Kore Potash - Initiation of Coverage

Kore Potash is a large fertiliser play that has been developing the Sintoukola potash basin in the Republic of the Congo (RoC) since 2010. Kore has a district scale development with approx 6 billion tonnes of potash, just 15km from the coast and US$150m has been spent on it thus far. Big projects need big budgets. The flagship 2.2Mtpa Kola project came through the DFS with flying colours but needs US$2.1bn of capex, not easy for a small cap player with a new project in such a jurisdiction to raise. So, the team has devised the smaller DX project to begin this district wide development.

• Game-changing 400,000tpa DX project could be in production by Q4 2023

  DX can rapidly come on stream with capex under US$300 million, making it financially possible for a greenfield operation in RoC. 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 begins to unlock the tremendous value here.

• Positioned to replace potash supply from the northern hemisphere

  Not only are the company’s production costs enviably low, but Kore is also blessed with having the shortest shipping route to the giant Brazilian market and the fast-growing African market. All the pieces are now almost in place to allow Kore to commence a dramatic growth trajectory. Shareholders could really benefit as either the majors will concede market share or buy them up.

• Potash demand rising as the world needs to grow 50% more food by 2050

  Arable land per person is sharply declining and farmers are increasingly using more fertiliser to feed an anticipated population of 9 billion people by 2050. Kore will produce MOP which is the cheapest and most important source of potassium for agriculture, so there is no risk of substitution.

• Risked NPV suggests potential upside of over 650%

  Our conservative valuation shows that Kore is highly undervalued. We initiate coverage with a conservative target price of 6.51p and Conviction buy stance.