Interim Results and Q3 Update

Emmerson PLC

27 September 2024

 

27 September 2024

Emmerson PLC ("Emmerson" or the "Company")

Interim Results for the six months ended 30 June 2024 and Q3 update

Emmerson, which is developing the world class Khemisset Potash Project in Morocco ("Khemisset" or the "Project"), is pleased to announce its Interim Results for the six-month period ended 30 June 2024 (the "Period") and an update on its activities during Q3 2024.

Q3 2024 highlights

·    Updated Environmental & Social Impact Assessment (''ESIA'') submitted in Q2 2024, incorporating the optimisations from the Khemisset Multi-mineral Process ("KMP"). Awaiting final examination by the Commission Régionale Unifiée de l'Investissement ("CRUI").

·    Re-evaluation of JORC Resource taking account of the impact of the KMP is underway, targeted to be complete during Q4 2024.

·    Second crop trials completed successfully, with final results pending.

·    Cash balance at 30 June 2024 was US$2.4 million, and US$1.7 million as at the time of this report.  

Environmental approval

As previously announced, in March 2024, the Commission Ministérielle de Pilotage (The "Ministerial Committee") invited the Company to update its ESIA to incorporate the optimisations arising from the KMP changes, which include a significant reduction in water consumption and the elimination of the need to dispose of waste brines concurrently with its positive transformational impact on the Project economics, and to resubmit this to the Centre Regional de l'Investissement ("CRI") for review by the CRUI. In April 2024, the Company completed these updates and resubmitted what it expects to be the final version of the ESIA.

During Q3, the Company continued to engage with the relevant Moroccan authorities to ensure there is acceptance that all technical issues previously raised by the authorities, mainly around preservation of water resources, have now been properly addressed prior to a final examination by the CRUI.

It is now understood that the approval process is reaching its conclusion, and the Company hopes to be able to announce the outcome, which it is confident will be positive, during this quarter.

Crop trials

After the successful completion of the first crop trials, a second round of agronomic trials looking at how effective the KMP products are at providing phosphates to lettuces was completed in September. Final laboratory results are expected in the coming weeks, but visual indications are that the new products perform in line with traditional phosphate sources, and considerably better than controls with no phosphate provided.

These trials are important to confirm the large body of research into struvite and vivianite. First and foremost, farmers require the products to provide phosphates for their crops. However, the KMP products also offer the additional advantages of being multi-nutrient and slow-release, allowing for lower usage rates and counteracting the negative environmental effects of phosphate run-off, which sets them apart as a higher-value product.

Other KMP upsides

Although the KMP enhancements arose from investigations to address brine management, the economic benefits of the new products (struvite and vivianite) have transformed the value of the Project compared with the original design (more than doubling the NPV₈ to US$2.2 billion as announced in February 2024).

This increase was based on the economic contribution of the new products, but the KMP offers further benefits over and above those included in the February 2024 estimates. In particular, the Company has begun work on a revised Resource, as the improvements in recovery of potash and the ability to monetise the other micro-nutrients previously considered waste elements should allow a considerable increase in economically extractable ore. An updated JORC Mineral Resource Estimate is targeted to be announced during Q4 2024.

As well as increasing the size of the Resource (and extending the mine life), the KMP offers the potential to re-visit the mine sequencing, as areas high in magnesium and iron, which were previously considered deleterious elements, could be more profitable than pure potash zones, allowing the mine plan to be fundamentally reworked and improved. This work will follow once the Resource update has been confirmed.

In addition, the KMP process changes will mean that a portion of the salt produced as a by-product will be at industrial grade, which is more valuable than de-icing salt, and commands a higher price. This will provide an additional revenue stream for minimal marginal cost, and will also reduce further the quantity of salt to be disposed on the dry tailings. 

Further value-adding optimisations enabled by the KMP are also being considered, although some of these may form modular enhancements later in the project. The overall impact of the KMP on Khemisset cannot be overstated, from an environmental or economic perspective, and will undoubtedly make the Project more attractive to investors and project financiers.

Resignation of CFO

Jim Wynn, the CFO of the Company, has announced that he has accepted another opportunity elsewhere, and will be leaving Emmerson on 30 September 2024. The company thanks Jim for his contribution since joining in February 2022. The process for identifying a successor will take place once the ESIA approval has been received, as a cost-saving measure.

Jim said: "Although the past couple of years have been frustrating for shareholders and management, I believe that Khemisset, particularly with the optimisations brought about through the KMP, is a unique Project that combines compelling economics with technical innovation, and strong sustainability credentials through contributing to African self-reliance and food security. I am genuinely confident the Project will proceed and remain a committed shareholder. I would like to wish Graham and his team the very best for the future".

