Exclusive: Kanga Potash seeks to raise about $500m for Republic of Congo development

By David Whitehouse
Posted on Wednesday, 27 July 2022 11:05

China is limiting phosphate exports to try to protect domestic fertiliser supply. China Daily via REUTERS

Kanga Potash is seeking to raise about $500m for the first phase of its potash development project north of Pointe Noire in the Republic of Congo, executive chairman Stéphane Rigny tells The Africa Report.

About 60% of the amount will be debt and 40% equity, including some mezzanine finance, Rigny says. A “significant” part of the equity has already been raised, he says, and the company has received letters of intent on debt financing from “several parties.” Kanga Potash is being advised by Vermilion Partners and Natixis.

The project is now moving to pre-construction phase. Kanga Potash this month received its exploitation licence, while its mining convention is awaiting approval by the Republic of Congo parliament. The approval is “an administrative process” which will hopefully be completed by the end of 2022, Rigny says. “I don’t foresee any major roadblocks.”

Potash is needed for fertiliser, global prices for which have soared due to the Russia-Ukraine war, contributing to a broader inflationary spike in the cost of food.

According to the International Food Policy Research Institute, 32 countries in the world have one third or more of their fertiliser use at risk. An agreement by Russia and Ukraine with Turkey and the United Nations to allow grain and fertiliser exports to resume was followed within a day by Russian bombing of the port of Odesa.

Meanwhile China, the world’s biggest phosphates exporter, this month imposed phosphate export quotas to ensure domestic fertiliser availability.

Kanga Potash says the project with a 12b tonne resource will be the world’s lowest-cost producer of muriate of potash (MOP). Rigny points to its combination of geology and geography as factors which will reduce the need for capital expenditure. Potash seams which exceed 210 metres are among the thickest in the world, he says.

  • Before the Russian invasion of Ukraine, Rigny was anticipating fertiliser market growth of about 3% per year.
  • The company’s pre-war financial modelling assumed prices of about $282 per tonne, compared with recent levels of about $1,000, and competitor models which assume about $400, Rigny says.
  • He expects that prices will over time revert to a more normal level, and that a price of $300 to $400 would still leave the project highly profitable.

Dedicated Jetty

The company’s main shareholders are AMED Funds in Luxembourg, Barbados-based private-equity investor Sarmin Mining and the Baker Steel Resources Trust, which is listed in London. The Kanga licence area covers 320 square km, and the first phase of the project targets production of 600,000 tonnes per year of MOP. The life of mine is projected to be over 30 years, with an option for annual production to be increased to over 2.4m tonnes.

CEO Achim Strauss says that the company will build its own jetty for shipping which will be connected to the processing plant and which will use barges to transport the produce to ships. The MOP can easily be transported to West Africa, South Africa or Brazil, he says.

  • Some of the potash will be held back from offtake agreements to allow the company to benefit from price spikes.
  • The project also has the potential to produce 600,000 tonnes of food-grade table salt as a by-product, for which offtake interest has also been received, Strauss says.
  • The company also holds an adjacent license in Loango, which gives it control of the full known extent of onshore thick potash seams in the country.
  •  A public listing of Kanga Potash may be a future possibility. “All options are open,” Rigny concludes.

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