Sustaining the future. WE RE ABOUT DELIVERY

Transcription

1 WE RE ABOUT DELIVERY Deutsche Bank Convertibles Conference 2018

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 31 to 35 of the Company s 2016 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 derived from internal or industry sources believed 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. In furnishing this document, no member of the Group undertakes or agrees to any obligation to provide the recipient with access to any additional information or to update this document or to correct any inaccuracies in, or omissions from, this document which may become apparent. This document contains certain forward-looking statements relating to the business, financial performance and results of the Group and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words believes, expects, predicts, intends, projects, plans, estimates, aims, foresees, anticipates, targets, and similar expressions. The forwardlooking statements contained in this document, including assumptions, opinions and views of the Group or cited from third party sources are solely opinions and forecasts which are uncertain and subject to risks, including that the predictions, forecasts, projections and other forward-looking statements will not be achieved. Any recipient of this document should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. Such forward lookingstatements speak only as of the date on which they are made. 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. 1

3 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 2

4 POLY4 A single source of bulk nutrients as foundation for more balanced fertilization POLY4 CHARACTERISTICS Improves yield and quality POLY4 CORNERSTONES Straight or as part of a fertilizer blend Benefits soil conductivity Low chloride ph Neutral Efficiency Effectiveness Flexibility Sustainability 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 3

5 A PRODUCT TO MEET GLOBAL DEMAND DRIVERS FOR FERTILIZERS Global demand driven primarily by food and feed demand Fertilizers are fundamental to improving agricultural yields and addressing future imbalance between food demand and supply Notes: 1) According to United Nations (UN) Population Division. 2) According to the Organisation for Economic Cooperation and Development (OECD) to meet rising food demand. 3) Protein consumption increase per capita between (FAO). 4) According to the Food and Agriculture Organization (FAO). 1. Population growth 53% Growth in middle class population between % Increase in agricultural production required % Reduction 33% World population expected to grow between Increasing food demand 63% Increase in meat demand to 130g per day by Increasing nutrient demand in arable land from 2,100m 2 1,800m 2 per person by

6 STRONG GLOBAL DEMAND 4.4 Mtpa of take-or-pay supply agreements in place Targeted regional strategy Ongoing negotiations to agree additional supply agreements Existing supply agreements expected to deliver ~US$145/t revenue 1.55 Mtpa 0.55 Mtpa 1.5 Mtpa 0.75 Mtpa Total regional market opportunity (Mtpa) 1 Market Opportunity (Mtpa) 2.5% Market share Latin America Notes: 1) POLY4 total demand forecast 2025, Source: CRU. North America Africa South East Asia China Europe Brazil India ROW Total (Mtpa)

7 POLY4 SUBSTITUTION OPPORTUNITIES Disruptive approach, proven market and clear opportunity for 20 Mtpa Estimated potential substitute demand in (Mtpa of polyhalite equivalent) Sirius capacity 4 (Mtpa) macro nutrient 2 macro nutrients 3 macro nutrients 4 macro nutrients Kieserite SOPM SOP SSP AS MOP NPK MOP Straight Total POLY4 Multi-nutrient substitution market opportunity represents more than ten times Sirius core infrastructure capacity 5 Notes: 1) Global demand forecast of primary substitute fertilizer products in 2025 by CRU expressed in polyhalite equivalent. 2) SOP-M demand calculated on MgO equivalent basis which represents 3.4 Mtpa of low chloride K 2 O on a polyhalite equivalent basis. 3) Fertecon estimates that 61% of the total K 2 O market ends up as part of multi-nutrient fertilizer blends. 4) Expansion phase capacity. 5) Represents the theoretical POLY4 demand by multiplying the recommended K 2 O rates per crop per ha by the global amount of hectares harvested for corn, soybean, wheat and sugarcane. Sources: CRU; Sirius Minerals. 6

8 POLY4 OUTPERFORMS OTHER AVAILABLE PRODUCTS NPK blends tested on a wide range of broad-acre and high-value crops Blend studies ratify POLY4 as an excellent component 1 Trials 260+ High value crops Tomato 2 Cabbage 2 +67% +73% Crops 32 Countries 17 Broad acre crops Peanuts 3 Corn 3 Soybean 2 Wheat 3 Sugarcane 3 +10% +9% +13% +30% +42% Yield Index MOP - T12 POLY4 - T12 Synthetic POLY4 T12 Notes: 1) Yield parameters by crop; sugarcane yield, wheat dry weight, soybean fresh weight, corn aerial fresh weight (40 days), peanuts fresh weight, cabbage head weight, tomato yield. Yield gains of POLY4 over MOP T12 NPK blends and T12 NPK synthetic POLY4 made out of SOP, Gypsum, and Kieserite. 2) Field trial. 3) Greenhouse trial. 7

