Proactiveinvestors United Kingdom Sirius Minerals PLC https://www.proactiveinvestors.co.uk Proactiveinvestors United Kingdom Sirius Minerals PLC RSS feed en Thu, 23 May 2019 21:55:12 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) <![CDATA[RNS press release - Notification of Major Holdings ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523120042_14085400/ Thu, 23 May 2019 12:00:42 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523120042_14085400/ <![CDATA[RNS press release - Notification Of Major Holdings ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523115504_14085386/ Thu, 23 May 2019 11:55:04 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523115504_14085386/ <![CDATA[News - Sirius Minerals shares look sharply undervalued, Liberum analyst says ]]> https://www.proactiveinvestors.co.uk/companies/news/220848/sirius-minerals-shares-look-sharply-undervalued-liberum-analyst-says-220848.html Sirius Minerals PLC’s (LON:SXX) financing risks are behind it and the UK mine developer’s shares now look “sharply undervalued”, that’s according to Liberum analyst Richard Knights.

With a target price of 40p the stockbroker suggests some 167% upside to the current Sirius market price of around 15p.

In recent weeks the company launched a near £4bn sequence of project financing – since then it has completed the first US$825mln raise, via the issue of equity and convertible debt.

READ: Sirius Minerals share sale sees strong demand

Liberum’s Knights, in a note, highlighted that Sirius is now “on the cusp of finalising” the funding package.

“The company plans to issue a $500m high yield bond in the coming months which will unlock the remaining $2.5bn credit facility from JP Morgan, needed to complete the project. With financing risk behind it we think the stock looks sharply undervalued,” the analyst said.

“In our view financing risk is a hefty component of Sirius's 78% discount to NPV (68p). With a line drawn under dilution, only construction risk and market risk remain.”

Share sale was oversubscribed

On Monday, Sirius announced that the open offer portion of its new funding package has now closed and said that that the shareholder equity sale was oversubscribed.

The FTSE 250-listed firm said, therefore, it would be issuing the full 218mln allocation of new shares which are priced at 15p each, in line with the placing shares launched in early May.

"We are encouraged by the oversubscribed open offer, which underlines the strong equity market support for our comprehensive markets-led solution for stage 2 funding,” said Chris Fraser, Sirius Minerals' managing director.

“Today's result takes us another step closer to bringing POLY4 to the global agriculture industry and I would like to thank shareholders and partners for their continued support. We now turn our focus to delivering the next phase of the funding package, with planning for the high yield bond well underway," Fraser added.

]]>
Thu, 23 May 2019 09:27:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/220848/sirius-minerals-shares-look-sharply-undervalued-liberum-analyst-says-220848.html
<![CDATA[RNS press release - Admission of New Ordinary Shares ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523082145_14084921/ Thu, 23 May 2019 08:21:45 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190523082145_14084921/ <![CDATA[RNS press release - Convertible Bond Offering Circular ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521143234_14082244/ Tue, 21 May 2019 14:32:34 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521143234_14082244/ <![CDATA[RNS press release - Result of General Meeting ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521130746_14082143/ Tue, 21 May 2019 13:07:46 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521130746_14082143/ <![CDATA[News - Sirius Minerals says open offer share sale sees strong demand, closes oversubscribed ]]> https://www.proactiveinvestors.co.uk/companies/news/220650/sirius-minerals-says-open-offer-share-sale-sees-strong-demand-closes-oversubscribed-220650.html Sirius Minerals PLC (LON:SXX) has revealed that the open offer portion of its new funding package has now closed and said that that the shareholder equity sale was oversubscribed.

The FTSE 250-listed firm said, therefore, it would be issuing the full 218mln allocation of new shares which are priced at 15p each, in line with the placing shares launched in early May.

READ: Sirius Minerals is at a ‘critical juncture’ as financing efforts continue

"We are encouraged by the oversubscribed open offer, which underlines the strong equity market support for our comprehensive markets-led solution for stage 2 funding,” said Chris Fraser, Sirius Minerals' managing director.

“Today's result takes us another step closer to bringing POLY4 to the global agriculture industry and I would like to thank shareholders and partners for their continued support. We now turn our focus to delivering the next phase of the funding package, with planning for the high yield bond well underway," Fraser added.

Project funding

Sirius launched a US$400mln share placing earlier this month as part of a US$3.8bn project funding plan, and it said the equity sale would be priced at between 15p and 18p each. Last Wednesday, it revealed that the shares would be sold at 15p.

Whilst the share offering was priced at the bottom of range, there evidently was strong demand for the new shares as Sirius revealed that it raised an additional US$25mln from the placing. Overall, the company is selling around 1.96bn new shares which equates to 28% of the company's enlarged share capital.

Later, in the summer, Sirius intends to secure US$3bn of purely debt based financing, first with a US$500mln Senior bond issue followed by a revolving credit facility.

Significantly, the phased funding package has a number of contingent elements so the completion of each comes with a certain amount of de-risking for the company and the project.

Critical juncture

In a note to clients, analysts at ShoreCap said in their view "the next few weeks represent THE critical juncture for the Stage 2 financing."

They added: "Successfully completing the Senior Debt Event is, effectively, the key to unlocking Sirius’s vast potential and, we expect, should catalyse a major re-rating of the shares.

"Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe."

in afternoon trading, shares in Sirius Minerals were 2.8% lower at 15.46p.

 -- Adds analyst comment, share price --

]]>
Tue, 21 May 2019 07:27:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/220650/sirius-minerals-says-open-offer-share-sale-sees-strong-demand-closes-oversubscribed-220650.html
<![CDATA[RNS press release - Results of Open Offer ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521070021_14080963/ Tue, 21 May 2019 07:00:21 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190521070021_14080963/ <![CDATA[RNS press release - Holding(s) in Company - Replacement ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190516144834_14077226/ Thu, 16 May 2019 14:48:34 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190516144834_14077226/ <![CDATA[RNS press release - 2019 Notice of Annual General Meeting ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190514134718_14073583/ Tue, 14 May 2019 13:47:18 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190514134718_14073583/ <![CDATA[News - Sirius Minerals financing clears some hurdles but full package 'by no means guaranteed' ]]> https://www.proactiveinvestors.co.uk/companies/news/219985/sirius-minerals-financing-clears-some-hurdles-but-full-package--by-no-means-guaranteed--219985.html Sirius Minerals PLC (LON:SXX) has announced its US$3.8bn stage-two funding package but is “not out of the woods”, said investment bank Berenberg as it cut its target price on the shares.

With the company having been in danger of running out of cash to be able to keep up spending on the development of its Woodsmith polyhalite mine by the end of next month, securing financing has been the primary focus for Sirius over the past year and a half.

READ: Norwegian sovereign wealth fund buys into Sirius Minerals on open market

The full financing package, which includes a signed-off share placing of US$425mln (£327mln), a US$2.5bn revolving credit facility from JPMorgan, a US$500mln high yield bond and a convertible bond offering, is designed to covers the entire development capital required by this highly complex project.

Before production is due to start in 2021, the company has to sink two 1.5km shafts near Whitby in North Yorkshire and a 40km tunnel to transport its polyhalite all the way from the site to the port at Teesside, from where the fertiliser product will be shipped around the world under the POLY4 brand.

Berenberg said the package “clears some hurdles surrounding the project” but the full financing “is by no means guaranteed and the company remains in a crucial phase to secure long-term funding”.

Berenberg analyst Rikin Patel said the composition and terms of the package did not match with his best-case scenario, noting that the terms of the convertible bond state that the funds will be held in escrow until the company is able to secure the revolving credit facility which is in turn contingent on successfully issuing the US$500mln high yield bond.

“If the company is not able to do this, there is no guarantee that alternative methods of financing can be secured, and as such the company will again run into cash flow issues.”

Berenberg remains positive on long-term concept

However, Patel remained confident that Sirius can secure the funding from the high yield market, even though this will likely come at an elevated interest cost, which he was now factoring into his forecast model and, while he cut his target price to 35p from 40p, reiterated his 'buy' rating.

“While shareholders may face some dilution in the short term, fundamentally, we remain positive on the project’s longer-term credentials. The economics and valuation are still favourable, even with conservative assumptions on pricing, volumes and capex,” the analyst said.

