Sirius Minerals, the company behind the £3.2bn Woodsmith polyhalite mine in the North York Moors National Park, has signed its largest ever offtake agreement.
The long-term supply agreement is with Cibra, Brazil’s sixth largest fertiliser distributor and is for up to 2.5 million tonnes a year of POLY4 fertiliser.
The deal will supply POLY4 in Brazil and other countries in South America.
Sirius has also agreed to acquire a 30 per cent equity interest in each of the Cibra Group Companies for a total of 95 million ordinary shares of Sirius.
Santiago Franco, CEO of Cibra, said: “We are excited to be entering into this long-term partnership with Sirius to deliver POLY4 into Brazil and other key markets of South America.
“The supply agreement provides Cibra with access to a unique multi-nutrient product that will play an important and valuable role in one of the fastest growing fertiliser markets in the world. POLY4 will change the shape of the fertilizer market in South America and Cibra will be at the heart of driving the growth and adoption of this innovative sustainable product across the region.”
Chris Fraser, managing director and CEO of Sirius, said: “We are delighted to have signed these supply and investment agreements with a leading player in the South American fertiliser market with a proven track record and ambitious growth plans.
“Cibra is a perfect partner for distributing POLY4 into this key market, where trials have demonstrated how it can significantly enhance farming economics. The Cibra offtake agreement takes us beyond our targeted 7 million tonnes a year and is a major step forward as we look to complete Stage 2 financing and building our global fertiliser business.”
The supply agreement provides for resale of POLY4 on an exclusive basis into Brazil, Bolivia, French Guaiana, Guyana, Paraguay, Surinam, Uruguay and Venezuela, and on a non-exclusive basis into Argentina, Chile, Colombia, Ecuador and Peru.
The initial contract term of seven years may be extended for two additional five-year periods.
Analyst Paul Smith at WH Ireland said: “This is an interesting departure for Sirius relative to its usual deals and provides the company with access to an established fertiliser business in a key market to help market the product and protect its long-term distribution interests in the region.
“Another tick in the box for Sirius today with a high quality partner in a key market for the company. An interesting deal that will allow Sirius to help in the strategic direction to grow business in South America.”
Analyst Richard Knights at Liberum added: “Four of the top six distributors in Brazil, which have 60 per cent of the market, are controlled by producers of key competing products, SOP or SSP.
“To pursue a disruptive sales strategy, Sirius needed to partner with an ambitious partner with no vested interest in downstream production of a competing commodity.
“Sirius now has a long-term partnership and avenue for distribution in one of the largest and fastest growing fertiliser markets where POLY4’s nutrient profile will be valued by end-users.
“Brazil is a market Sirius can’t afford not to be in.
“Cibra has significant growth plans and its management team have an established track record.”