9 COMPATIBILITY CHARACTERISTICS POLY4 can extend the overall shelf life of a blend, offering practical benefits for both NPK blenders and farmers: No incompatibilities with common fertilizer products 5.5 kgf crush strength Low caking propensity Critical relative humidity of 70% 8

10 LOW CARBON FOOTPRINT CO 2 emissions of common fertilizers 1 (kg t -1 of fertilizer) POLY4 Conventional chemical fertilizers High energy demanding N sources POLY4 (mitigated) 2 POLY4 SSP TSP MOP MAP SOP DAP AS Urea CAN AN Notes: 1) SSP Single Super Phosphate, TSP Triple Super Phosphate, MOP Muriate of Potash, SOP Sulphate of Potash, MAP Monoammonium Phosphate, DAP Diammonium Phosphate, AS Ammonium Sulphate, CAN Calcified Ammonium Nitrate, AN Ammonium Nitrate; 2) 10% mitigation from renewable energy sources and 10% from tree planting offset. Sources: Sirius Minerals 2015, Ricardo-AEA Ltd

11 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. 10

12 DEVELOPMENT PLAN Mining infrastructure designed to maximise throughput and long-term opportunity Large-scale Long-life High Volume Low maintenance Shaft sinking contractor Preferred tunnelling contractor Partnership with world-class mining equipment supplier 11

13 Bentonite plant Service shaft Production shaft Site offices/welfare MTS shaft platform Haul road Concrete batch plant February

14 SHAFT SINKING Shaft Boring Roadheader DMC Mining Services (DMC) will construct Sirius s shafts DMC is one of the world s leading shaft sinking and mining contractors The innovative, proven Herrenknecht Shaft Boring Roadheader (SBR) will be used to construct the main shafts SBR enables high sinking rates and maximum safety Work Decks Rock support area Excavation chamber 13

15 CAPITAL COSTS Area Basis US$m Mine site development DFS/contractor 977 Mineral transport system DFS/contractor 857 Materials handling facility and harbour facility DFS 229 Other infrastructure and facilities DFS 82 Stage 1 and 2 financing Owner costs DFS/owner 280 Contingency and escalation DFS 445 Working capital and other DFS 31 Total 2,902 Additional ramp-up capital DFS 207 Incremental capital to 13 Mtpa Owner/DFS 328 Funded from operating cash flow Incremental capital to 20 Mtpa Owner/DFS 1,157 Notes: Total capital funding requirement presented in nominal terms, to be funded by the stage 1 and 2 financing as per the detail set out in the company s prospectus. Sources: Sirius Minerals, 14

16 HIGH-MARGIN BUSINESS DUE TO LOW COST BASIS Lowest cost multi-nutrient potassium producer Operating cost by area US$/t of POLY4 1,2 Estimated FOB Low chloride cost US$/t K 2 O equivalent 3 US$32.6/t 1 Weighted Avg. FOB costs (US$/t of K 2 O) Mtpa Mining Transportation Processing Storage and loading General infrastructure POLY4 SOP Primary SOP Secondary SOP-M Cumulative Low chloride K 2 O fertilizer capacity ( 000tpa) MINE TRANSPORT GRANULATE SHIP Notes: 1) Operating cost based on LoM on a real 2016 basis and 80:20 split of granulated and coarse POLY4 production (excl. sustaining capex and royalties). 2) Includes outsourcing charges associated with mining equipment, harbour facilities, MHF and a proportion of indirect costs of US$7.2/t and US$4.9/t for 10 Mtpa and 20 Mtpa respectively. 3) Operating costs shown on a real 2016 basis. CRU estimated weighted average cost for SOP primary, secondary and SOP-M production and capacity (expressed in K 2 O equivalent) in POLY4 LoM cost and supply based on 10 Mtpa (US$233/t) and LoM cost 20 Mtpa case (US$197/t). Sources: Sirius Minerals, CRU. 15

