Sirius Minerals. Update. Investment summary: Company update. Market Cap 279m. Initial polyhalite assays exceed JORC Exploration Target

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1 Update 30 November 2011 Sirius Minerals Price 27p Market Cap 279m Year End Revenue ( m) PBT* ( m) EPS* (p) DPS (p) P/E (x) Yield (%) Share price graph 03/ (0.3) (0.4) 0.0 N/A N/A 03/ (1.5) (0.4) 0.0 N/A N/A 03/ (7.6) (1.0) 0.0 N/A N/A 03/12e 0.0 (7.7) (0.7) 0.0 N/A N/A Note: *PBT and EPS are normalised, excluding intangible amortisation and exceptional items. Investment summary: Company update Sirius Minerals has entered a new phase in its development. The first of up to eight potential drill holes at its flagship York Potash Project (YPP) validates historical drill data, confirming that three seams (two potassium chloride and one potassium sulphate) are present at depths from c 1,100m below sea level. Based on the intersections recorded in drill hole SM1, recently announced initial assay data and resource estimation criteria used in New Mexico, we have produced a first estimate of the potential value of SM1 and the YPP at 277m or 27p per share, which we will update following release of further drill results (up to 7 remain in the current programme). Initial polyhalite assays exceed JORC Exploration Target The first batch of chemical assay results has been received for hole SM1, with a thickness reported of 22.1m of Polyhalite across three seams, that is, over 4x the thickness assumption used (ie 5m) in the calculation of its JORC Exploration Target. Assays also indicate grades for the polyhalite that match or exceed the upper limit of assumptions used by Sirius in its JORC Exploration Target. Polyhalite assays for 15.1m (of a total 22.1m thickness intersected) indicate an average grade of 95.7% or 27% K 2 SO 4, (incl. 8.83m at +99.5% Polyhalite or + 28% K 2 SO 4 ). Valuation: EV/t value of SM1 based on current assays For a first valuation of Sirius Minerals, we have used a peer group of early stage potash companies, including the closest comparator to the YPP, Intercontinental Potash looking to develop one of the only other sulphate of potash projects in the world. Based on these peers we apply an EV/t value of US$0.06 to the intersections of SM1 and an area of influence of 5km around the drill hole (as used by Intercontinental Potash in its resource estimates), this results in potential tonnages for potassium chloride (the most common form of potash) and sulphate of potash (which typically trades at up to a 50% premium to potassium chloride) of 147Mt and 221Mt respectively. Applying our EV/t value of US$0.06 values SM1 at c 278m, or 27p per share. We await assay results and further drill intersections to update this valuation (due mid-december). Share details Code SXX Listing AIM Sector Metals and mining Shares in issue 1,033m Price 52 week High Low 32.5p 6.4p Balance Sheet as at 30 September 2011 Debt/Equity (%) N/A NAV per share (p) 11.8 Net cash ( m) 14.9 Business Sirius Minerals owns interests in the UK, Australia and the US. It is proposing to develop these assets for potash using conventional and solution mining techniques. Its main focus is now to develop the York Potash project in NE England. Valuation e P/E relative N/A N/A N/A P/CF N/A N/A N/A EV/Sales N/A N/A N/A ROE N/A N/A N/A Geography based on revenues (2011) UK Europe US Other N/A N/A N/A N/A Analysts Charles Gibson +44 (0) Tom Hayes +44 (0) mining@edisoninvestmentresearch.co.uk Sirius Minerals is a research client of Edison Investment Research Limited

2 2 Edison Investment Research Update Sirius Minerals 30 November 2011 First drill hole suggests c 368Mt of KCl/K 2 SO 4 Sirius s flagship York Potash Project (YPP) in the north of England is situated next to the longstanding Boulby Potash mine operated by Cleveland Potash, a subsidiary of Israel Chemicals. The YPP is one of three potash licence areas first put up for development in the 1960s. Boulby was the only project developed, reflecting the global potash market at that time, which was not considered able to absorb production from multiple deposits. Boulby has a long operating mine life (remaining reserves are not disclosed. This is significant as the Boulby potash seam (and the Fordon and Sneaton