Sirius Minerals faces further hurdles to exploit Yorkshire potash By Kate Burgess ft Last updated: September 28, 2014 11:02 pm Uphill battle awaits miner looking to grow in fertiliser market A Yorkshire miner handing out gardening tips to cabbage growers doesn’t sound like a business strategy. But last week Sirius Minerals, which has plans to extract potash from under the Yorkshire moors, broadcast snippets of research by some horticultural boffins in the US. Cultivating cabbages – of which 70m tonnes are grown a year, mostly in China – requires “precise and balanced fertilisation”. When dressed with Sirius’s particular brand of potassium-based fertiliser, however, yields rose 90 per cent. If Kent is the garden of England, a corner of Yorkshire near Whitby is the source of a superior sort of plant food called polyhalite that could help to relieve the growing pressure on global food resources. Or so Sirius claims. It is big talk from a small wannabe potash miner. But Sirius faces the age-old challenge of many innovative businesses: it must establish a market for its product. The Aim-quoted company has a tougher job than many. It must convince guardians of the North York Moors National Park that extracting 6.5m tonnes of dusty white polyhalite pellets is commercially viable and of sufficient benefit to allow Sirius to despoil the landscape. Sirius needs the permits before it can embark on raising the $2.2bn needed to construct the mine, whether through equity issues, convertible bonds, bank debt, project finance or a joint venture. The park authorities have already forced Sirius to delay and rework its plans once, causing the miner’s shares to tumble last year to less than 10p from close to their five-year high of 30p. The shares linger at about 13p. But this week Sirius will submit new designs in the hope that the park guardians will approve them by January. The trouble is that while potash is widely used as a fertiliser, the need for it is greatest in emerging markets that are a long way from Yorkshire. And potash is hardly in short supply. A Canadian cartel, Russia’s Uralkali and Belaruskali of Belarus dominate the market. There are oodles more producers around the world from the Danakil Depression in Ethiopia to Israel. There is even a deep potash mine at Boulby, less than 20 miles from Whitby. However, potash found under the Yorkshire moors is different, says Chris Fraser, Sirius’ chief executive. Unlike most sources, which have high levels of salts harmful to vegetables, polyhalite is naturally rich in plant-friendly nutrients such as magnesium, sulphur and selenium. These are the minerals that have been leached out of the soil by farmers across regions of Asia where pressure from population growth is highest. Sirius will never be more than a bit player on the world stage of potash production. Mr Fraser acknowledges polyhalite is unlikely to take more than 5 per cent of the total market. Nonetheless, he says, it is cheap to process and should be immensely profitable on the basis it costs $30 a tonne to produce and will sell for $200 a tonne. However, Mr Fraser is currently offering the product at nearer $150 a tonne – a significant discount to most forms of potash – to woo buyers in China, Central and North America. So far he has won commitments to take about 5.5m tonnes of polyhalite as and when Sirius starts production. Last week, the state-owned Tanzania Fertiliser Company agreed to take 500,000 tonnes of polyhalite a year. But park planners and investors still have to be convinced these are bankable commitments. Sirius’s rival at Boulby, a few miles away, may or may not help its case. Having suggested to the park authorities last year, along with other commentators, that the market in polyhalite was limited and there was no need for it to blot the Yorkshire landscape, Boulby is now investing millions in ramping up its own production of polyhalite. But even if Sirius wins over local planners, it has yet to win over investors in a mining sector bruised by recent losses. Sirius still needs $2.2bn to get going and shareholders won’t get much by way of returns any time soon. Even if all goes to plan, production will not start until 2018. Investors listening to Sirius’s gardening tips would be wise to take a leaf from the book of other horticultural pundits. Most gardeners know that trees that are slow to grow often bear the best fruit, but many saplings never make it to maturity.
Posted on: Mon, 29 Sep 2014 06:04:42 +0000
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