Sirius Minerals to supply 500,000 tonnes of fertiliser a year to Chinese Huaken International

Sirius Minerals, a potash exploration and mining company, has inked a deal to supply Chinese import and export group Huaken International with polyhalite — a form of fertiliser. The latter will purchase as much as 500,000 tonnes of the fertiliser in an "offtake agreement".

Such agreements are entered into between two parties before a mine goes into production. These help secure the finances required for the development of the mine, which in this case is Sirius's potash mine located on the coast of North Yorkshire. An actual supply will start once the mine is fully operational.

Apart from this deal, the company has also signed agreements to supply 3.1 million tonnes of fertiliser a year from the mine. This follows an increase in demand after an American fertiliser group tripled its seven-year deal in August to 1.5 million tonnes a year.

Sirius is currently seeking partners to finance the development of this mine, which a study estimates will cost around £1.5bn (€2bn, $2.2bn) to build. It will produce about 13 million tonnes of polyhalite a year.

Chris Fraser, chief executive of Sirius, said that he was happy to have signed this deal and was looking forward to working very closely with the Chinese company for the long term. "Polyhalite's multi-nutrient qualities have useful soil conditioning properties and it can assist in helping countries like China restore agricultural productivity and maintain food security for future generations," Fraser added.

In October, the AIM-listed miner received planning permission for the North Yorkshire mine and an underground transport system. This marked a big win for Sirius, which overcame a difficult and disputed four-year application process. After this grant of permission, many investors were doing due diligence on the mine, the company had said previously.

Russell Scrimshaw, chairman at Sirius, described receiving the approvals as a moment of "relief and joy". "It is about a British company set on breaking down the barriers to become a global leader in a product and industry that the world will rely upon to successfully feed its growing population," Scrimshaw said.