seams being drilled by Sirius) was formed in a large-scale evaporite environment. So we can reasonably assume the same seams can be traced into the YPP area directly to the south, which should yield similar production longevity to that at Cleveland Potash. The announcement of 27 October indicates that all three seams are present at thicknesses that correlate well to drilling undertaken by Rio Tinto and several oil and gas explorers from the 1960s to the 1980s. Sirius s first drill programme at the YPP The first six locations of eight potential holes to be drilled are in Exhibit 1 below. The red triangles indicate the locations of previous drill holes intersecting the Fordon Polyhalite Seam, which have been used to target the current work programme and to give background information into the potential thicknesses and potash grades to be expected. Data from these historical drill holes is a portion of Sirius s extensive geological database. Exhibit 1: Drill locations (yellow circles) at the York Potash Project Drill hole SM1 Source: Sirius Minerals

3 3 Edison Investment Research Update Sirius Minerals 30 November 2011 SM1 drill intersection results The result of SM1 indicated, in order from sea level, the Sneaton (potassium chloride) seam intersected over 9m (from 1,088.2m depth), the Boulby (potassium chloride) seam over 7.9m (from 1,136.6m depth) and, significantly due to its greater thickness and potential value, the Fordon Polyhalite seam over 65.7m (from 1,449.7m depth including 7m of halite/anhydrite).the drill hole ended in the Fordon Polyhalite Seam, which suggests the stated 65.7m is likely to be short of its true extent. The current programme s remaining holes will have to prove exactly how thick this potash seam is, with it being the deepest, historically thickest and more valuable of the three. All stated thicknesses are true thicknesses. The results of SM1 correlate well with the conceptual stratigraphy Sirius released in its corporate presentations and are shown in the following exhibit: Exhibit 2: Conceptual stratigraphy of the Boulby potash region Note: Based on available historic drill data. 1km 1km Approx. Depth (m) Sneaton Potash Seam 5 to 10m thick ~10 to 20% KCl 1,150 1,200 1,300 Boulby Potash Seam 2 to 8m thick ~ 35 to 40% KCl 1,500 1,700 Fordon Polyhalite Seam 10 to 50m thick high-grade polyhalite ~19 to 27% K 2 SO 4 Source: Sirius Minerals Potash geology suitable for order of magnitude assessments Potash formations are relatively homogenous compared to other economic minerals and so the distances that can be used to extrapolate mineralised sections away from a drill hole s centre point can be far greater than for, say, gold or copper. The following paragraphs explain the assumptions we have used in our order of magnitude assessment for potential potash tonnages at the YPP. We have used the 22.1m intersection for the three polyhalite seams as stated in the 28 November announcement regarding the first chemical assay results for hole SM1 in our calculations of tonnages. Assumptions used in our order of magnitude resource assessment We have attempted to give an order of magnitude assessment of the tonnages of potash that could be present near the first drill hole at YPP, named SM1. We have adopted the method for this assessment from credible well-established potash mining companies operating in the Saskatchewan and New Mexico potash regions. Using Intercontinental Potash s preliminary economic assessment of its Ochoa sulphate of potash project in New Mexico (the closest comparator for an SOP project to the YPP), we have deduced the following areas of influence around a drill hole:

