Sirius Minerals share price: what's the outlook as supply deal agreed?

The UK-based fertiliser development company signed a take-or-pay supply agreement with Indian farmers co-up last week, but the deal did little to stop its share price from sliding further.

Sirius Minerals Source: Bloomberg

Sirius Minerals unveiled a major new supply deal with a leading Indian farming co-op for its POLY4 fertiliser product, increasing contracted sales.

The take-or-pay deal signed with Indian Farmers Fertilisers Cooperative Limited (IFFCO) will see volumes ramp up to one million tonnes per annum in the eighth year of their 11-year agreement, with the option to increase supply by an additional 250,000 tonnes.

‘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,’ Sirius Minerals Managing Director Chris Fraser said.

‘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,’ he added.

Sirius Minerals share price slides further despite striking major supply deal

Despite securing the major supply deal it has done little to stabilise Sirius Minerals' share price, which has fallen more than 16% to 13.64p a share, down from 16.40p since the announcement last week.

In a note to investors, analysts at Shore Capital has reached a crucial milestone in its $3.8 billion Stage 2 financing package with the capital allocated to fund the construction of its new polyhalite project in North Yorkshire, UK.

‘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,’ Shore Capital analysts said in the note.

‘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.’

Read an in-depth analysis of where the Sirius Minerals share price is headed.


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