Sustaining the future. WE RE ABOUT GROWTH. BMO Farm to Market Conference, New York May 2018

Transcription

1 WE RE ABOUT GROWTH BMO Farm to Market Conference, New York May

2 IMPORTANT NOTICES This document is produced for information only and not in connection with any specific or proposed offer (the Offer ) of securities in Sirius Minerals Plc (the Company ). No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and must not be relied upon in any way in connection with any investment decision. An investment in the Company or any of its subsidiaries (together, the Group ) involves significant risks, and several risk factors, including, among others, the principal risks and uncertainties as set out on pages 48 to 52 of the Company s 2017 annual report and other risks or uncertainties associated with the Group s business, segments, developments, regulatory approvals, resources, management, financing and, more generally, general economic and business conditions, changes in commodity prices, changes in laws and regulations, taxes, fluctuations in currency exchange rates and other factors, could have a material negative impact on the Company or its subsidiaries' future performance, results and financial standing. This document should not be considered as the giving of investment advice by any member of the Group or any of their respective shareholders, directors, officers, agents, employees or advisers. Any Securities offered for sale by the Company will not be registered under the U.S. Securities Act of 1933 (the Securities Act ) and may only be offered and sold pursuant to an exemption from, or in a transaction not subject to, such registration requirements and applicable U.S. state securities laws. Unless otherwise indicated, all sources for industry data and statistics are estimates or forecasts contained in or deriv ed from internal or industry sources believ ed by the Company to be reliable. Industry data used throughout this document was obtained from independent experts, independent industry publications and other publicly-available information. Although we believe that these sources are reliable, they have not been independently verified, and we do not guarantee the accuracy and completeness of this information. The information and opinions contained in this document are provided as at the date of this document and are subject to amendment without notice. 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No member of the Group or any of their respective affiliates or any such person s officers, directors or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does any of the foregoing accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments or undertakes any obligation to review, update or confirm any of them, or to release publicly any revisions to reflect events that occur due to any change in the Group s estimates or to reflect circumstances that arise after the date of this document, except to the extent legally required. Any statements (including targets, projections or expectations of financial performance) regarding the financial position of the Company, any of its subsidiaries or the Group or their results are not and do not constitute a profit forecast for any period, nor should any statements be interpreted to give any indication of the future results or financial position of the Company, any of its subsidiaries or the Group. Any statements (including targets, projections or expectations of financial performance) regarding the financial position of the Company, any of its subsidiaries or the Group or their results are not and do not constitute a profit forecast for any period, nor should any statements be interpreted to give any indication of the future results or financial position of the Company, any of its subsidiaries or the Group. 1

3 WORLD S LARGEST & HIGHEST GRADE POLYHALITE RESOURCE Located in UK and only 37km from deep-water harbour facilities Scale, thickness and quality of deposit allows for efficient mining methods JORC Reserve of 280 million tonnes and Resource of 2.66 billion tonnes 1 Historical boreholes not drilled to depth of polyhalite resource Historical boreholes drilled through polyhalite General area of interest Sirius Minerals borehole Mineral transport system Resource area Notes: 1) JORC compliant probable reserve 280m tonnes with a mean grade of 88.4% polyhalite, JORC compliant indicated and inferred resource of 2.66bn tonnes with a mean grade of 85.7% polyhalite. 2

4 DEVELOPMENT PLAN Mining infrastructure designed to maximise throughput and long-term opportunity World - class partners Shaft sinking contractor MTS Drive 1 tunnelling contractor Partnership with world class mining equipment supplier 3

5 POLY4 A single source of bulk nutrients as foundation for effective, efficient, flexible and sustainable fertilization Characteristics Improves yield and quality Straight or as part of a fertilizer blend Efficient nutrient release profile Benefits soil conductivity Low chloride ph Neutral Notes: 1) Based on 90% polyhalite grade. Macro nutrients based on w/w % and micro nutrients based on mg/kg; micro nutrients content: B 169, Zn 1.9, Mn 3.1, Mo 0.3, Se>0.5, FE>0.5, Cu 1.1, Sr ) POLY4 is the trademark name for polyhalite products from the Sirius Minerals polyhalite project in North Yorkshire, *48% SO 3. B Boron, Cu Copper, Se Selenium, Zn Zinc, Fe Iron, Sr Strontium, Mo Molybdenum, Mn Manganese 4