Financial review

With the focus on obtaining the ESIA, external consultancy costs have been minimised and fieldwork in the period was limited to specific low-cost workstreams including crop trials for some of the new KMP products, and work related to the filing of patent applications. The loss for the period of US$1.6 million (30 June 2023: US$1.6 million), reflects administration and corporate costs, while capitalised intangible costs amounted to US$0.2 million.

After accounting for net proceeds after costs from the equity placing of US$2.3 million, the net cashflow for the period was US$0.5 million, leaving the cash balance at 30 June 2024 at US$2.4 million (31 December 2023: US$1.9 million). At the time of this report, the Company has cash reserves of US$1.7 million.

Outlook for 2024

For the balance of the year, the Company's focus will remain on obtaining the environmental approval for the Project, as well as advancing the various technical studies, including a Resource update, targeted for announcement during Q4 2024. 

Chief Executive Graham Clarke said: "We have continued to prioritise engagement with the Moroccan authorities towards the granting of the ESIA approval while pursuing technical workstreams to maximise integration of the KMP's benefits into the Project design. We have continued engaging with relevant authorities to ensure acceptance that the technical issues previously raised are well addressed by the optimisations adopted for the project, mainly from the KMP.

"Water is a precious resource in Morocco particularly in the context of droughts that have affected the country over the recent years, and the benefits of the KMP, together with previous improvements including the use of recycled water and the switch to dry stack tailings, underline the Company's commitment to delivering a project with robust environmental and social credentials, thus contributing to the country's efforts in minimising the impact of new projects on water resources.

"We understand that the approval process is reaching its conclusion, and we are hopeful to be able to announce the outcome, which we are confident will be favourable, within this quarter.

"I wanted to say thank you to Jim on behalf of the Board. We are grateful to Jim for all of the work carried out whilst he has served as CFO and wish him all the best in his future endeavours.

"As ever, thank you for your patience, and I look forward to providing further updates as and when appropriate."

For further information, please visit www.emmersonplc.com, follow us on Twitter (@emmerson_plc), or contact:

Emmerson PLC Graham Clarke / Jim Wynn / Charles Vaughan	[phone]
Panmure Liberum Limited (Nominated Advisor and Joint Broker) Scott Mathieson / Matthew Hogg	[phone]
Shard Capital (Joint Broker) Damon Heath / Isabella Pierre	[phone]
BlytheRay (Financial PR and IR) Tim Blythe / Megan Ray / Said Izagaren	[phone]

Notes to Editors

Emmerson is focused on advancing the Khemisset Project ("Khemisset" or the "Project") in Morocco into a low cost, high margin supplier of potash, and the first primary producer on the African continent. With an initial 19-year life of mine, the development of Khemisset is expected to deliver long-term investment and financial contributions to Morocco including the creation of permanent employment, taxation, and a plethora of ancillary benefits. As a UK-Moroccan partnership, the Company is committed to bringing in significant international investment over the life of the mine.

Morocco is widely recognised as one of the leading phosphate producers globally, ranking third in the world in terms of tonnes produced annually, and the development of this mine is set to consolidate its position as the most important fertiliser producer in Africa. The Project has a large JORC Resource Estimate (2012) of 537Mt @ 9.24% K₂O, with significant exploration potential, and is perfectly located to support the expected growth of African fertiliser consumption whilst also being located on the doorstep of European markets. The need to feed the world's rapidly increasing population is driving demand for potash and Khemisset is well placed to benefit from the opportunities this presents. The Feasibility Study released in June 2020 indicated the Project has the potential to be among the lowest capital cost development stage potash projects in the world and also, as a result of its location, one of the highest margin projects. Updated financial estimates published in February 2024 indicated a net present value of US$2.2 billion, with an internal rate of return of approximately 40%.

For further information, please visit www.emmersonplc.com, follow us on Twitter (@emmerson_plc), or contact:

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 June 2024

US$'000		6 months to 30 Jun 2024	6 months to 30 Jun 2023	12 months to 31 Dec 2023
	Notes	(Unaudited)	(Unaudited)	(Audited)
Administrative expenses	3	(1,496)	(1,386)	(2,664)
Share-based payment expense		(135)	(199)	(335)
Net foreign exchange gain/(loss)		38	(43)	18
Operating loss		(1,593)	(1,628)	(2,981)
Finance cost		(3)	(6)	(11)
Loss before tax		(1,596)	(1,634)	(2,992)
Income tax		-	(1)	-
Loss for the period attributable to equity owners		(1,596)	(1,635)	(2,992)
Other comprehensive income
Exchange gain on translating foreign operations		8	146	117
Total comprehensive loss attributable to equity owners		(1,588)	(1,489)	(2,875)
Loss per share (cents)	4	(0.15)	(0.16)	(0.29)

