Sirius Minerals Plc - Supply agreement signed in India
Supply agreement signed in India
§ Major take-or-pay supply agreement signed with IFFCO for POLY4 supply
§ IFFCO is one of the largest co-operative societies in the world with access to over 55 million Indian farmers
§ Terms are for 11 years ramping up to 1 Mtpa in year eight, with a mutual agreement option for an additional 250,000 tonnes per annum
§ Total peak aggregate volumes now under contract stands at 11.7Mtpa (13.4 Mtpa including customer volume options)
Sirius Minerals Plc ("Sirius" or the "Company") has signed a take-or-pay supply agreement (the "Agreement") with Indian Farmers Fertilisers Cooperative Limited ("IFFCO") for the supply of POLY4 in India. Volumes will ramp up to one million tonnes per annum ("Mtpa") in year eight, with an option subject to mutual agreement of the parties to increase this to 1.25 Mtpa.
IFFCO is one of the largest co-operative societies in the world with over 36,000 member cooperatives and access to over 55 million Indian farmers. Its primary business is the manufacturing and marketing of fertilizers and it is in the top 100 of India's Fortune 500 group of companies.
India is one of the top three fertilizer markets in the world with a total nutrient consumption of around 30 Mtpa. The demand for fertilizers in India has been growing steadily due to increasing demand for food as the country's population increases. With the need to increase productivity per hectare, multi-nutrient products like POLY4 are well suited to Indian agriculture and soils.
The Agreement is for the exclusive supply and distribution of POLY4 throughout India and is on a take-or-pay basis. Volumes ramp up to 1 Mtpa in year eight of the 11 year term, with the option for an additional 250,000 tonnes per annum by mutual agreement, and pricing is based on a nutrient linked formula on a CIF India basis. IFFCO has a break clause after year eight and there is a 10-year extension option subject to mutual agreement by the two parties.
Chris Fraser, Managing Director and CEO of Sirius, comments:
"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. 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."
Dr Udai Shanker Awasthi, Managing Director & Chief Executive Officer of IFFCO, comments:
"POLY4 offers a unique opportunity for IFFCO to help deliver our vision of increasing farmer's incomes by increasing crop productivity and the balanced use of energy efficient fertilizers. The multi-nutrient characteristics of POLY4 are well suited to Indian soils and crops. Having seen the ongoing crop science work and results, I know that this partnership between Sirius and IFFCO will have an important role to play for farmers in improving yield, quality and profitability of crops.
"This Agreement is very much in line with IFFCO's ongoing initiative of achieving balanced nutritional management for soil, because good quality soil will help our farmers to increase their yields. In turn this can help in our Prime Minister's initiative of seeking to double farmer income by 2022 as well as helping to address the most challenging issues of agricultural sustainability and food security.
"POLY4's combination of potassium, sulphur, magnesium and calcium, together with trace micronutrients, low chloride content and suitability for organic use, means that it can help to offer better balanced crop nutrition and sustained soil health to Indian agriculture and farmers."
Volume commitments ramp up after Sirius' first commercial production begins. The initial terms include provisions for volume flexibility where, subject to certain conditions, IFFCO may roll forward a proportion of the minimum quantities between contract years. Similarly, subject to the agreement of the Company, IFFCO may also elect to increase ramp up volumes.
The Agreement provides for a steering committee that will be established to assist both parties in working together to implement the in-country marketing plan for sales of POLY4, including liaising in relation to research and development.
IFFCO is one of the world's largest co-operative societies and is wholly owned by Indian co-operatives. Founded in 1967 with just 57 co-operatives, today it is an amalgamation of over 36,000 co-operatives, with diversified business interests ranging from general insurance to rural telecom. Its core business remains the manufacture, sale and distribution of fertilizers and it therefore has access to the extensive infrastructure needed to deliver that.
IFFCO has five fertilizer manufacturing facilities across India and three overseas units in Oman, Jordan and Senegal. Every third bag of phosphate fertilizers' and every fifth bag of nitrogen fertilizer marketed in India is handled by IFFCO. It has an extensive marketing network consisting of over 36,000 cooperative societies, 163 R&D Farmer Service Centres and over 82,000 retail outlets. It has presence in 30 states of India, with over 400 sales agronomists in the field and member societies forming the backbone of the Indian rural economy. During 2018-19, IFFCO produced 8.14 million tonnes of fertilizer (urea and complex blends) and sold approximately 11.55 million tonnes to farmers.
IFFCO also has diversified interests beyond fertilizers in sectors like general insurance, agrochemicals, rural mobile telephony and international trading. It also runs various programmes for the benefit of farmers in India - around 10,000 farmers are trained annually in appropriate farm technologies for efficient soil management and balanced fertilization practices. Soil testing services are also provided free of cost for farmers and it undertakes special projects for soil rejuvenation and water resource development, livelihood generation, farm mechanization and capacity development.