Berenberg estimates that project should generate an internal rate of return of 15% with a price/net present value ratio of 0.4 times.

“Furthermore, we remain positive on the long-term success of its POLY4 product. Our argument is predicated on the idea that polyhalite can offer a cheaper alternative to existing speciality fertiliser products like SOP (sulphate of potash). With farmer incomes under pressure, we think speciality products like POLY4 can grow share in the market given the potential yield benefits, especially for higher-value crops.”

]]>
Thu, 09 May 2019 14:01:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219985/sirius-minerals-financing-clears-some-hurdles-but-full-package--by-no-means-guaranteed--219985.html
<![CDATA[News - Norwegian sovereign wealth fund buys into Sirius Minerals on open market ]]> https://www.proactiveinvestors.co.uk/companies/news/219902/norwegian-sovereign-wealth-fund-buys-into-sirius-minerals-on-open-market-219902.html Norway’s US$1trn sovereign wealth fund has snapped up shares in Yorkshire-based polyhalite miner Sirius Minerals PLC (LON:SXX) on the open market as the UK company looks to secure long-term funding for its huge underground mine.

It was confirmed this week that the Oslo-based fund, the largest such fund in the world, now owns a 3.5% stake in the London-listed outfit. The shares are held under the name of Norges Bank, the country’s central bank, which manages the wealth fund.

READ: Sirius Minerals is now at a ‘critical juncture’ as financing efforts continue

The Norwegians snaffled a total of 166.52mln shares, completing the purchase on Thursday 2 May. Of this, 115.45mln shares were held directly by the fund, representing 2.4% of Sirius’s shares, plus another 51.08mln that was said to be on loan. Many funds that buy shares on a long basis also loan some of their shares to hedge funds and others who want to take short positions, with a right to recall them.  

This came a day after Sirius, as part of a planned US$3.8bn project financing plan, confirmed that its brokers had tied up a US$425mln placing with City institutions at a price of 15p per share. The placing was priced at the bottom of the 15-18p range previously indicated, even though the funding was said to have been oversubscribed.

Sirius’s broker Shore Capital would not confirm if Norges Bank had been in direct contact, but confirmed that shares from the placing will not be issued until after the group’s shareholders convene for a general meeting, which is expected to be on 23 May.

The Norges Bank share purchase was therefore made on the open market, though at what price at it has not confirmed. Having hit a three-year low of 15.5p on the Wednesday, the shares rose to a daily high of 17.15p on the following day and fell as low as 16.31p, before closing at 16.53p.               

But as part of this stage of the finanacing, the Norwegian fund will along with all existing shareholders be able to take part in the open offer element of the fundraising, also priced at 15p apiece, with each shareholder having the opportunity to buy one share for every 22 they already own.

READ: Oilers shaken as Norwegian sovereign wealth fund decides to dump sector stocks

The purchase of shares in Sirius comes as the sovereign wealth fund pivots away from its historic focus on oil. Originally formed as Norway’s ‘oil fund’ with the piles of cash generated by the country’s vast petroleum reserves, the Government Pension Fund Global, as it is officially known, has been told by the Norwegian government to focus less on oil and gas exploration and production companies.

Sirius is raising funds to continue development of its Woodsmith mine in North Yorkshire, which will produce polyhalite, a mineral that is seen as an attractive multi-nutrient fertiliser and for which it has secured a number of off-take agreements.

Analyst positive on long-term project

This week, Berenberg analyst Rikin Patel said the long-awaited stage-two financing package, which as well as the US$425mln share placing, also includes a proposed convertible bond offering, a US$500mln high yield bond and a revolving credit facility providing US$2.5bn of finance, would cover the entire development capital required by the Woodsmith project and “goes some way to de-risking the viability of the project”.

The company is not out of the woods yet, Berenberg said. “While this package clears some hurdles surrounding the project, financing is by no means guaranteed and the company remains in a crucial phase to secure long-term funding.”

Patel said the package still left some uncertainty about mid-term financing, although less than previously, and he was confident that funding would be secured from the high yield market.

“While shareholders may face some dilution in the short term, fundamentally, we remain positive on the project’s longer-term credentials,” he said, adding that the economics and valuation are “still favourable”, with conservative assumptions on pricing, volumes and capex leading to a forecast internal rate of return of 15% and an price/net present value ratio of 0.4 times.

Sirius shares were up 5% to 15.98p in Wednesday afternoon.

]]>
Wed, 08 May 2019 14:48:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219902/norwegian-sovereign-wealth-fund-buys-into-sirius-minerals-on-open-market-219902.html
<![CDATA[RNS press release - Notification of Major Holdings ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190507130532_14065071/ Tue, 07 May 2019 13:05:32 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190507130532_14065071/ <![CDATA[News - Sirius Minerals is now at a ‘critical juncture’ as financing efforts continue ]]> https://www.proactiveinvestors.co.uk/companies/news/219565/sirius-minerals-is-now-at-a-critical-juncture-as-financing-efforts-continue-219565.html Sirius Minerals PLC (LON:SXX) is said to be at the critical juncture in its development as it zeros in on project financing designed to take the company through to production and revenue generation.

The UK firm yesterday confirmed it had raised the first US$425mln of a US$3.8bn total funding package via a share sale.

It is now raising more equity with an open offer to existing shareholders – who are entitled to buy one share for every twenty-two shares they own – and separately it will raise US$400mln through a corporate bond issue.

READ: Can Sirius Minerals beat Brexit to deliver funding for its Yorkshire mine?

Later, in the summer, the company intends to secure US$3bn of purely debt based financing, first with a US$500mln senior bond issue followed by a revolving credit facility.

Significantly, the phased funding package has a number of contingent elements so the completion of each comes with a certain amount of de-risking for the company and the project.

“Consequently, in our view, the next few weeks represent THE critical juncture for the Stage 2 financing,” said Yuen Low, analyst at house broker Shore Capital.

“Successfully securing the Stage 2 financing is effectively the key to unlocking Sirius’s vast potential, and we expect should catalyse a major re-rating of the shares.

“Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe.”

Share placing priced at bottom of range

Earlier this week, Sirius launched a US$400mln share placing as part of a US$3.8bn project funding plan, and, it said the equity sale would price between 15p and 18p, and, on Wednesday, it revealed that the shares would be sold at 15p.

Whilst it was priced at the bottom of range, there evidently was strong demand for the new shares as Sirius revealed that the placing was oversubscribed and it raised an additional US$25mln.

"I am pleased that we have had such a positive response to the launch of our Stage 2 financing solution which is key to unlocking the vast and long-term potential of our project,” said Chris Fraser, Sirius chief executive.

“The order books were oversubscribed, providing scope for a modest increase in the funds raised, further strengthening our financial position as we turn our attention toward securing the next phase of our Stage 2 financing requirements.”

In total, the company is selling 1.96bn new shares, which equates to 28% of the enlarged company.

Open offer shares will also be priced at 15p each.

]]>
Thu, 02 May 2019 09:57:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219565/sirius-minerals-is-now-at-a-critical-juncture-as-financing-efforts-continue-219565.html
<![CDATA[RNS press release - Publication of Prospectus and Circular ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501182905_14060077/ Wed, 01 May 2019 18:29:05 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501182905_14060077/ <![CDATA[News - Sirius Minerals prices new shares at bottom of range, raises extra US$25mln ]]> https://www.proactiveinvestors.co.uk/companies/news/219436/sirius-minerals-prices-new-shares-at-bottom-of-range-raises-extra-us25mln-219436.html Sirius Minerals PLC (LON:SXX) has priced its large equity raise at the bottom end of the anticipated range, selling new shares to institutional investors at 15p – a 32% discount to pre-funding levels.

Yesterday, the company launched a US$400mln share placing as part of a US$3.8bn project funding plan, and, it said the equity sale would price between 15p and 18p.

READ: Can Sirius Minerals beat Brexit to deliver funding for its Yorkshire mine?

Whilst it was priced at the bottom of range, there evidently was strong demand for the new shares as Sirius revealed that the placing was oversubscribed and it raised an additional US$25mln.

"I am pleased that we have had such a positive response to the launch of our Stage 2 financing solution which is key to unlocking the vast and long-term potential of our project,” said Chris Fraser, Sirius chief executive.

