African Potash Limited ("African Potash" or "the Company")
Landmark Trading Agreement with COMESA
African Potash, the AIM listed exploration company focused on sub-Saharan potash assets, is pleased to announce that it has entered into a trading agreement (the "Trading MOU") with the Common Market for Eastern and Southern Africa ("COMESA") and the Mask Africa Crowd Farm Fund Limited ("MACFF"), with a view to creating a vertical platform for the mining, production and distribution of fertiliser, focussed on the Eastern and Southern Africa (COMESA States) region and beyond. This represents a significant step in the development of the Company's corporate strategy to transform into a vertically integrated African fertiliser business. This is the first agreement of this nature entered into by COMESA, the signing of which represents a significant milestone in the African fertiliser industry and provides the Company with first-mover advantage.
· African Potash enters into three year fertiliser trading agreement with COMESA to supply and deliver at least 500,000 metric tonnes ("MT") of fertilisers on an annual basis during an initial three year period to off-takers identified and introduced by COMESA
· Trading agreement complements the Company's Lac Dinga Potash Project in the Republic of Congo, which continues to advance
· Near term revenue potential and a strong customer base expected as a result of the trading agreement
· African Potash now has a prime interest in both the exploration & extraction and trading sectors of the fertiliser industry as part of strategy to create a vertical platform for the mining, production and distribution of fertiliser
· Further upside available - the Company is developing strategic opportunities to add additional complementary industry division
· Further details of the Trading MOU are set out below.
George James Magai, Director of Trade and Markets of COMESA/ACTESA, said, "We are delighted to enter into this MoU with African Potash and look forward to working with them to deliver and implement the joint fertiliser procurement initiative (Abuja declaration 2006) over the next 10 years. I believe this will be a game changer for the agricultural sector in the COMESA region."
African Potash Executive Chairman Chris Cleverly said, "The signing of this trading agreement with COMESA is a significant step as we seek to transform the Company into a vertically integrated African fertiliser business. By adding a credible trading operation to our existing exploration operations we have demonstrated our commitment to this project, with the added benefit of generating short term cash-flows from first-class customers who have been identified and introduced by COMESA.
"Given the growing need for development of a large scale agricultural industry within Africa to feed the African population and the importance that fertilisers will inevitably hold in this development being successful, we believe that our strategy to develop a vertically integrated business with operations at all levels of the "fertiliser chain" will prove to be attractive to, and provide significant value and benefits for all stakeholders, investors and end users alike. We will continue to provide updates as we further implement this strategy.
"Finally, I wish to thank Sindiso Ngwenya and the team at COMESA for their hard work in finalising this agreement. We look forward to a long and mutually successful relationship with COMESA."
Further Details of the Trading MOU
As announced on 11 June 2015, African Potash has been engaged in negotiations with the ACTESA agency of COMESA for some time. The terms are now formalised in the Trading MOU as signed by Sindiso Ngwenya, Secretary General of COMESA.
Under the terms of the Trading MOU, which is an implementation of ACTESA's Five-Year Strategic Plan, African Potash and MACFF will supply and deliver at least 500,000MT of fertilisers to off-takers identified and introduced by COMESA, during an initial 3-year period (subject to a mutual renewal term of 10 years). COMESA will receive a commission fee of between 5 - 7.5% from sales made pursuant to the Trading MOU and will, amongst other matters, use its best endeavours to assist on any government related issues in COMESA member states relating to the implementation of the Trading MOU and generally assist and support the implementation of the Trading MOU. At present DAP fertiliser is trading at a price of approximately US$470/MT and Urea at approximately US$290/MT; based on these prices, it is expected that the Company will be able to generate net revenues of 5-15%/MT on each transaction under the Trading MOU.
As investors are aware, the Company is already developing its Lac Dinga Potash Project in the Republic of Congo and is now also separately exploring potential entry points into the fertiliser production industry within Africa to add another complementary industry division to its operations. The Company now has a prime interest in both the exploration & extraction and trading sectors of the fertiliser industry and intends to add other complementary aspects in due course, as it continues to explore opportunities.