Sirius Minerals Plc has entered into an exclusive 10 year supply and distribution agreement with a leading European agribusiness group, BayWa Agri Supply & Trade B.V. (BAST), a wholly owned subsidiary of BayWa AG, for the distribution of POLY4 into Europe (the agreement). BAST intends to actively distribute POLY4 through its Cefetra business, a well-established distributor and trader in Europe active across the agricultural value chain to the farmgate.
BayWa AG is a publicly-listed entity headquartered in Munich, Germany with revenues of €16 billion (2018). The group distributes over 30 million tpy of agricultural goods across Europe including sales of approximately 2 million tpy of fertilizers. Across Europe the group has a strong footprint and agricultural platform with strategically located assets such as warehouses, hubs and ports. BayWa is also active in developing and managing digital farming platforms to strengthen the 'One-Stop-Shop' strategy for farmers.
Chris Fraser, Managing Director and CEO of Sirius, comments: "The European fertilizer market is highly advanced and the second largest in the world behind China. We are delighted to be partnering with a leading agribusiness to distribute our POLY4 product into this key market. Our exclusive partnership with BAST will enable us to reach downstream customers through the groups' well-established and extensive logistics network and long-term, trusted relationships with farmers. Our exclusive partnership is structured to enable us to achieve maximum value for our POLY4 product."
Daan Vriens, CEO of BAST, comments: "We are excited to be partnering with Sirius to bring a high performing, multi-nutrient fertilizer like POLY4 to customers across Europe through Cefetra. We believe in long term partnerships and we feel confident that this will be a successful new endeavour. POLY4 fits with our sustainability and farmer services strategies across our markets. This will provide farmers, via our extensive networks, a fertilizer product that promotes sustainable agricultural practice in our home market, Europe."
The agreement provides for the exclusive distribution of guaranteed minimum tonnes of POLY4 across most of Europe for a 10 year term that commences from first production and includes two five year extension options. Pricing under the agreement is unique in that it aims to incentivise both parties to optimise product value appreciation as well as logistics excellence.
The guaranteed minimum volumes under the agreement increase to 2.5 million tpy in year five. The agreement also provides for an option for Sirius to elect for BAST to purchase and distribute additional volumes above the guaranteed volumes. If this option is exercised, BAST would receive a greater share of the received pricing. This mechanism provides Sirius with significant flexibility to move uncontracted capacity within the European market through the extensive BayWa network.
The pricing mechanism in the agreement is linked to the downstream pricing received by BAST on the sale of POLY4 in Europe. The price received by Sirius under the agreement is determined by the price received by BAST with reference to benchmark pricing and the nature of the final BAST customer. BAST is incentivised to sell the product further down the value chain (i.e. closer to the farmgate) and to optimise the best FOB netback price for Sirius.
The company expects this partnership approach to pricing to deliver it the highest prices across its current supply agreement portfolio. Based on prices implied for POLY4 by current farmgate prices of polyhalite and similar products in Europe, this Agreement is expected to deliver prices to Sirius between the current offtake agreement levels and the full nutrient value of POLY4.
Subject to the parties' internal approval processes, the agreement provides for the establishment of a joint venture vehicle for the management of sales and marketing of POLY4 into Europe, as well as the movement of product. Subject to the establishment of the joint venture vehicle, the rights and obligations of BAST under the agreement will be novated to the joint venture vehicle, while BAST would continue to guarantee the obligations of the joint venture vehicle under the agreement.
Read the article online at: https://www.drybulkmagazine.com/dry-bulk/25042019/sirius-minerals-signs-major-eu-supply-and-distribution-agreement-with-baywa/