Kore Potash has signed non-binding term sheets with OWI-RAMS for a $2.2 billion funding package to develop its flagship Kola Potash Project in the Republic of Congo, combining senior secured finance and royalty-based funding under Shariah principles.
- Non-binding term sheets signed for $2.2 billion funding
- Funding split, $1.53 billion senior secured facility and $655 million royalty finance
- Financing structured under Shariah-compliant principles
- Construction targeted to start early 2026 with 2.2 Mtpa production capacity
- Royalty finance avoids equity dilution but further equity funding still required
A Major Financing Milestone
Kore Potash has taken a significant step towards realising its Kola Potash Project by signing non-binding term sheets with OWI-RAMS GMBH for a funding package totaling approximately US$2.2 billion. This funding is intended to cover the development, construction, and commissioning of the project located in the Republic of Congo, a region poised to become a key player in global potash supply.
The financing arrangement is split into two components – a senior secured project finance facility of about US$1.53 billion and a royalty finance facility of approximately US$655 million. Both components are structured in accordance with Shariah principles, reflecting a bespoke approach to investment that aligns with ethical financing standards and broadens the appeal to diverse capital sources.
Innovative Royalty Financing to Preserve Shareholder Value
The royalty finance facility is particularly noteworthy as it provides a quasi-equity revenue-linked funding mechanism that avoids the issuance of new shares, thereby protecting existing shareholders from dilution. Instead of repayment, the financier receives a share of gross revenues; 14% during the senior debt repayment phase and 16% thereafter for the life of the mine. This structure offers Kore Potash a way to secure substantial capital without immediate equity dilution, though the company acknowledges that additional equity funding will still be necessary to reach financial close and cover working capital.
While royalty rates here are higher than typical mining royalties, the arrangement mitigates the risk of failing to raise the required equity at acceptable terms, a critical consideration given current market conditions and the scale of capital needed.
Project Outlook and Conditions Ahead
The Kola Project is designed as a mechanised underground mine with a nameplate capacity of 2.2 million tonnes per annum of muriate of potash (MoP), targeting a 23-year mine life. Construction is slated to begin in early 2026, following financial close, with a fixed-price engineering, procurement, and construction contract already signed with PowerChina International Group Limited.
However, the term sheets are non-binding and subject to extensive due diligence and several conditions precedent. These include appointing a contract operator, addressing political risk through insurance or development finance institution participation, finalising operating strategies, and enhancing Kore Potash’s internal management capabilities. The financier will also conduct thorough legal, financial, technical, and ESG reviews before committing.
Balancing Ambition with Risk
Financial covenants embedded in the senior secured facility impose strict operational and financial discipline, including cash flow cover ratios, leverage limits, and capital expenditure controls. Events of default cover a broad range of risks from payment failures to production underperformance and regulatory issues, underscoring the project's complexity and the high stakes involved.
Kore Potash’s chairman, David Hathorn, emphasised the strategic importance of this funding milestone in advancing global food security and economic growth in Africa. Yet, the company remains cautious, highlighting that the arrangements are preliminary and that securing binding agreements and financial close will require navigating political, operational, and market challenges.
Bottom Line?
As Kore Potash moves toward financial close, the balance between innovative financing and project execution risks will define the future of the Kola Project and its role in global potash supply.
Questions in the middle?
- Will Kore Potash successfully secure the additional equity funding required for financial close?
- How will political risk mitigation strategies impact the timeline and terms of financing?
- What are the long-term implications of the high royalty rates on project profitability and shareholder returns?