potash project at the DX sylvinite deposit was
completed.
-- The Scoping Study considers the extraction of sylvinite from
DX by a solution mining method over an initial life of 17 years
that depletes 43% of the Indicated Mineral Resources at DX.
-- The full details of the Scoping Study were released on 29 April 2019 and highlights include:
o Attractive life-of-mine cost of sales, free on board (FOB) of
approximately USD82.74/t MoP.
o Estimated base case initial capital cost of approximately
USD327 million (real 2019) to produce approximately 400 ktpa white
granular MoP.
o Estimated two-year construction period provides the company
with near term production options.
o Base case real ungeared IRR of approximately 19.3% and base
case post-tax ungeared NPV10 (real) of approximately USD221 million
on an attributable basis at life-of-mine average MoP price for
granular product of USD360/t.
o Average base case annual post construction, post-tax, free
cash flow of approximately USD74 million and approximately 4.25
years post-tax payback period from first production.
o 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.
-- During the quarter, the Company finalised planning for a
Pre-feasibility Study (PFS) on the DX project. The PFS work
programme includes a 2D seismic survey, a 4-hole diamond drill
programme and a series of technical studies that collectively
should satisfy the requirements for a pre-feasibility study. The
prefeasibility study is scheduled for completion in April 2020.
Dougou Extension Sylvinite Pre-Feasibility Study
-- The Pre-feasibility work programme on the DX sylvinite deposit has commenced.
-- The major components of the PFS include a 2D Seismic survey
programme, a 4 hole diamond drill programme and a series of
technical and trade off studies.
-- Clearing of more than 60km of survey lines in advance of
commencement of the 2D seismic survey has been completed.
-- The drill rigs are being assembled and made ready for commencement of the drilling programme.
-- Technical consultants have been appointed for each area of the PFS.
-- Dissolution test work undertaken at Agapito Laboratory in
Grand Junction, USA, has been completed.
-- The pre-feasibility study is scheduled for completion in April 2020.
The Kola Potash Project
-- The Company completed its review of the Kola DFS and released
a summary of results to Shareholders on 29 January 2019. The
announcement made on 29 January 2019, which is available on the
Company's website, included the following highlights from the Kola
DFS:
Business case highlights potential of the Kola asset
-- Post-tax, NPV(10) (real) of USD1,452 million and a real
ungeared Internal Rate of Return of 17% on an attributable basis at
life-of-mine average MoP prices for granular of USD360 per tonne
CFR Brazil and standard of USD350 per tonne CFR Brazil.
-- Operating cash margin averaging 75%.
-- Average annual EBITDA of approximately USD585 million.
-- 24% annual free cash return on invested capital.
-- Average annual free cash flow, post-tax, post commissioning of approximately USD500 million.
-- 4.3-year post-tax payback period from first production.
Industry leading operating costs and cost of sales
-- Mine gate operating cost (pre-transhipment) averaging
USD61.71 per tonne, which is in the lowest cost quartile globally
based on equivalent CRU market data.
-- Kola forecast to be the lowest cost potash supplier CFR Brazil based on CRU market data.
-- Average cost of MoP delivered to Brazil of USD102.47 per tonne.
Long life and high quality asset
-- Nameplate production target of 2.2 Mtpa MoP over a 33 year
life, with a scheduled life of 23 years based primarily on Ore
Reserves and including 6% Inferred Mineral Resource and a further
10 years based entirely on Inferred Mineral Resources (in each
case, reported in accordance with the JORC Code).
-- There is a low level of geological confidence associated with
inferred mineral resources and there is no certainty that further
exploration work will result in the determination of indicated
mineral resource or that the production target itself will be
realised.
-- Kola Project Ore Reserves of 152.4 Mt with average KCl grade
of 32.5%, reported in accordance with the JORC Code.
Capital program aligned with industry averages
-- Pre-production capital cost of USD2.1 billion (on EPCM basis)
which includes USD110 million contingency, USD106 million of
escalation and USD89 million EPCM margin.
-- Pre-production capital intensity of USD956 per tonne MoP
annual capacity is in second quartile relative to MoP industry
peers and suggests that further capital optimisation is
possible.
-- 46-month construction period, with a commencement date to be
determined following advancement of construction contract
negotiations and project financing.
