Sirius Cuts Start-Up Cost for UK Potash Mine

on Dec 4, 2012

**“Simplified Development Approach” to Cut Costs and Bring Production Launch Forwards**

The start-up cost for building a large potash mine in Yorkshire has been reduced by $1 billion (£620,270), or more than a third, as its developer Sirius Minerals (LON:SXX) said it could sell the mineral raw rather than processed, The Financial Times reported on 4 December 2012.
The price of building the potash mine in the north of England has now fallen to $1.7 billion (£1.05 billion), from $2.7 billion (£1.7 billion), as following a concept study, Sirius decided to sell the ore it produces as unrefined polyhalite, rather than as the sulphate of potash as it had initially intended. According to the UK-based potash development company, polyhalite can be sold as a direct application fertiliser — containing additional nutrients calcium and magnesium, as well as sulphur — besides being a raw material for other nutrients. Further citing its concept study, which confirms the viability of producing fertilisers using polyhalite, Sirius remarks that this raw form of the mineral is also vital for food security.

The potash company’s chief executive Chris Fraser said: “Our engagement in the major fertiliser markets around the world has led us to focus the initial development of the York Potash Project on granulated polyhalite, a unique and sustainable potash product. This simplified development approach delivers a significantly lower capital cost to achieve first production and materially reduces our initial financing requirements.”

!m[UK-Based Potash Development Company Says It Could Sell Mineral Raw Rather Than Processed](/uploads/story/959/thumbs/pic1_inline.png)The decision to sell raw potash material also enables Sirius to launch production at least three months earlier than initially planned. The date for first production at the project has now been brought forwards to the fourth quarter of 2016 from early 2017, while the annual production target has been estimated at 5 million tonnes of granulate polyhalite.

Following the announcement Sirius shares were flat at 21.75 pence in today’s London trading.
**Sirius in Talks with Potential Investors**
Along with slashing its project’s start-up cost, Sirius also confirmed that it was in talks with sovereign wealth funds and other potential customers in key markets including the US, Europe, Brazil, China, India and South East Asia about investing in its York Potash Mine.

The company’s CEO Mr Fraser remarked that a deal with an equity investor could involve an “off-take agreement”, guaranteeing supplies of the key fertiliser ingredient. He said: “We are in discussions with a lot of potential partners round the world – a lot of financial investors and strategic investors. There is an equity requirement for development. That might include an off-take agreement. Potash is a very strategic mineral.”
Sirius also outlined in a statement that Europe and the US are well developed fertiliser markets with large-scale sophisticated farmers who understand the importance of balanced fertilisation. China, India and Brazil, on the other hand, all face significant nutrient deficiencies which will need to be addressed to meet the needs of their growing populations.


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