Sirius Minerals : Interim results for period to 30 June 2016

16 August 2016

Sirius Minerals Plc

Interim results for period to 30 June 2016

The Directors of Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) ('Sirius' or the 'Company') announce the condensed interim unaudited consolidated financial statements for Sirius and its subsidiaries ('the Group') for the six-month period ended 30 June 2016.

Highlights

· Completion of definitive feasibility study for the Company's North Yorkshire Polyhalite Project (the 'Project').

· Selection of preferred construction contractors for the Project - Associated Mining Construction (UK) and Hochtief Murphy joint ventures.

· The announcement of a Project capital funding requirement of US$2.91 billion and a Stage 1 capital funding requirement of US$1.09 billion.

· Take-or-pay offtake agreement with Yunnan Dian Huang Peony Industrial Group Co. Ltd (Dian Huang).

· Appointment of Louise Hardy as a Non-executive director to the Board.

· Increase of the Company's polyhalite probable reserve.

· Announcement of the details of a potential de-icing salt opportunity as part of an opportunistic strategy to generate additional revenues.

Post-balance sheet events

· Government approval for the harbour facilities element of the Projectwhich includes a new berth, ship loading facilities and conveyor linkage to the materials handling facility and all the compulsory purchase powers needed to develop them. As a result, all major approvals for the Project have been granted.

Financials

· During the six-month period ended 30 June 2016 the Group made a consolidated loss of £4.1 million compared to a loss of £4.7 million for the six-month period (April to September) last year.

· Cash resources at the end of June 2016 were £16.9 million compared to £29.1 million at 31 December 2015 and £25.1 million at 30 September 2015.

· The Group's net assets at 30 June 2016 were £161.7 million compared to £165.2 million at 30 December 2015 and £153.4 million at 30 September 2015.

Chris Fraser, Managing Director and CEO of Sirius, comments:

'It has been another period of progress for Sirius, during which time we have successfully secured the final major approval for our important Project and set the platform for the advancement of our financing strategy.'

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

For further information, please contact:

About Sirius Minerals Plc

Sirius Minerals is the fertilizer development company focused on the development of its North Yorkshire polyhalite project, the United Kingdom. It has the world's largest and highest grade deposit of polyhalite, a multi-nutrient form of potash containing potassium, sulphur, magnesium and calcium. Incorporated in 2003, Sirius Minerals' shares are traded on the London Stock Exchange's AIM market. Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility. Further information on the Company can be found at: www.siriusminerals.com.

CHAIRMAN'S STATEMENT

Dear Shareholders,

This is the first interim report since the change in our accounting reference date which was announced in March 2016 and covers the six-month period from January to June 2016. The Board considered that this change aligned with best practice amongst major UK listed businesses and also provided greater timing flexibility for future financing execution for our North Yorkshire polyhalite project (the Project).

This half-year has been focused on moving our Project closer towards construction. We were initially centred on the completion of the definitive feasibility study (DFS) and the publication of its material findings in March, which defined a very attractive fertilizer business. The Project's business case is based on the ability to generate annual earnings before interest, tax, depreciation and amortisation (EBITDA) ranging between US$1 billion and US$3 billion through various volume and price outcomes.

The completion of the DFS allowed our team to move onto the next important stage of our Project development which was to select preferred construction contractors. These were announced in June and were the culmination of a 19-month highly competitive tendering processes. The tenders ran in parallel with the preparation of the DFS and, on behalf of the Board and management, I can say we were both impressed by the quality of the submissions and thankful for the efforts of all the bidders.

In selecting both Associated Mining Construction (UK) and Hochtief Murphy joint ventures we are confident that we have two excellent contractor teams that can help us successfully deliver the Project. During our discussions with both groups they have been able to refine their construction methodologies, update their competitive tender rates and evolve their designs.

The outcomes of these processes has resulted in a total Project capital funding requirement of US$2.91 billion and a Stage 1 capital funding requirement of US$1.09 billion. The Project has a net present value of $15 billion (assuming ultimate production levels of 20mtpa) rising to US$27 billion upon commencement of production. The Project has an unlevered after tax internal rate of return of 28%.

The period has also seen further progress with our customer commitments. In addition to several routine agronomy updates from our ongoing crop trial work, we announced a new take-or-pay offtake agreement with Yunnan Dian Huang Peony Industrial Group Co. Ltd (Dian Huang). This replaced our previous offtake contract with Yunnan TCT and was facilitated by the latter. It also strengthened the Company's supply position in Yunnan province by supplying a customer closer to the end user and also by removing the conditions that were included in the original TCT agreement.

Away from development matters, and turning to governance issues, I can also reflect on the non-executive director change we made in May when Louise Hardy replaced Stephen Pycroft on the Sirius Minerals Board. Stephen's increasing work commitments in his role as executive chairman of Mace meant that it was a logical time for him to step down. I would like to reiterate the Board's thanks to him for his valuable involvement and support over the last few years.