“The order books were oversubscribed, providing scope for a modest increase in the funds raised, further strengthening our financial position as we turn our attention toward securing the next phase of our Stage 2 financing requirements.”

In total, the company is selling 1.96bn new shares, which equates to 28% of the enlarged company.

READ: Sirius Minerals launches US$3.8bn ‘markets-led’ project financing

Additionally, the company has now kicked off an accompanying open offer so that qualifying existing shareholders can also buy new shares at the same price.

Shareholders can buy one additional Sirius share for every 22 existing shares they hold.

The placing requires approval at a general meeting, on 21 May, and, it is conditional upon the completion of a separate convertible bond funding which seeks to bring in a further US$400mln of new capital (as well as US$244mln to repay an existing convertible debt series).

After that the other elements of the project financing exercise - a US$500mln senior debt issue and a revolving credit facility – will follow in the autumn, subject to market conditions and operational progress at the company’s Yorkshire mine development project.

In a note to clients, analysts at ‘house’ broker Shore Capital commented: “Successfully securing the Stage 2 financing is effectively the key to unlocking Sirius’s vast potential, and we expect should catalyse a major re-rating of the shares.

“Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe.”

In afternoon trading, shares in Sirius Minerals were 5.9% lower at 16.40p.

 -- Adds analyst comment, share price --

]]>
Wed, 01 May 2019 07:31:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219436/sirius-minerals-prices-new-shares-at-bottom-of-range-raises-extra-us25mln-219436.html
<![CDATA[RNS press release - Convertible Bond Placement ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501072636_14058878/ Wed, 01 May 2019 07:26:36 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501072636_14058878/ <![CDATA[RNS press release - Results of Firm Placing and Placing ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501070013_14058442/ Wed, 01 May 2019 07:00:13 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190501070013_14058442/ <![CDATA[News - Can Sirius Minerals beat Brexit to deliver funding for its Yorkshire mine? ]]> https://www.proactiveinvestors.co.uk/companies/news/219396/can-sirius-minerals-beat-brexit-to-deliver-funding-for-its-yorkshire-mine-219396.html Sirius Minerals PLC (LON:SXX) saw its shares take a hit on Tuesday as the UK fertiliser mine developer’s ‘long tail’ of private investors were caught wrong footed by project financing news.

Many had hoped the hotly anticipated ‘Stage 2’ financing would be a ‘one-and-done’ debt based deal, with limited or no dilution for equity holders.

Instead, Sirius revealed a phased and partially contingent financing plan, front-ended with US$800mln of equity and convertible debt.

READ: Sirius Minerals launches US$3.8bn ‘markets-led’ project financing

Some US$400mln worth of new shares will be sold imminently at a discounted price of between 15p and 18p each (exact pricing likely confirmed shortly).

This capital injection - call it the ‘Stage 1.5 financing’, if you wish – means Sirius can keep building its Yorkshire mine with the path to production, revenue and ultimately dividends remaining intact.

The project itself is no small venture. In fact, it is one of the biggest civil engineering undertakings in Europe at present.

It comprises the Woodsmith polyhalite fertiliser mine, which is 1.5km deep, along with a 37km-long underground conveyor belt to a new processing facility.

Initial funds are guaranteed

Significantly, the imminent equity and convertible bond raises are being underwritten in the City - effectively guaranteeing Sirius the funds.

However, the subsequent steps in the funding plan are not, and they will rely on ‘market conditions’.

Specifically, the US$2.5bn revolving credit facility (RCF), the final piece - and the most critical - has yet to be nailed down.

The loan is not expected to be drawn upon until June 2021, but, establishing the facility is contingent upon the completion of a separate US$500mln senior bond issue later this year.

Sirius expects to issue the bonds no later than September, subject to prevailing market conditions, and, a deadline of 30 October is set in the commitment letter for the RCF.

In other words, Sirius must close the US$500mln senior bonds a day before the current deadline for Brexit – the UK’s exit from the European Union.

Sirius still needs to secure the remainder of the project financing in the market place, and, whether the bonds are launched in September or October, the most significant acid test looks likely to come at the sharp-end of Brexit.

So, delivering this large scale UK export story now effectively hinges on the liquidity and appetite among bond investors on the literal eve of Brexit.

Given the Brexit deadline date is Halloween, should investors be scared?

Before long term investors see their heads spin over what may yet be, it is probably fair to say that, overall, Tuesday’s funding news ought to be taken positively.

It is definitely good news, in as much as it allows mine construction to keep moving forward.

Sirius is deep in the project execution phase, and, without the new funds it would otherwise be left simply owning a big and expensive hole in the ground.

However, investor disquiet is probably warranted too. It is estimated that Sirius has something like 85,000 small shareholders, of which about a quarter are believed to reside in Yorkshire and the North East.

This ‘long tail’ of private investors will be stinging for some time after the dilutive fundraising news.

That has taken around 17% off the price on Tuesday, but, arguably, the funding also removes important near-term uncertainties.

Once they come to terms with the shock, private investors will all be hoping to see forward operational progress rewarded in the share price.

Nevertheless, a binary element of the financing risk remains and with the current timeline Brexit potentially now looms over the project in a more tangible way than before.

]]>
Tue, 30 Apr 2019 16:16:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219396/can-sirius-minerals-beat-brexit-to-deliver-funding-for-its-yorkshire-mine-219396.html
<![CDATA[RNS press release - 2018 Annual Report ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430073856_14056830/ Tue, 30 Apr 2019 07:38:56 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430073856_14056830/ <![CDATA[News - Sirius Minerals launches US$3.8bn ‘markets-led’ Stage 2 project financing ]]> https://www.proactiveinvestors.co.uk/companies/news/219328/sirius-minerals-launches-us38bn-markets-led-stage-2-project-financing-219328.html Sirius Minerals PLC (LON:SXX) this morning launched a ‘markets-led’ Stage 2 project financing which aims to fund the Yorkshire mine development project to completion.

The US$3.8bn financing will comprise a US$400mln equity fundraising, a US$644mln issue of convertible bonds, a US$500mln senior secured bond issue and a credit facility up to a maximum of US$2.5bn.

READ: Sirius Minerals inks new sales deal with German agribusiness

"In March we paused discussions with prospective lenders to work on an alternative financing proposal with J.P. Morgan Cazenove,” said Chris Fraser, Sirius chief executive.

“Today we are pleased to announce that, as a result of that work, we are launching a comprehensive markets-led solution for our funding requirements which will enable Sirius Minerals to complete the development of its mine and unlock what we believe to be the world's largest known high-grade polyhalite deposit.”

“The funding package will bring together equity, convertible bonds, high yield debt, and a US$2.5bn revolving credit facility in a multi-stage, flexible structure that balances the availability of capital with the needs of the project.”

Fraser added: “Today's announcement provides a clear pathway to a fully financed project in the months ahead, while enabling us to progress construction at full speed."

Share placing

Sirius aims to raise US$400mln of new equity in three related issues – it will conduct a fully underwritten firm placing, a regular placing and an open offer to qualifying existing shareholders.

It expects to price the new shares between 15p and 18p (Monday’s closing price was 21.9p). In early morning trading, shares in Sirius Minerals were trading at 18.74p, down 4.4%.

The company anticipates that the majority of the placing shares, about 90%, will be sold to institutional investors.

Bonds

Some US$644mln will be raised via a convertible bond issue, though around US$244mln of that will effectively replace existing 8.5% convertible bonds.

It will be launched in conjunction with the equity raise.

The issue will take place in two tranches. One will be the fully underwritten issue of US$400mln, to guarantee the new funding, the other US$244mln issue raises capital to use in the buy-back of the existing convertibles.

The separate US$500mln senior secured bond issue is being delivered by JP Morgan Securities which will endeavour to find buyers though it is not under obligation to take the bonds, so the US$500mln raise is not guaranteed.

Revolving credit facility

Sirius has now signed an engagement letter with JP Morgan for the proposed US$2.5bn revolving credit facility. It is contingent upon the completion of the full US$500mln bond issue, before 30 October 2019.

JP Morgan is the sole lead arranger, though it is expected that the facility will be syndicated to other lenders.

Timing

Sirius has already this morning launched the ‘buy-back’ convertible bond issue, and it is expected to close in May.

