LONDON (ShareCast) - (Sharecast News) - Morocco-focussed potash developer Emmerson announced the signing of non-binding memoranda of understanding relating to the offtake of potash and salt to be produced at its Khemisset Mine on Monday.
The AIM-traded firm said the first was signed with Keytrade for the sale of a minimum of 245,000 metric tonnes per year of muriate of potash for 10 years.

It said the second was with Hexagon Group for the sale of at least 245,000 metric tonnes per year of MOP, and a minimum of 500,000 metric tonnes per year of salt product, both for 10 years.

The memoranda were non-binding, and set out the key terms for subsequent formal bankable offtake agreements.

Emmerson said the prices for MOP and salt products were expected to be derived from the market, or as quoted in independent expert reports such as Argus Research, averaged to form a monthly price in the month prior to bill-of-lading, and after deducting a marketing fee.

It said importantly, the deals contemplated 'take-or-pay' provisions, under which the offtakers would market the product to end users and compensate the company for any quantities not taken by end users or otherwise sold by the offtakers.

The memoranda envisaged that all MOP and salt products sold would be delivered free-on-board at Casablanca, unless otherwise agreed.

They were also non-exclusive, with Emmerson saying it would continue to engage in ongoing offtake discussions with other wholesale customers, distributors and traders for the remaining production capacity from Khemisset.

"I am delighted to present our first offtake memoranda of understanding to the market as we continue our process of advancing towards construction readiness at Khemisset," said chief executive officer Graham Clarke.

These memoranda are an important milestone in this process, and will account for more than 65% of MOP production and 50% of salt production."

Clarke said that underpinning a "significant proportion" of future potash and salt sales on a take-or-pay basis was a "strong endorsement" for the project, de-risking the development for debt and other financiers.

"They are also a clear signal of the critical importance of potash in the context of international food security, and we look forward to advancing further negotiations as we continue to lay the foundations for establishing Africa's first commercial potash mine."

At 1156 GMT, shares in Emmerson were up 9.46% at 5.09p.

Reporting by Josh White for Sharecast.com.

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