Sirius Minerals has entered into a new take-or-pay agreement with Yunnan Dian Huang Peony Industrial Group Co. Ltd. The new agreement replaces the offtake contract announced on June 27, 2013, with Yunnan TCT Yong-Zhe Co. Ltd., which TCT and Sirius have mutually agreed to cancel. The TCT agreement was for a period of three years with a seven-year extension option. The new agreement is for a period 10 years from first production, ramping up to 1 million metric tons per year over the first six years of the contract.
Sirius Minerals is a U.K.-based fertilizer development company focused on the development and operation of its polyhalite project in North Yorkshire. TCT has facilitated the Dian Huang agreement as a replacement and upgrading of the contract to supply Yunnan. The agreement with Dian Huang strengthens the company’s supply position in Yunnan by supplying a customer closer to the end user and also by removing the conditions that were included in the original TCT agreement. Dian Huang is a national peony seed oil production enterprise in China with strong government support and backing.
The price to be paid under the new agreement will be based on a formula linked to the market price of nutrients contained in POLY4, which is consistent with the company’s other offtake agreements. The TCT agreement in Yunnan had a fixed price for three years followed by a renegotiated price for the remaining seven years. The 10-year pricing mechanism in the new agreement gives greater confidence to both parties moving forward, according to Sirius.
“There is great potential for our multinutrient product in both Yunnan and China so firming up this supply arrangement is another positive step for us, especially at such a competitive time for the fertilizer industry,” said Chris Fraser, managing director and CEO for Sirius. “We look forward to working with Dian Huang for many years to come and our POLY4 product playing a significant role in more effective, efficient and environmentally sustainable agriculture in the region.”