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Sirius Minerals in detailed offtake discussions as site preparation starts

'Sirius is now undertaking multiple, detailed conversations with major potential offtakers.'

picture of Teeside
Using Tata's old dock is one of the options under consideration

Sirius Minerals PLC (LON:SXX) has started detailed discussions with a number of new offtakers for its polyhalite fertiliser it told analysts at a visit to its site in Yorkshire last week.

Richard Knights, at house broker Liberum and one of the those that visited the site, said Sirius is now undertaking multiple, detailed conversations with major potential offtakers.

Progress on offtaking is the main catalyst to further stock re-rating, he added, but said the mood had been transformed since Sirius completed a US$1.2bn financing last year.

‘Night and day’ after financing

JT Starzeki, chief marketing officer,  described the difference in some customers willingness to engage on major offtake agreements post-financing as “night and day”.

No timelines were mentioned, but Sirius indicated it was reluctant to sign phase 1 offtake deals  above 7mt at this stage to give it some flexibility on pricing once Phase 1 commenced.

Agronomy programmes across the globe continue  to support the efficacy of the polyhalite product said Sirius with new studies to be customer specific going forward.

Site preparation gets underway

Earthworks were also well underway at site with shaft sinking at the project likely to start next month.

“Two rigs are undertaking geotechnical drilling ahead of commencement of the shaft-sinking, likely around June/July. AMC has around 40 Engineers in Germany and Canada finalising the shaft engineering.

“The final terms of the shaft sinking contract, the largest single contract in the capex programme, haven't yet been finalised, but will incorporate mutually aligned incentives to deliver the best cost/time outcome.

“The company expects costs will come in-line with BFS estimates in Sterling terms,” Knights wrote in a note today.

Tata port option can give cost boost

Sirius is also in talks about acquiring a port site on Teeside that was attached to the Tata steel works now in administration.

It seems ‘an obvious source of capex synergies’ if a deal could be struck to take over the site said Knights.

Sirius said talks have begun with Tata’s administrators, though a deal would need to concluded by the end of the year to keep the project on schedule.

Shares rose 2% to 25.2p.

Quick facts: Sirius Minerals PLC

Price: 3.424 GBX

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