4 4 Edison Investment Research Update Sirius Minerals 30 November 2011 Exhibit 3: Drill hole area of influence based on IC Potash s maiden resource criteria Inferred Indicated Measured Radius in miles to 1.5 Up to 0.75 Radius in km to 2.4 Up to 1.2 Source: Intercontinental Potash NI report on the Ochoa Potash Project The radiuses in Exhibit 3 determine the extent to which a drill hole s potash intersection may be expected to extend away from its centre point, a key assumption in all mineral resource estimations. Although the radiuses Intercontinental Potash uses are based on a different geological region to that of the YPP, we still consider such distances appropriate to use to derive a first order of magnitude assessment of potential tonnages. As there is only one drill hole intersection currently available, we have only applied the inferred radius of 5.0km in our order of magnitude assessment. However, every resource estimate will require careful consideration of an appropriate distance to extrapolate a mineralised drill hole intersection away from its centre point. This will involve accurate mapping and modelling of all structural features such as faults, sills, dykes and any folding or undulations present in the region, all of which can affect the volume of mineralisation between drill holes. Specific gravity and grade values used to determine tonnages We have used a specific gravity value of 2,800kg/m 3 for the Fordon Polyhalite seam, the value used by ICP in its Ochoa NI report. To determine potential tonnages for the Boulby and Sneaton potassium chloride potash seams, we have applied a typical specific gravity value of 1,900 kg/m 3. Grade values used to determine KCl and K 2 SO 4 tonnages We have used actual grade values as stated by Sirius in its 28 November announcement for each of the potash seams intersected in drill hole SM1. Chemical assays have been received for 15.1m of the 22.1m of the Fordon Polyhalite Seam, Exhibit 4: Grades used in valuing SM1 Note: Based on November 28 announcement *95.7% is an average over 15.1m of the 22.1m intersection for the Fordon Polyhalite Seam and may change slightly upon release of the remaining assay results (due early December). however, for the purposes of valuing SM1 we apply this average over the entire 22.1m intercept. Potash grade values SM1 Grade (%) Thicknes s of horizon (m) Sneaton 13.97% 8.98 Boulby 3.45% 7.90 Fordon Polyhalite 95.70%* Source: Sirius Minerals corporate presentation A note on the Boulby Seam Potash type Potassium chloride Potassium chloride Sulphate of potash As per Exhibit 4 above it is worth noting that the current assay value of 3.45% KCl received for the Boulby Seam over the 7.9m (true thickness) intersected would not be considered mineable. However, it is known that the Boulby Seam is highly variable in width and grade, which is one reason why Sirius has not focused on drilling this seam as part of the current surface drill programme (N.B the nearby Boulby mine undertakes assessment of the seam via probing during mining underground). However, we include our estimation of the value for Boulby seam based on this low grade for completeness and would expect a more economic assay value to be encountered in some of the remaining holes to be drilled.

5 5 Edison Investment Research Update Sirius Minerals 30 November 2011 Order of magnitude assessment of potential tonnages Based on the assumptions given in the preceding sections, the estimates below of potential tonnages come from the first hole drilled at the YPP, based on a radius of 2.4km. Exhibit 5: Potential tonnages delineated by SM1 Note: 5.0km radius comes from IC Potash maiden resource statement. Tonnes ore Radius = 5km Thickness (m) (Mt) SM1 grade Cont. KCl/K 2 SO 4 (Mt) Fordon , % 1,300 Boulby 7.9 1, % 41 Sneaton , % 187 Total 7,400 1,528 Source: Intercontinental Potash As seen in Exhibit 5, drill hole SM1 is estimated to represent around 4.9bn tonnes of polyhalite ore or the median value of Sirius s JORC exploration target of bn tonnes of 67-94% polyhalite (19-27% K 2 SO 4 ). Our order of magnitude assessment also suggests this first hole could represent c 1.2bn tonnes of potassium chloride potash in the Boulby seam, which exceeds the upper limit of the company s JORC exploration target of m tonnes of potassium chloride contained within the Boulby seam, though the assayed grade would need to improve for this seam to be economically viable. The c 201m tonnes of potassium chloride potash estimated for the Sneaton seam in Exhibit 5 cannot be related to the JORC exploration target as Sirius s geological consultants did not include it in their calculations. So, we can view the potential tonnages that SM1 suggests for the Sneaton seam as additional potash material in excess of Sirius s JORC exploration target. More drill testing will be needed to determine the variability of each seam