The straight equity components – the underwritten placing, placing and open offer – and the US$400mln convertible bond issue will take place at around the same time (the share placing process launches today).

Together, these elements will raise about US$1bn of new funds which will allow Sirius to continue the advancement of the Yorkshire mine development project.

By September, the company will aim to issue the separate US$500mln senior secured bonds and, so long as it completes before 30 October, the revolving credit facility will be put in place (it will have a maximum of US$2.5bn).

It is anticipated that the initial drawdown under the facility will occur no later than June 2021.

 -- Adds share price --

]]>
Tue, 30 Apr 2019 07:18:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219328/sirius-minerals-launches-us38bn-markets-led-stage-2-project-financing-219328.html
<![CDATA[RNS press release - Convertible Bond Offering ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070107_14056431/ Tue, 30 Apr 2019 07:01:07 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070107_14056431/ <![CDATA[RNS press release - Launch of Stage 2 Financing ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070103_14056441/ Tue, 30 Apr 2019 07:01:03 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070103_14056441/ <![CDATA[RNS press release - 2018 Preliminary Results ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070017_14056364/ Tue, 30 Apr 2019 07:00:17 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190430070017_14056364/ <![CDATA[News - Sirius Minerals shares up as it inks new sales deal with German agribusiness ]]> https://www.proactiveinvestors.co.uk/companies/news/219071/sirius-minerals-shares-up-as-it-inks-new-sales-deal-with-german-agribusiness-219071.html Sirius Minerals PLC (LON:SXX) shares were higher on Thursday after the firm revealed the latest sales agreement for its new mine in Yorkshire, with European agribusiness, BayWa AG signing a ten-year deal.

Through the deal, which is expected to ramp up over the term, BayWa will receive a minimum of 2.5mln tonnes of polyhalite fertiliser per year by year five. It takes the Sirius future contracted sales up to 10.7mln tonnes, which approximately equates to the mine’s first phase capacity.

READ: Is now the time to invest in Sirius Minerals?

Sirius highlighted that the deal gives it greater downstream pricing exposure in the premium European market.

"The European fertilizer market is highly advanced and the second largest in the world behind China,” said Chris Fraser, Sirius chief executive.

“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.”

Daan Vriens, chief executive of the BayWa Agri Supply & Trade (BAST) business, added: "We are excited to be partnering with Sirius to bring a high performing, multi-nutrient fertilizer like POLY4 to customers across Europe.

“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."

'Highest prices'

Munich headquartered BayWa distributes agricultural products in the European market, presently including 2mln tonnes of fertilisers per year.

Sirius noted that the supply deal includes a pricing mechanism linked to downstream pricing, determined by the price received by BAST whilst referencing a benchmark price and the ‘nature of the final BAST customer’.

It added that BAST is incentivised to sell the POLY 4 product further down the supply chain – described as those ‘closer to the farm gate’.

The UK miner anticipates that via BAST it will see highest prices across its current supply agreement portfolio.

In afternoon trading, shares in the FTSE 250-listed firm were 3.2% higher at 21.66p.

 -- Adds share price --

]]>
Thu, 25 Apr 2019 07:40:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/219071/sirius-minerals-shares-up-as-it-inks-new-sales-deal-with-german-agribusiness-219071.html
<![CDATA[RNS press release - Major European supply and distribution agreement ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190425070008_14051012/ Thu, 25 Apr 2019 07:00:08 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190425070008_14051012/ <![CDATA[News - Sirius Minerals: Is now the time to invest ahead of key US$3.5bn financing? ]]> https://www.proactiveinvestors.co.uk/companies/news/218157/sirius-minerals-is-now-the-time-to-invest-ahead-of-key-us35bn-financing-218157.html Sirius Minerals PLC (LON:SXX) is approaching a “crucial juncture”, according to analysts, so is it time to make an investment?

You’ll struggle to find an analyst who says not to: out of the four abacus rattlers who watch the stock, three have ‘buy’ recommendations while the other has an ‘outperform’ rating.

READ: Sirius Minerals makes it onto Liberum’s most preferred list

Sirius is behind one of the biggest civil engineering projects currently being undertaken in Europe.

It is building the Woodsmith polyhalite fertiliser mine in North Yorkshire, which is 1.5km deep and requires a 37km-long underground conveyor belt to take the minerals from the mine to a processing facility.

Backing such a complex and impressive project in the UK will no doubt be reason enough for some investors.

Financing due this month

Analysts are less romantic, though, and instead point to an upcoming financing as perhaps the biggest remaining inflection point and one which punters should get in ahead of.

“If all goes to plan, Sirius’s US$3.4-3.6bn stage 2 financing will be successfully completed over the coming weeks,” said Shore Capital’s Yuen Low in a recent note to clients.

“We expect this seminal achievement to catalyse a major re-rating of the shares.”

Low thinks the financing will spur the Sirius share price onto the 50p level, while Liberum’s mining analyst Ben Davis is looking for somewhere between 45p and 60p post-funding.

Either way, both are forecasting a sharp rise in the FTSE 250 group’s share price, which currently sits at just above 20p.

It has been pushed back before though …

Critics will have their doubts as to whether the financing will be secured on time and on terms the market considers acceptable.

The deadline for completion has already been pushed back once: it was supposed to be delivered in the first quarter of this year, but Sirius bosses are now guiding for the end of this month (April).

Sirius can’t afford any more delays either. In an update back in January, it said it has enough in the bank to last it “into the second quarter” without having to alter the project’s timeline.

Then there was the surprise at the start of the year when the UK government only committed to lending the company US$1bn to help develop Woodsmith. The expectation previously was that the government would underwrite US$2bn of loans.

Sirius tried to jazz up the announcement by saying that it would rely less heavily on debt from one particular party, although others argued that government financing is almost always the cheapest.

Digging such a deep mine isn’t easy (or cheap)

While the financing accounts for the majority of the project risk – about 60% seems to be the consensus – the rest of the risk lies in the ground (literally).

Because the mine is so deep and requires such a complex conveyer belt system to be built, Sirius is having to drill through a lot of earth.

With every metre comes more risk that tunnellers bump into the unexpected. In a recent op-ed, the Financial Times claimed that the digging costs alone could end up being US$530mln higher than forecast, although this figure was disputed by Liberum.

Rising costs are a touchy subject for long-term Sirius investors, though. In September, Sirius said it needed to build a wider tunnel for the mineral transportation system (MTS) which would add US$400-600mln to the overall bill, currently at US$4.2bn.

Is Sirius over-egging the potential of POLY4?

Assuming the project does go ahead without any major operational or financial hiccups, being able to sell the fertiliser is critical. What’s the point otherwise?

Sirius has struck deals with various companies around the world that have agreed to take a combined 8.2mln tonnes of POLY4 every year.

As yet, there is no supply agreement in place in Europe, but negotiations with a potential offtake partner are “well advanced” and Liberum’s Davies is of the view that a “big player could be a share catalyst”.

Some in the industry are sceptical over the market for the fertiliser, though given that only one other company produces it: Israeli Chemicals (ICL) at a nearby mine.

While Sirius is looking to build a mine that can produce 10mln tonnes of polyhalite every year – and with plans to double that by 2029 – ICL reckons potential long-term demand is nearer to 3mln.

Liberum thinks the fact that Sirius has managed to strike deals with several big firms around the world means the market for POLY4 is now “unquestionable”, although only time will tell.

Sirius shares were up 5% to 23.2p on Tuesday. They had been as high as 26.6p earlier in the session.

-- Updates share price --

]]>
Mon, 22 Apr 2019 08:00:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/218157/sirius-minerals-is-now-the-time-to-invest-ahead-of-key-us35bn-financing-218157.html
<![CDATA[News - Sirius Minerals surges as US investment giant sells £20mln stake ]]> https://www.proactiveinvestors.co.uk/companies/news/218230/sirius-minerals-surges-as-us-investment-giant-sells-20mln-stake-218230.html Sirius Minerals PLC (LON:SXX) shares surged on Tuesday as one of the world’s largest investment groups offloaded another slug of shares worth more than £20mln.

In a stock exchange filing, Sirius confirmed that US giant Capital Group sold off a 2.12% stake worth just over £22mln based on Monday’s closing price.