Condensed Consolidated Statement of Financial Position at 30 June 2024

US$'000		30 June 2024	30 June 2023	31 Dec 2023
	Notes	(Unaudited)	(Unaudited)	(Audited)
Non-current assets
Intangible assets	5	20,648	19,239	20,457
Property, plant and equipment		28	38	31
Total non-current assets		20,676	19,277	20,488
Current assets
Trade and other receivables		1,310	1,304	1,080
Cash and cash equivalents		2,392	4,179	1,937
Total current assets		3,702	5,483	3,017
Total assets		24,378	24,760	23,505
Current liabilities
Trade and other payables		(290)	(351)	(346)
Total current liabilities		(290)	(351)	(346)
Net assets		24,088	24,409	23,159
Shareholders equity attributable to equity owners
Share capital		36,375	35,145	34,958
Share-based payment reserve		2,507	2,427	1,633
Reverse acquisition reserve		2,234	2,234	2,234
Retained earnings		(16,821)	(15,211)	(15,451)
Translation reserve		(207)	(186)	(215)
Total equity		24,088	24,409	23,159

Condensed Consolidated Statement of Changes in Equity for the six months ended 30 June 2024

US$'000	Share Capital	Share-based payment reserve	Reverse acquisition reserve	Retained earnings	Translation reserve	Total equity
Balance at 1 January 2023	34,733	2,470	2,234	(13,636)	(332)	25,469
Loss for the period	-	-	-	(1,635)	-	(1,635)
Other comprehensive loss:
FX on translating foreign operations	-	-	-	-	146	146
Total comprehensive loss	-	-	-	(1,635)	146	(1,489)
Fair value of share options	-	206	-	-	-	206
Share options and warrants exercised	225	(62)	-	60	-	223
Issue of shares for cash	187	(187)	-	-	-	-
Balance at 30 June 2023	35,145	2,427	2,234	(15,211)	(186)	24,409
Balance at 1 January 2023	34,733	2,470	2,234	(13,636)	(332)	25,469
Loss for the year	-	-	-	(2,992)	-	(2,992)
Other comprehensive loss:
FX on translating foreign operations	-	-	-	-	117	117
Total comprehensive income	-	-	-	(2,992)	117	(2,875)
Fair value of share options	-	335	-	-	-	335
Options exercised for cash	225	(62)	-	60	-	223
Options exercised cashless	-	(187)	-	187	-	-
Warrants expired	-	(930)	-	930	-	-
Net adjustment for options cancelled	-	7	-	-	-	7
Balance at 31 December 2023	34,958	1,633	2,234	(15,451)	(215)	23,159
Balance at 1 January 2024	34,958	1,633	2,234	(15,451)	(215)	23,159
Loss for the period	-	-	-	(1,596)	-	(1,596)
Other comprehensive gain:
FX on translating foreign operations	-	-	-	-	8	8
Total comprehensive loss	-	-	-	(1,596)	8	(1,588)
Issue of shares for cash	2,472	-	-	-	-	2,472
Warrants issued with equity	(965)	965	-	-	-	-
Share issue costs	(90)	-	-	-	-	(90)
Share options expired	-	(226)	-	226	-	-
Fair value of share options	-	135	-	-	-	135
Balance at 30 June 2024	36,375	2,507	2,234	(16,821)	(207)	24,088

 

Condensed Consolidated Statement of Cash Flows for the six months ended 30 June 2024

	6 months to 30 June 2024	6 months to 30 June 2023	12 months to 31 Dec 2023
	(Unaudited)	(Unaudited)	(Audited)
	US$'000	US$'000	US$'000
Cash flows from operating activities
Loss before tax	(1,596)	(1,634)	(2,992)
Adjustments:
Foreign exchange	38	43	18
Taxation	-	(1)	-
Share-based payments	135	199	335
Depreciation	5	5	19
Changes in working capital:
(Increase)/decrease in trade and other receivables	(230)	(123)	101
Decrease in trade and other payables	(56)	(681)	(719)
Net cash flows used in operating activities	(1,704)	(2,192)	(3,238)
Cash flows from investing activities
Exploration expenditure	(216)	(520)	(1,726)
Purchase of property, plant and equipment	(2)	-	(7)
Net cash flows used in investing activities	(218)	(520)	(1,733)
Cash flows from financing activities
Proceeds from issuing shares and warrants	2,472	230	-
Cost of issuing shares	(90)	-	-
Proceeds from exercise of share options & warrants	-	-	225
Net cash flows generated from financing activities	2,382	230	225
Increase/(decrease) in cash and cash equivalents	460	(2,482)	(4,746)
Cash and cash equivalents at beginning of period	1,937	6,670	6,670
Foreign exchange on cash and cash equivalents	(5)	(9)	13
Cash and cash equivalents at end of period	2,392	4,179	1,937

Notes to the Condensed Consolidated Financial Statements for the six months ended 30 June 2024

1.        General information

Emmerson PLC (the "Company") is a company incorporated and domiciled in the Isle of Man, whose shares were admitted to the Standard Listing segment of the Main market of the London Stock Exchange on 15 February 2017. On 27 April 2021, the Ordinary Shares of the Company were admitted to trading on AIM and the listing of the Company's ordinary shares on the Official List and their trading on the Main Market were cancelled.

