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Sirius Minerals looks to next phase as review window shuts

The window for all appeals against the company’s giant fertiliser mine has closed

teesside.jpg
Local landmark: The historic transporter bridge on Teeside, downriver from the company's planned port facility.

Investors in Sirius Minerals PLC (AIM: SXX, OTCQX: SRUXY) can stop holding their breath.

The window for all appeals against the company’s giant fertiliser mine has slammed shut.

It follows the closure of the judicial review period for the mine’s proposed harbour facility on Teesside.

“As a result of this, all key planning and development consent approvals for the company's North Yorkshire Polyhalite Project have therefore been received and all related judicial review periods have expired without any objections being tabled,” Sirius said in short stock exchange statement.

Now the focus will turn to actually building a mine that will, initially, churn out 10mln tonnes of this nutrient-rich polyhalite material to be transported 23 miles underground to the shipping site mentioned above.

The cost of the initial development is put at £833mln (US$1.09bn) to get the company producing its first exports by 2021.

There is the potential then to double capacity for a similar cost.

The project financing will come from the debt market, although investors may have to dig in their pockets one last time for the initial phase of the mine development.

Getting the project to the ‘oven-ready’ stage it is today was just one facet of the work carried out by Fraser and the Sirius team.

Polyhalite – the fertiliser that will be mined - wasn’t particularly well understood by the market when the project was first being mooted.

Its detractors tried to say it was inferior to the products already out in the market.

In fact it contains a number of essential macro-nutrients (potassium, sulphur, calcium and magnesium) which makes it a well-rounded additive to promote crop growth.

That then translates to cost-savings and increased farm profits for those using it.

Having put the case for polyhalite, Sirius then had to get potential customers to sign up for shipments once the mine goes live.

An extensive marketing programme secured at least 3.6mln tonnes a year in what are known as take or pay agreements with an option of up to 7.9mln tonnes.

Yuen Low, mining analyst at Shore Capital, described the above deals as “proof-of-the-pudding validation” of the mining project’s potential once operational.

The recent definitive feasibility study said it has the potential to generate up to £2.3bn (US$3bn) in operating profits a year. The same report put the project’s net present value at £11.5bn.

The risk now is that Sirius fails to land the cash required to take its monster deposit into production.

“Given said project’s myriad strengths, we are more confident than ever that procuring the requisite funds should not prove overly problematic,” said Shore Capital’s Low recently.

In fact the company has begun to appoint the contractors that will build the mine.

Shares are up 144% in the last year, although in the past couple of weeks have succumbed to a bout of profit-taking.

Quick facts: Sirius Minerals PLC

Price: 3.424 GBX

LSE:SXX
Market: LSE
Market Cap: £240.34 m
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