6 STRONG GLOBAL DEMAND 4.4 Mtpa of take-or-pay supply agreements in place 1.55 Mtpa 1.5 Mtpa 0.75 Mtpa 0.55 Mtpa Total regional market opportunity (Mtpa) 1 Latin America North America Africa South East Asia China Europe Brazil India ROW Total Market Opportunity (Mtpa) 2.5% Market share (Mtpa) Notes: 1) POLY4 total demand forecast 2025, Demand based on the aggregate nutrient opportunity for POLY4 by forecasting demand for products containing one or more of potassium, magnesium, and sulphur Source: CRU. 5

7 NORTH AMERICA 1.5 MTPA SOLD Premium market served by existing high cost SOP / SOPM incumbents Huge low chloride opportunity in corn and potatoes Corn up to 6 Mtpa 2,3 Typical blend - 15:15:15 + 5S POLY4 replica - 32% POLY4 inclusion POLY4 alternative 12:12:12 +10S + 3M go (50% inclusion) Added benefits - M g, Ca, micronutrients and lower chloride Potatoes up to 2 Mtpa 3,4 Typical blend - 12:11:18 + 8S + 2MgO POLY4 replica - 30% POLY4 inclusion POLY4 alternative 10:10:14 +10S + 3M go (48% inclusion) Added benefits - low chloride Mtpa POLY4 Notes: 1) Based on 2016 area harvested in North America. 2) An estimated 44.6% of total K 2 O consumption in the USA is used on corn. 3) Market potential based on meeting K 2 O consumption in North America using suitable POLY4 replica blend. 4) Estimated 18% of total K 2 O in North America is used on potato. Sources: FAO, IFA, Roland Berger. 5) CRU substitution opportunity for North America as detailed on slide 7 6

8 NORTH AMERICA BLEND SUBSTITUTION Corn blend 15:15:15 + 5S 1,3 POLY4 replica 15:15:15 + 6S 1,3 Nutrients Content 15 N 15 P 15 K 5 S 11% Urea 21% AS 33% DAP 25% MOP 15 N 15 P 15 K 6 S 5 Ca 2 MgO 19% Urea 32% DAP 17% MOP 30% POLY4 Input Prices $289/t $423/t $293/t $298/t $423/t $293/t $198/t Blend Costs $33 $61 $137 $73 $57 $135 $50 $63 Total cost US$305/t Mid-West Total cost US$305/t Mid-West Corn blend netback price - US$168/t FOB 2 Potato blend netback price - US$192/t FOB 1,2,4 8Mtpa opportunity at attractive margins for both producer and distributor Notes: 1. Fertilizer market prices as of April 2018 for relevant benchmarks in the US Mid-West. 2. Netback freight rates based on ocean freight and associated inland freight costs estimates as of April Fertilizer filler used to make up the difference between the weight of the added ingredients in a tonne used. 4. Please find more details in the appendix. 7

9 EUROPE TARGETING 2 MTPA Large consumer of S and MgO Incumbent suppliers are high cost Push towards sustainable farming practises Cereals up to 6 Mtpa 2,3 Typical blend - 20:10:10 + 5S POLY4 replica - 25% POLY4 POLY4 alternative 16:8:8 + S + MgO (55% inclusion) Lower chloride + multi-nutrient Potatoes up to 5 Mtpa 3,4 Typical blend - 12:11:18 + 8S + 2MgO POLY4 replica - 40% POLY4 Lower chloride Mtpa POLY4 Notes: 1) Based on 2016 area harvested in Europe. 2) Estimated 41% of total K 2 O consumption in Europe is used on cereals. 3. Market potential based on meeting K 2 O consumption in Europe using suitable POLY4 replica blend. 4) Estimated 39% of total K 2 O in Europe is used on potato. Sources: FAO, IFA, Roland Berger. 5) CRU substitution opportunity for Europe as per slide 7. 8

10 EUROPE BLEND SUBSTITUTION Nutrients Content Potato blend 12:11:18 + 6S + 3MgO 1,3 12 N 11 P 18 K 7 S 3 MgO 10% AN 20% AS 24% DAP 30% MOP 12% Kies. POLY4 replica 12:11:18 + 8S + 2MgO 1,3 12 N 11 P 18 K 8 S 7 Ca 2 MgO 16% Urea 24% DAP 20% MOP 40% POLY4 Input Prices $274/t $156/t $445/t $330/t $281/t $289/t $445/t $330/t $198/t Blend Costs $28 $31 $107 $99 $32 Total cost US$298/t CFR $46 $107 $66 $79 Total cost US$298/t CFR Potatoes blend netback price - US$189/t FOB 2,3 SOP based potato blend delivers a netback price of - US$260/t FOB Cereals blend netback price - US$98/t FOB 1,2,4 Both broadacre and high value options deliver industry leading margins (60%+) Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks. 2) Netback freight rates based on ocean freight estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used. 4. Please find more details in the appendix. 9

