Sirius Minerals expects up to $3bn annual earnings from York project

Sirius Minerals released the eagerly-awaited results of its feasibility study on the potash project in North Yorkshire on Thursday, saying its net present value is $15bn at a 10% discount rate.

Net present value will rise to $27bn once production begins, Sirius said.

The company expects annual operational earning before interest, taxes, depreciation and amortisation to range between $1bn and $3bn a year depending on volume and price outcomes.

Average operating costs were estimated at $27.2 per tonne, delivering “industry-leading” cash margins of 70% to 85%.

Sirius said first production was expected in 2012, followed by completion of the fit out and ramp-up with a rate of 10m tonnes per year anticipated in 2023. After that, production is expected to increase to 13m tonnes a year and then 20m tonnes.

Managing director Chris Fraser said: “The business that is created from this project will sit as a world leader in the fertilizer industry based here in the UK. It is expected to have a low operating cost structure, high margins and a very long asset life in one of the most business friendly, stable and dynamic economies in the world.

"In delivering this project we can create thousands of jobs in North Yorkshire and Teesside, deliver billions of pounds of investment to the UK and put the country at the forefront of the multi-nutrient fertilizer industry.”

Shore Capital said the feasibility study results were in line with its estimates. It noted that Sirius remains very well-funded for a company at this stage, with £25m of cash on its balance sheet as of February 2016.

“While an investment in Sirius will become progressively de-risked as the company advances towards production, we believe that it already offers a more robust, lower-risk investment with the prospect of better returns than typical of its peers,” Shore said.

At 0951 GMT, Sirius shares were down 18% to 18.65p.