s thickness and the true tonnages contained within each seam. Peer comparison premium rating for sulphate of potash? Due to Sirius s very early stage, we have also undertaken a peer group analysis. The potash universe is dominated by large firms that produce millions of tonnes per year, so we have put together a peer group that is more relevant to a very early or exploration stage company. The following exhibit shows companies based on their enterprise value per total potash resource ore tonne (irrespective of whether the potash is KCl or K 2 SO 4 ). Exhibit 6: Peer group comparison on a EV/t basis Note: Sirius s EV/t is based on the total tonnages implied by SM1 as detailed in this note for all three seams intersected EV/t (US$) Karnalyte Resources Sirius Minerals Western Potash Fortis Mines Allana Potash Inc Intercontine ntal Potash Rio Verde Potash Encanto Potash Source: Edison Investment Research

6 6 Edison Investment Research Update Sirius Minerals 30 November 2011 We would like to stress that the average EV/t value of US$0.06 is only indicative of early stage companies and we would expect to add more appropriate companies to this group as Sirius develops its flagship York Potash Project (and indeed its other projects in Australia and North Dakota). As an example of the type of EV/t value that could be applied to Sirius as it establishes a sizeable JORC compliant resource base and completes feasibility studies in to the likely cost parameters one could look to the recent acquisition of Athabasca Potash by BHP Billiton. In this transaction BHP paid a reported US$320m or US$8.35 per share for Athabasca a company that had completed a prefeasibility study and controlled almost 7,000km 2 of exploration permits in Saskatchewan. Based on Athabasca s resource base at the time of the deal of 612m (measured +indicated+inferred) tonnes at 36.2% KCl (221m tonnes contained KCl), equates to a far higher EV/t value of US$0.55 per tonne of potash ore, or US$1.44 per tonne of contained KCl (NB our EV/t value is based on ore tonnes only). Another point to consider is that the share price of Intercontinental Potash (which is currently developing the Ochoa Potash Project, the only sulphate of potash resource in the peer group), appears not to reflect the value of the asset (sulphate of potash typically trades at up to a 50% premium to the most common potassium chloride form). Although only at a very early stage, with one hole drilled and no JORC or NI resource delineated, Sirius and specifically the YPP, is focused on the investigating and delineating one of the world s largest-known polyhalite seams (for more details of the differences between potassium chloride and sulphate of potash types please see to our January 2011 note Global potash player ). Sirius and Intercontinental Potash should be considered as distinctly different to companies developing potassium chloride deposits because they own deposits containing this premium type of sulphate of potash, which, based on our peer group analysis, the current market fails to identify. If the potash sector evolves in a similar fashion to the coal industry (where companies developing purely or predominantly anthracite deposits trade at a distinct premium to lower quality lignite producing companies), we would expect to see segregation of the potash sector to reflect the premium value of sulphate of potash. The potential value of SM1 based on EV/t multiples Based on the tonnages outlined in Exhibit 5 and the average of the enterprise values per total resource tonne for each of the companies in our peer comparison, we have attempted to value SM1. The results are given in the following exhibit: Exhibit 7: Potential value of SM1 based on Edison ore tonnage calculation Note: EV/t value of US$0.06/t excludes the value for Sirius Minerals due to it having no formal JORC compliant resource estimate. USD/GBP = 1.6. Seam Tonnes ore (Mt) Weighted avg. EV/t Value of SM1 (US$m) Value of SM1 ( m) Fordon 4,900 Boulby 1,200 Sneaton 1,300 Total 7, Source: Edison Investment Research A value for the resource suggested by SM1 of c 278m based on the assumptions stated in this report represents a first pass order of magnitude valuation and is in line with Sirius s current market capitalisation.

