BayWa, which has an extensive commercial and logistics platform across Europe's agricultural value chain with direct access to the farmgate, has agreed to actively distribute POLY4 from first production at the Woodsmith mine.

Under the agreement, BayWa is guaranteed to receive at least 2.5 million tonnes per annum in year five and Sirius has the option to elect BayWa to purchase and distribute additional volumes in exchange for a greater share of the received pricing. 

Sirius said this gave it "significant flexibility to move uncontracted capacity within the European market through the extensive BayWa network".

The agreement also includes two five-year extension options. 

In combination with other offtake agreements, Sirius has agreed aggregate peak contracted sales volumes of 10.7Mtps, or 12.1Mtpa with customer options.

Sirius said the BayWa agreement's pricing mechanism was linked to the downstream pricing received by BayWa on the sale of POLY4 in Europe.

Subsequently, the price received by Sirius would be determined by that downstream price with reference to benchmark pricing and the nature of the final BayWa customer.  

Sirius said it expected the partnership approach to pricing to deliver the highest prices across its current supply agreement portfolio, as BayWa was incentivised to sell the product further down the value chain and to optimise the best FOB netback price. 

"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," it said.

The parties described the pricing as "unique in that it aims to incentivise both parties to optimise product value appreciation as well as logistics excellence".  

Sirius CEO Chris Fraser said the agreement would distribute POLY4 into the key European fertiliser market, which was second in the world behind China. 

"Our exclusive partnership with BayWa 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," he said.

BayWa distributes over 30Mtpa of agricultural goods across Europe, including around 2Mtpa of fertiliser sales.

Sirius' (LSE:SXX) shares gained 4% on the news to 21.92p (US28.26c), although down fromm 22.5p half a year ago.