MINING & ENERGY Sliding potash market can’t dent Kore belief...

MINING & ENERGY

Sliding potash market can’t dent Kore belief


Kore Potash chairman David Hathorn tips 15 per cent returns from day one. Picture: Colin Murty

• The Australian
• 12:00AM June 6, 2017
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• PAUL GARVEY
  
  Resources reporter
  Perth
  @PDGarvey
  

It is typically the mark of death for a wannabe miner: a big-ticket capital cost that is more than 10 times the company’s market capitalisation.

Africa-focused Kore Potash finds itself on the wrong side of that equation — its market cap of $137 million compares with the estimated $US1.5 billion ($2bn) capital cost of its Kola potash project in the Republic of Congo — but chairman David Hathorn and chief executive Sean Bennett are adamant the project has a future.

The duo’s background and their progress so far give reason to think there is more behind their confidence than blind enthusiasm.

Up until last month, Mr Hathorn was the chief executive of Mondi, a London-listed packaging heavyweight worth about £10bn ($17.3bn).

Mondi was a spin-off from mining giant Anglo American, where Mr Hathorn was once seen as a potential chief executive, and its shares increased more than fourfold under Mr Hathorn’s leadership.

As Kore chairman, Mr Hathorn convinced Mr Bennett to give up his career as an investment banker at UBS and take on the CEO’s role with responsibility for leading the fundraising efforts.

There is work ahead for the pair, given the continued weakness in the potash market, which has fallen from more than $US600 a tonne to about $US220-$US230 a tonne.

But it is what Mr Hathorn calls Kola’s “structural cost advantages” — its high grade, its shallowness, its proximity to the coast, and its short shipping distance to Brazil, the world’s biggest potash import market — that gives the project a chance of winning funding.

“We have an opex here including sustaining capex of less than $US100 a tonne. So a two-million-tonne-per-annum plant, we’re going to be making $US250m free cash per annum within 18 months of starting up, even at this point in the cycle,” Mr Hathorn told The Australian.

“We’re going to be generating 15 per cent-plus returns from day one at the bottom of the cycle. That’s pretty unique.”

Last November, Kore completed a $US45m placement that drew in both Chilean potash heavyweight SQM and Oman’s sovereign wealth fund SGRF for $US20m each.

http://www.theaustralian.com.au/bus...f/news-story/e308ed895258b6e134a36260298895fd