Louise brings over 25 years' experience in the engineering sector to the Company. In addition to a previous part time executive role at Skanska, she currently holds non-executive director roles at Ebbsfleet Development Corporation and Defence Infrastructure Organisation, both executive non-departmental public bodies sponsored by government departments. Her experience at Aecom and particularly at Laing O'Rourke - where she worked as Infrastructure Director as part of the consortium delivering the London 2012 Olympics - will be invaluable to us as we move through the next phases of development.

During the period there have also been other significant developments for the Company. In May we announced an increase to our polyhalite probable reserve. The reserve increased to 280 million tonnes at an average grade of 88.4% (up from the previous level of 250 million tonnes at a grade of 87.8%). This added further confirmation of the outstanding nature of this deposit, which is already the world's largest and highest quality polyhalite reserve.

During the period we also announced details of a potential de-icing salt opportunity at our Project. Whilst the salt deposits within our area of interest (and in close proximity to the polyhalite deposits) have been well known for some time, its extraction could be used in the future as an opportunistic strategy to generate additional revenues in severe winters and if full mine capacity is not being used for polyhalite. We have defined an inferred resource of 550 million tonnes within the Project's area of interest. The initiative, which is subject to approvals, remains an optional and potential bolt-on to our main POLY4 business, but is nevertheless one that could generate additional revenues and also help the UK, particularly in harsh winters.

During the six-month period ended 30 June 2016 the Group made a consolidated loss of £4.1 million compared to a loss of £4.7 million for the six-month period (April to September) last year. Cash resources at the end of June 2016 were £16.9 million compared to £29.1 million at 31 December 2015 and £25.1 million at 30 September 2015.

The Group's net assets at 30 June 2016 were £161.7 million compared to £165.2 million at 31 December 2015 and £153.4 million at 30 September 2015.

The condensed interim unaudited consolidated financial statements have been prepared under the going concern assumption. However, the directors recognise that there are a number of material uncertainties inherent in the Project. The impact of these uncertainties on the directors' consideration of the going concern assumption is set out in note 1 to these financial statements.

The principal risks and uncertainties facing the Group have not changed since the annual report for the period ended 31 December 2015. The principal risks are exploration and development, reserves and resources estimates, mineral title risk, commodity price risk, liquidity risk, currency risk, permits and licenses, community relations, competitors, operational delays, employer and contractor relations and product risk. In respect of the UK's vote in June 2016 to leave the EU, we do not feel the risk to our business is great and there are also potential benefits for the Project. As an export-focused business, any consequent fall in the value of the pound sterling could be beneficial. Detailed explanations of these principal risks can be found in the Company's last annual report.

The Company's Board and management remain focused on the efficient deployment of our existing funds. Together with our external finance and advisory groups, they also continue to concentrate on the ongoing (and extensive) work to secure financing for the construction of our Project. The strategy is still to deliver the overall funding requirement through a range of financing mechanisms, with debt funding making up as much of the overall requirement as possible.

Post balance sheet events

On 20 July 2016 we announced an approvals update, confirming that we had received government approval for the harbour facilities element of our Project. This approval includes the new berth, ship loading facilities and the conveyor linkage to the materials handling facility and includes all the compulsory purchase powers needed to develop them. This was the last major approval needed for the Project and we were clearly delighted to have secured it. This decision provides a welcome prelude to the financing stages of the Project.

I thank all shareholders for their support for the Company and we look forward to an exciting year ahead as we continue to develop our world-class polyhalite Project.

Kind regards

Russell Scrimshaw

Chairman

16 August 2016

Report on the condensed interim consolidated financial statements

Our conclusion

We have reviewed Sirius Minerals Plc's condensed interim consolidated financial statements (the 'interim financial statements') in the interim report of Sirius Minerals Plc for the six-month period ended 30 June 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Unionand the AIM Rules for Companies.

Emphasis of matter

Without modifying our conclusion on the interim financial statements, we have considered the adequacy of the disclosure made in note 1 to the financial statements concerning the Group's ability to continue as a going concern. The Group is involved in efforts to secure short and long-term finance for its polyhalite project in North Yorkshire, the outcome of which is uncertain. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The Group financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

What we have reviewed

The interim financial statements comprise:

· The condensed consolidated statement of financial position as at 30 June 2016;

· The condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;

· The condensed consolidated statement of cash flows for the period then ended;

· The condensed consolidated statement of changes in equity for the period then ended; and

· The explanatory notes to the interim financial statements.

The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Leeds

16 August 2016

Loss for the financial period shown above is fully attributable to equity shareholders of the parent in all periods.

Total comprehensive loss shown above is fully attributable to equity shareholders of the parent in all periods.

The share premium account is used to record the excess proceeds over nominal values on the issue of shares.

The share-based payment reserve is used to record the share-based payments made in the Group.

Foreign exchange reserve records exchange differences which arise on translation of foreign operations with a functional currency other than sterling.