The principal activity of the Company and its subsidiaries (together "the Group") is the exploration, development and exploitation of a potash project in Morocco.

2.        Basis of preparation

2.1    General

The Condensed Consolidated Financial Statements have been prepared in accordance with the valuation and recognition principles of UK-adopted International Accounting Standards. The Condensed Consolidated Financial Statements for the six months ended 30 June 2024 are unaudited and have not been reviewed by the Group's auditor, and do not include all of the information required for full annual financial statements.

They should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2023. The principal accounting policies applied in the preparation of the Condensed Consolidated Financial Statements are unchanged from those disclosed in those statements. These policies have been consistently applied to each of the periods presented.

The financial information of the Group is presented in US Dollars, which is also the functional currency of the parent Company and has been prepared under the historical cost convention. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).

2.2    Basis of consolidation

The Consolidated Financial Statements comprise the financial statements of the Company, Moroccan Salts Limited ("MSL"), Potasse de Khemisset SA, Mines de Centre SARL, and Khemisset UK Ltd ("KUL").  

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·    The contractual arrangement with the other vote holders of the investee;

·    Rights arising from other contractual arrangements; and

·    The Group's voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the period are included in the Group Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

All the Group's companies have 31 December as their year-end. Consolidated financial statements are prepared using uniform accounting policies for like transactions.

2.3    Functional and presentational currency

The financial information of the Group is presented in US Dollars, which is also the functional currency of the parent Company, and has been prepared under the historical cost convention. The individual financial statements of each of the Company's wholly owned subsidiaries are prepared in the currency of the primary economic environment in which it operates (its functional currency).

2.4    Going concern

The Group's cash position at the date of this report is US$1.7 million. This amount is sufficient to cover all committed expenditures for the twelve months. Additional expenditures related to the development of the Khemisset Project which are not committed and would not be covered by cash reserves would need to be financed by fundraising in the future, however these expenditures are discretionary, and the Directors are confident that any funds could be raised from existing and new shareholders for such activities, which would be value accretive to shareholders. Accordingly, the Directors have adopted the going concern basis in preparing the Interim Financial Statements.

2.5    Segment reporting and cyclicality

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

The Directors consider the Group is engaged in a single segment of business being the exploration activity of potash in one geographical area, being the Khemisset Project in Morocco.

The interim results for the six months ended 30 June 2024 are not necessarily indicative of the results to be expected for the full year ending 31 December 2024. Due to the nature of the entity, the operations are not affected by seasonal variations at this stage.

3.        Administrative fee and other expenses

US$'000	6 months to 30 Jun 2024	6 months to 30 Jun 2023	12 months to 31 Dec 2023
	(Unaudited)	(Unaudited)	(Audited)
Directors' fees	296	333	581
Depreciation	5	-	19
Travel and accommodation	6	35	30
Auditors' remuneration	37	32	51
Employment costs	425	404	837
Professional and consultancy fees	565	361	776
Other expenses	162	221	370
Total Administrative Expenses	1,496	1,386	2,664

4.        Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

US$'000	6 months to 30 Jun 2024	6 months to 30 Jun 2023		12 months to 31 Dec 2023
	(Unaudited)	(Unaudited)		(Audited)
Earnings
Loss from continuing operations for the period attributable to the equity holders of the Company	(1,596)		(1,635)		(2,992)
Number of shares
Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share
	1,052,292,157		1,016,540,028		1,021,272,676
Basic and diluted loss per share	0.15 cents		0.16 cents		0.29 cents

5.        Intangible assets

The intangible assets consist of capitalised exploration and evaluation expenditure, including the cost of acquiring the mining license and research permits held by the Company's subsidiaries.

	30 Jun 2024	30 Jun 2023	31 Dec 2023
	(Unaudited)	(Unaudited)	(Audited)
	US$'000	US$'000	US$'000
Cost:
At the beginning of the period	20,457	18,607	18,607
Additions	216	520	1,726
Exchange differences	(25)	112	124
As at end of period	20,648	19,239	20,457

 

6.        Related party transactions

Directors' consultancy fees

Robert Wrixon is a Director of the Company and provided consulting services to the Company. During the period, Robert Wrixon received fees of US$12k (year to 31 December 2023: US$30K). The amount outstanding as at period-end was US$ nil (31 December 2023: US$ nil).

7.        Post-balance sheet events

There were no post-balance sheet events.

 

END