17 PROJECT SCHEDULE PROJECT MILESTONES AND KEY DATES STAGE 2 FINANCING COMMITTED STAGE 2 DRAWDOWN FIRST POLYHALITE 10 Mtpa RATE CONSTRUCTION AND RAMP UP CONSTRUCTION RAMP UP & COMPLETION WOODSMITH MINE MAIN SHAFT SINKING FORESHAFT CONSTRUCTION MAIN SHAFT SINK FIT OUT MINERAL TRANSPORT SYSTEM MTS CONSTRUCTION FIT OUT MATERIALS HANDLING FACILITY CONSTRUCTION & COMMISSIONING HARBOUR FACILITY CONSTRUCTION & COMMISSIONING 16

18 TWO-STAGE FINANCING PLAN PHASED SOLUTION Stage 1 US$1.2 billion completed 2016 Equity Placing and Open Offer - 370m Convertible note US$400m Strategic investment US$300m Stage 2 100% debt financing Mandated bank group provided letters of interest prior to stage 1 NEXT STEPS Execute stage 1 construction scope Complete remaining procurement Enter into additional offtake agreements Commence stage 2 due diligence process Draw down royalty 6 Complete stage 2 financing 17

19 STAGE 2 FINANCING Facilities and uses Terms and structure Process timetable Facilities Up to US$3bn total debt >US$1bn commercial tranche Up to US$2bn UK government guaranteed bond tranche Uses of proceeds Remaining project costs Includes cost of building berth (previously assumed to be outsourced) Finance costs (interest, guarantee fees) Security All facilities senior secured project debt on a pari-passu basis Terms Sized as 16 year amortizer based on Target DSCR of 2.0x Commercial debt [10] year maturity Guaranteed bonds up to 16 year maturity [6-7]% all in interest rate 65% leverage Nov-Feb: Government and consultant engagement March: Release bank package with IM, lenders reports and term sheet June: Commitment letters September-December: Financial close including provision of government guarantee Notes: Indicative financing plan subject to market standard conditions including due diligence, credit and other business approvals, and execution of legal documentation acceptable to Stage 2 lenders. IPA's prequalification does not constitute an offer of financing or an underwriting commitment. IPA requires its normal processes to be undertaken in addition to due diligence, such as satisfaction of conditions, HM Treasury credit process, risk committee, credit committee and ultimately Ministerial approval. 18

20 FINANCING PLAN CASHFLOWS Cash flow break even achieved in Peak Debt/EBITDA of ~3.5x at 10 Mtpa run rate 2 4% of resource mined over debt sizing period Capable of servicing ~US$2.8bn of dividends and/or debt repayments within 5 years of full production 2 All debt can be fully repaid by cash sweep within 5 years of full production 2 1,000 (200) (400) (600) (800) US$M Debt availability period Full amortization period Assumes bank case pricing assumptions (circa US$125/t) 3 (1,000) (5.0) Unlevered Project Cashflows Net Debt / EBITDA (full repayment) Net Debt / EBITDA (amortising) Debt / EBITDA (1.0) (2.0) (3.0) (4.0) Notes: 1) Project cashflows based on 10mtpa production and bank case pricing less operating costs, royalties, outsourcing charges associated with mining equipment, and taxes. Assumes $3bn total debt financing available for drawdown Q to Q Net Debt / EBITDA presented assuming both a) full 16-year door-to-door amortisation period and b) accelerated repayment, for illustration purposes only. Assumes 10mtpa run rate achieved mid ) Bank case pricing assumes weighted average FOB Teesside polyhalite prices over the commercial debt maturity period of US$125/t. 19

21 VALUE PROPOSITION 90% Fertilizer industry benchmarking EBITDA Margin (%) 1 80% 70% 60% 50% 40% 30% 20% 10% Intrepid Acron Compass Minerals Uralkali SQM OCI PotashCorp PhosAgro CF Industries K+S ICL Mosaic Yara Sirius Minerals 13 Mtpa Agrium ,000 1,500 2,000 2,500 Key: US$ Mkt Cap: Bubble Size EBITDA (US$m) 1 US$5bn US$15bn US$0.5bn Notes: 1) EBITDA values are FY18 estimates with the exception of Sirius, which is projected steady-state EBITDA once construction for 13Mtpa at Woodsmith mine is complete. Source: Factset 20

22 QUESTIONS 21