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UPDATE - Sirius Minerals unveils sales deal with Central American fertiliser distributor

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Sirius Minerals' (LON:SXX) York potash project was boosted further by a five year agreement on sales with a large Central American fertiliser distributor.

The binding take-or-pay offtake agreement for the polyhalite product is based on the supply of 150,000 tonnes per annum (tpa) in the first year, rising on a stepped basis to 250,000 tpa in the fifth year of production.

It is structured to align with the proposed production ramp-up schedule for the site and can be extended for a further five years.

Sirius chief executive and managing director Chris Fraser told investors: "This agreement continues to extend the global sales reach of polyhalite and means we are now partnered with an organisation that controls a substantial proportion of the Central American crop input market.

"Our customer commitments now exceed five million tonnes per annum, with additional options for 750,000 tonnes per annum.

"We are having a number of ongoing discussions with customers seeking to tie down supply agreements for this important multi-nutrient mineral."

The customer also has the option to increase the minimum amount of the contract by an additional 250,000 tpa, while the price of the polyhalite will be based on a formula linked to the market price of nutrients contained and is in line with previous market guidance.

Stockbroker Liberum was upbeat on the news, rating the Sirius stock a 'buy' and targeting 29p.

It noted that pricing looked to be in line with previous contracts, which the broker models at US$150/ per tonne, or around a 25% discount to the firm's sum-of-the-parts.

It also highlighted that the key date will be the permitting approval in January, but today's deal is a further endorsement for the project from one of the largest distributors in South America.

Sirius shares rose Monday 9.3% to 11.75p.

Quick facts: Sirius Minerals PLC

Price: 3.558 GBX

LSE:SXX
Market: LSE
Market Cap: £249.78 m
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