Sirius Minerals PLC (LON:SXX) shares rose on Wednesday as the firm announced a 7-year supply deal which will see it sell POLY4, the fertiliser product from its Yorkshire mine, to Intercontinental Trade DMCC Dubai which will, in turn, distribute it in Nigeria.
The supply deal covers up to 350,000 tonnes of POLY4 per year for the seven years following the start of production.
"Africa is a huge potential market for POLY4 and we are very pleased to establish our initial footprint in Nigeria, which is the largest market in West Africa,” said Chris Fraser, Sirius Minerals chief executive.
“Nigeria is positioned as the key market for fertiliser growth in the region and we believe ITL Trading will be a fantastic long-term partner for the company.”
As a result of the deal, the company has now pre-contracted up to a maximum of 4.4mln tonnes to 4.7mln tonnes of POLY4 sales per year.
The deal has a pricing mechanism that’s linked to a relevant product benchmark, and, the company noted that it is consistent with the Company's existing agreements.
Fraser added: “We continue to make good progress on all aspects of our project and are in active discussions with potential customers in other key markets such as Europe, India and Brazil in order to support the stage 2 financing."
Step in the right direction
In afternoon trading, shares in the FTSE 250 listed firm were 2.4% higher at 32.18p.
Russ Mould, investment director at AJ Bell commented: ”Finding buyers for future polyhalite production may seem unexciting and just the course of doing business. However, for Sirius Minerals it is extremely important to keep signing new offtake deals for material that will be produced from its large mine in Yorkshire.”
He added: “Sirius needs more of these deals in order to convince banks to grant it project finance debt to fund the second stage of its financing requirements. News of a seven year supply deal with ITL Trading, one of the largest suppliers of fertiliser to Nigeria, is therefore a step in the right direction.”
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