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 6 billion tonnes of potash, just 15km from the coast and US$230m has been spent on it thus far. The flagship 2.2Mtpa Kola project came through the DFS with flying colours but will need US$1.65bn of capex, not easy for Kore to raise for a greenfield project in such a jurisdiction. Just as the team began rapidly advancing the smaller DX project, potential investors came knocking with the promise of fully financing Kola.
Very sizeable growth opportunity in developing the large Kola project
Early April 2021 saw Kore announce a no-binding MOU with Summit to arrange the total financing for the Kola project with the company retaining its 90% stake. The MoU sets out a roadmap to optimise, fully finance and construct Kola via a mix of debt and royalty financing. Waiting in the wings is the smaller DX project which is also being progressed in parallel as it provides a good backstop if anything should go wrong with the negotiations at Kola.
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.
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 900%
Our conservative valuation shows that Kore is highly undervalued. We initiate coverage with a conservative target price of 11.22p and Conviction Buy stance.
RISK WARNING & DISCLAIMER
Kore Potash (KP2) is a research client of Align Research. Align Research own shares in KP2. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/
For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
|Year to Dec