Kore Potash : Kola Project Optimisation Study

Kore Potash plc

(Incorporated in England and Wales) Registration number 10933682 ASX share code: KP2

AIM share code: KP2

JSE share code: KP2

ISIN: GB00BYP2QJ94

("Kore Potash" or the "Company")

27 June2022

Kola Project optimisation study outcomes

Kore Potash, the potash development company with 97% ownership of the Kola and DX Potash Projects in the Sintoukola Basin, located within the Republic of Congo ("RoC"), is pleased to provide additional information on the outcomes of the optimisation study ("Study") for the Kola Potash Project ("Kola" or the "Project").

The Company has completed its review of the Study undertaken by the engineering partner of the Summit Consortium ("Consortium"), SEPCO Electric Power Construction Corporation ("SEPCO") as announced in "Kola optimisation study received" on 1st April 2022.

The Kola production target and forecast financial information has now been updated to incorporate the results of the optimisation study.

Highlights

• Capital cost is reduced by US$520 million to US$1.83 billion on an engineering, procurement and construction ("EPC") basis compared to the DFS capital cost of US$2.35 billion on an equivalent EPC basis.
• Construction period reduced to 40 months from the DFS construction period of 46 months.
• Key financial metrics improved on DFS outcomes (at potash pricing averaging US$360/ tonne unchanged from the DFS): o Kola NPV10 post tax improved to US$1.623 billion
  o IRR improved to 20% on ungeared post tax basis
• At a potash price of US$1000/t MoP CFR Brazil (less than current potash price of approximately US$1100/t MOP CFR Brazil) the Kola financial metrics improve to:
  o Kola net present value ("NPV")10 post tax US$ 9.354 billion
  o Internal rate of return ("IRR") of 49% on ungeared post tax basis
• Kola designed with a nameplate capacity of 2.2 million tonnes per annum ("Mtpa") of Muriate of Potash ("MoP")
• MoP production from Kola scheduled over an initial 31 year project life.
• Kola is designed as a conventional mechanised underground potash mine with shallow shaft access. Ore from underground is transported to the process plant via an overland conveyor approximately 25 km long. After processing, the MoP product is conveyor transported 11 km to the marine export facility. MoP is conveyed from the storage area onto barges via the dedicated barge loading jetty and then trans-shipped into ocean going vessels for export.
• These results support moving to the next phase of the Kola development.
• The Consortium has advised that the EPC contract proposal for the construction of Kola will now be submitted to the Company during August 2022. The EPC proposal will be based on the capital cost and construction schedule from the optimisation study.

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• The Consortium advises that it intends to provide the financing proposal for the construction cost of Kola after the
  Company's receipt of the EPC proposal and agreement on key EPC terms.

Brad Sampson, Chief Executive Officer of Kore Potash, commented:

"The development of Kola is of global importance. The security of the world's food supply is at risk as a result of disruptions to the supply of fertiliser globally. Recent geopolitical events highlight the risks inherent with potash production concentrated within a small number of companies and locations with operations situated long distances inland far from ports and global customers. New potash producers are required in locations closer to customers. With low capital intensity and low production costs, Kola is ideally situated to supply high quality potash to meet growing global demand.

"The successful completion of the Kola optimisation study moves us closer to production and we eagerly await delivery of the construction contract and financing proposals."

Optimisation Study

On 6 April 2021, Kore Potash announced the signing of a Memorandum of Understanding ("MoU") with the Consortium for the optimisation, construction and financing of the Kola Project.

The Study, which represented the first part of the financing process, has been undertaken by SEPCO. The key goals of the Study were to improve the value of Kola through reductions in the capital cost and by shortening the construction schedule.

During the Study, SEPCO employed two key sub-contractors, China ENFI Engineering Corporation to review the mining, processing and infrastructure aspects of the Project and CCCC-FHDI Engineering Co Limited to consider the optimisation of the marine facilities.

A summary of the key assumptions adopted in the Optimisation Study and the DFS that related to Mining, Processing, Infrastructure, Capital Cost, Operating Cost and Schedule are detailed in this announcement.

The results of this analysis compared with those of the January 2019 DFS are summarised in Table 1 below.