Upside potential
-- Review of the DFS by Kore and its third party independent
consultants identified opportunities to further improve and
optimise the project indicating that the work completed to date by
the FC has not fully optimised the Kola Project.
-- As previously reported, due to high operating margin and high
free cash return on invested capital, financial advisors indicated
that the project has a debt carrying potential of up to USD1.4
billion.
-- As part of the DFS, Ore Reserves were estimated for the Kola
sylvinite Deposit. The combined total Ore Reserves are 152 Mt of
sylvinite grading 32.5% KCl, hosted within 3 layers ('seams').
Details of the Ore Reserve estimate are provided in the market
announcement dated 29 January 2019.
-- The Company received the EPC proposal from the FC on 23 March 2019.
-- The Company continued discussions with the FC to explore
options to reduce the capital cost and shorten the construction
schedule for Kola.
-- In July 2019, the Company received a proposal from the FC
that identifies opportunity to reduce the capital cost of the Kola
project by USD415M below that indicated in the Kola DFS.
-- Kola project optimisation discussions are planned to continue with the FC.
-- The Company has invited a number of international engineering
and construction companies to provide pricing against the bills of
quantities for the Kola project. It is anticipated that this
pricing information will be received by the Company in Q3 2019.
Receipt of this competitive pricing information forms part of the
Company's plan for capital optimisation of the Kola project.
Environmental and social impact assessment for Kola ("ESIA")
-- The Minister of Environment of the Republic of the Congo
previously requested the Company to reformat the amended Kola ESIA
document. No further technical studies or report content are
required. During the quarter, further discussions with the
regulator took place to clarify their requirements and the amended
Kola ESIA is now planned to be submitted for approval in Q3
2019.
Mining Convention and Research Convention
-- The Company continues to engage with the RoC Government on
the implementation of commitments contained within the Mining
Convention. This includes the intra-group transfer of the Dougou
Mining License from Sintoukola Potash S.A. to the operating entity
Dougou Potash Mining S.A. and the transfer of a 10% shareholding in
Kola Potash Mining S.A. and Dougou Potash Mining S.A. to the
State.
-- The Company further progressed discussion with the Government
on terms and conditions for a Mining Research Convention covering
the Sintoukola 2 exploration license. This convention is required
to be negotiated in advance of any exploration activity.
Going Concern
On 19 July 2019, an additional USD13,123,561 was raised through
the placing and direct subscription of new ordinary shares in the
Company. The Directors also actively manage the liquidity position
of the Group and prepare cash flow forecasts on a regular basis.
Based on the most up-to-date information the Group is forecast to
have sufficient liquidity to meet its working capital requirements
to the end of the going concern period, which is 12 months from
signing of these interim results, and accordingly the Group's
financial statements have been prepared on a going concern
basis.
Please refer to note 4 on page 26 of the full report for full
details.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE 6 MONTHSED 30 JUNE 2019
6 months ended 6 months ended Year ended
Notes 30 June 2019 30 June 2018 31 Dec 2018
USD USD USD
Unaudited Unaudited Audited
Continuing operations
Interest income 18,992 20,454 72,873
Expenses
Directors remuneration (422,388) (420,210) (812,575)
Equity compensation benefits 6 (144,956) (676,255) (695,345)
Salaries, employee benefits
and consultancy expense (447,084) (712,539) (1,325,505)
London listing and re-domicile
expenses (10,490) (1,087,911) (1,200,192)
Other administration expenses 7 (616,472) (1,994,967) (2,323,176)
