Kore Potash PLC (LON:KP2) has switched tack in the Republic of Congo to a smaller potash project at the Dougou Extension (DX) site.
Until now, Kore Potash had focused on the much larger Kola project, but said it would require substantially lower investment to get DX up and running.
According to a scoping study just completed, for upfront capital expenditure of US$327mln, a low-cost mine with a life of 17 years can be established at DX.
Production will be 400,000 tonnes of potash a year, which would generate revenues of US$134mln at a price of US$360 per tonne.
Kore said that it assessed all of its strategic options within the Sintoukola District before making the decision and had decided that a reduced-scale potash development would expedite cash flow.
The smaller scale of the DX Project additionally comes with relatively low operational and financial risks, said the statement.
“We believe that the US$327 million capital cost estimate to construct the DX Project makes the project attractive from a capital perspective and the successful completion of the Scoping Study allows the company to rapidly progress to pre-feasibility study, which will further define and de-risk the project, said Brad Sampson, chief executive.
"The development of the DX Project will give advantages in terms of overlapping infrastructure reducing the future capital cost of Kola."
A feasibility study was published for Kola in January that indicated an NPV of US$1.45bn but with upfront capital costs of US$2.1bn.
DX’s scoping study estimated an NPV of US$221mln and an ungeared rate of return of 19.3%.