Kore Potash (ASX:KP2) signs MOU to finance Kola Potash Project
- Kore Potash (KP2) has signed a non-binding memorandum of understanding (MOU) with a consortium of investors and engineering firms
- Under the MOU, the consortium will fully finance construction of the company’s Kola Potash Project in the Republic of Congo
- The MOU proposes that the project’s construction capital costs would be funded through a combination of debt and royalty financing
- The company has committed to paying half of the cost of the optimisation study which will start the process
- Kore Potash is up 5.88 per cent and trading at 3.6 cents per share
Kore Potash (KP2) has signed a non-binding memorandum of understanding (MOU) with a consortium of investors and engineering firms.
The MOU was signed by Summit Africa, on behalf of consortium members including SEPCO Electric Power Construction, China ENFI Engineering and BRP Global. Kore Potash is familiar with Summit Africa after the latter company led and arranged financing for the definitive feasibility study (DFS) at the company’s Kola Potash Project.
This MOU also concerns the Kola Project, which is located in the Sintoukola Basin within the Republic of Congo. Under the MOU, the Summit Consortium proposes to fully finance construction capital costs of the projects, through a combination of debt and royalty financing.
Together with Kore Potash, the Summit Consortium will conduct an optimisation study to reduce the Kola project’s capital cost to a target of under US$1.65 billion (roughly A$2.15 billion). The company has agreed to pay half of the optimisation study’s costs, representing a commitment of US$900,000 (approximately A$1.17 million).
The other half of the optimisation study costs will be covered by SEPCO.
Once due diligence is completed and the target capex is reached through the optimisation study, the Summit Consortium will present a financing proposal for financing construction at Kola. The consortium has nine months from the signing of the MOU to present this financing proposal.
Kore Potash’s CEO, Brad Sampson, welcomed the consortium’s proposal to potentially fully finance construction of the Kola Project through debt and royalty financing.
“This 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,” he said.
“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,” he added.
Over the next 12 months, Kore Potash will prioritise its focus on optimising and financing the Kola Project. This may draw some of the company’s attention away from its DX Project, which is located in the same basin as the Kola Project.
Kore Potash is currently reviewing its allocation of resources to its projects and will update shareholders on changes to the DX Project in the weeks to come.
Kore Potash is up 5.88 per cent, trading at 3.6 cents per share at 10:10 am AEDT.