Kore Potash has signed a landmark $1.929 billion fixed-price EPC contract for its Kola Potash Project, reinforcing its strategy to become a low-cost producer. The company is now awaiting a financing proposal from the Summit Consortium expected by February 2025.
- Signed $1.929 billion fixed-price EPC contract with PowerChina for Kola Project
- EPC contract includes penalties for delays and non-performance
- Summit Consortium to deliver non-binding financing term sheet by end of February 2025
- Successful $0.9 million fundraising completed in November 2024
- Republic of Congo government maintains 10% stake and continues strong support
A Milestone EPC Contract Signed
In a significant development for Kore Potash (ASX: KP2), the company announced the signing of a fixed-price Engineering, Procurement and Construction (EPC) contract worth US$1.929 billion with PowerChina International Group Limited. This contract, inked in Brazzaville in the presence of the Republic of Congo's Minister of Mines and Geology, marks a critical step toward advancing the Kola Potash Project from development to construction.
The fixed-price nature of the contract is particularly noteworthy, as it mitigates the risk of cost overruns, a common challenge in large-scale mining projects. Additionally, the contract includes penalty provisions for delayed completion and failure to meet performance metrics, underscoring Kore Potash's commitment to disciplined project execution.
Financing on the Horizon
While the EPC contract is a major milestone, it remains subject to financial close. Kore Potash is relying on the Summit Consortium, a long-term financing partner, to deliver a non-binding financing term sheet within three months, expected by the end of February 2025. This financing package is anticipated to include a mix of debt and royalty financing, enabling the company to fund the construction without additional equity contributions, thereby preserving shareholder value.
The Summit Consortium's track record with Kore Potash is well established, having facilitated previous equity investments including a US$40 million injection from major shareholders Oman Investment Authority and Sociedad Quimica y Minera de Chile (SQM). The consortium's involvement provides a degree of confidence, though Kore Potash retains the right to reject any financing proposal that does not meet its terms.
Strong Government Backing and Strategic Focus
Government relations remain a cornerstone of Kore Potash's progress. The Republic of Congo government holds a 10% stake in the Kola Project and has consistently reaffirmed its support, including written assurances from the Minister of Mines and Geology. This political backing is crucial for navigating regulatory and operational challenges in the region.
Meanwhile, Kore Potash continues to focus on advancing the Kola Project, with the Dougou Extension project currently under strategic review. The company’s recent fundraising of approximately US$0.9 million and a cash position of US$1.34 million as of December 31, 2024, provide a modest but essential financial runway as it awaits the larger financing package.
Outlook and Market Positioning
The signing of the EPC contract positions Kore Potash to become one of the lowest-cost potash producers globally, targeting high-growth agricultural markets in Brazil and Africa. The company’s ability to secure fixed-price construction terms and a robust financing solution will be pivotal in translating its substantial mineral resources into commercial production.
Investors will be watching closely for the Summit Consortium’s financing proposal and the subsequent financial close, which will unlock the path to construction. The next few months are critical as Kore Potash moves from planning to execution, with the potential to reshape its market standing in the potash sector.
Bottom Line?
Kore Potash’s progress hinges on securing financing by February, a make-or-break moment for advancing the Kola Project into construction.
Questions in the middle?
- Will the Summit Consortium’s financing proposal meet Kore Potash’s terms and timelines?
- How will Kore Potash manage potential risks if financing delays occur beyond February 2025?
- What strategic options will Kore Potash pursue for the Dougou Extension project amid Kola’s prioritization?