READ: Is now the time to invest in Sirius Minerals?

It is the second time this year that Capital Group has trimmed its interest in the FTSE 250 group. Back in February, it disposed of a 2.8% stake, which was worth around £25mln.

Such sales typically flood the market and keep a lid on the share price, something which keen Sirius followers would have seen in recent weeks when the stock has never drifted too far away from 20p.

Shore Capital’s mining analyst Yuen Low has speculated that one of the reasons for the sudden jump in the company’s share price today could be because Capital has possibly stopped selling down.

“We know that one of the Capital funds has been selling down not just Sirius but others as well, and it might be that the weakness in the share price in recent weeks is due to that particular fund within Capital selling down,” Low explained to Proactive Investors.

“Share prices are a function of supply and demand. If there is no supply but there is lots of demand, then the price can only go up.

“Maybe [Capital] has stopped selling and that is allowing the buying pressure to come through. That is just speculation though.”

Major financing on the horizon

Low added another potential explanation: momentum, especially with Sirius due to complete a major US$3.5bn financing by the end of the month.

“I would say it is also a possibility [that investors are getting in ahead of that financing].

“If you are confident that the management will deliver, completion of the financing would be an inflection point for the stock because at that point the company’s destiny would effectively be in its own hands.”

He concluded: "I would imagine the real answer is probably a combination of [Capital not selling any more and momentum building], although I'll re-emphasise that this is just speculation on my part."

Sirius shares were up 15% to 25.7p in mid-morning trading on Tuesday.

]]>
Tue, 09 Apr 2019 10:35:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/218230/sirius-minerals-surges-as-us-investment-giant-sells-20mln-stake-218230.html
<![CDATA[RNS press release - TR-1: Notification of major holdings ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190409091801_14034125/ Tue, 09 Apr 2019 09:18:01 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190409091801_14034125/ <![CDATA[RNS press release - Director/PDMR Shareholding ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190409081241_14033871/ Tue, 09 Apr 2019 08:12:41 +0100 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190409081241_14033871/ <![CDATA[News - Sirius Minerals makes it onto Liberum’s most preferred list ahead of key US$3bn financing ]]> https://www.proactiveinvestors.co.uk/companies/news/217757/sirius-minerals-makes-it-onto-liberums-most-preferred-list-ahead-of-key-us3bn-financing-217757.html Sirius Minerals PLC (LON:SXX) has made it onto Liberum’s list of most preferred stocks for the year ahead.

The FTSE 250 group is behind one of the biggest civil engineering projects currently being undertaken in Europe.

READ: City analyst disputes claims Woodsmith could be US$530mln over budget

It is building the Woodsmith polyhalite fertiliser mine in North Yorkshire, which is 1.5km deep and requires a 37km-long underground conveyor belt to take the minerals from the mine to a processing facility.

Work on the initial construction is already underway and Sirius is now working with a global financial institution to close its US$3bn stage 2 financing package.

That is expected to complete by the end of this month (April) and will be used to fund the next stage of works at Woodsmith. Once it does close, Liberum believes it will trigger a re-rating of the stock.

“Sirius is now within weeks of its targeted closure of the US$3bn financing for the North Yorkshire polyhalite project,” said Liberum in a note to clients.

“Successful closure would eliminate what, in our view, is the largest component driving the current discount to net present value – financing risk.”

The analysts added: “With only construction risk standing between Sirius and first production, we would expect the shares to re-rate towards c.60% of our NPV range of 75p to 100p, depending on dilution.”

European offtake could drive shares higher

Another potential share price driver is a European offtake deal. Sirius already has major supply agreements in place with several industry players across four continents.

“Europe is the only major agricultural region without a major POLY4 supply agreement, and Sirius has noted it is in advanced discussions. A big player could be a share catalyst.”

Should Sirius manage to close the debt package and secure another offtake deal from a major European player, Liberum thinks shares could surge by 150% over the next 12 months to 50p.

Shares were down 0.6% to 20.1p on Tuesday.

]]>
Tue, 02 Apr 2019 11:45:00 +0100 https://www.proactiveinvestors.co.uk/companies/news/217757/sirius-minerals-makes-it-onto-liberums-most-preferred-list-ahead-of-key-us3bn-financing-217757.html
<![CDATA[News - City analyst hits back at claims Sirius Minerals’ Woodsmith mine could run another US$530mln over budget ]]> https://www.proactiveinvestors.co.uk/companies/news/217518/city-analyst-hits-back-at-claims-sirius-minerals-woodsmith-mine-could-run-another-us530mln-over-budget-217518.html City broker Liberum has hit back at claims Sirius Minerals PLC (LON:SXX) has underestimated the cost of digging a huge tunnel at its Woodsmith polyhalite mine in North Yorkshire by as much as US$530mln.

FTSE 250-listed Sirius was forced to up its project cost estimate back in September by US$500mln, taking the total requirement – including contingencies – to US$4.2bn.

READ: Why Sirius’ Woodsmith mine could come into production ahead of schedule

Much of that increase was down to the “optimisation” of its mineral transport system – a 37km long conveyor belt that will take the fertiliser from the mine to the old Redcar Steelworks dock for processing and shipping.

But in an op-ed on Thursday, the Financial Times argued that Sirius still hasn’t understood how much money is needed to build such a big and deep – it is 250m underground – tunnel.

“A new, wider tunnel will cost $1.46bn or US$39mln (£28mln) per kilometre,” said the FT. “That figure looks low.”

“Data from the British Tunnelling Society show that tunnelling costs for this diameter have ranged up to £35mln per kilometre previously.

“Should dig costs rise to the heights of past projects, it would add US$530m to costs — eating up its budget for contingencies.”

Sirius’ estimates have to align with lenders’

Liberum analyst Ben Davies has disputed the claims, though.

“The implication that the tunnelling costs could jump a further US$530mln and take up the entire project contingency is at odds with engineers' detailed assessments of all available technical information and extensive ground investigation,” read a note to clients.

“The company’s base case (P65) contingency across the entire project is US$465m – i.e. there is a 65% chance that contingency is below this level.

“Given the amount of debt the company expects to take on, lenders will also be undertaking the same level of due diligence and will need to come to a similar view in order for the project to be financed – hence the Sirius view can’t deviate materially from the view of independent technical experts employed by the lenders.”

Not only that, but Davies reckons the FT got its calculations wrong when converting from US dollars into pounds.

At the current exchange rate of US$1.30, the US$39mln cost for every kilometre of digging equates to just over £30mln.

Sirius’ value ‘isn’t sensative to capex overruns’

Even if Sirius does have to lift its capex forecasts once again, Davies doesn’t expect it to impact the company’s value much at all.

“We use the P65 contingency of US$465m and if we took this even beyond the P80 of US$580mln, the impact would have little bearing on our project net present value of US$6.8bn.

“Indeed, by simply applying POLY4 pricing in line with existing contracts at US$140/t instead of US$125/t we could add another c.US$1bn to project NPV, dwarfing any potential capex over-run.

“The more important factor will be the amount of headroom the company has in eventual debt structure to see it through a worst-case scenario without the requirement of further equity and we await further developments from the company on this front before the end of April.”

Sirius shares were steady at 20p on Friday morning.

]]>
Fri, 29 Mar 2019 10:35:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/217518/city-analyst-hits-back-at-claims-sirius-minerals-woodsmith-mine-could-run-another-us530mln-over-budget-217518.html
<![CDATA[News - Why Sirius Minerals’ Woodsmith mine could come into production six months ahead of schedule ]]> https://www.proactiveinvestors.co.uk/companies/news/217115/why-sirius-minerals-woodsmith-mine-could-come-into-production-six-months-ahead-of-schedule-217115.html Sirius Minerals PLC (LON:SXX) could bring its Woodmsith polyhalite mine in North Yorkshire into production six months earlier than expected thanks to a high-tech piece of boring equipment.

Currently, the FTSE 250 group is guiding for the first production in the final quarter of 2021.

But City broker Shore Capital thinks that the use of shaft boring roadheaders (SBRs) – a vertical version of a tunnel boring machine – could bring that date forward to May 2021.

READ: Sirius Minerals tipped to more than double

SBRs are used to drill deep mine shafts and the first one to be used at Woodsmith is currently being assembled at Herrenknecht’s factory in Schwanau, southwest Germany.

