19th Aug 2015 08:23
LONDON (Alliance News) - Sirius Minerals PLC shares rose on Wednesday after it said it has secured an upgrade to its take or pay supply agreement with an existing Fortune 500 US-based agri-business customer, which it did not name.
Sirius shares were up 2.8% to 17.22 pence per share on Wednesday morning.
The initial agreement was signed back in January 2014 for 500,000 tonnes per year of polyhalite for a five-year period from the recently approved York potash project, starting from the commencement of production, with an option to be renewed for another five years.
The revised agreement triples the amount of polyhalite to be supplied to 1.5 million tonnes per year, while the contract term has been extended to seven years, with two further five-year extension options.
That polyhalite, which is primarily used in fertiliser, will come from the company's potash project in Yorkshire, which once constructed will be the largest mine of its type in the world and the first in the UK for over 40 years.
The price that the unnamed customer will pay will remain confidential but will still be based on a formula linked to the market price of nutrients contained in polyhalite, it said.
"To give context on the significance of the agreement, on current prices and over a full 17 year period, it represents a multi-billion dollar trade deal between the UK and US," said Sirius in a statement.
"We are delighted with this further show of confidence from our North American partner and look forward to sharing successes together for decades to come," said Sirius Chief Executive and Managing Director Chris Fraser.
The agreement means Sirius has secured 3.1 million tonnes per annum of offtake agreements, with an additional 4.8 million tonnes per annum in other forms of commitments, which will both assist the company secure further financing for the project in the future, it said.
Sirius plans to secure the first tranche of financing for the project in the first quarter of 2016. The total cost of the project is around USD2.70 billion. Sirius currently intends to split the financing of the project into two stages. Stage one will focus on the initial construction period where the perceived risks are higher and will be fully funded by debt funding.
To put the financing and offtakes into context, the project will initially produce a 10.0 million tonne per year project in its first phase before being upgraded to deliver up to 20.0 million tonnes per year in the second.
By Joshua Warner; [email protected]; @JoshAlliance and Sam Unsted; [email protected]; @SamUAtAlliance
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