Sirius Minerals Regulatory News (SXX)

28 March 2017

Sirius Minerals Plc

Financial results 2016

Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) ("Sirius" or the "Company") announces the results for Sirius and its subsidiaries ("the Group") for the year ended 31 December 2016.

Key highlights

· Completion of Stage 1 Financing by securing funding of ~US$1.2 billion required to begin the construction of the Company's polyhalite project in North Yorkshire.

· Progressing Stage 2 Financing through mandating a group of six financial institutions ("MLAs").

· The receipt of the final major planning approval for the Company's North Yorkshire polyhalite project - a development consent order for the harbour facilities.

· Increase of the Company's polyhalite probable reserve to 280 million tonnes of polyhalite at an average grade of 88.4%.

· Completion of the definitive feasibility study and the publication of its material findings.

· Selection of preferred contractors for the Woodsmith Mine and mineral transport system works.

· Ongoing progress with customer engagement regarding product sales and further positive crop study results for the Company's POLY4 product.

Post-balance sheet events

· Commencement of construction enabling works in the vicinity of the Woodsmith Mine.

· Appointment of Thomas Staley to the role of Finance Director and Executive Board Director in February 2017.

Financials

Cash resources at the end of December 2016 were £665.3 million (liquid funds including investments and restricted cash) compared to £29.1 million as at 31 December 2015.

During the financial year ended 31 December 2016 the Group made a consolidated loss of £23.0 million compared to a loss of £7.0 million for the nine-month period to 31 December 2015.

The Group's net assets at 31 December 2016 were £496.3 million compared to £165.2 million at 31 December 2015.

Annual report and accounts

The annual report and accounts for the year ended 31 December 2016 have now been published on the Company's website: www.siriusminerals.com. The hard copy of the annual report and accounts will also be posted to shareholders shortly.

The Company's annual general meeting will be held at 1.00pm on Thursday 29 June 2017 at the Royal York Hotel, Station Road, York, YO24 1AA. The Notice of Meeting will be issued to shareholders in due course.

Investor conference call

Sirius Minerals' Chief Financial Officer, Thomas Staley, will host a conference call for investors and analysts at 9.00 am today. Any analysts wishing to ask questions on the call can receive dial in details by emailing sirius@tavistock.co.uk.

The call can be listened to live at: http://event.onlineseminarsolutions.com/wcc/r/1391936-1/6AA91F73112E78BB991EE5447D8D1B10?partnerref=rss-events and a replay will be available on the Company's website in due course.

For further information, please contact:

About Sirius Minerals Plc

Sirius Minerals Plc is the fertilizer development company focused on the construction and development of its North Yorkshire polyhalite project in the United Kingdom. It believes the Project represents the world's largest high-grade known 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 (AIM: SXX). 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,

Welcome to 2016 annual report which covers the period from 1 January to 31 December.

Some five years ago, in my first Chairman's overview, I commented that Sirius Minerals is one of the world's most exciting resource development companies. For me nothing has changed in terms of the sentiment, although clearly we have made significant progress towards reaching our goals.

If 2015 was principally about securing key approvals, until that time seen by the market as the major barrier to our progress, then 2016 was the year we cleared the second major hurdle - stage 1 financing. As long-term shareholders will know, the completion of our stage 1 financing in November 2016 was the culmination of much hard work in the preceding years including resource exploration and definition, the signing of several bankable sales contracts and the securing of key planning approvals.

In 2016 we published the key findings of our definitive feasibility study (DFS). The study was essentially prepared over two years, with input from the results of planning approvals and contributions from a wide range of experienced consultancies. The DFS defined a business that has the potential to be a world leader in the fertilizer industry, with expected low operating costs, healthy margins and a very long asset life.

In the period around and immediately after the DFS announcement we had been running competitive tender processes for both the construction of the mine shafts and the mineral transport system, and subsequently we announced our preferred contractors.

This, together with the receipt of the final major planning approval - the harbour facilities - and the update on stage 2 financing progress, provided the ideal spring board that we needed to execute the stage 1 financing. I can assure all shareholders that we undertook a tremendous amount of detailed work with a number of financing and consulting parties in the run up to the announcement of the Royalty Financing Agreement with Hancock British Holdings Ltd in October 2016.

Hancock Prospecting Chairman, Mrs Gina Rinehart, needs no introduction given her extremely successful business track record. We were delighted to partner with her company, particularly given its extensive experience in both the mining industry and with royalty agreements. Hancock's growing agricultural interests also make them an excellent partner for us.

With this part of the stage 1 financing in place, we could execute the remaining elements of the financing package being the convertible bonds and a firm placing and placing and open offer. This meant we were able to secure funding of US$1.2 billion required to begin the construction of our Project.