Herrenknecht has already made SBRs for BHP Group PLC’s (LON:BHP) Jansen potash project in Canada and for the Nezhinsky potash mine in Belarus.

As such, Sirius is getting third-generation machines which could knock months off the construction timetable, according to Shore Cap analysts.

Assembly is well underway of our first 350 tonne Herrenknecht Shaft Boring Roadheader (SBR). The 60 metre high, 6.5 metre wide excavator will sink the main mineshafts at Woodsmith Mine.

Read how it works here: https://t.co/6OWIH320jS#mining #construction #engineering pic.twitter.com/rm0oTQfxQQ

— Sirius Minerals (@siriusminerals) March 22, 2019

“With third-generation SBRs, Sirius sees ‘real opportunities’ to unlock potential savings in its construction schedule, potentially delivering first polyhalite as early as May 2021 (i.e. up to six months earlier than the base schedule’s Q4 2021),” read a note to clients on Monday.

“The reason is that shaft sinking would be significantly faster on these optimised machines: cutting, mucking and shaft lining can be conducted concurrently, whereas these activities need to be carried out sequentially when employing conventional drill-and-blast techniques.”

SBRs twice as fast as usual D&B techniques

Shore Cap points to Deilmann-Haniel, which is using the SBRs at Nezhinsky, as a good example of how much time the equipment can save.

“We note that Deilmann-Haniel, which is also using SBRs to construct two 750m-deep shafts at Slavkaliy’s Nezhinsky project, is expecting to average 3 metres per day, almost double the rate it benchmarked with conventional D&B.”

Sirius shares rose 0.6% to 19.8p on Monday morning. Shore Cap expects to see a “major re-rating” once the US$3.5bn stage 2 financing completes, which could happen in a matter of weeks.

]]>
Mon, 25 Mar 2019 11:15:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/217115/why-sirius-minerals-woodsmith-mine-could-come-into-production-six-months-ahead-of-schedule-217115.html
<![CDATA[News - Sirius Minerals tipped to more than double in value as financing nears ]]> https://www.proactiveinvestors.co.uk/companies/news/216376/sirius-minerals-tipped-to-more-than-double-in-value-as-financing-nears-216376.html For British mine developer Sirius Minerals PLC (LON:SXX), the “crucial juncture is nigh”, according to broker Shore Capital, which has issued a note highlighting significant potential for valuation upside compared to other fertiliser mineral peers.

To recap, Sirius has a large ‘world class’ resource and presently has an increasingly large hole in the ground in North Yorkshire.

READ: New backer in talks to finance Sirius Minerals Yorkshire mine

The construction work, which will include a 23-mile tunnel and mineral transport system connected to new port facilities in Teeside, is expected to run into 2021, though the initial phase will come to completion in the relatively near future.

Such is the progress that attention has recently been fixed on the anticipated Stage 2 project financing, which will aim to secure the remaining funds necessary to complete the mine and take the Sirius fertiliser product to market.

A new project finance opportunity emerges

Evidently, a deal is now close, following news this week that a new backer had approached Sirius with a funding proposal.

Consequently, Sirius decided to put on hold its previously long-running debt finance negotiations to explore the new funding opportunity.

“The company believes that the alternative proposal potentially offers a more flexible and attractive solution to its stage 2 financing requirements and therefore it is pausing discussions with its existing prospective lenders to pursue the alternative proposal,” Sirius said in a statement.

Sirius told investors that it is working to obtain firm commitments for the new proposal and any additional financing before the end of April.

“We think this gives some clarity around the delays in debt financing from a top-down view looks a simpler solution with only one party to deal with,” said Liberum analysts Richard Knights, who repeated his ‘buy’ recommendation.

Sirius shares reacted positively on Tuesday, rising around 9% on the day, and have remained positive today.

Shore Capital bullish on value opportunity as financing nears

Yuen Low, analyst at Shore Capital, in a note, said: “If all goes to plan, Sirius’s US$3.4bn to US$3.6bn Stage 2 financing will be successfully completed over the coming weeks.

“We expect this seminal achievement to catalyse a major re-rating of the shares, as it is effectively the key to unlocking Sirius’s vast value potential.”

Specifically, the Shore Capital analyst gives Sirius a 50p per share valuation (risked net present value) post-financing, versus a current share price just below 20p.

“Beyond that, while Sirius would still be some years from becoming cash generative, an investment in the company should become progressively de-risked and enjoy significant value uplift as it advances towards production, we believe,” Low added.

The analyst highlighted comparisons to sector peers and suggested that as Sirius approaches full production from the Yorkshire mine, it should upgrade significantly, to potentially have a market value of some US$18bn - based on an enterprise value to earnings (EV/EBITDA) rating of around x11).

Moreover, he asserts: “In other words, we see c.13.5x upside to the current market cap over the next few years.

“In our view, the current market cap also represents a material undervaluation in that, for any plausible acquirer, Sirius would not only be appreciably ‘needle-moving’ but should also improve said acquirer’s margins and EV/EBITDA rating.”

]]>
Wed, 13 Mar 2019 10:51:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/216376/sirius-minerals-tipped-to-more-than-double-in-value-as-financing-nears-216376.html
<![CDATA[News - Sirius Minerals puts long running finance negotiations on hold as new funding proposal lands ]]> https://www.proactiveinvestors.co.uk/companies/news/216251/sirius-minerals-puts-long-running-finance-negotiations-on-hold-as-new-funding-proposal-lands-216251.html Sirius Minerals PLC (LON:SXX) has put its long-running debt financing talks on hold as it has received a new alternative funding proposal.

The news sent Sirius shares soaring by 9.6% to 19.7p come Tuesday afternoon.

In a statement, the UK mine developer said the new proposal contains an alternative senior debt structure which would replace the structure envisaged in the prior negotiations, that began back in 2016.

READ: Sirius Minerals reveals its Yorkshire mine will rely less on government debt

“The company believes that the alternative proposal potentially offers a more flexible and attractive solution to its stage 2 financing requirements and therefore it is pausing discussions with its existing prospective lenders to pursue the alternative proposal,” Sirius said in a statement.

“A number of options for the additional non-senior debt financing requirement, as previously outlined in the company's announcement of 6 September 2018, continue to be progressed.”

Sirius told investors that it is working to obtain firm commitments for the new proposal and any additional financing before the end of April.

“We think this gives some clarity around the delays in debt financing from a top-down view looks a simpler solution with only one party to deal with,” said Liberum analysts Richard Knights, who repeated his ‘buy’ recommendation.

-Adds share price and analyst comment--

]]>
Tue, 12 Mar 2019 07:17:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/216251/sirius-minerals-puts-long-running-finance-negotiations-on-hold-as-new-funding-proposal-lands-216251.html
<![CDATA[RNS press release - Alternative financing proposal ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190312070019_13998140/ Tue, 12 Mar 2019 07:00:19 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190312070019_13998140/ <![CDATA[RNS press release - Notification of major holdings ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190226103805_13982084/ Tue, 26 Feb 2019 10:38:05 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190226103805_13982084/ <![CDATA[News - BHP upbeat on outlook for fertiliser, knock-on effects for Sirius could be positive ]]> https://www.proactiveinvestors.co.uk/companies/news/214884/bhp-upbeat-on-outlook-for-fertiliser-knock-on-effects-for-sirius-could-be-positive-214884.html BHP Group PLC (LON:BHP) said in commentary that ran alongside interim results this week that it expects the price for muriate of potash, otherwise known as MOP, to increase by around 2-3% per year over the next decade or so.

From BHP’s point of view, that analysis makes it worthwhile sticking with the giant Jansen project in Canada, which it has been working on for more than a decade.

READ: BHP commits US$700mln of funding to develop next stage of BP-led Atlantis oilfield

That the project has yet to make it into production is partly a reflection on the variability of the potash price in the intervening period. Last year, BHP did not seek board approval for funds to complete the mine, but for 2019, the company has earmarked US$240mln. In 2017, Deutsche Bank estimated that the project would require around US$12.8bn in total capital expenditure to bring it into production.

So BHP’s decision to push ahead again is a considerable vote of confidence in MOP, and more broadly in the fertiliser market in general, in which two other major products also figure.

