Developing one of the lowest capital cost potash projects in the world January 2019
“ Two out of every five people on Earth today owe their lives to the higher crop outputs that fertiliser has made possible. ” -Bill Gates- 1
Feeding a Growing Population Over the next 30 years population will increase by Adding 9 cities the size of London approximately 2.2bn every year for 30 years = 2020 2050 200% growth in Africa’s population… …accounting for over 50% of world’s population growth 2020 2050 Corporate Presentation Q1 2019 2 Source: World Bank
Africa has 60% of the world’s uncultivated arable land and among the worlds lowest fertiliser application rates The Khemisset Project The Khemisset Potash Project Northern Morocco Northern Morocco Fertiliser Application (kg per hectare of arable land) 2014 (group) <25kg/ha 25-50kg/ha 50-100kg/ha >100kg/ha 600 million arable hectares Corporate Presentation Q1 2019 3 Source: World Bank
Morocco is a Top 5 Fastest Growing Import Market for Potash MOP IMPORTS TO MOROCCO ~500Kt 500,000 375,000 250,000 125,000 0 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 F Global Potash Demand Growth – 2-3% per annum Corporate Presentation Q1 2019 4 Source: www.oc.gov.ma/DataBase/CommerceExterieur/requete.htm, Company Estimates
Only Two Things Matter in Potash Development 1 Capital Cost to Production Can you make an economic return in a low or “normal” price environment? 2 Location Relative to Customer and End Prices Do you have a competitive advantage over your producing peers? Corporate Presentation Q1 2019 5
Khemisset among the lowest capital cost projects in the world and very close to end markets CAPITAL INTENSITY - US$/TONNE PRODUCTION Bethune Jansen Hatch Estimate for Canada Volgakaliy Rio Colorado Usolskiy Global Peer Mengo Average Capital Intensity US$1,142/tonne Garlyk Muskowekwan Autazes Sintoukola Wynyard Potash Project Danakil Holbrook Gensource Holbrook Emmerson Capital Muga Intensity US$520/tonne Sierra del Perdon 0 500 1,000 1,500 2,000 2,500 Corporate Presentation Q1 2019 6 Source: Company Research, Optiva Research
Outstanding Project Fundamentals A rare combination of very low capital cost and very high margins 20 years US$1.14bn 29.8%* Post Tax NPV 10 Initial IRR ( using industry expert Argus Media Life of Mine forecast prices) Ave. post tax Ave. steady state annual cashflow of EBITDA margins production rate US$184M* 800,000 ~64% * per annum Less than 3.25yr Metric tonnes capital payback * Assumes flat real price of US$360/tonne CFR Brazil price, Corporate Presentation Q1 2019 7 nominal cashflows including 2% cost and revenue escalation ** including 30% of contingency
Significant Potential to Expand Drilling underway at Khemisset to upgrade existing JORC Resource JORC Exploration Target* Tonnage Range Grade Range (Mt) ( K 2 O %) 264-616 5.0-14.0 *The potential quantity and grade of the Exploration Target expressed in this release is conceptual in nature, there has been insufficient exploration to estimate a JORC (2012) Mineral Resource and it is uncertain if further exploration will result in the estimation of Mineral Resource Corporate Presentation Q1 2019 8
World Class Asset with High Strategic Value Fertiliser Companies with limited downstream exposure to K LARGE SCALE ASSET AMONG THE LOWEST CAPITAL COST PROJECTS GLOBALLY EBITDA MARGINS ESTIMATED TO BE >60% GLOBAL OLIGOPOLY MARKET WITH INCUMBENTS TIGHTLY CONTROLLING SUPPLY Corporate Presentation Q1 2019 9
The Next Steps 2019 will be a year of significant news flow for Emmerson Completion Bankable Deliver Commence of drilling metallurgical Scoping Feasibility and upgrade test work Study Study resource programme Corporate Presentation Q1 2019 10
The he Kh Khem emisset isset Pr Projec oject 11
DEAD SEA WORKS (ICL & ARAB PO Geology ANNUAL PRODUCTION ~ 6MTP General ‣ Sedimentary deposits ‣ Typically formed by inland seas being cut-off from oceans and evaporating causing precipitation ‣ Basins can extend for thousands of km 2 ‣ Most potash basins have large sandstone sequences that contain fresh water aquifers Khemisset Basin ‣ Typical sedimentary potash basin ‣ Overlain with reasonably thick, competent, basalt sequence ‣ No sandstone sequence with no evidence of overlying aquifer unit ‣ Total area over 1,200km 2 prospective for mineralisation Corporate Presentation Q1 2019 12
