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UPDATE - Sirius Minerals milestone as it signs off-take deal with the Chinese

Sirius Minerals said it has signed a one-million tonne a year off-take agreement for polyhalite produced at its York Potash project. The 10-year deal, starting 2017, is with the Yunnan TCT Yong-Zhe Company (TCT) of China.

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Sirius Minerals (LON:SXX) said it has signed a one-million tonne a year off-take agreement for polyhalite produced at its York Potash project.

The 10-year deal, starting 2017, is with the Yunnan TCT Yong-Zhe Company (TCT) of China.

Sirius said the off-take is for a fixed price over the first three years of the contract, with the potential renegotiate terms from year-four onwards.

Pricing details remain confidential. However, they are in line with assumptions made when modelling the economics of the company’s flagship project.

Sirius managing director Chris Fraser said: "This is a major milestone for the company that further demonstrates the market for polyhalite, supports the economics behind the project and will ultimately help to give confidence in the financing for construction.

"The off-take agreement is the latest endorsement of the global demand for polyhalite, its unique multi-nutrient qualities and the role that balanced fertilisation can play in the largest fertilizer market in the world. We look forward to working with TCT to realise the outstanding potential for polyhalite."

Privately-owned TCT is one of the fastest growing agricultural products companies in China, with its head office in Kunming, in the Yunnan Province. It also operates in the important agricultural provinces of Sichuan, Guizhou, Hainan, Guangzhou, plus Beijing and Shanghai.

The signing ceremony for the deal took place in Kunming and was attended by senior government officials from the Yunnan Province as well as senior executives from the Industrial and Commercial Bank of China.

Yu Yan Qing, chief executive of TCT, said: "We see great potential in polyhalite as an organic multi-nutrient fertilizer that can provide a competitive advance in agricultural efficiency and helping to increase crop yields and quality in China.

“This is an important step for a long term and prosperous relationship between TCT and Sirius Minerals."

The shares rose 4% to 27.11 pence each, valuing Sirius at £365mln.

City broker Investec said the agreement was an “encouraging development”.

Natural resources boutique SP Angel said the base-case price used to assess the net present value of the York Potash project was around US$550 a tonne.

Analyst John Meyer said it will be “very helpful” in funding discussions if this price can be “locked in”.

Quick facts: Sirius Minerals PLC

Price: 3.518 GBX

LSE:SXX
Market: LSE
Market Cap: £246.94 m
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