Kore Potash Review of Operations for the Quarter ended 30 June 2023

AIM-listed Kore Potash, the potash development company with 97%-ownership of the Kola Potash Project and Dougou Extension (DX) Potash Project in the Sintoukola Basin, located in the Republic of Congo (RoC), provides its quarterly update for the period ended 30 June 2023 (the Quarter).

Quarterly Highlights

Projects

Discussions continue towards finalising terms for the Engineering, Procurement and Construction (EPC) contract at the Kola Project.
PowerChina International Group Limited (PowerChina) and SEPCO Electric Power Construction Corporation (SEPCO) have commenced work to support the provision of guarantees regarding an EPC contract for Kola.
Summit Consortium has confirmed that the financing proposal for the full capital cost of Kola will be provided within six weeks of finalisation of EPC contract terms.
A review of the strategic options available for the DX Project is underway.

Operational Activities

Kola EPC

Kore Potash signed a Memorandum of Understanding with the Consortium in April 2021 for the Optimisation of Kola, the provision of an EPC contract proposal and to provide a debt and royalty financing proposal for the full construction cost of Kola.

The results of the Optimisation Study announced on 27 June 2022 supported moving to the next phase of Kola’s development.

On 28 June 2022, the Company announced that it had signed a Heads of Agreement (HoA) for the construction of Kola with SEPCO.

Under the HoA, SEPCO undertook to continue negotiations with Kore Potash towards an EPC contract for the construction of Kola. Importantly, the HoA recognises the outcomes of the Study, and confirmed the capital cost of Kola, the construction period and related EPC contract terms.

Discussions with SEPCO to finalise key EPC terms continue.

Recognising the world-class scale of Kola, the length of the proposed construction period and the total financing requirement, Kore Potash has requested that SEPCO’s parent company, PowerChina, provides the typically required EPC contract guarantees, including performance and retention bonds supporting the completion of construction and the operating performance of Kola.

PowerChina is now actively involved in the process to finalise the EPC contract terms. As part of this process, PowerChina is reviewing aspects of the Kola design and the planned construction schedule and has had direct communications with the management of Kore Potash. PowerChina’s review has generated a number of potential design improvements to the Kola Project that identify potential opportunities to further reduce the capital cost and the construction schedule. Discussions on incorporating these design improvements into the EPC contract continue.

PowerChina has engaged a number of external experts to support its review of the Kola design and they require completion of this review to support the provision of the required EPC contract guarantees. PowerChina has not yet advised Kore Potash of the timeline to complete its reviews and internal approvals.

The process to conclude EPC contract discussions has taken longer than the Consortium initially envisaged, however it is necessary to conclude these discussions prior to receiving their financing proposal.

Kola Financing

Kore Potash continues to work with the Consortium to provide financing for the full construction cost of Kola which is intended to be based on royalty and debt finance.

The successful outcomes of the Study were in line with the Consortium’s requirements and supported the ongoing financing discussions. The financing parties of the Consortium have again reinforced their ongoing strong interest in financing Kola and await finalisation of the EPC contract terms.

The Consortium has advised that the financing proposal for the full construction cost of Kola will be provided to the Company within six weeks of EPC terms being finalised.

Kore Potash continues to hold the view that the members of the Consortium have the capability to provide the required financing to commit to the construction of Kola and that pursuing this financing opportunity currently remains the best path forward for Kore Potash’s shareholders.

DX Potash Project

At present, the Company remains focused on completing the financing of Kola and moving forward to construction of Kola as soon as possible.

The Company is now exploring what strategic options are available for the DX project.