Kore Potash (KP2) – Size Matters to Investors Says Turnaround Expert

Kore Potash PLC
  • AIM/ASX: KP2
  • Shares Outstanding: 859M
  • Share price GB£0.01 (03.07.2020)
  • Market Cap: GB£10M

Interview with Brad Sampson, CEO of Kore Potash (AIM/ASX: KP2).

Kore Potash is a potash developer with assets in the Republic of Congo. The company’s focus is on bringing its ‘world-class’ potash projects into production. Kore Potash’s Sintoukola district is a globally significant potash basin in the Republic of the Congo. This is for 2 reasons. The first is the extremely high-grade. The deposits are also at shallow depth. The second is scale.

Moreover, this new potash basin is positioned strategically in close proximity to the growing African and South American potash markets. Africa appears to be becoming the next focal point for fertiliser demand and food production and is by far the fastest-growing potash market. However, investors should note that progress may not be rapid because it is developing from scratch.


Let’s start by exploring the potash space. The main use for potash is as an agricultural fertiliser, providing a source of potassium to crops. This is a fundamentally important long-term application and is a strong base driver to turn potash’s demand narrative on. In the global agricultural space, there is a train of thought that is gaining momentum, and it regards environmental efficiency. The rapidly growing global population needs more and more food, and the potash macro story features a global ambition to satiate humanity’s hunger whilst making more efficient use of dwindling arable land via increased yields. Science has not currently plugged this gap, short of providing GMOs to increase yields without fertilisers. Potash is a natural, environmentally friendly solution. The long-term demand thematic ensures that potash is a more stable commodity than many because even in the most unstable of markets, food is a constant consumer good necessity. However, stability isn’t always desirable. It totally depends on what sort of investor you are. While it may not possess the glitz and glamour of gold or the pizzazz of battery metals, potash can make investors money if they pick the right company.

The potash market is around 65Mt pa in size. COVID-19 and the trading stand-off between the US and China has caused the market to take a slight hit. The market is only growing by 2-3% pa. Some investors will view this as stable; some will view it as stagnant, especially considering the sort of growth seen in the gold sector right now. Nobody can claim that 2-3% growth is an exciting figure, and investors will question why to choose this investment class over others. Some investors might argue that we don’t really need another potash company, but buyers are always going to appreciate the additional competition; the quality and total cost at which it produces confirms its potential to compete. The real question is do investors care? Sampson says that multiplier majors have moved into the potash space and acquired big projects for a reason. He believes that despite Kore’s status as a minnow, the company has managed to acquire perhaps the most exciting land package around.

Let’s delve into those assets. There are 3 projects, all in the Republic of Congo, all within the Sintoukola district. The DX Sylvinite project is the highest grade undeveloped potash deposit globally. A PFS was released on 13th May 2020, outlining some impressive economics. The life-of-mine operating cost is just US$87/t Muriate of Potash (MoP) FOB. The operational process is inherently simple and involves single well selective dissolution mining, churning out 400ktpa MoP production over an 18-year lifespan. Kore Potash can forge an accelerated pathway to production in with just a 21-month construction period. Moreover, the project’s strong infrastructure overlaps with the other 2 projects.

First, Kola, Kore Potash’s largest project, is a tier-1 potash asset that is anticipated to be one of the lowest-cost potash producers on the planet. It has a Measured and Indicated Mineral Resource of 508 Mt grading 35.4% KCl, and the industry’s lowest operating cost: US$102/t MoP CFR delivered to Brazil. However, it will require a 4-year construction period and a sizeable US$2.1Bn initial CAPEX.

Secondly, Dougou is a large, thick carnallite deposit with a Measured & Indicated Mineral Resource of 1.1Bn tonnes grading 20.6% KCl. This is an good portfolio of projects in a reasonable mining jurisdiction. This company IS NOT in the DRC, though it is next door.

Sampson expects a fast-tracked DFS for DX in 8 to 12-months time. A front-end engineering and design phase would follow, concluding in construction within 15-months. Sampson is adamant that as he de-risks the projects further, the completely share price should start to rise. We’re yet to see investors take much interest in the potash space, so investors may want to err on the side of caution. He’s going to have to find a way to excite the market as a whole, which is easier said than done when it comes to potash; there is no shortage of supply in the market, and no-one wants a price war.