MOP is one of two major forms of potash fertiliser that is sold on a large scale to farmers around the world. It’s the most widely used, but under some circumstances can increase soil toxicity, so it needs to be carefully managed. Nutrien Ltd (TSE:NTR), the company formed by the merger of Agrium and PotashCorp, is a major producer.

The other main form of potash fertiliser is sulphate of potash, which is considered to be the premium product because it increases the resilience of the plants themselves as well as yield. It’s usually used on higher value crops, like nuts, fruits and coffee. SQM (NYSE:SQM) is a major producer.

A third major form of fertiliser, polyhalite, is about to debut on the market in a big way too, assuming US$3bn in debt financing can be found for the Sirius Minerals (LON:SXX) project in northern England.

READ: BHP shares retreat as latest production numbers underwhelm

Serious fertiliser buyers have signed off-take deals with Sirius, so it looks as though there is confidence in the market that polyhalite will make the grade when set against its more established rivals. It’s particularly designed to make inroads into the higher end of the market.

It remains to be seen if it will, but if BHP is right about the ongoing increases in demand for MOP, then at least polyhalite will be able to debut into a strong market.

In MOP at least, BHP reckons demand is likely to exceed existing supply “by the mid-to-late 2020s”, and it’s not alone in that outlook. Nutirien has said that it expects that new capacity will be “more than absorbed”, with significant tightening of supply even if the market only grows at 2.5% per annum.

Since annual consumption growth has averaged 4% over the past five years, it could be argued that that 2.5% projection is conservative.

But on the other hand, it’s also worth noting that potash prices at the moment are trading at below their long-term average, so it’s not exactly as if the market is moving into boom time.

According to data provided by Infomine, potash prices have dropped by around a third over the past four years. And worse, potash is down by around 70% since it peaked towards the end of the last decade.

But even as new production like Sirius’s is planned, demand is also continuing its inexorable rise. BHP’s own projections give the potash market a US$50bn valuation by 2040.

How smooth the ride will be on the way, remains to be seen though.

For now, Nutrien has noted a recent shift in acreage in China into more potassium-intensive crops like fruits and vegetables. That favours SOP, and also potentially polyhalite, although so far the off-take deals that have been struck are looking west to the Americas rather than east.

But for investors and potential lenders looking at the billion dollar price tags of projects like Jansen or Sirius’s polyhalite project, there are still plenty of grounds to be cautious.

After all, the major Canadian and eastern European producers also have the capacity for expansion, and they’ve shown in the past that they can lock up the market too.

]]>
Tue, 19 Feb 2019 13:14:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/214884/bhp-upbeat-on-outlook-for-fertiliser-knock-on-effects-for-sirius-could-be-positive-214884.html
<![CDATA[News - Sirius Minerals investors excited as boring machine lands in Yorkshire ]]> https://www.proactiveinvestors.co.uk/companies/news/214804/sirius-minerals-investors-excited-as-boring-machine-lands-in-yorkshire-214804.html Investors in Sirius Minerals PLC (LON:SXX) will be pleased with the news that the first of three tunnel boring machines is now on site in Yorkshire.

The mine developer will use the new gear to drill out the 23 mile tunnel that will connect the group’s polyhalite fertiliser mine to export facilities on Teeside.

Two more boring units will be added to the project next year to complete the tunnels.

READ: Sirius Minerals Yorkshire mine will rely less on government debt

“Sirius is intending that mined polyhalite never comes to surface at the Woodsmith minesite,” said Yuen Low, mining analyst at Shore Capital.

Our tunnelling machine has arrived safely at Wilton International after its long journey on river, land and sea. Assembly starts this week before excavation commences in the coming months.#progress #tunnelling #tunnelboringmachine #construction @WiltonSite pic.twitter.com/6XgDUSTjye

— Sirius Minerals (@siriusminerals) February 16, 2019

“Instead, it would be hoisted to the 360m level and transported to the MHF via a Mineral Transport System (MTS), which is essentially a high-capacity conveyor in a 37km-long tunnel.”

Low added: “All things considered, while Sirius is currently at development stage and still some years from becoming a cash flow-generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

Sirius Minerals shares were up 1% on Monday, changing hands at 20.0p.

--Updates for share price--

]]>
Mon, 18 Feb 2019 09:28:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/214804/sirius-minerals-investors-excited-as-boring-machine-lands-in-yorkshire-214804.html
<![CDATA[News - Sirius Minerals reveals its Yorkshire mine will rely less on UK government debt ]]> https://www.proactiveinvestors.co.uk/companies/news/213031/sirius-minerals-reveals-its-yorkshire-mine-will-rely-less-on-uk-government-debt-213031.html Sirius Minerals PLC (LON:SXX) told investors it is making progress with the US$3bn debt financing that’s needed to deliver the group’s Yorkshire fertiliser mining project.

The company revealed in a stock market statement that it has made changes to the anticipated format of the debt in order to “modify credit risk allocation” amongst its potential lenders

It effectively means the UK government will play a smaller role in underwriting the project than previously expected.

READ: Theresa May confirms Sirius Minerals financing discussions

Sirius had envisaged receiving project finance in two tranches, one from commercial banks and one tranche guaranteed by the UK government. The expectation, previously, was that the UK government would underwrite some US$2bn of the project loans.

Now, however, it is anticipated that the debt will come in three sequential tranches, with a US$1bn government-backed bond coming last.

In the new arrangement, Sirius expects the first tranche to comprise uncovered debt raised via capital markets, followed by a second from commercial banks and the third in the form of a government guaranteed bond.

The debt tranches will be linked to construction milestones.

Risks to UK taxpayer lower

Sirius explained that the new structure was designed to facilitate a smaller portion of government-backed debt and noted that the risks to the UK taxpayer would be lower as the major construction and commercial milestones will have been reached by the time the debt is drawn.

It comes after Theresa May mentioned the mine development project during last week’s highly charged Prime Ministers Questions in Westminster.

Speaking to parliament, May said: “In relation to the particular discussions … these are commercially sensitive so it would be inappropriate for me to comment on the specific discussions, but this is exactly the sort of project that is what the Northern Powerhouse is all about: driving investment, driving exports, good for the north.”

Sirius, on Tuesday, said that it will be working closely with the group of lenders, the government and advisors to work through the due diligence and the detailed terms of the proposed financing.

The company added that it is working to secure agreed commitment letters as soon as possible.

It noted that, at the end of December, the company had £290mln of cash including some £230mln of unrestricted cash.

Sufficient liquidity to fund the project into Q2

Sirius said it has sufficient liquidity to fund the project into the second quarter of this year, in line with the current project schedule.

"Executing our stage 2 financing plan remains our priority,” said Chris Fraser, Sirius chief executive.

“We continue to make progress towards obtaining stage 2 financing commitments and are working constructively with all relevant parties to achieve this. 

“The process with the lenders is continuing this quarter as we work through the due diligence reports with the lending group and progress discussions on the revised debt structure."

In terms of operations, Sirius highlighted “significant construction progress” during the period and it said that procurement is complete for the major construction packages to support stage 2 financing.

READ: Sirius Minerals shows off latest progress at £4bn Woodsmith fertiliser project

Sirius highlighted that the project remains on track to achieve first polyhalite and commercial production on time and in line with its most recent cost schedule, as announced on 6 September.

It also highlighted the progress made on the sales and marketing side as the company continues to open up the market for the POLY4 branded polyhalite product that will be unearthed from the mine.

In afternoon trading, shares in Sirius Minerals were 6.1% lower at 21.02p.

In a note to clients, analysts at ‘house’ broker Shore Capital commented: “All things considered, while Sirius is currently at development stage and still some years from becoming a cash-generating company, we remain of the belief that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

 -- Adds share price, analyst comment --

]]>
Tue, 22 Jan 2019 07:38:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/213031/sirius-minerals-reveals-its-yorkshire-mine-will-rely-less-on-uk-government-debt-213031.html
<![CDATA[RNS press release - Q4 Progress Update ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190122070006_13941988/ Tue, 22 Jan 2019 07:00:06 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190122070006_13941988/ <![CDATA[News - Sirius Minerals shows off latest progress at £4bn Woodsmith fertiliser project ]]> https://www.proactiveinvestors.co.uk/companies/news/212967/sirius-minerals-shows-off-latest-progress-at-4bn-woodsmith-fertiliser-project-212967.html Sirius Minerals PLC (LON:SXX) has released flyover videos and images marking the latest progress at its £4bn fertiliser project in North Yorkshire.