I believe, after many further successes, people will look back and truly appreciate what a momentous achievement this financing was. A great deal of credit should be attributed to our executive team, led by Chris Fraser, and our Chief Financial Officer, Thomas Staley. But the credit stretches throughout the entire organisation, such is the level of effort needed across the business in preparing for, coordinating and executing such a complex structure - essentially three separate significant finance components.

We have also made other substantial progress this past year including a new, upgraded take-or-pay offtake agreement, an increase to our polyhalite probable reserve and the development of a potential de-icing salt opportunity at our Project. On the governance side in 2016 Louise Hardy replaced Stephen Pycroft on the Sirius Minerals Board as a non-executive director. Louise has brought to our Board additional extensive major project experience in senior roles in the UK construction industry. Her background is already proving most valuable for the Company.

Post-balance sheet events

On 19 January 2017 we set out a schedule for reporting our Project construction updates. Given the levels of interest in our construction from both shareholders and wider stakeholders, we felt it was important to give clarity on when to expect Project progress information to be shared. The first of these updates is scheduled for release alongside the issue of this annual report.

On 2 February 2017 we appointed our Chief Financial Officer, Thomas Staley, to the role of Finance Director and Executive Board Director. Thomas has demonstrated his strong capabilities as Sirius CFO over the last two years and he brings valuable financing and governance experience to the Board.

As always, I thank all shareholders for their support for the Company. We are continually uplifted by the good wishes we receive from our very large number of loyal shareholders. We look forward to our first year of construction as we continue to develop our world-class polyhalite Project.

Kind regards,

Russell Scrimshaw

Chairman

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2016

Diluted loss per share are calculated by dividing the loss attributable to ordinary shareholders by 2,480,858,000 (2015: 2,231,795,000) ordinary shares, being the average number of ordinary shares in issue during the year adjusted by the dilutive effect of employee share schemes and convertible loan options.

For the year ended 31 December 2016, options over 1,343,090,000 shares (2015: 45,450,000) were excluded from this calculation because their effect was anti-dilutive for continuing operations.

On 28 November 2016 the Group issued $400m of 7 year, 8.5% quarterly coupon USD-denominated convertible loans at par, receiving gross proceeds of £319,923,000 and incurring transaction costs of £11,577,000 which have been net off the carrying value of the loan. The key terms of the convertible loans are that at any date subsequent to 8 January 2017 up until maturity a bondholder may convert their bonds into ordinary shares in the Company at a conversion price of $0.31 per share.

Under the terms of the convertible loan, the Group has also been required to set aside an amount in an Escrow bank account in respect of all coupon payments due until 28 November 2019 and so this amount of £82,924,000 has been disclosed on the Group's statement of financial position as restricted cash as the Group is not able to use the cash for any purpose other than the payment of quarterly coupons.

Due to the conversion terms of the bonds leading to the issuance of a fixed number of ordinary shares in the Company in return for the extinguishment of the bonds whose value is variable in terms of the Company's functional currency of Sterling, the Group has accounted for the bonds as a host loan instrument containing an embedded derivative liability in respect of the conversions features. The split of the convertible loan between the host loan and the embedded derivative is detailed in the table below

Fair value estimation

In order to estimate the fair value of the embedded derivative at inception and year-end, the Group estimated the fair value of the cash flows due under the host loan at the prevailing discount rate that would likely apply to any debt issued by the Group which was not convertible. Based on the pricing terms obtained on the convertible bonds, management have estimated a discount rate that for the loan component based on bond yield data of comparable entities with similar credit profiles at the measurement dates.

The effect of using a discount rate that was one percentage point higher/(lower) at 31 December 2016 would have been an increase/(decrease) in the finance cost recognised in the income statement of £13,085,000/(£13,961,000).

In estimating the fair value at 31 December 2016, the Group incorporated the mid-price of the bonds' quoted market price of 102.9 (28 November 2016: 100.0). Therefore, the fair value of the Group's convertible loan bonds as at 31 December 2016 was £334,679,000 compared to the stated carrying value of £321,366,000.

On 25 October 2016 the Group entered into a royalty financing agreement with Hancock British Holdings Limited ("Hancock"). Under the agreement Hancock will pay consideration of USD 250 million in return for future royalty payments amounting to 5% of gross revenues on the first 13 million tonnes of product sold in each calendar year and a further 1% of gross revenues on sales in excess of 13 million tonnes, for the life of the Project.

Drawdown of the USD 250 million consideration is subject to certain conditions precedent being met, principally the Group giving notice to Hancock that it has expended USD 630 million of the proceeds of the Group's November 2016 stage 1 financing and that all material permits, commercial arrangements and authorisations for the project remain in place.

The royalty purchase represents a loan commitment and therefore falls outside of the scope of IAS 39 "Financial Instruments: Recognition and Measurement". As such no accounting entries are recognised in the financial statements prior to receipt of the consideration.

ENDS