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Huge UK Fertilizer Deal Confirmed By Chinese Company: Reuters

Huge UK Fertilizer Deal Confirmed By Chinese Company: Reuters
Confirmation of a binding agreement with the UK firm, Sirius Minerals, was given by a small Chinese company that is key to plans by Sirius Minerals to build a huge fertilizer mine under a national park in the north of England, reports news agency Reuters.
Saying it had been signed on May 27 last year. DianHuang would buy 150,000 tonnes of the mineral polyhalite a year from first extraction in 2021, DianHuang CEO Wang Xiaotian reiterated the agreement in a letter to Reuters on May 15. He said that as part of plans to grow peony flowers and extract edible oil from their seeds it would be scaled up to a million tonnes a year over five years.
So far, the biggest take-or-pay agreement Sirius has inked with a named customer is the DianHuang deal. It helped Sirius to win planning permission from the North York Moors national park and raise $1.2 billion in financing for the mine by demonstrating confirmed demand for its product.
To complete the mining project, a further $2.6 billion, in debt financing need to be raised by Sirius from its existing take-or-pay agreements and more. In order to satisfy the banks arranging the financing that it has enough potential cash flow, the company has said it must double the amount of polyhalite covered by take-or-pay deals.
"We have not officially signed this, it is just a strategic cooperation agreement ... Because with Sirius we have a framework cooperation, of course we hope this cooperation can be pushed forward", Wang had said when asked if DianHuang had signed a legally binding agreement with Sirius.
Under a take-or-pay arrangement, DianHuang would buy up to a million tonnes of fertilizer a year from first extraction, Sirius said.
Negotiations with a rival firm, ICL, also known as Israel Chemicals, was also being carried on by DianHuang, Wang had said.
"It depends whose fertilizer is more beneficial for us," he said. "ICL is the biggest global producer of organic potassium fertilizer. They are also competing, they are also in touch with us. They have brought over some fertilizer for test use."
There were no comments on DianHuang's statement by ICL, whose mine is on the same Yorkshire seam that Sirius plans to exploit. The assertion that it only had a framework agreement with DianHuang was incorrect, Sirius said when Reuters posed questions to Sirius Minerals about Wang's phone comments: "The Company has a binding offtake agreement in place."
"To clarify, the contract is not a framework agreement but rather a firm take or pay agreement," said Wang's letter.
Polyhalite is a multi-nutrient product superior to traditional potash, both the companies say and it is a relatively new entrant to the fertilizer market and ICL is so far the only company that has actually begun mining polyhalite.
So far, for its polyhalite product, Sirius has announced take-or-pay agreements for up to 3.6 million tonnes a year. For commercial reasons, it has not named some customers.

Christopher J. Mitchell

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