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Emmerson could get $230 million of debt financing for potash project
By Sarah Lizee
Olympia, Wash., June 10 – Emmerson plc said it has received a formal indication of up to $230 million of debt financing for its Khemisset potash project from a major European commercial bank.
It is expected the syndicate will comprise of three or four commercial banks and export credit agencies, according to a company announcement.
The debt will have a 10-year term and include a three-year grace period prior to first repayments, assuming involvement of export credit agencies.
Interest will be calculated at a margin of 500 basis points above Libor or Euribor.
Emmerson said the debt sizing is based on “very conservative, bank case, pricing assumption of $235/tonne (delivered to Brazil) muriate of potash price flat over the life of the project.”
This price represents a 35% discount to current spot prices, the company said.
There is “strong potential” to increase debt capacity if customer floor prices above the base case can be negotiated, the company said.
The indicative terms of the financing are line with market norms for mine construction project finance including standard covenants, cash sweeps and security packages.
Emmerson said it is assessing multiple options for financing the required capital expenditure of the Khemisset potash project.
“Traditional project finance is considered one of the most attractive financing solutions for new mining projects but is often not available for a variety of reasons,” the company said.
“To have received an indication of significant debt capacity from a major financial institution, following initial technical and financial due diligence, is a significant positive for the company and an endorsement of the quality of the Khemisset project.”
The Isle of Man-based company is developing the Khemisset potash project located in Morocco.
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