Shares in Sirius Minerals (LON:SXX), the British company building a huge polyhalite mine beneath a national park, were off to the races on Wednesday after it announced it had secured a major seven-year African supply deal.
Sirius, which plans to sink two 1,500m deep shafts in the Yorkshire moors this year, said Intercontinental Trade DMCC Dubai had agreed to buy up to 350,000 tonnes a year of POLY4, the fertilizer product to come out of its Woodsmith mine.
The supply deal covers up to 350,000 tonnes of fertilizer a year for the seven years following the start of production.The deal, said Sirius, also gives it exclusive marketing rights into Nigeria.
"Africa is a huge potential market for POLY4 and we are very pleased to establish our initial footprint in Nigeria, which is the largest market in West Africa," managing director and chief executive Chris Fraser said in the statement.
The stock climbed more than 4% in London after the announcement, trading at 33p at 8:14AM local time, but dropped in the afternoon to close at 32.06p.
The York mine, poised to be one of the world's largest in terms of the amount of resources extracted, is set to generate an initial 10 million tonnes per year of polyhalite - a form of potash that is used in plant fertilizers -, before it enters a second phase that will double that production to 20 million tonnes a year.
The operation will create about 1,800 jobs during construction and 1,000 permanent positions once it opens, in May 2021.
In a note to clients, Liberum called the news "a small incremental positive for Sirius" because it means the group now has binding agreements in place for 4.7 million tonnes of fertilizer a year, against a target of six to seven million tonnes, announced earlier this year. The agreement should help satisfy lenders as part of stage-two project financing.