Jun. 13, 2019
Sirius Minerals Plc. has signed a take-or-pay supply agreement with Indian Farmers Fertilizers Cooperative Limited (IFFCO) for the supply of POLY4 in India. Volumes will ramp up to one million tpy in year eight, with an option subject to mutual agreement of the parties to increase this to 1.25 million tpy.
IFFCO is one of the largest co-operative societies in the world with over 36000 member cooperatives and access to over 55 million Indian farmers. Its primary business is the manufacturing and marketing of fertilizers and it is in the top 100 of India’s Fortune 500 group of companies.
India is one of the top three fertilizer markets in the world with a total nutrient consumption of around 30 million tpy. The demand for fertilizers in India has been growing steadily due to increasing demand for food as the country’s population increases. With the need to increase productivity per hectare, multi-nutrient products like POLY4 are well suited to Indian agriculture and soils.
The supply agreement is for the exclusive supply and distribution of POLY4 throughout India and is on a take-or-pay basis. Volumes ramp up to 1 million tpy in year eight of the 11 year term, with the option for an additional 250 000 tpy by mutual agreement, and pricing is based on a nutrient linked formula on a CIF India basis. IFFCO has a break clause after year eight and there is a 10-year extension option subject to mutual agreement by the two parties.
Volume commitments ramp up after Sirius’ first commercial production begins. The initial terms include provisions for volume flexibility where, subject to certain conditions, IFFCO may roll forward a proportion of the minimum quantities between contract years. Similarly, subject to the agreement of Sirius Minerals, IFFCO may also elect to increase ramp up volumes.
The agreement provides for a steering committee that will be established to assist both parties in working together to implement the in-country marketing plan for sales of POLY4, including liaising in relation to research and development.