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New offtake and procurement deals to drive Sirius Minerals’ share price, says JP Morgan

JP Morgan reckons Sirius Minerals will boost its chances of securing the second and final round of financing if it can sign new offtake agreements and procurement contracts

woodsmith mine
Sirius is currently evaluating proposals from third parties who are competing to complete various bits of the project

Analysts at JP Morgan expect new off-take agreements and additional procurement contracts to drive Sirius Minerals PLC’s (LON:SXX) share price going forward.

In an operations update on Monday, the FTSE 250 company said it was on target to deliver first polyhalite production from its Woodsmith mine in North Yorkshire in 2021.

READ: SXX making “good progress” at Woodsmith mine

To do that, it still needs to raise another US$2.6bn or so, and Sirius confirmed that it still expects to finalise this second and final round of funding by the end of this year.

In order to convince banks to put up the necessary cash, the firm has been working on securing offtake deals and it now has agreements in place to sell 4.7mln tonnes of fertiliser a year.

JP Morgan wants more of these to be signed over the coming months, while it also wants to see more procurement deals inked for the outstanding bits of work at the mine which haven’t been priced up or contracted out yet.

READ: Sirius’ major value drivers remain on track

“We reaffirm our view that the near-term equity thesis will be dictated by SXX’s ability to secure the next tranche of financing, and as such look for additional procurement contracts (MTS drive 2 & 3, port etc.) and off-take agreements as focal points going forward,” read a brief research note.

The US investment bank kept its ‘overweight’ rating on hold, as well as its 45p price target.

Sirius shares were down 0.7% to 32.2p in late-morning trade on Tuesday.

Quick facts: Sirius Minerals PLC

Price: 3.528 GBX

LSE:SXX
Market: LSE
Market Cap: £247.67 m
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