This image has an empty alt attribute; its file name is company-profile-ad-copy-1024x115.jpg

Once the cash is flowing at DX, this could enhance Kore Potash’s optionality. The company currently has US$4.7M in the bank and will be heading to the market shortly to push the development of DX over the line. In an ideal world, Sampson will try to avoid dilution. Kore Potash is considering all options. The company is pursuing strategic partners. Sampson claims he “knows” there is significant interest in the company’s portfolio. The current shareholder base appears to be supportive.

Sampson claims that the share registrar doesn’t have a significant overhang. He states that the majority of investors are providing committed support. Kore shareholders own 60-70% of the company. More than US$150M has been spent developing these projects already. Sampson last bought shares himself roughly 6-months ago. The company has raised US$13.5M over the last 2-years. Market cap today in £17.5M. The company has a lot to do before investors start to look their way.

What did you make of Brad Sampson and Kore Potash?

Company Website: https://korepotash.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Emmerson PLC (LSE: EML) – Investors Can Make Money From Potash

Emmerson PLC
  • LSE: EML
  • Shares Outstanding: 686M
  • Share price GB$0.59 (01.06.2020)
  • Market Cap: GB£39M

Emmerson PLC is a potash developer that is focussed on the development of the Khemisset Potash Project in Northern Morocco: a very favourable jurisdiction for mining and business.

Does the market want or need another potash story right now? Locke believes the low initial capital cost of Khemisset is what really sets the project apart from its potash competition; he claims that most potash projects have a “very, very high CAPEX.”

Let’s start with some context: what does the potash market look like? Potash is primarily used in agriculture as a fertiliser that provides a source of potassium to crops. Potash may not be the most fashionable commodity, especially compared to soaring commodities like gold, but there is money to be made. Potash has some important, fundamental reasons propping up its demand. There is a global agricultural ambition that includes growing global populations and shrinking arable land. There is no science to solve this problem yet, short of GMOs to increase yields without using fertilisers, which renders potash “fundamental to supporting humanity over the long-term.” Potash has a “long-term demand” theme that is less subject to the lurching nature of global economic growth.

Matthew Gordon interviews Hayden Locke, 29th May 2020

The market size is c. 65Mt pa; there has been something of a tail-off caused by COVID-19 and the trading stand-off between China and the U.S. The market is growing at an “unexciting 2-3% per annum.” As a consequence, the price is relatively stable or stagnant depending on your personal investment stance. In terms of global markets, potash is very diverse. The largest total market (did you guess?) is China, who import c. 7-8Mt pa. The biggest import market, with huge tracts of agricultural land in the north of the country, is in Brazil. The U.S. market is also very large with c. 10Mt pa. The European market is very large, while the Indian and South-East Asian market is relatively large. Locke claims that everyone is realising that Africa is going to be the next focal point of fertisiler demand and food production. Africa is by far the fastest-growing market but is starting from a small base.


That’s the potash market. Now, what about Emmerson PLC?

Emmerson PLC is in the lowest-quartile for initial cost; this will always make a company competitive. However, as the potash industry is saturated with many player and is lacking the sexiness of other commodities, is there any desire for another potash story? The reality is that every single incumbent in a commodity would argue they don’t need another an additional player occupying their territory. However, for the consumers of potash, it appears to have become clear they would love some more competition: potash is regarded by Locke as an oligopoly “in the truest sense of the word.”There is currently a lot of price signalling, and there is a manipulation of supply and prices. As a rule of thumb, potash producers currently make “supernormal profits,” which is why so many mining companies want a piece of the potash pie.

As previously mentioned, Morocco is an advantageous mining jurisdiction “in an African context.” The country is generally sophisticated and well-educated, and the Moroccan government sees the country as the gateway from Europe to Africa. One of the benefits in the mining sector is that the government is acting as a driving force for the fledgling industry by providing clarity to companies on the application of certain rules. However, it’s important to stitch a caveat onto this: this is still Africa, with the same protracted permitting times, social issues and geopolitical risks that investors will have come to expect.

This image has an empty alt attribute; its file name is company-profile-ad-copy-1024x115.jpg

The quality of the team is another encouraging trait of Emmerson PLC. Locke started his career as an investment banker after studying engineering and commerce, but he transitioned over to mining and private equity. Around 9 years ago, he moved over the junior resources sector and a West African gold mining developer called Papillon Resources. The company was eventually taken out in June 2014 by Vancouver-based gold producer B2Gold Corp (TSE: BTO)(NYSE MKT: BTG)  in a deal valued at US$570 million. He then moved to the Spanish potash developer, Highfield Resources, who we interviewed several months back. His experience at Highfield gave him an accelerated learning experience of the potash space and how to analyse potash assets. Locke prides himself on being the commercial stalwart of Emmerson PLC, and while he is technically proficient, the management team is full of talent that is more focussed on the technical side of things.