11 CHINA 1.5 MTPA SOLD The largest nutrient market Government regulation encouraging balanced fertilizer practises Vegetables up to 10 Mtpa 2,3 Typical blend - 6:12:17 POLY4 replica - 56% POLY4 inclusion Incremental value opportunity from improving nutrient use efficiency Fruit up to 9 Mtpa 3,4 Typical blend - 12:12:12 POLY4 replica - 50% POLY4 inclusion Multi-nutrients provide incremental performance Mtpa POLY4 Notes: 1) Based on 2016 area harvested in China. 2) Estimated 29% of total K 2 O consumption in China is used on vegetables. 3. Market potential based on meeting K 2 O consumption in China using suitable POLY4 replica blend. 4) Estimated 20% of total K 2 O in China is used on potato. Sources: FAO, IFA. 5) CRU substitution opportunity for China as per slide 7. 10

12 CHINA BLEND SUBSTITUTION Vegetable blend 06:12:17 1,3 POLY4 replica 06:12:17 + 3MgO 1,3 Nutrients 6 N 12 P 17 K 13 S 5 Ca 6 N 12 P 17 K 11 S 9 Ca Content 30% AS 25% TSP 33% SOP 25% DAP 15%MOP 3 MgO 56% POLY4 Input Prices $112/t $308/t $434/t 4% Urea $278/t $410/t $230/t $191/t Blend Costs $34 $77 $143 $11 $102 $35 $107 Total cost US$255/t CFR Total cost US$255/t CFR Vegetable blend netback price - US$156/t FOB 2,3 Fruit blend netback price - US$160/t FOB 1,2,4 Substantial incremental value opportunity from nutrient use efficiency Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks. 2) Netback freight rates based on ocean freight estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used. 4. Please find more details in the appendix. 11

13 BRAZIL TARGETING 2 MTPA Sulphur intensive soybean market provides a huge broad acre opportunity circa 20 Mt of fertilizer used annually Chloride free and Magnesium products in short supply Soybean up to 7 Mtpa 2,3 Typical blend - 0:18:18 + 6S POLY4 replica - 40% POLY4 inclusion POLY4 alternative 0:16: S (50% inclusion) Multi-nutrient and lower chloride Coffee up to 1 Mtpa 3,4 Typical blend - 20:5:15 + 2MgO POLY4 replica - 31% POLY4 inclusion POLY4 alternative 16:4:16 + 3MgO (44% inclusion) Clear market demand for Magnesium Mtpa POLY4 Notes: 1) Based on 2016 area harvested in South America 2) Estimated 49% of total K 2 O consumption in Brazil is used on soybean. 3. Market potential based on meeting K 2 O consumption in Brazil using suitable POLY4 replica blend. 4) Estimated 6% of total K 2 O in Brazil is used on Coffee. Sources: FAO, IFA. 5) CRU substitution opportunity for South America as per slide 7 12

14 BRAZIL BLEND SUBSTITUTION Soybean blend 0:18:18 + 6S 1,3 POLY4 replica 0:18:18 + 8S + 2MgO 1,3 S Nutrients Content 18 P 18 K 6 S 18 Ca 18 P 18 K 8 S 2 MgO 15% TSP 55% SSP 30% MOP 39% TSP 21% MOP 40% POLY4 4 Ca Input Prices $404/t $234/t $382/t $404/t $382/t $170/t Blend Costs $61 $129 $114 Total cost US$304/t Mato Grosso $155 $80 $68 Total cost US$304/t Mato Grosso Soybean blend netback price - US$110/t FOB 2,3 Coffee blend netback price - US$207/t FOB 1,2,4 9 Mtpa opportunity delivering >70% margins Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks for Mato Grosso. 2) Netback freight rates based o n ocean freight and inland freight costs estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used. 4) Please find mo re details in the appendix. 13

