Long-term supply agreements signed with two new Chinese customers

20/07/2018

  • New long-term supply agreements signed each with two new Chinese customers, Eiliseng and YSA, for 1.2 Mtpa and 800,000 tpa respectively.
  • Pricing terms consistent with the Company's existing agreements.
  • Eiliseng taken up the rights to resell POLY4 in Yunnan and Sichuan and to service demand from Dian Huang.
  • Dian Huang and the Company have mutually agreed to terminate the existing agreement for supply of up to 1 Mtpa.
  • Company's aggregate peak contracted take-or-pay sales volume increased to 5.7 Mtpa.

Sirius Minerals has announced the signing of binding take-or-pay supply agreements to supply POLY4 to Guangzhou Eiliseng Biotech Co Ltd ("Eiliseng") and Yantai Service Agricultural Science and Technology Co Ltd ("YSA").

Sirius has entered into binding take-or-pay supply agreements with each of Eiliseng and YSA for the resale of POLY4 into certain southern and northern provinces of China. Both agreements have 10-year terms which run from first production and pricing mechanisms linked to relevant product benchmarks that are consistent with the Company's existing portfolio of agreements.

In China, government enforced changes in agricultural practices and planned farm consolidation will support the drive to restore soil efficiencies through the adoption of more balanced and environmentally sustainable fertilization practices. Sirius has conducted over 320 successful agronomy trials on 35 types of crop in 23 countries. These trials have demonstrated the benefits of POLY4 as a multi-nutrient fertilizer with a low environmental impact that delivers greater nutrient uptake and can improve both yield and quality.

This announcement builds on the Company's strong position in Asia, having signed multiple deals across the region with distributors including leading agri-business Wilmar Group, one of the largest and most established fertilizer buyers and distributors in South East Asia.

Taking the minimum volumes under the new Chinese agreements into account, the Company's aggregate peak contracted take-or-pay sales volumes has increased from 4.7 Mtpa to 5.7 Mtpa.

Chris Fraser, Managing Director and CEO of Sirius, comments:

"China is a key market for POLY4 and we are very pleased to have signed agreements with new customers who both have established fertilizer distribution networks and expertise relevant to their respective regions. We look forward to working with Eiliseng and YSA to establish POLY4 as a long term sustainable fertilizer for use in both of their important agricultural regions in China."

Southern China

Eiliseng is part of an established agricultural group operating with access to an extensive distribution network across key southern agricultural provinces in China. Eiliseng is committed to moving towards organic and more sustainable fertilizers in line with policy in China. The Eiliseng agreement provides for resale of POLY4 into provinces based across the south of China with potential sales volumes up to a maximum of 1.3 Mtpa by the seventh year and provides mechanics to ensure minimum volumes on a take-or-pay basis reaching 1.15 Mtpa in the peak year.

Due to its changing growth plans Yunnan Dian Huang Peony Industrial Group Co Ltd ("Dian Huang") and the Company have mutually agreed to terminate their existing agreement for supply of up to 1 Mtpa of POLY4 into Yunnan and Sichuan. Eiliseng now has the rights to resell POLY4 in these provinces and to service demand from Dian Huang.

Mr Jing Hai Shan, General Manager of Eiliseng, comments:

"Eiliseng is committed to delivering quality solutions for best practice agriculture in southern China through our distribution network direct to farmers. We are confident that with Chinese Government policy support and POLY4's unique multi nutrient characteristics that it will play an important role in meeting southern China's agricultural challenges and delivering best practice fertilization."

Northern China

YSA is an agricultural services business and strategic partner of Yantai Agricultural Means of Production Corporation ("Yantai AMP") responsible for product innovation and procurement in line with the Chinese Government's policies. YSA distributes its products through the Yantai AMP network utilising their extensive agronomic and sales support network. The YSA agreement provides for resale of POLY4 into certain provinces in the north of China. The agreement provides for a minimum volume commitment on a take-or-pay basis of 800,000 tpa in its peak year with an accelerated ramp-up schedule which has it reaching 800,000 tpa in the sixth year.

Mr Zhang Ya Bin, General Manager of YSA, comments:

"YSA and Yantai AMP are delighted to have secured the distribution rights for POLY4 in northern provinces of China. POLY4 is a unique fertilizer product that we believe will play a significant role in revolutionising farmer practices in the region and support the policy goals of China."

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