Emmerson Gold PLC is a small company in relation to most other potash players, so what is the business model? The long-term goal is capitalise on the difficult nature of obtaining a potash mine. Within the global multi-nutrient fertiliser space, potash is by far the most element to obtain courtesy of sky-high capital costs for production. Once the Khemisset Potash Project is in production, the goal is to build a mid-tier multi-nutrient fertisiler company. Emmerson Gold PLC is in talks with strategic partners to help get this all financed. These partners would provide the nitrogen, Emmerson Gold PLC would provide the potash (the most strategically difficult to access), and a further partner would provide the phosphorous.

In the short-term, the goal was to deliver a rigorous analysis of the company in the form of a feasibility study, which will either confirm or refute that Khemisset is a low-CAPEX, high-margin development opportunity. Now, the company has a feasibility study that proves this, and Lockew can focus on the next financing stage to get the company shovel ready.

What are the headlines from the feasibility study?

  1. Post-tax NPV: US$1.4B
  2. IRR: 38.5%
  3. Initial mine-life: 19 years
  4. Pre-production capital cost: US$387M. This is a sizeable reduction of US$19M from the scoping study.

The only project with comparable economics is within Highfield Resources’ portfolio.

Locke needs to keep getting this story out to the market, both for investment and sales purposes. The company is not going to build an internal marketing team. Emmerson PLC will go to a fertiliser trader who will build the company an internal marketing team at a cost of c. US$1/t. The company has a huge transport and logistics advantage and is focussing on markets that are closer to the company in the Atlantic corridor. The operating costs make Emmerson PLC a relatively high-cost producer, but the company’s location makes it competitive.

Looking forward, the goal for Emmerson this year is to deliver a fully permitted mine. Alongside this, the company will be focussing on its financing dicussions and is setting itself agresive onbjectives.

What did you make of Hayden Locke? Comment below and we will get back to you.

Company Website: https://www.emmersonplc.com/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

Harvest Minerals (AIM: HMI) – Fertiliser Play In The Fastest Growing Market Globally

The Harvest Minerals Company Logo
Harvest Minerals Ltd.
  • AIM: HMI
  • Shares Outstanding: 186M
  • Share price GB£0.03 (06.03.2020)
  • Market Cap: GB£6.3M

We recently interviewed Mark Heyhoe. He’s the COO of Harvest Minerals (AIM: HMI). We wrote a detailed article about Harvest Minerals around a month ago.

We have interviewed some fertiliser companies in the past. It is worth checking these interviews out if you are interested.

So, Harvest Minerals. Heyhoe discussed some exciting aspects of his Brazil-based KPfertil business. KPfertil is a unique fertiliser that Heyhoe claims has big economic and environmental advantages over conventional fertisilers. If Harvest Minerals can pull off what they want to, it could mean a big payday for patient investors. However, investors will want to see this materialise in robust sales figures; otherwise, all this potential is meaningless.

We Discuss:

  1. KPfertil: The Advantages And Applications
  2. An Underperforming Sales Partner
  3. A Falling Share Price
  4. Plans To Set Things Right In 2020

Company Website: http://www.harvestminerals.net/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

The Harvest Minerals Company Logo

Harvest Minerals (LON: HMI) – There Is More To Invest In Than Mining

An aerial photo of a Brazilian soybean field being harvested. There are 2 Crux Investor logos added.
Harvest Minerals Ltd.
  • LON: HMI
  • Shares Outstanding: 185.84M
  • Share price GB$0.37 (12.02.2020)
  • Market Cap: GB£6.88M

Recently, we interviewed Mark Heyhoe, Chief Operating Officer for Harvest Minerals, an AIM-listed organic natural fertiliser producer located in Brazil. CLICK HERE to watch the full interview.

Crux Investor has previously investigated potash investment, but this one is a little different. Harvest Minerals says it has a unique fertiliser product: KPfertil. Heyhoe claims KPfertil has significant cost, production and technical advantages; let’s unpack them.

