KORE Potash is to make a fresh run at its Kola project in the Republic of Congo (Roc), previously put on the backburner because capital estimations for its development – at some $2.1bn – were considered too high.
A memorandum of understanding (MoU) signed with advisory, Summit Consortium, and its technical partner, China’s SEPCO Electric Power Construction Corporation (SEPCO), is aiming to scope Kola at less than $1.65bn. Summit Consortium helped finance the $50m for the previous definitive feasibility study into the Kola project.
Kore, listed in London and Johannesburg, said today that the MoU paved the way for a debt and royalty stream financing model for Kola in which the company was not required to contribute capital, and retained 90% of the equity in the project. It would have to contribute $900,000 – about half – to a project optimisation study.
BRP Global, headquartered in Abu Dhabi, will help provide the project financing. The optimisation study would be completed within nine months.
Kore is currently investigating the feasibility of the Dougou Extension (DX) project which it said previously offered a lower capital cost option to Kola. The DX project is scoped for production of 400,000 tons a year of muriate of potash. It would require 21 months of construction at a pre-production capital cost of $286m.
Kola was initially scoped for production of 2.2 million tons of potash a year over a scheduled life of mine of 22 years. The two projects are part of the larger Sintoukola deposit situated about 30km from the RoC coast.
The re-assessment of Kola was at the behest of the RoC government. According to Kore today, the government had in recent discussions “… highlighted their strong desire for the development of Kola to be the company’s primary focus”.
“The government will become a 10% shareholder in Kola through the conditions of the Mining Convention and this arrangement is preserved in the MoU,” said Kola.
“We welcome the consortium’s innovative proposal to potentially fully finance the construction of Kola through debt and royalty financing,” said Brad Sampson, CEO of Kore in a statement. “This approach by the Summit Consortium to the financing of Kola would eliminate the requirement for further equity contributions by the company’s shareholders to the capital cost of the construction of the project.”
An update regarding the DX project was due “in coming weeks”, said Kola.
Increasingly, the specialised resources sector has been turning its attention to the prospects offered by mineral fertiliser production, such as potash. Potash contains potassium, nitrogen and sulphur which is beneficial to economic development as a crop-growing fertiliser.
In January, Anglo American bought Sirius Minerals for £405m for its Woodside polyhalite project, another source of fertiliser aimed at the food security market.