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Sirius Minerals confirms Archer Daniels is its largest off-take partner

Sirius's granulated POLY4 product will be produced by extracting polyhalite from its Woodsmith Mine, crushing and grinding the mineral and then granulating the resulting powder using a starch binder, supplied by ADM

The Woodsmith mine
The Woodsmith Mine in North Yorkshire will access the world's largest and highest grade polyhalite deposit

Sirius Minerals PLC (LON:SXX) has expanded its relationship with Archer Daniels Midland Co (NYSE:ADM), the Fortune 500 US-based agri-business.

Archer Daniels Midland (ADM) has agreed to supply Sirius with a starch-based binding agent, used in the POLY4 fertiliser production process, for an initial period of five years from the commencement of production with renewal options written into the arrangement.

READ: Sirius Minerals shares up as it inks new 7-year POLY4 supply deal for Nigerian market

Sirius will design and construct a binder handling facility with the support and expertise of ADM, at or close to, Sirius's materials handling facility in Teesside.

ADM will continue its existing research and development programme on binders for POLY4 for a further period of three years. These research activities will help to evolve processes to develop the most efficient and effective methods for the granulation of POLY4.

The US company plans to assess how best to service the contract with Sirius and this may include the construction of a new processing facility close to Sirius’s operations in Teesside.

ADM already has a relationship with Sirius, having entered into an off-take agreement with the UK company in 2014; the agreement was subsequently expanded in 2015. At the time the off-take agreements were signed, ADM's identity was kept a secret.

"Sirius has been working with ADM for more than four years and today's announcement further strengthens our relationship by securing ADM as an important supplier and as a customer aligning our interests for the long-term and demonstrating the significant role POLY4 will play in the world fertiliser markets," said Chris Fraser, the managing director and chief executive officer of Sirius.

Scott Nagel, the president of ADM Fertilizer, said the company was an early adopter of POLY4 and the agreement announced today would enable it to expand into the Mexican market with the POLY4 offering.

“The opportunity to expand our distribution into the Mexican market with a product like POLY4 supports the overall growth strategy of our business. We are pleased that Sirius sees the benefits of the efficient distribution system we have built in North America and we are looking forward to adding POLY4 to our portfolio of fertiliser products," Nagel said.

The Liberum mining team provided a bit more detail about the existing relationship between ADM and Sirius, explaining that ADM had opted to remain anonymous when it signed a 1.5mln tonnes per annum (mtpa) binding take-or-pay supply agreement three years ago.

“Its naming as an off-take partner today adds to the public endorsement of POLY4 as a product,” Liberum suggested.

Shares in Sirius were up 4.3% to 37.2p on the news.

--- adds broker comment and share price reaction ---


Quick facts: Sirius Minerals PLC

Price: 5.2 GBX

Market: LSE
Market Cap: £365.05 m

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