Kore Potash has finally signed the $1.9 billion (approximately R34bn) engineering, procurement and construction (EPC) contract for its Kola project in Congo Brazzaville.
The company is pursuing the Sintoukola Potash Project, including the Kola and Dougou Potash Permits in the Republic of Congo Brazzaville.
After completing a $1.2 million fund-raise at the beginning of July, Kore Potash closed the half year to June 2024 with cash and cash equivalents worth nearly $1m against $1.5m in the year earlier contrasting period, while its exploration and evaluation assets dipped by $3.6m
It said yesterday that it had signed the EPC for the Kola project together with PowerChina, an integrated construction group that provides investment and financing, planning design, engineering construction, equipment manufacturing, and operation management for clean and low-carbon energy, water resources, environmental construction and infrastructure.
Shares in Kore Potash traded 2.6% stronger at R0.79 in afternoon trade on the JSE yesterday after it resumed trading following the voluntary suspension of the stock on November 11.
“The entry into this EPC contract marks a significant milestone for the Kola potash project,” said Andre Baya, CEO of Kore Potash.
“By signing this fixed-price construction contract with one of the largest international engineering groups, the company has minimized risks associated with cost and time overruns typical in large mining projects.”
Kore Potash believes that under the EPC, there will be accelerated financing and a relatively straightforward construction process that is set to translate to speedy profitable production as the fixed price minimises the cost overrun risks to the company.
Of the total $1.929bn EPC, about $708.9m will be allocated for the construction of transportation links and utility pipelines. These will make the Kola project self-reliant without the need for the State infrastructure.
“The company believe this will be a critical advantage compared to other potash projects around the world,” explained Kore Potash.
The construction period for the project has been fixed for 43 months, with penalties in the event of delayed completion and bonuses in the event of early completion.
Although the signing of the EPC contract with PowerChina “reaffirms the board’s aim for Kore Potash to become one of the lowest cost producers in the global agricultural market,” some significant milestones, including “achievement of product quality specifications for target markets (and) operator risk” remain.
“One of Kore Potash’s biggest challenges is developing the operating capacity to run the operations after commissioning,” it explained.
“Given that Kore Potash is a standalone business, a contract operator model will minimise the company’s risk and costs, avoiding the need to recruit and train a fully operational team.”
Kore Potash has previously said that its potash deposits in Congo Brazaville were ideally located to supply the important Brazilian agricultural market and high growth African markets.
The potash deposits being high grade, shallow, and situated only 35km to the Atlantic coast with easy access to infrastructure and immense upscaling potential (6 billion tons of resources) are “ideal for a competitive mining” project.
BUSINESS REPORT