7 7 Edison Investment Research Update Sirius Minerals 30 November 2011 Developing potash assets In putting context to the potential value of potash deposits, we assess the development capital expenditure requirements to bring such deposits into production. Many potash deposits around the world, for example those in the Saskatchewan region, are deep and require costly shafts to extract the potash. Development of a potash deposit can be considered analogous to developing an underground bulk tonnage operation, with all the transport (rail and port) infrastructure construction at surface required to extract and deliver potash to market at a suitable scale. For example, BHP s Jansen Project in the Saskatchewan region of Canada has a total capital expenditure requirement of an estimated U$12bn, with c US$2bn already committed. This will deliver a project capable of generating eight million tonnes of potash per year after ramp up from Jansen has a total resource of some 3.37bn tonnes of potash (potassium chloride type), which is comparable to the lower end of Sirius s exploration target and is capable of supporting an operation for a currently estimated 70 years. First production is expected in Sirius s R&D projects to maximise profitability Sirius has a number of projects underway to investigate the uses of by-products created from treating polyhalite potash and using underground voids from the potential solution mining of its deposits. These include the potential for carbon sequestration, compressed air energy storage and solar pond energy storage. Although these research and development projects are not core catalysts to Sirius s investment case, they demonstrate the company s holistic approach to mine development. With high capital expenditure outlays demanded for development of potash resources, it is prudent to investigate how to maximise cash-flow generation using redundant mine infrastructure and marketing and selling by-products (including the production of magnesium hydroxide as a by-product of treating polyhalite with anhydrous ammonia a tonne of which currently sells for around US$500). Such projects will become more important to Sirius as it progresses along its development timelines, especially for YPP, which could potentially start production in Financials Sirius Minerals raised 20m via the issue of ordinary shares in 2011, enough to complete the current scope of works at the YPP (up to eight c 1.7km drill holes) and technical studies at its North American and Australian projects. Sirius also announced on 1 November that it had been awarded (subject to due diligence) a grant of up to 2.8m from the UK government s Regional Growth Fund to develop a research and development centre in Yorkshire. We forecast that Sirius will have approximately 2.9m cash at the end of FY12. On historic cash burn rates, excluding drill programmes such as that at the YPP, this should be enough to cover the company s expenditures in early FY13.

8 8 Edison Investment Research Update Sirius Minerals 30 November 2011 Exhibit 8: Financials '000s e Year end 31 March IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue Cost of Sales Gross Profit EBITDA (302) (339) (1,539) (7,666) (7,648 ) Operating Profit (before amort.and except.) (303) (339) (1,544) (7,668) (7,713) Intangible Amortisation Exceptionals (375) (196) (636) 0 0 Share based payments 0 0 (1,659) 0 0 Operating Profit (677) (534) (3,838) (7,668) (7,713) Net Interest 1 (5) Profit Before Tax (norm) (302) (343) (1,544) (7,623) (7,713) Profit Before Tax (FRS 3) (676) (539) (3,838) (7,623) (7,713) Tax Profit After Tax (norm) (302) (343) (1,544) (7,623) (7,713) Profit After Tax (FRS 3) (676) (539) (3,838) (7,623) (7,713) Average Number of Shares Outstanding (m) ,032.6 EPS - normalised (p) (0.4) (0.4) (0.4) (1.0) (0.7) EPS - FRS 3 (p) (1.0) (0.6) (1.0) (1.0) (0.7) Dividend per share (p) Gross Margin (%) N/A N/A N/A N/A N/A EBITDA Margin (%) N/A N/A N/A N/A N/A Operating Margin (before GW and except.) (%) N/A N/A N/A N/A N/A BALANCE SHEET Fixed Assets 569 1,224 79,393 91,233 94,754 Intangible Assets 568 1,221 79,392 91,197 94,754 Tangible Assets Investments Current Assets ,566 21,317 3,169 Stocks Debtors Cash 4 9 1, ,010 2,8 62 Other Current Liabilities (695) (543) (472) (2,234) (2,234) Creditors (695) (543) (472) (2,234) (2,234) Short term borrowings Long Term Liabilities 0 0 (3,233) (9,701) (9,701) Long term borrowings Other long term liabilities 0 0 (3,233) (9,701) (9,701) Net Assets (112) , ,615 85,988 CASH FLOW Operating Cash Flow (199) (525) (1,979) (622) (7,648 ) Net Interest 1 (5) Tax Capex (105) (8 6) (318 ) 0 (10,500) Acquisitions/disposals 0 (363) 0 (3,557) 0 Financing ,764 23,490 0 Dividends Other 0 0 1, Net Cash Flow (58 ) 5 1,641 19,356 (18,048 ) Opening net debt/(cash) (62) (4) (9) (1,78 2) (21,010) HP finance leases initiated Other (128 ) (100) Closing net debt/(cash) (4) (9) (1,78 2) (21,010) (2,8 62) Source: Edison Investment Research, company accounts EDISON INVESTMENT RESEARCH LIMITED Edison Investment Research is a leading investment research company. 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