  1. KPfertil is much easier to produce than many other fertilisers. It is found at surface in the form of a heavily weathered rock/lava. The only processing step required is for the material to be crushed. The conventional crusher appears to be a relatively inexpensive overhead. Once crushed, KPfertil can be applied to soil to enhance crops.
  2. At surface means KPfertil is cheaper to produce than conventional fertilisers. Heyhoe quotes a current production figure of around US$18 per ton, with a reduction to US$7.50 once Harvest Minerals scales up their operation. This is good news for farmers: Harvest plans to undercut the competition.
  3. KPfertil claims to be considerably more environmentally friendly than other fertilisers, given its organic, natural properties. The modular plant allows for more simple production than more conventional fertilisers: the product is excavated, trucked, homogenised, crushed, then is ready to sell. This is far less environmentally impactful courtesy of the simplified, more energy-efficient process.
  4. Heyhoe says KPfertil has some interesting consumer advantages. With KPfertil there is no leaching, the loss of water-soluble plant nutrients from the soil, due to rain and irrigation, which can reduce the yield of crops significantly. KPfertil goes straight into soil and stays there for longer than other fertiliser options. This is means farmers use less fertiliser and therefore save money in time and product. Studies have shown the remineraliser releases phosphate and other nutrients into the soil in a more gradual way, finding that it was over ten times as effective as TSP in sandy soil after 80 days.

So, what does their business model look like?

Harvest Minerals has performed “extensive” trials in order to the get the product registered; there have been numerous trials performed on KPfertil’s primary markets, such as coffee, sugar cane and maize. Last year, Harvest Minerals produced 50,000t of KPfertil for potential customers to test on their crops; now they have to wait for the reaction from the farmers testing the product.

A photo of some budding plants with a hand placing fertiliser around them.
A long way to grow…

In June 2018, Harvest Minerals had cash and had conducted trials efficiently, but they were missing something; the market wasn’t listening to their story. The company was offered a distribution deal by a local operator that Heyhoe says looked strong on paper. However, disappointing sales figures by their chosen sales partner left Harvest Minerals with a decision to make. They decided to bring sales in house and now have 10 salespeople and a sales manager covering the area. It’s hard to tell if that exercise has delayed their sales efforts in the market or whether it’s just slow getting traction in Brazil at this level. We appreciate it can take time to establish relationships and build trust in a new market, and a few more salespeople on the ground would have helped.

A recently financed 320,000t per annum processing plant is clearly under-utilised, because the testing period by local farmers means smaller orders until they are confident of the product. Even when they are confident of the KPfertil product, the farmers still have relationships with other sales forces and fertiliser companies. This is similar to the pharmaceutical industry: it takes time and the competition won’t let up. Hayhoe defends the decision to spend the money upfront to build a plant of that scale. The cost to build is around US$1M, with the hope that sales dramatically improve once the results of this year’s growing season are in.

The buying season for fertiliser is May to December. Heyhoe may be correct about the order in which they chose to spend their available cash. Current cash to hand is c.$5M and given current plans and the relatively low overheads and burn-rate should not need to go to market to raise more money anytime soon. It rests on how quickly the farmers and grouping groups take up KPfertil and how the competition responds.

The main difficulty with selling KPfertil is inherent in the nature of the market itself. While Harvest Minerals claims Brazil has the world’s fastest-growing fertiliser market, the simple reality is that local agriculturalists were unwilling to risk their entire harvest on an unfamiliar product; normal, prudent, and not alarming. The demand could be there, with 4.5M hectares of potential agricultural land between their operation and the nearest major Brazilian airport.

Heyhoe explains the company currently sells c. 50,000t of KPfertil per annum, to around 70-75 customers. Their largest customer constitutes 9% of total sales. In addition, Heyhoe says there have been ‘positive indications’ that farmers will move to 100% KPfertil use. The number of customers and quantity is unknown. Hayhoe is unwilling to speculate or give guidance as to what they are targeting: a major frustration to Harvest Minerals investors.

Harvest Minerals is waiting for a permit, and the management team is currently working on upgrading storage capacity so that it is more in line with the company’s production capability.

It is very early days, but the share price has seen little movement. We will continue to follow this story closely to see if they do what they say and to see how their competition reacts.

Company Website: http://www.harvestminerals.net/

If you see something in this article that you agree with, or even disagree with, please let us know in the comments below.

Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situations or needs. You should not rely on any advice and / or information contained in this website or via any digital Crux Investor communications. Before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice.

An aerial photo of a Brazilian soybean field being harvested. There are 2 Crux Investor logos added.