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KORE POTASH PLC - Kore signs Heads of Agreement for construction of Kola

Release Date: 28/06/2022 08:00
Code(s): KP2     PDF:  
Wrap Text
Kore signs Heads of Agreement for construction of Kola

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 “Kore” or the “Company”)

28 June 2022

                       Kore signs Heads of Agreement for construction of Kola

Kore Potash, (AIM: KP2, ASX: KP2, JSE:KP2) 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”).


Highlights
        •    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:

          Table 1: Estimated Capital Cost for Kola Project
                                                                       Estimated Cost
                            Description                                 (USD million)

        Mine Area                                                           361.7

        Process Area                                                        453.4
        Tailings Disposal                                                     0
        Roads                                                                51.6

        Marine Facilities                                                   166.9
        General Infrastructures                                             236.7
        Sub-Total Direct Costs                                             1,270.3
        Construction Supervision                                             74.9
        Pre-Comm. / Comm- /Start-up Supervision                              28.5

        Home Office Services                                                154.3
        Miscellaneous                                                         8
        Sub-Total Services & Misc.                                            265.7
        Sub-Total Technical Cost                                             1,536.0

        Owner's Costs                                                         118.8
        Escalation, contingency and margin                                    172.6
        Total Capital Costs                                                  1,827.4


    •     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.


Kola Financing
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.


                                                  END

                  For further information, please visit www.korepotash.com or contact:
  Kore Potash                                                       Tel: +27 84 603 6238
  Brad Sampson – CEO


  Tavistock Communications                                          Tel: +44 (0) 20 7920 3150
  Emily Moss
  Adam Baynes

  SP Angel Corporate Finance – Nomad and Broker                     Tel: +44 (0) 20 7470 0470
  Ewan Leggat
  Charlie Bouverat

  Shore Capital – Joint Broker                                      Tel: +44 (0) 20 7408 4050
  Toby Gibbs
  James Thomas

  Questco Corporate Advisory - JSE Sponsor                          Tel: +27 (11) 011 9205
  Doné Hattingh


Forward-Looking Statements
This release contains certain statements that are "forward-looking" with respect to the financial
condition, results of operations, projects and business of the Company and certain plans and
objectives of the management of the Company. Forward-looking statements include those containing
words such as: “anticipate”, “believe”, "expect," “forecast”, “potential”, "intends," "estimate," "will",
“plan”, “could”, “may”, “project”, “target”, “likely” and similar expressions identify forward-looking
statements. By their very nature forward-looking statements are subject to known and unknown risks
and uncertainties and other factors which are subject to change without notice and may involve
significant elements of subjective judgement and assumptions as to future events which may or may
not be correct, which may cause the Company’s 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.


Neither the Company, nor any other person, gives any representation, warranty, assurance or
guarantee that the occurrence of the events expressed or implied in any forward-looking statement
will occur. Except as required by law, and only to the extent so required, none of the Company, its
subsidiaries or its or their directors, officers, employees, advisors or agents or any other person shall
in any way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of
whatever nature arising in any way out of, or in connection with, the information contained in this
document.


In particular, 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
parameters 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. Shareholders are
cautioned not to place undue reliance on forward-looking statements, which speak only as of the date
they are made. The forward-looking statements are based on information available to the Company
as at the date of this release. Except as required by law or regulation (including the ASX Listing Rules),
the Company is under no obligation to provide any additional or updated information whether as a
result of new information, future events, or results or otherwise.
Summary information
This announcement has been prepared by Kore Potash plc. This document contains general
background information about Kore Potash plc current at the date of this announcement and does
not constitute or form part of any offer or invitation to purchase, otherwise acquire, issue, subscribe
for, sell or otherwise dispose of any securities, nor any solicitation of any offer to purchase, otherwise
acquire, issue, subscribe for, sell, or otherwise dispose of any securities. The announcement is in
summary form and does not purport to be all-inclusive or complete. It should be read in conjunction
with the Company’s other periodic and continuous disclosure announcements which are available to
view on the Company’s website www.korepotash.com.


The release, publication or distribution of this announcement in certain jurisdictions may be restricted
by law and therefore persons in such jurisdictions into which this announcement is released, published
or distributed should inform themselves about and observe such restrictions.


Not financial advice
This document is for information purposes only and is not financial product or investment advice, nor
a recommendation to acquire securities in Kore Potash plc. It has been prepared without considering
the objectives, financial situation or needs of individuals. Before making any investment decision,
prospective investors should consider the appropriateness of the information having regard to their
own objectives, financial situation and needs and seek legal and taxation advice appropriate to their
jurisdiction

Date: 28-06-2022 08:00:00
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