Sirius signs materials handling agreement and lease with Redcar Bulk Terminal

09/07/2018

  • Materials handling agreement signed with Redcar Bulk Terminal Limited to provide port and ship loading services for up to 10 million tonnes per annum.
  • Long-term lease of land for storage facilities adjacent to port facilities.
  • Arrangements will provide greater flexibility in storage and port operations.
  • Reduces construction risk and capital expenditure requirements during the current construction programme which will have stage 2 financing benefits.

Sirius Minerals Plc ("Sirius" or the "Company") announces that its subsidiary York Potash Ltd ("YPL") and Redcar Bulk Terminal Limited ("RBT") have entered into a materials handling agreement ("MHA") under which RBT will provide port and ship loading services from its existing Redcar Bulk Terminal port facility. RBT and York Potash Processing & Ports Ltd ("YPPPL"), another Sirius subsidiary, have also entered into a long-term lease for land adjacent to the Company's existing port facilities for the Company's finished product storage facilities.

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

"We are pleased to enter into this arrangement which reduces the complexity of our construction programme and ultimately helps to simplify our stage two financing plan which is being finalised over the coming months.

"By working with a local partner, we can develop our project and also deliver benefits to an existing established business in the Tees Valley. The RBT facility has been underutilised since the closure of the steel works and this agreement will ultimately help us deliver tremendous economic benefits for the region."

Garry O'Malley, RBT's General Manager, said:

"This is excellent news for Teesside and we're delighted to be working with Sirius Minerals on a project of such regional magnitude.

"It's another significant step forward in the continued resurgence of Redcar Bulk Terminal (RBT) and demonstrates the integral role we're playing in the regeneration of the South Tees site."

Materials Handling Agreement

RBT's port facility is located adjacent to the Company's Bran Sands site and is also a deep-water terminal capable of handling up to Capesize vessels. RBT has historically operated as a bulk import terminal in connection with the adjacent steel works that closed in 2015. Following the closure of the steelworks, RBT continued to operate, invest and grow into a multi-model terminal attracting a number of new customers and products. However, in order to handle POLY4 exports, some capital expenditure, predominantly ship loaders and conveyors, is required at RBT to facilitate the loading of ships with POLY4.

Pursuant to the agreement with RBT, Sirius will, as part of the Company's procurement plan that is currently being finalised, procure and install the necessary ship loading equipment and systems onto the RBT owned facility. RBT will operate and maintain the new equipment installed and owned by Sirius. The services are to be provided for a period of ten years from first shipment of POLY4, subject to customary extension and termination rights for YPL.

The agreement is for up to ten million tonnes per annum of production from Sirius. From the third year of production YPL will guarantee certain payments to RBT for a minimum volume of materials handling. The minimum volumes for such are set in line with the Company's POLY4 sales expectations. The rate payable to RBT for the materials handling services are based on flat rates (linked to inflation) with incentives for Sirius to utilise larger vessels. The rates are in line with Sirius' existing operating cost expectations.

The arrangements with RBT provide flexibility for the Company through the utilisation of existing port infrastructure which leads to capital expenditure savings and reduces construction risk during the current construction programme. Sirius has retained the right to develop its Bran Sands facility at a future date of its choosing, which it continues to plan to do in due course. As the Company looks to expand beyond the initial production levels, the agreement with RBT provides the flexibility to continue to utilise RBT and to bring on-stream Bran Sands. This provides Sirius with maximum shipping flexibility and opportunities for berth optimisation for the long-term.

Product Storage Facilities

Via YPPPL the Company has also secured a 30 year lease (with rights to renew) over 40 acres of land adjacent to the RBT port facilities and the Company's Bran Sands port site. This land will be used to develop the Company's finished product storage facilities. Locating the storage facilities adjacent to both port locations provides the Company with a more efficient loading circuit by substantially decreasing the distance from the warehouse (previously planning to be located at the materials handling facility at Wilton) to the ship loader. The Company received planning permission from Redcar Cleveland Borough Council for locating the storage facilities on the RBT site on 30 April 2018.

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