Sirius Minerals. Update. Investment summary: SM2 drill result. Price 25.5p Market cap 263m. Two separate seams of massive polyhalite

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1 Update 25 January 2012 Sirius Minerals Price 25.5p Market cap 263m 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: SM2 drill result Sirius Minerals has released preliminary core results for hole SM2, targeting the Fordon polyhalite seam at its York Potash Project. Based on the two polyhalite seams intersected (totalling 67.6m) and applying the same valuation assumptions as our November 2011 update, we value the net area of influence of both SM1 and SM2 at 0.62 (including 0.09/share for the implied tonnages of the Boulby and Sneaton seams intersected in SM1; these were not recovered in SM2 to reach the Fordon Seam quickly after delays in drilling the upper parts of the hole). This is a 129% uplift on our 0.27/share valuation of SM1 alone (announced November 2011). Two separate seams of massive polyhalite Two seams of massive (ie continuous and un-interrupted) polyhalite were intersected at depths of 1,419.8m bsl (33.3m named the Upper Shelf unit) and 1,535.32m bsl (34.3m named the Lower Basin unit). These seams are separated by c 80m of very low-grade polyhalite, halite and anhydrite with some 1.5m massive bands of polyhalite. A total of 67.6m of massive polyhalite was intersected in hole SM2. Completion of maiden resource to follow SM3 With an area of influence around each drill hole of 5km used to define inferred resources (used by IC Potash in its calculation of the Ochoa maiden resource), Sirius should be able to announce a maiden resource after completing of SM3. Preliminary core results for SM3 should follow in around six weeks. Valuation: Considerable uplift on implied tonnages Our valuation of 0.62/share is based on an order of magnitude assessment of the potential tonnages identified in both holes SM1 and SM2. As the 5km radius around each hole causes an overlap, we have used the net area of both holes to calculate tonnages. We then applied an EV/t value for potash (both KCL and K2SO4 types, although per tonne K2SO4 trades at a 50% premium to KCL) to the total implied tonnage to derive our total 0.62/share valuation for SM1 and SM2. Share details Code SXX Listing AIM Sector Metals & 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 newly acquired York Potash project in NW 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 100% 0% 0% 0% 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 25 January 2012 Valuation increase expected from potash type deposits A 126% increase in our valuation of Sirius may seem an extreme uplift considering only one more drill hole has been completed. However, it would be prudent to remember that a 5km area of influence has been used around each drill collar. Further, potash deposits are known to be vast and relatively (to other deposit-styles such as gold for instance) homogenous in structure and ore distribution, allowing for such large tonnages to be estimated from relatively few drill holes. Assumptions used in 0.62 valuation To value drill hole SM2 we have had to look carefully at its position with respect to drill hole SM1. The distance between these drill holes is 5km, so there is an obvious overlap in a circle drawn around each drill hole collar (position at surface) using a radius of 5km. This radius is the area of influence that any potash intersection down hole might have in delineating resources to a confidence level that would result in an inferred category of resource (see our November 2011 update). 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. Exhibit 1: 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 Exhibit 1 details the area of influence around a drill hole centre point as used by IC Potash in its maiden resource of the Ochoa Potash Project in New Mexico. Exhibit 2 shows the locations of the drill holes: Exhibit 2: location map SM2 5km SM3 SM1 Source: Sirius Minerals

3 3 Edison Investment Research Update Sirius Minerals 25 January 2012 Net area of SM1 and SM2 using a 5km area of influence Taking into consideration a 5km distance of separation between SM1 and SM2 and an area of influence around each drill hole centre point, we calculate a net area for both drill holes of 121.4km 2. For the purposes of this, our second, order of magnitude assessment of the implied tonnages posed by SM1 and SM2, we divide 121.4km 2 by two and apply the down-hole potash intersections as stated for SM1 and SM2 for the Fordon Seam only. We use a full circle around SM1 to calculate the potential tonnages for the Boulby and Sneaton Seams, as these were not cored in SM2, see following section. Boulby and Sneaton not cored in SM2 To mitigate the effect of slow drilling encountered during the completion of SM2, Sirius decided not to core the shallower Boulby and Sneaton Seams. Therefore we only value the Boulby and Sneaton core sections present in SM1 and disregard the likelihood of them being present in SM2. Order of magnitude assessment of potential tonnages Based on the assumptions given in the preceding sections and our November update, Exhibit 3 below details the potential tonnages implied by hole SM1 for the Boulby and Sneaton Seams only, based on a radius of 5km: Exhibit 3: Potential tonnages and value delineated by SM1 core intersections Note: 5km radius comes from IC Potash maiden resource statement. Full circle (no overlap) used to calculate potential tonnages for Boulby and Sneaton seams. Seam Tonnes ore (Mt) Weighted avg. EV/t Value of SM1 (US$m) Cable rate Value of SM1 ( m) Fordon 0 Boulby 1,200 Sneaton 1,300 Total 2, TOTAL SHARES 1,033,477,755 Source: Intercontinental Potash Value in /share 0.09 Exhibit 4 below details the tonnages implied by the net area of SM1 and SM2 for Fordon Seam only. Note that in our assessment of implied tonnages for SM1 alone (in our November update), we calculated that a potential 4,900Mt of polyhalite may have been delineated. The 14,600Mt of polyhalite now estimated for SM1 and SM2 and shown in Exhibit 4 is a 198% increase over our previous estimate of SM1 alone.

4 4 Edison Investment Research Update Sirius Minerals 25 January 2012 Exhibit 4: Potential tonnages and value delineated by SM1 and SM2 core intersections Note: 5km radius comes from IC Potash maiden resource statement. Seam Tonnes ore (Mt) Weighted avg. EV/t Value of SM1&SM2 (US$m) Cable rate Value of SM1 ( m) Fordon 14,600 Boulby 0 Sneaton 0 Total 14, TOTAL SHARES 1,033,477,755 Source: Intercontinental Potash Value in /share 0.53 Therefore our total valuation for the tonnages implied by holes SM1 and SM2 on an EV/t basis is 0.62 per share. This is a 129% uplift on our valuation of SM1 alone undertaken in November Valuing Sirius beyond a resource We accept that applying an EV/t method of valuation has its limits in the context of envisaging the scale of any operation at the York Potash Project and also the magnitude of any future cash flow generation. The first indications of potential development costs and the level of production from the project will have to follow completion of a formal resource. This is will be around March 2011 when the first detailed scoping study is completed on the project. This study will include the first assessment of the likely needs for mining, processing and infrastructure at the project and a first indication of likely capital and operating costs. It would then be appropriate to undertake a justifiable DCF-type valuation of the York Potash Project, potential funding requirements and dilution analysis.

5 5 Edison Investment Research Update Sirius Minerals 25 January 2012 Exhibit 5: 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) ,033.5 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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