The deal, described as a ‘major take or pay’ agreement, sees Indian Farmers Fertilisers Cooperative Limited (IFFCO) take significant volumes of the POLY4 fertiliser product over an eleven year term.
Volumes are expected to reach 1mln tonnes per year by year eight, with options in place to increase supply further to 1.25mln tonnes.
IFFCO – one of the world’s largest co-ops with 36,000 members representing up to 55 million Indian farmers - has a break clause after year eight and there is also a 10-year extension option which is subject to mutual agreement.
"We are delighted to be embarking on a long-term partnership with IFFCO, an organisation with a wide reach and a proud history in India and a substantial profile in the global fertilizer market,” said Chris Fraser, Sirius managing director.
“POLY4 can undoubtedly have a hugely positive impact on Indian agriculture, both in terms of yields and sustainability and we look forward to working with IFFCO to deliver these benefits for Indian farmers for many years to come."
IFFCO chief executive Dr Udai Shanker Awasthi, meanwhile, added: “POLY4 offers a unique opportunity for IFFCO to help deliver our vision of increasing farmer's incomes by increasing crop productivity and the balanced use of energy efficient fertilizers.
“The multi-nutrient characteristics of POLY4 are well suited to Indian soils and crops.
“Having seen the ongoing crop science work and results, I know that this partnership between Sirius and IFFCO will have an important role to play for farmers in improving yield, quality and profitability of crops.”
The agreement adds to the London-listed group’s existing supply deals. Prior to the IFFCO deal, Sirius had 10.7mln tonnes worth of contracted sales per year across multiple customer agreements.
Critical financing juncture
In a note to clients, analysts at Shore Capital pointed out that Sirius is now at the crucial juncture of its US$3.8bn Stage 2 financing package for the construction of its paradigm-shifting North Yorkshire polyhalite project in England.
Having successfully completed the first phase of this package, raising US$425m of equity and a further US$400m via the issuance of eight-year convertible bonds, the analysts said they now look to the US$3.0bn ‘Senior Debt Event’, which they expect will be completed over the summer of 2019.
The analysts said: “We expect the Senior Debt Event to catalyse a major re-rating of the shares, as it is in our view effectively the key to unlocking Sirius’s vast value potential.
“Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe.”
In afternoon trading, Sirius shares were 0.6% lower at 15.80p.
-- Adds analyst comment, share price --