15 MISCONCEPTION 1 - FARMERS DON T LIKE CHANGE Replicating blends with POLY4 delivers substantial value - $150/t average Mtpa POLY4 Brazil - coffee NA - potatoes Europe - potatoes POLY4 netback supply curve based on regional substitution opportunities Sirius production range delivers US$ /t NA - corn China - fruits China - vegetables Brazil - soybeans Europe - cereals US$/t FOB Volume (LHS) Netback FOB (RHS)

16 MISCONCEPTION 2 THERE IS TOO MUCH GYPSUM IN POLYHALITE Calcium is a fundamental macronutrient and a key to healthy soils NUTRIENTS VIDEO FROM WEBSITE 15

17 MISCONCEPTION 3 PROHIBITIVE LOGISTICS COST Substitute blend approach delivers like-for-like volumes. All costs factored in. US$12-14/t New Orleans US$8-10/t Rotterdam US$30-40/t Guangzhou US$12-16/t Santos Source: Sirius estimates based on Panamax and Supramax vessels and current market pricing 16

18 MISCONCEPTION 3 POLYHALITE DOES NOT DISSOLVE POLY4 dissolves, becomes available and stimulates sustained macro-nutrient delivery Notes: 1) Amount of water is monthly equivalent to 2 years rainfall based on a 5 year average rainfall of 1385 mm yr-1 in Florida; 2) Fertilizer application rate of 300 kg K2O ha. Soil analysis for ph 8.06, K 44 mg kg-1, Ca 1360 mg kg-1, Mg 551 mg kg-1, S 15,642 mg kg-1, OM 0.4%, soil texture: 88.4% Sand, 0.6% Silt, 10.6% Clay. 1.6 pore volumes would be equivalent to 3 months rainfall in UK. 3) The results are based on 32 trials, which include trials conducted in Asia (China), Europe (UK & France), Latin America (Brazil) and North America (US) covering both high value and broad acre crops such as tea, tobacco, tomato, soybean, wheat, potato and corn. Initial soil analysis P 38 mg kg -1, K 100 mg kg -1, Mg 116 mg kg -1, Ca 1311 mg kg -1, S 20 mg kg -1, OM 19 g kg -1

19 CONSTRUCTION UPDATE Service shaft Production shaft MTS shaft platform Welfare facility Concrete batch plant Bentonite plant Haul road Woodsmith Mine site May

20 US$70/t (70%) US$170/t (85%) MARGIN EBITDA Margin (%) Sustaining the future. VALUE PROPOSITION Low volume/ High margin US$1.7bn EBITDA High volume/ High margin US$3.4bn EBITDA 100% 90% 80% 70% 60% Fertilizer industry benchmarking Sirius - 20Mtpa Low volume/ Low margin 10Mtpa US$0.7bn EBITDA VOLUME High volume/ Low margin US$1.7bn EBITDA 20Mtpa 50% 40% 30% 20% 10% - Intrepid Acron Compass Minerals SQM PhosAgro OCI K+S ICL CF Industries Mosaic Yara Nutrien ,000 1,500 2,000 2,500 3,000 3,500 4,000 EBITDA (US$m) 1 Key: US$ Mkt Cap: Bubble Size US$5bn US$15bn US$0.5bn Notes: 1) EBITDA values are FY18 estimates with the exception of Sirius, which is projected steadystate EBITDA once construction for 13Mtpa at Woodsmith mine is complete. Source: Factset 19

21 INVESTMENT PROPOSITION Unparalleled resource Disruptive premium product, proven market Simple and low cost business model Construction underway Resource definition and mineral rights Development and approvals Nov 2016 Stage 1 financing complete Construction and development 2021 First polyhalite 20

22 APPENDIX 21

23 NORTH AMERICA POTATO BLEND SUBSTITUTION POLY4 netback price of $192/t FOB POLY4 blend delivers additional calcium and reduced chloride (-19%) Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks for US Midwest 2) Netback freight rates based on ocean freight and inland freight costs estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used.

24 CHINA FRUITS BLEND SUBSTITUTION POLY4 netback price of $160/t FOB POLY4 blend delivers additional calcium Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks. 2) Netback freight rates based on ocean freight estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used..

25 BRAZIL COFFEE BLEND SUBSTITUTION POLY4 netback price of $207/t FOB POLY4 blend delivers bonus calcium and reduced chloride Notes: 1) Fertilizer market prices as of April 2018 for relevant benchmarks for Mato Grosso. 2) Netback freight rates based o n ocean freight and inland freight costs estimates as of April ) Fertilizer filler used to make up the difference between the weight of the added ingredients in a ton used.