In the pursuit of gold, when do you know that you’ve hit a sparkling rock that is anything but? This is a story Kore Potash (ASX: KP2) knows all too well as the Company deals with mistrust from the Minister of Mines of the Republic of Congo, following the arrest and release (without charge and, apparently, reason) of two senior officials.
After the arrest, the Company received a letter dated 12 October, 2022, from the Minister expressing dissatisfaction with how Kore’s Kola Project was progressing with regard to its financing. As per the letter, they are discontent with aspects of the administration of the Company’s subsidiary companies, including the Summit Consortium.
This could be in part due to SEPCO’s delay in providing an EPC proposal. On 28 June, 2022, the Company said that it had signed a Heads of Agreement for the construction at Kola with SEPCO Electric Power Construction Corporation (SEPC”), a China-based company and the engineering partner of the Consortium. Kore expected to receive an EPC contract proposal from SEPCO in August 2022. However, that didn’t happen because of Covid-related delays. SEPCO was finally able to deliver its proposal in October.
The EPC proposal reflects the capital cost and construction timeline reported in the feasibility study and the terms agreed to in the HoA. It includes an EPC Agreement detailing the contractual terms and many of these require further discussion before acceptance, resulting in a further delay. It looks like SEPCO will require further approvals prior to the finalisation of the contractual terms.
Mining in local regions of Africa is a competitive, challenging and sometimes deadly mission. For one, corruption is deep-rooted in the industry, with labourers getting the worst end of the bargain. Secondly, many companies that choose to outsource labour agencies to be one step removed from modern slavery. Rest assured, it is not for the weak-hearted.
Kola is Kore’s largest project and will be optimised to increase potash supply in the Brazilian and African markets. Potassium (from potash) is a key nutrient, essential for high-quality and high-yield food production. Kore boasts 97%-ownership of the Kola and DX Potash Projects in the Sintoukola Basin, located in the Republic of Congo.
Even though the impact of COVID controls in China caused a delay in the timing of the finalisation of the EPC proposal, the Summit Consortium continues to work through the agreed process steps towards presenting the Company with the financing proposal for the full construction cost of Kola. Kore believes that it is in compliance with its obligations to the Government of the RoC under the Mining Code and Mining Convention.
It will keep working through the process for financing Kola as agreed with the Minister. The Company has responded to the concerns raised by the Minister and is seeking his ongoing support to enable the completion of the financing process for the construction of the Kola Potash project.
Potentially, Kore Potash is considering teaming up with potential offtake partners to share the load, and hopefully avoid more arrests.
A lot of the world’s supply of potash comes from Russia and Belarus. Given the current tense geopolitical states, it is a great time for Kore Potash to enter the business—but at what cost?
Alinda is a Business Reporter for The Sentiment
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