Kore Potash moves closer to financing Kola project

Republic of the Congo-focussed potash development company Kore Potash announced on Tuesday that it has signed a non-binding memorandum of understanding with Summit Africa, on behalf of a consortium of investors and engineering firms, to arrange the total financing required for the construction of the Kola Potash Project.

The AIM-traded firm said the memorandum outlines a roadmap to optimise, fully finance and construct Kola via a mix of debt and royalty financing.

Summit and its technical partners Sepco Electric Power Construction and China Enfi Engineering, which was subcontracted by Sepco, would work with Kore to undertake an optimisation study to reduce Kola's capital cost, with a target of less than $1.65bn.

Kore said Summit would work with potential financing partner BRP Global to, subject to completion of their due diligence and achieving the target capital expenditure through the optimisation study, present a financing proposal on behalf of the Summit consortium based on debt and royalty funding for 100% of the Kola construction capital costs.

Under the proposed financing structure, Kore said it would not be required to contribute to the capital needed to build the project, and would retain a 90% equity interest in Kola.

The memorandum was signed in the Minister of Mines’ offices in Brazzaville with the minister and his key staff present.

Under the proposed financing arrangements, the government of Congo would retain its 10% shareholding in the Kola project.

The company said it would contribute around $0.9m to the optimisation study costs, with Sepco to cover the remaining 50% of the estimated costs of the study.

“We are excited to have this agreement in place with a consortium with such significant technical and financing capability and long term focus,” said chief executive officer Brad Sampson.

“We welcome the consortium's innovative proposal to potentially fully finance the construction of Kola through debt and royalty financing.

“The definitive feasibility study for Kola demonstrated that it will have large operating margins and a long project life which is ideally suited to royalty financing.”

Sampson said the 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.

“Kola and our other potash projects at Sintoukola have the potential to help feed the world's population for many generations to come.

“We are pleased that the financing for Kola is moving forward at a time when we see increasing potash prices and demand for potash remains strong despite challenging times in the global economy, underpinning our belief in continued potash demand growth.”

At 1454 BST, shares in Kore Potash were up 27.54% at 1.8p.