Losses mount, but Sirius pins hopes on early polyhalite output

Losses at Sirius Minerals mounted in 2017, but the company — which was set up to develop the world’s largest deposit of the fertiliser polyhalite in northern England — expects to start production ahead of schedule in mid-2021.

CEO Chris Fraser said the company had deals to sell 4.4-million tonnes a year of the fertiliser and is seeking “similar arrangements” with northwest Europe and Brazil.

Britain’s departure from the EU would also open up more direct negotiation with China, where Sirius has already signed supply contracts, he said.

“We could then have the ability to go and talk directly to China about trade, rather than have to go through the glove of the EU,” said Fraser, who accompanied British Prime Minister Theresa May to China in February. “Our dialogue with China is very strong.”

Sirius reported an operating loss for 2017 of £24m on Tuesday, versus £16.9m in 2016 as the company began to build its huge mine beneath a national park in Yorkshire.

As the company was in the development stage, Fraser said the loss was “a paper loss”.

Production is scheduled to reach 10-million tonnes per year in 2021 and 20-million tonnes annually by 2026. Fraser said output should begin in the middle of 2021, up to six months earlier than previously planned after the hiring of a new drilling company, DMC Mining Services of Canada, a subsidiary of Poland’s KGHM.

The plan in 2018 is to secure up to $3bn in financing, after an initial $1.2bn was raised, and to win additional supply contracts.

Britain’s government may provide treasury-backed guarantees to reassure investors.

Sirius’s rival, Israel Chemicals, is the only company to have begun mining polyhalite, a relatively new entrant to the fertiliser market.

Although the potash market is oversupplied, Fraser said there was a long-term need for fertiliser as a growing global population must be fed.

Investment group Shore Capital reiterated its buy rating and said Sirius should become “progressively derisked” as it moves towards production.

The share price has risen about 20% in 2018, but was down just more than 1% after the results on Tuesday.