Emmerson - Initiation of Coverage
Development of a low capex, high margin potash project in an outstanding location to provide fertiliser to help feed the world
Emmerson first listed on the LSE in February 2017 as an investment company. In June 2018, the company was re-admitted following the RTO of Moroccan Salts Ltd which is developing the Khemisset Potash Project near Rabat in northern Morocco, a country where fertiliser giant OCP requires significant potash feedstock. Khemisset has a large JORC resource of Muriate of Potash (MOP), which is the most widely used and cheapest source of potassium. The project is in the midst of a Scoping Study which will answer a lot of questions, including the size of the prize.
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Big agriculture investment drivers pushing up the MOP price
The UN believes that the world will need to produce 70% more food by 2050, not just to meet the needs of its fast-growing population but also for a burgeoning middle class that is seeking a higher protein diet. Fertilisers led by MOP are seen to be vital in improving the efficiency of farming.
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Large JORC resource potash project + significant exploration potential
Progress at Khemisset is being accelerated with Scoping Study results expected in Q1 2019. More than 80,000m of historic drilling exists allowing feasibility study costs and timelines to be substantially reduced. Metallurgical tests could allow the project to go straight into the BFS following the upcoming Scoping Study, with production beginning as early as 2022.
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Management targeting a low capex development – rare in potash
Management has extensive potash development experience, previously with ASX listed Highfield Resources, and believes Khemisset has the potential to be a low capital cost development which is very rare in potash and should allow the economics to work regardless of potash price.
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Risked conservative NPV suggests potential upside of 313%
Our conservative valuation illustrates the clear potential. We initiate coverage of Emmerson with a target price of 12.05p and Conviction buy stance.
Emmerson does not have any operations or principal activities. Co. was formed to acquire a target company or business.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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