SHARES in Kore Potash yo-yoed on Wednesday after the firm concluded its long-awaited engineering, procurement and construction contract for Kola, a 2.1 million ton a year muriate of potash project situated on the Republic of Congo (RoC) peninsula.
The stock raced up nearly 18% in early Johannesburg trade before smacking back down to earth, losing 15% towards close of trade.
PowerChina International Group, parent company of SEPCO, signed the $1.93bn EPC contract agreement in Brazzaville. The contract is fixed priced, meaning the risk of project overruns was “minimised”, said Kore in its announcement.
“By signing this fixed-price construction contract with one of the largest international engineering groups, the company has minimised risks associated with cost and time overruns typical in large mining projects,” said André Baya, CEO of Kore.
Kore, which has a 97% stake in Kola as well as the neighbouring DX project, said it would move on to financing the project with a term sheet due to be delivered within three months of today’s announcement. Kola is backed by Summit Consortium, a group in which the United Arab Emirates is participating.
Construction, which Baya said would be “relatively straight-forward” is expected to take about 43 months.
It has taken more than two years to get to this stage. In October 2022, Kore warned of possible delays in the signing of an EPC contract. Before that, the company fell out with the RoC after some of the company’s employees were arrested and detained.
However, a new EPC deal was set out by PowerChina in February. In April, Kore announced the appointment of Baya, previously of Sundance Resources, Cominco, and Roxgold among others. Immediately prior to his appointment at Kore, Baya consulte on the corporate re-engineering of South Africa’s Fraser Alexander.
Of the $1.93bn contract, roughly $708.9m is for transportation and utilith pipelines which Kore said would make it self-reliant unlike other potash projects. It will supply muriate of potash to Brazil and other emerging African nations.
Potash is used to improve crop yields. New mineral fertiliser projects are under currently under development by BHP and Anglo American. The potash market is projected to grow at a compound annual growth rate of 4.5% for the foreseeable future, according to a recent report in BusinessLive.
