RELATIONS between Kore and the Republic of Congo (RoC) have taken a turn for the worse after the country’s mines ministry expressed “discontent” with the progress of the $1.85bn Kola potash project the company is building there.
Kore said in an announcement to the JSE today that it had been given 30 days to respond to the letter from the mines ministry after which the RoC would act “in accordance with its existing agreements and the Mining Code”. The letter also registers complaints about the administration of Kore’s subsidiary companies in the RoC.
Kore did not provide additional details. Shares in the company fell as much as 18% in mid-afternoon trade matching Kore’s previous 12 month low in February.
Kore said it had updated the minister on October 10 regarding Kola which has suffered delays in the approval of a financing arrangement. On the same day, Kore announced that certain aspects of an engineering and procurement proposal delivered by China’s SEPCO – a member of the project’s financing ‘Summit Consortium’ – required further board discussion. This would in turn require approvals from SEPCO.
Some of the delays relate to Covid-19 lockdowns in China where SEPCO is based. “Whilst the impact of COVID controls in China caused a delay in the timing of the finalisation of the EPC proposal, the Summit Consortium continue to work through the agreed process steps towards presenting the Company with the financing proposal for the full construction cost of Kola,” said Kore.
Other members of Summit Consortium are the Oman Investment Authority and SQM, a Chilean chemicals company.
The RoC’s letter comes amid heightened tensions between it and Kore. Most worringly, two senior employees of Kore were arrested by RoC police before their subsequent release – without charge. “Neither the employees nor the company have been informed of the reason for the arrests,” the company said.
Kore said today it would respond to the minister within the time stipulated. It added: “The company advises that it is continuing to progress the development of the Kola and Dougou (DX) projects towards production, believes that it is in compliance with its obligations to the Government of the RoC under the Mining Code and Mining Convention and will continue to keep the Minister briefed on the company’s plans and progress”.
Potash is critical for improvement in crop yields and comes at a time when Russia’s invasion of Ukraine had led to a shortage of wheat and potash production – a development that recently sent the potash prices to fresh highs.
SP Angel, the UK stockbroker said earlier this year that Kola was “one of the major catalysts” in unlocking value from Kore. “The project offers potentially one of the most competitive potash supply sources for end markets in Brazil,” it said.