Sirius inks fertilizer supply deal with Qatar’s Muntajat amid Moors project worries
Troubled potash mine developer Sirius Minerals (LON:SXX) has entered into a ten-year supply and distribution agreement with Qatar Chemical and Petrochemical Marketing and Distribution Company (Muntajat) amid doubts about the fate of its ambitious mining project in Britain’s Moors National Park.
The 2m tonne-a-year deal secures distribution of POLY4, the trademark name for the company’s Woodsmith project output, into Africa (except Nigeria and Egypt), Australia, New Zealand and certain remaining Middle-Eastern and Asian territories, Sirius said.
The future of the company and its huge fertilizer project beneath the park were thrown into doubt last month, after Sirius cancelled a bond offering that was required to unlock a $2.5 billion financing package for the mine.
Analysts at SP Angel were not very confident that Sirius could find a way out of its current financial predicament, saying they saw “little chance of a rescue” and that more job losses were likely to follow.
Early this week, the mine developer let go about 300 workers in order to slash costs and preserve cash while it carries out a strategic review of the project and alternative funding options for it.
“On one level, we admire the determination of management and the workforce to look to build the Woodsmith project and if willpower was enough on its own then the workers determination could get the job done,” they wrote.
Analysts questioned, however, Sirius’ decision to proceed with the construction of a mine project that was “evidently unfunded to completion.” “We would normally consider it to be extremely risky and unusual to start construction of a mine of this scale and this type of product without being certain of where the finance was coming from.”
The Woodsmith mine, poised to be one of the world’s largest in terms of the amount of resources extracted, is set to generate an initial 10 million tonnes per year of polyhalite, a form of potash that is used in plant fertilizers. Output is forecasted to reach 13 million tonnes in 2026.
The operation involves sinking two 1.5km shafts below a national park on the North York Moors and is expected to create about 1,800 jobs during construction, as well as 1,000 permanent positions once it opens in May 2021.
The ore will be extracted via the two mine shafts and transported to Teesside on the world’s longest underground conveyor belt, via a 37km-underground tunnel. It will then be granulated at a materials handling facility, with the majority being exported to overseas markets.
Sirius said it planned to provide a financing update by the end of the month.