By Dr. Michael Green

Good news this morning from Kore Potash which continues to make really satisfying progress towards the Definitive Feasibility Study (DFS) on its Dougou Extension (DX) Project in the Sintoukola Basin in the Republic of Congo. The latest announcement continues to point towards Kore progressing increasingly towards potentially becoming the lowest cost Muriate of Potash (MoP) supplier to the huge Brazilian market over the coming years.

It’s all steam ahead, with Phase 1 of the DFS set to be completed in May 2021 as was demonstrated by the progress that is being made simultaneously across a number of the critical elements that feed into this study.

The drilling campaign seems to be going well. Already, mud rotary drilling of drill holes DX 10 and DX 11 has been completed to the anhydrite layer and ahead of the diamond drilling of the core these holes have both been cased and grouted. Also, mud rotary drilling of the upper part of drill hole DX 12 should have been competed by now.

Geo-mechanical testing has begun on samples from previously drilled core using both unconfined compressive strength and triaxial compressive strength tests at Agapito Associates (AAI) laboratory in the US. Meanwhile, creep tests have begun in Germany at the laboratory of the Institut fur Gebirgsmechanik. These tests provide invaluable information for the geotechnical modelling of the planned caverns formed by recovering potash from underground, because potash at DX is to be won by low cost solution mining.

Dissolution test work has been satisfactorily completed at AAI’s laboratory in the US. These test results have demonstrated that production brine can be produced with KCl concentrations in the range of 170–200g/l – it should be pointed out that this creates potential to improve on the 165g/l which had been determined in the Pre-Feasibility Study (PFS). Test work is set to continue to now nail down the optimum residence time/production brine grade with the goal of maximising the economic return. All this information is being used to update the project’s brine model which will predict KCl production from the caverns over the mine’s life.

At the time CEO Brad Sampson was quick to point out that “The work programme in Phase 1 of the DX Definitive Feasibility study is focused on improving our knowledge of a number of the key drivers for the success of this project. We are pleased that the programme is progressing on schedule and look forward to being able to report the full results of this work and the expected positive impact on the project economics. The DX project stands out as a very low cost producer of MoP, with compelling economics and close proximity to port and to our target markets, the more work we do, the more convinced we are that this is potentially one of the world’s very best potash assets.”

So, it does look as though Kore is imminently well-placed to become the lowest cost potash supplier to the giant Brazilian market from its globally significant deposits in the Congo. Kore’s painstaking work on its vast Sintoukola potash basin in the Republic of the Congo begun in 2010.  The company has certainly been blessed as Kore has a district scale development with 6 billion tonnes of potash which is just 12km from the coast. There is no shortage of technical data and existing feasibility studies as something like US$150 million has already been spent here.

The vast scale of this potash basin will eventually require a big project to do it justice which will need a big budget. Its flagship 2.2Mtpa Kola project came through DFS with flying colours but needed US$2.1 billion of capex, which is not easy for a small cap player to raise for a new project in the Congo. All this has resulted in the team devising the smaller starter DX project which will mark the first stage in the district wide development of the Sintoukola potash basin.

Progress continues to be impressive towards the DFS and we can see few reasons why the 400,000tpa DX project could not be in production by Q4 2023. Early signs are that the DX can rapidly come on stream with capex under US$300 million, making it financially possible for a greenfield operation in the Republic of the Congo. DX is a scalable solution mine which is low risk as there are many such successful potash projects around the world. Getting DX into production is a game changer as it will make the financing of Kola possible and begin to unlock the tremendous value here.

We also see a simple scenario here that Kore will either be allowed to grow or be acquired. DX and Kola put Kore on a real journey with its 6 billion tonnes of potash. Not only are the company’s production costs very cheap but importantly Kore has the shortest shipping route to the African markets and Brazil. Moving ahead, the development of the Sintoukola Potash District will be serving to replace potash from the Northern Hemisphere.

Achievements to date look as though they should allow Kore to commence a dramatic growth trajectory place but it remains to be seen whether the majors will be prepared to concede market share to them or buy them up. Either way there looks to be substantial value to be created at Kore for the benefit of all shareholders over the coming years. We initiated coverage on Kore Potash with a Conviction Buy stance in June 2020 with a target price of 6.51p, and we are more than happy to reconfirm our stance.

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