Table 1: Key Project Parameters and Assumptions comparison between DFS and Optimisation Study

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Notes: + The capital cost published in conjunction with the DFS was on EPCM basis, the capital cost estimate from optimisation study is on an EPC basis.

• US$360/t is the average future potash price CFR Brazil forecast over the project life.

Table 2: Kola Project financial performance sensitivity to potash pricing

SEPCO's recommended improvements to Kola potentially reduce the Kola capital cost to US$1.83 billion on an EPC basis. The US$1.83 billion capital cost includes US$118 million for Kore's owner's costs during the EPC phase.

The capital cost for Kola published in conjunction with the DFS was US$2.1 billion on an Engineering, Procurement and Construction Management ("EPCM") basis. The DFS capital cost on an equivalent Engineering, Procurement and Construction ("EPC") basis to the SEPCO optimisation study capital cost was US$2.35billion.

The optimisation study has thus identified reductions in the capital cost of Kola of approximately US$520 million.

Prior to commencement of the Optimisation Study SEPCO set targets to reduce the capital cost to US$1.65 billion and to shorten the construction schedule by 6 months. The Optimisation Study achieved the targeted reduction in the construction schedule. Despite identifying significant cost savings of US$520 million, the targeted capital cost of US$1.65 billion was not achieved mostly as a result of a higher than anticipated inflationary environment.

The Summit consortium has advised that the strongly positive outcomes of the Optimisation Study continue to support their financing of the Kola Project.

The Consortium have further advised the Company that the EPC contract proposal will now be provided to the Company in August 2022. It also advises that the financing proposal for Kola will be provided to the Company within 2 months of Kore's agreement on the terms of the EPC contract.

Key assumptions related to the ore reserves, production target and financial evaluation of the project have been updated in Appendix B of this announcement.

Ore Reserves and Mineral Resources

The Kola Potash Ore Reserves (Table 3) are based on the Kola Sylvinite Mineral Resources (Table 4) as reported on 6 July 2017. Further detail on the Ore Reserve Estimate is provided in Appendix B: (Summary of Information required according to ASX listing Rule 5.9.1) and Appendix C: JORC 2012 - Table 1, Section 4 Ore Reserves .All of the Ore Reserves and Mineral Resources reported here for Kola are Sylvinite.

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Table 3: Kola Sylvinite Ore Reserves

Table 4: Kola Sylvinite Mineral Resources (inclusive of Ore Reserves)

Reasonable Basis for Forward-Looking Statements (including production target and forecast financial information) and Ore Reserves

This release, inclusive of Appendix A: Summary of Kola Optimisation Study, contains a series of forward-looking statements. The Company has concluded that it has a reasonable basis for providing these forward-looking statements and the forecast financial information included in this release. This includes a reasonable basis to expect that it will be able to fund the development of the Kola Project when required.

The detailed reasons for these conclusions are outlined throughout this release. All material assumptions, including the JORC modifying factors, upon which the Ore Reserves, production target and forecast financial information is based are disclosed in this release (including the summary information in Appendix B and Appendix C). This announcement has been prepared in accordance with the requirements of the JORC 2012 and the ASX and LSE: AIM Listing Rules.

The Ore Reserves (Proved and Probable) and Inferred Mineral Resources underpinning the production target have been prepared by a competent person in accordance with the requirements of JORC 2012 Details of those Ore Reserves and Mineral Resources are set out in this release (including, in relation to the Ore Reserves, the details in Appendix B and Appendix C).

The production target is based on average scheduled annual production of 2.1 Mtpa MoP over a 31 year life. Ore Reserves form 72% of the processed material and Inferred Mineral Resources form 28% of the processed material underpinning the Production Target. No exploration targets underpin the production target. In particular, following exhaustion of the Ore Reserve during the first 25 years of the mine life, which includes the exploitation of 9.7 Mt of Inferred Mineral Resources (6% of the total production during that period), the Production Target includes the mining of Inferred Mineral Resources for a further 6 years. Each of the same modifying factors as used for Ore Reserve determination was considered and applied to this material in preparing the production target.

There is a lower level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration will result in the determination of Indicated Mineral Resources or that the production target will be realised,

This announcement has been approved for release by the Board of Kore Potash

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Market Abuse Regulation

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

END

For further information, please visit www.korepotash.com or contact:

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