Access to Mineralisation a Key to Low Capex Decline Long Section with Lithology Comparison of Costs of Decline or Shaft Access at Various Projects 4) Passport Potash NI43-101 17 October 2013 with 30% contingency added 1) Highfield DFS 30 Mar 2015 with 30% contingency added 2) Emmerson PLC RNS: “Decline Cost Estimate Indicates Very Low Capex 5) http://publications.gov.sk.ca/documents/310/93667-PotashRequirementGuide%20Rev1.pdf with 30% contingency 13 Access to Mineralisation” 17 September 2018 with 30% contingency 6) BHP Annual Report 2017 no detail on contingency 3) Kore Potash NI43-101 17 September 2012 including 20% contingency
Mining Conventional mining is lowest technical risk and most flexible extraction method ‣ Potash to be mined by Conventional Room and Pillar Mining ‣ Solution Mining and Longwall Mining were also evaluated, Room and Pillar selected because: High production rate Multiple working faces Lower upfront capital cost High level of flexibility ‣ Continuous miners selected for ore extraction and underground infrastructure development ‣ Both herringbone and long room will be employed in panels ‣ Potential to improve extraction ratios with pillar retreat extraction Corporate Presentation Q1 2019 14
Processing Potash Ore ‣ Processing via Hot Leaching and KCI Screening/Milling Milled Ore (optional) Milled Ore Crystallisation Magnetic Separation Rinneite Fraction Decomposition Sylvite/Halite Fraction Mother Liquor Slurry ‣ Flotation also evaluated, Crystallisation Mashing/Washing Wet Halite/Sylvite Filtration/Washing V selected because: Mashing Slurry Underflow Filtrate Filtration I Filtrate Thickening I Overflow (Part) Thickening V Filtrate Hot Leaching Brine Debrined Solids Overflow Soda Limestone Lower technical, metallurgical and Multistage Leaching Underflow Filtration III Solid Residues Solar Evaporation CaCl 2 Brine Hot Leaching operational risk Leaching Overflow Filtrates Wet Halite/Slyvite Flocculant Flocculant Thickening II Thickening III Harvesting of Solids (optional() Underflow Underflow Hot KCl Brine Overflow Wet Halite/Sylvite Pre-Warmed Liquor to Mashing/Washing (optional) Mother Liquor KCl Crystallisation Steam Well understood from a capital and Heat Exchangers 1st Section Pre-Warmed Liquor Condensate Surplus Overflow to Hot KCl Slurry Hot Leaching Brine Thickening I Leaching operating cost perspective Soda Cooling Water KCl Crystallisation Filtration II Brine Cleaning Filtrates Solid Residues Cooling Water Return 2nd Section Cooled KCl Slurry Leaching Overflow Flocculant to Mashing/ Washing to Mother Liquor Hydrocyclones Overflow Overflow Thickening VI Usage ‣ Mass and energy balances, detailed Underflow Overflow Mashing Slurry equipment lists and process flow diagrams Centrifuges Filtrate Thickening IV Solid Residues Filtration VI Wet KCl Solids Underflow Filtrate all completed for Scoping Study back to Crystallisation 2nd Section Fuel Drying Off-Gases Air ‣ Dynamic recovery rates calculated, with Dried KCl Product Compaction Process Product Post-Treatment 83.6% recoveries expected for LOM (optional) Saleable KCl Product Compacted KCl Product average grade of 9.4% K 2 O KCl 95 Product KCl 95 Product Wet Solid Residues Surplus Brine (Standard) (Red Granular) Khemisset Process Flow Diagram Corporate Presentation Q1 2019 15
Utilities and Infrastructure ‣ Short connections to existing roads (1.2km) and electrical infrastructure (5.5km) ‣ Port with existing capacity 150km from site requires only minor upgrades Proposed new mine access road Approximate location of connection points in relation to mine infrastructure area Cross section of reclaim and ship loading facilities Corporate Presentation Q1 2019 16
Why is Location so Important? Royalties, transport and logistics make up 60% to 70% of Canadian delivered cost to Brazil Nearly 70% of global potash supply is very remote from end Saskatchewan markets Royalties US$20-30/tonne 1,700km by Rail Saskatoon US$40-45/tonne 90km Truck to Port Nominal Royalties US$10/tonne US$0.10/tonne Shipping Vancouver - Brazil Shipping Morocco US$30-35/tonne – Brazil US$12-18/tonne Panama Canal Moroccan Delivery US$5-10/tonne Location Advantage Cost to Brazil US$22-28/tonne is worth US$67-108/tonne in Canadian Delivery delivered cost to Brazil Cost to Brazil US$95-130/tonne Source: Company Research, Nutrien Annual Report; Canada Pacific Railway Annual Report Corporate Presentation Q1 2019 17
Industry All-in-Sustaining Delivered Cost Curve to CFR Brazil Transport and logistics typically accounts for more than 50% of delivered cost to customer 300 250 200 $US/Tonne 150 100 50 0 Mining Processing Royalties, Sustaining Capital, and S,G&A Freight Source: Argus, November 2018 Corporate Presentation Q1 2019 18
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