Fair value change of a derivative
financial liability 16 482,274 213,313 110,114
Interest and finance expenses (6,732) (1,543) (81,407)
Net realised and unrealised
foreign exchange (loss)/gains (10,959) 99,749 2,886)
Loss before income tax expense (1,157,815) (4,559,909) (6,252,327)
Income tax expense 8 (18,968) (10,881) (17,039)
Loss for the period from continuing
operations (1,176,783) (4,570,790) (6,269,366)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating
foreign operations (655,659) (3,786,338) (7,104,236)
Other comprehensive loss for
the period (655,659) (3,786,338) (7,104,236)
Total comprehensive loss for
the period (1,832,442) (8,357,128) (13,373,602)
Loss attributable to:
Owners of the Company (1,175,521) (4,538,341) (6,249,696)
Non-controlling interest (1,262) (32,449) (19,670)
(1,176,783) (4,570,790) (6,269,366)
Total comprehensive loss attributable
to:
Owners of the Company (1,805,272) (7,892,158) (12,832,564)
Non-controlling interest (27,170) (464,970) (541,038)
(1,832,442) (8,357,128) (13,373,602)
Loss per Share from Continuing
Operations
Basic and diluted loss per
share (cents per share) 15 (0.14) (0.56) (0.75)
The above Condensed Consolidated Statement of Profit or Loss and
Other Comprehensive Income should be read in conjunction with the
accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
JUNE 2019
Notes 30 June 2019 30 June 2018 31 Dec 2018
USD USD USD
Unaudited Unaudited Audited
ASSETS
Current Assets
Cash and cash equivalents 1,040,969 14,219,356 6,187,113
Restricted cash 684,160 - -
Trade and other receivables 568,059 312,251 345,155)
Total Current Assets 2,293,188 14,531,607 6,532,268)
Non-Current Assets
Trade and other receivables 129,357 134,938 120,922)
Right-of-use asset 129,055 - -
Property, plant and equipment 271,723 357,081 302,255
Exploration and evaluation
expenditure 9 153,374,657 145,043,137 149,863,323
Total Non-Current Assets 153,904,792 145,535,156 150,286,500
TOTAL ASSETS 156,197,980 160,066,763 156,818,768
LIABILITIES
Current Liabilities
Trade and other payables 10 3,231,495 846,131 1,702,392
Derivative financial liability 16 21,124 400,200 503,398
Total Current Liabilities 3,252,619 1,246,331 2,205,790)
Non-Current Liabilities
Lease liability 132,994 - -
TOTAL LIABILITIES 3,385,613 1,246,331 2,205,790
NET ASSETS 152,812,367 158,820,432 154,612,978)
EQUITY
Issued share capital - Ordinary
Shares 11 862,739 859,234 860,852
Reserves 213,044,827 216,046,613 213,644,634
Accumulated losses (60,507,321) (57,620,445) (59,331,800)
Equity attributable to the
shareholders of Kore Potash
plc 153,400,245 159,285,402 155,173,686
Non-controlling interests (587,878) (464,970) (560,708)
TOTAL EQUITY 152,812,367 158,820,432 154,612,978
The above Condensed Consolidated Statement of Financial Position
should be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE 6
MONTHSED 30 JUNE 2019
Ordinary Share Merger Accumulated Option Foreign Owners of Non-Controlling Total
Shares Premium Reserve Losses Reserve Currency the Parent Interest Equity
Reserve Translation
Reserve
USD USD USD USD USD USD USD USD USD
Balance at 1
Jan
2019 860,852 13,054,936 203,738,800 (59,331,800) 12,161,843 (15,310,945) 155,173,686 (560,708) 154,612,978
Loss for the
period - - - (1,175,521) - - (1,175,521) (1,262) (1,176,783)
Other
comprehensive
loss - - - - - (629,751) (629,751) (25,908) (655,659)
Total
comprehensive
loss - - - (1,175,521) - (629,751) (1,805,272) (27,170) (1,832,442)
Transactions
with
owners:
Issue of
shares (net
of costs) 1,887 - - - - - 1,887 - 1,887
Share based
payments - - - - 29,944 - 29,944 - 29,944
Balance at 30
June
2019 862,739 13,054,936 203,738,800 (60,507,321) 12,191,787 (15,940,696) 153,400,245 (587,878) 152,812,367
The above Condensed Consolidated Statement of Changes in Equity
should be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(CONTINUED) FOR THE 6 MONTHS ENDED 30 JUNE 2019
Ordinary Share Merger Redeemable Accumulated Option Foreign Owners of Non-Controlling Total Equity
