Following completion of concept studies, Sirius Minerals (SXX) has been able to slash an estimated $1bn (£633m) from the cost of bringing its wholly-owned York Potash project into production. Sirius has been able to reduce its upfront costs to $1.7bn after taking the decision to sell its ore as unrefined, granulated polyhalite, as opposed to the sulphate of potash (SOP) it had initially intended to produce on Teesside.
Maiden production at the York Potash project is now expected a year earlier, during the fourth quarter of 2016, before it ramps up to a targeted annualised rate of 5m tonnes of ore by 2018. Future expansion is achievable given that the planned project infrastructure should support an additional 7m tonnes in annual output. Sirius confirmed that this option - along with the possible production of SOP - will be explored once York Potash begins to generate positive cash flow, currently expected during 2017.
The studies confirm the viability of plans by Sirius to establish production at its Teesside site for multi-nutrient NPK fertilisers containing nitrogen, potassium and phosphorus. Polyhalite is a suitable feedstock for NPK products, which are currently the fastest-growing segment of the fertiliser market. The concept study also pointed to possible cost benefits in the Sirius NPK model over traditional forms of production, although a more detailed picture will emerge on the release of the definitive feasibility study during the first half of next year.
But some analysts have started to question existing projections for the expected increase in worldwide potash demand. And near-term caution with regards to potash pricing is probably warranted given that a number of existing producers - most notably, the Mosaic Company - are in the process of expanding capacity, but the global imperative to feed an additional 3bn mouths by 2050 will surely underpin long-term growth in the fertiliser sector.
