Lining up the key catalysts for success

Sirius has entered Q4 with a strong operational tailwind having established 3 construction sites for the Woodsmith Mine project and generated momentum with its new supply agreements which both establish initial demand for its natural multinutrient fertilizer and sets a price which generates significant returns. We move now into the final phase of Stage 2 funding with Sirius looking to conclude negotiations for its $3bn senior debt funding package (expected Q1 19) and finalise an additional capital component of between $0.4-0.6bn for which Sirius sees several alternative funding solutions. The company has now concluded most of the planning for the various modules of construction and has negotiated fixed term deals for much of it, transferring risk away from Sirius shareholders. The planned construction timeline remains in place with first polyhalite production expected by the beginning of 2022, ramping up to a capacity of 10Mt/yr by 2024 – expansions thereafter (funded from cash flow) see capacity for 13Mt/yr by 2027 and then 20Mt/yr by 2030. We set our SOTP risked fair value at 49p/sh using a scenariobased approach with a production plan to ultimately produce 20Mt/yr polyhalite with our NPV starting in 2025. This scenario removes the distortion of the high capital spend in the first few years balancing with the significant cash flow generation we see in future years. There is upside through rebasing POLY4 prices upwards as the product becomes accepted.