Shares Premium Reserve Preference Losses Reserve Currency the Parent Interest
Reserve Share Translation
Reserve
USD USD USD USD USD USD USD USD USD USD
Balance at 1
Jan 2018 771,396 - 203,738,800 65,631 (53,356,794) 11,814,770 (8,747,747) 154,286,056 - 154,286,056)
Loss for the
period - - - - (4,538,341) - - (4,538,341) (32,449) (4,570,790)
Other
comprehensive
income - - - - - - (3,353,817) (3,353,817) (432,521) (3,786,338)
Total
comprehensive
income - - - - (4,538,341) - (3,353,817) (7,892,158) (464,970) (8,357,128)
Transfer of
previously
lapsed options 888,202 (888,202) - - - -
Transactions
with
owners:
Issue of
shares (net
of costs) 87,838 12,806,554 - - - - - 12,894,392 - 12,894,392
Share based
payments - - - - - 676,255 - 676,255 - 676,255
Shares
cancelled - - - (65,631) - - - (65,631) - (65,631)
Free-attaching
warrants - - - - (613,512) - - (613,512) - (613,512)
Balance at 30
June
2018 859,234 12,806,554 203,738,800 - (57,620,445) 11,602,823 (12,101,564) 159,285,402 (464,970) 158,820,432
The above Condensed Consolidated Statement of Changes in Equity
should be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(CONTINUED) FOR THE 6 MONTHS ENDED 30 JUNE 2019
Ordinary Share Merger Redeemable Accumulated Option Foreign Owners of Non-controlling Total
Shares Premium Reserve Preference Losses Reserve Currency the Parent Interest Equity
Reserve Share Translation
Reserve
USD USD USD USD USD USD USD USD USD USD
Balance at 1
Jan 2018 771,396 - 203,738,800 65,631 (53,356,794) 11,814,770 (8,747,747) 154,286,056 - 154,286,056
Loss for the
period - - - - (6,249,696) - - (6,249,696) (19,670) (6,269,366)
Other
comprehensive
income - - - - - - (6,563,198) (6,563,198) (541,038) (7,104,236)
Total
comprehensive
income - - - - (6,249,696) - (6,563,198) (12,812,894) (560,708) (13,373,602)
Transfer of
previously
lapsed options - - - - 888,202 (888,202) - - - -
Redeemable
Preference
Shares - - - (65,631) - - - (65,631) - (65,631)
Share issue
(net of
costs) 89,456 13,054,936 - - - - - 13,144,392 - 13,144,392
Free-attaching
warrants - - - - (613,512) - - (613,512) - (613,512)
Share based
payments - - - - - 1,235,275 - 1,235,275 - 1,235,275
Scheme of - - - - - - - - - -
Arrangement
Balance at 31
Dec
2018 860,852 13,054,936 203,738,800 - (59,331,800) 12,161,843 (15,310,945) 155,173,686) (560,708) 154,612,978
The above Condensed Consolidated Statement of Changes in Equity
should be read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 6 MONTHS
ENDED 30 JUNE 2019
6 months ended 6 months ended Year ended
30 June 2019 USD 30 June 2018 USD 31 Dec 2018 USD
Notes Unaudited Unaudited Audited
Cash Flows from Operating Activities
Cash used in operation (1,507,652) (4,604,070) (6,054,050)
Income tax paid (20,726) - (37,030)
Net Cash Flows Used in Operating Activities 17 (1,528,378) (4,604,070) (6,054,050)
Cash Flows from Investing Activities
Payments for plant and equipment (17,371) (4,547) (8,452)
Payments for exploration and evaluation (2,840,929) (11,043,648) (17,104,196)
Interest received 23,282 10,675 68,528
Net Cash Flows Used in Investing Activities (2,835,018) (11,037,520) (17,044,120)
Cash Flows from Financing Activities
Deposit on application of shares 36,843 - -
Proceeds from issue of shares 1,887 12,894,392 12,894,392
Proceed from convertible note - 250,000 250,000
Repayment of lease liabilities related to offices (87,593) - -
Interest paid on lease liabilities (5,001) - -
Net Cash Flows (Used in)/Generated from Financing
Activities (53,864) 13,144,392 13,144,392
Net decrease in cash and cash equivalents (4,417,260) (2,497,198) (9,953,778)
Cash and cash equivalents at beginning of period 6,187,113 16,455,490 16,455,490
Foreign currency differences (44,724) 261,064 (314,599)
Cash and Cash Equivalents at Period End 17 1,725,129 14,219,356 6,187,113
The above Condensed Consolidated Statement of Cash Flows should
be read in conjunction with the accompanying notes.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFLRATIEIIA
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