Sirius Minerals plc, Scarborough, England, said on Oct. 11 it has inked an exclusive 10-year supply and distribution agreement with Qatar Chemical and Petrochemical Marketing and Distribution Co., known as ‘Muntajat.’ The deal, which was agreed through Sirius’ subsidiary, York Potash Ltd., is for the sale and distribution of volumes of Poly4 into Africa (except Nigeria and Egypt), Australia, New Zealand, and certain remaining Middle-Eastern and Asian territories.
Contracted volumes under the agreement increase to around 2 million mt/y in year five and peak at 2.1 million mt/y in year eight, and take Sirius’ aggregate peak polyhalite sales volumes to 13.8 million mt/y.
Muntajat is a state-owned Qatari company which markets and distributes approximately 9 million mt/y of fertilizer.
Qatar is already an investor in Sirius. This past May, the Qatar Investment Authority, Doha, acquired 3.28 percent of Sirius (GM May 24, p. 29).
The new supply agreement with Muntajat provides Sirius with access to a number of new markets for Poly4, said Sirius Minerals Managing Director and CEO Chris Fraser in a statement.
He revealed that the U.K. company is also working with Muntajat to explore the downstream combination of Poly4 with nitrogen products in Qatar and/or the U.K. to create a value-added multi-nutrient fertilizer.
Muntajat represents and is exclusively responsible for the global sales and distribution of products from 15 major industrial production entities in Qatar and for marketing, selling and distributing all of Qatar’s fertilizer production. The Qatari company has a global marketing network servicing more than 3,000 customers in 135 counties.
The Sirius deal with Muntajat includes a five-year extension option and the Qatar company has the right to terminate the agreement in the event that Sirius does not meet certain financing or operational milestones. In turn, Sirius can terminate Muntajat’s distribution rights in relation to a specific territory if the Qatar company fails to distribute 75 percent of the contracted minimum volumes for such territory over a three-year rolling period.
The pricing mechanism in the agreement is linked to downstream pricing received by Muntajat on the sale of Poly4 and incentivizes the Qatar company to optimize the best FOB netback price for Sirius, the U.K. company said. It added that it expects the deal to deliver pricing in line with its average price expectations across its current supply agreement portfolio
In the meantime, Sirius hopes to complete a strategic review by the end of this month, including having “a good idea” of alternative funding options for its North Yorkshire polyhalite mine and processing plant under development in northeast England, CEO Fraser said in an interview this week with the U.K.’s The Times newspaper. He said it would take around six months to implement the resulting plans.
Sirius has said that the strategic review would include the potential to bring in a partner for the acquisition of “a significant part” of the project (GM Sept. 20, p.1). Analysts at the London branch of Germany’s Berenberg said in a client note earlier this month that a strategic investor could be the only lifeline left for the company (GM Oct. 4. p. 23).
Sirius announced last month that it had cancelled plans to raise US$500 million through a bond issue (GM Sept. 20, p.1). The bond raising had been a critical part of the US$3.8 billion Stage 2 financing needed to complete the polyhalite project, and the bond’s successful completion was key to unlocking a US$2.5 billion revolving credit facility (RCF) from JP Morgan Securities LLC (GM May 3, p. 1).
One option now could be to raise a much smaller amount of money and fund the construction of the parts of the project – such as the mine shafts – that project finance banks and the bond market are said to be “least comfortable with”, according to Fraser.
Following the decision to abandon the bond issue, Sirius began slowing construction at the project site in order to conserve funds and started a strategic review to assess and incorporate optimizations to the project development plan that could reduce overall capital costs and reduce risk to debt holders (GM Sept. 20, p.1).
Berenberg analysts in the client note said they believed Sirius’ North Yorkshire project now had only a 25 percent probability of completion, and said the risks of securing financing are seen as outweighing the potential returns (GM Oct. 4, p. 23). Even in a best-case scenario, they see further delays to start-up as likely. Up until recent events, Sirius had been touting first polyhalite output in 2021.
Fraser confirmed in the interview that 300 staff had lost their jobs following the decision to abandon the bond issue and the collapse of the markets-led stage-2 financing plan.
The company has had to return to investors the proceeds of US$400 million convertible bonds due 2027, raised in May as part of the company’s stage 2 financing (GM May 3, p. 1). But it says it has enough cash to keep going for about six months (GM Sept. 20, p.1).
Fraser in the newspaper interview lashed out at online shareholder chat forums, and believes the bulletin boards should be investigated by the U.K.’s Financial Conduct Authority (FCA). According to The Times, Fraser believes a 10 percent fall in Sirius’ share price the afternoon prior to its funding announcement may have been caused by a post on an online forum reportedly falsely claiming the company was about to announce an equity raise. The FCA declined to comment, according to the newspaper.