The interactive map shows before, after and future images of the works at all of the key locations, including the materials handling facility near Redcar and the Woodsmith mine itself.

WATCH: Take a look at the latest videos and images

There is also a flyover of Lockwood Beck, where Sirius is building a mineral transport system – effectively a 37km-long tunnel which will take the fertiliser from the mine to the processing facilities.

The latest evidence of mine site progress follows on from a short video released last week which showed work continuing on the tunnel at Wilton.

Sirius also gained more publicity last week, when it was mentioned by Theresa May in Prime Minister’s Questions.

Work continues 24/7 on our mineral transport tunnel at @WiltonSite on #Teesside. #progress #construction #tunnelling #engineering #fertilizer pic.twitter.com/dkqZEVfUgH

— Sirius Minerals (@siriusminerals) January 16, 2019

The FTSE 250 company is in the process of raising the final US$3.5bn it needs to complete development of the mine and has previously said that a Treasury guarantee, which would see the government underwrite US$2bn of project loans, was “essential” in securing the remaining funding.

“In relation to the particular discussions … these are commercially sensitive so it would be inappropriate for me to comment on the specific discussions, but this is exactly the sort of project that is what the Northern Powerhouse is all about: driving investment, driving exports, good for the north,” May told fellow MPs.

Sirius shares were up 0.5% to 22.5p on Monday morning.

]]>
Mon, 21 Jan 2019 10:40:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/212967/sirius-minerals-shows-off-latest-progress-at-4bn-woodsmith-fertiliser-project-212967.html
<![CDATA[News - Theresa May confirms Sirius Minerals financing discussions ]]> https://www.proactiveinvestors.co.uk/companies/news/212713/theresa-may-confirms-sirius-minerals-financing-discussions-212713.html Theresa May has confirmed that the government is in discussions with Sirius Minerals PLC (LON:SXX) about providing financial backing to the latter’s hugely ambitious £4bn fertiliser project near Whitby.

Sirius is currently in the process of raising the final US$3.5bn it needs to complete development of the Woodsmith mine, which is scheduled to achieve first production by the end of 2021.

Thank you the Rt Hon Robert Goodwill MP and @theresa_may for your support today for our project and our game changing #POLY4 #fertilizer product. Construction continues at #WoodsmithMine as we deliver jobs and growth for the #NorthernPowerhouse. pic.twitter.com/IJ7wGkSfAd

— Sirius Minerals (@siriusminerals) January 16, 2019

The FTSE 250 group has previously said that a Treasury guarantee, which would see the government underwrite US$2bn of project loans, was “essential” in securing the remaining funding.

Speaking at Prime Minster’s Questions, May said: “I was particularly pleased to meet the CEO of Sirius during my trip to China and talk to them about the work they are doing.

“In relation to the particular discussions … these are commercially sensitive so it would be inappropriate for me to comment on the specific discussions, but this is exactly the sort of project that is what the Northern Powerhouse is all about: driving investment, driving exports, good for the north.”

PM's comments 'encouraging'

City broker Liberum said it was “encouraging” that, even amid the Brexit turmoil, Sirius’ project is still getting “well deserved attention” from politicians.

It added: “With procurement now complete for all the major construction projects to support stage 2 financing, the banks are now expected to come together to sign commitments letter, with the government’s approval to follow.”

Shore Capital analyst Yuen Low also noted Sirius’ appearance in PMQs, before adding: “All things considered, while Sirius is currently at development stage and still some years from becoming a cash flow generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

Sirius shares were up 0.6% to 22p on Thursday afternoon.

-- Updates for tweet, share price and analyst comment --

]]>
Wed, 16 Jan 2019 14:45:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/212713/theresa-may-confirms-sirius-minerals-financing-discussions-212713.html
<![CDATA[RNS press release - Blocklisting Six Monthly Return ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190102122249_13921144/ Wed, 02 Jan 2019 12:22:49 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20190102122249_13921144/ <![CDATA[News - Sirius Minerals and other London-listed fertiliser groups have big year ahead ]]> https://www.proactiveinvestors.co.uk/companies/news/211658/sirius-minerals-and-other-london-listed-fertiliser-groups-have-big-year-ahead-211658.html The world needs fertiliser and it will need more of the stuff as the population continues to rise. Perhaps that explains why there is a string of potash developers now listed in London.

But which is most attractive?

UK-based Sirius Minerals PLC (LON:SXX), which is developing the hugely ambitious Woodsmith polyhalite mine near Whitby in Yorkshire is the most visible, but it’s not the only choice.

The London-listed majors Rio Tinto (LON:RIO) and BHP Billiton also have significant production, although their shares tend to trade more in line with base metals and iron ore prices.

WATCH: Mining Capita l's Alastair Ford on the risk and rewards at Sirius Minerals

Then further down the scale, where the upside is greater but so are the rewards, there are the likes of Salt Lake Potash (LON:SO4), Danakali (ASX:DNK)(LON:DNK) and Kore Potash (LON:KP2).

Danakali’s project at Colluli in Eritrea would be one favourite for investors to swap out Sirius for since it at least has a scale that’s some way towards being comparable to Woodsmith.

With a 1.1bn tonne reserve of the higher quality sulphate of potash, this is a project that will make a mark on the global scale, and it too has off-take agreements in place.

Kore Potash

Kore Potash meanwhile, is also developing a project of some scale, the 508mln tonne Kola sylvanite project in the Republic of Congo, and might also make an attractive alternative.

That’s partly because it’s now in the final stages of completing a definitive feasibility study for Kola, and partly because when the nearby Dougou deposits are taken into account the total amount of potash ore available to Kore rises to well over 1bn tonnes.

Salt Lake Potash

Salt Lake Potash is somewhat smaller, as it’s currently working up the Lake Way project in Western Australia, where it plans a 50,000 tonnes per year sulphate-of-potash demonstration plant. In time this could be scaled up too, though, so the upside could be that much greater.

Sirius Minerals meanwhile is approaching a key point in its development.

Polyhalite a new option

At York Potash, Sirius will mine polyhalite a fertiliser that’s not widely used currently

Sirius hopes to change all that and argues correctly that the market for the constituent components of Poly4, the name under which polyhalite will be marketed, runs into the hundreds of billions of dollars and could reach as much as US$245bn by 2020.

But the market for the constituent components might not be the same as the market for the actual product.

Testing in local conditions is often an essential precursor to securing supply deals.

And that’s where there’s already some understanding of the types of fertiliser that are on offer, be they sulphate or muriate of potash or some blend or variant of the two.

Because not all fertilisers are created equal, and neither are all soils.

This makes marrying up supply with customers an interesting exercise of some subtlety that won’t necessarily happen quickly.

Influential friends

Still, a major tick in that box as far as Sirius is concerned is the participation of Fortune 500 company Archer Daniels Midland (NYSE:ADM).

It plans to take a sizeable slug of the Woodsmith polyhalite output and sell it into the North American market, including Mexico, where it expects to find willing customers.

ADM is no slouch in this market, so any investors jittery about the real potential of polyhalite should take heart.

And once Sirius sorts out the financing for the £2.6bn cost of the construction phase of the project, some of the jitters that have affected the share price recently should ease.

Company

Share price (21/12)

Market value (£mln)

NPV

Sirius Minerals

21p

995

US$14.9bn

Salt Lake Potash

26p

46

na*

Danakali

42p

111

US$902mln

Kore Potash

7.9p

67

na**

*Scoping study based on 50K tonnes pa production published in July, **DFS received by company

Fundamentals strong

Underpinning Sirius’s and all of the other projects is that fact that the fundamentals underlying the fertiliser business remain robust, and global demand is set to increase still further as general wealth levels increase and more people are able to afford better food.

With all these companies, investors will want to weigh up the balancing factors of jurisdiction, product type and financial risk.

All are moving towards production, all still face significant financing hurdles, and all could end up selling into a strong market.

Investors who make the right choices here could be sitting on handsome returns.

]]>
Wed, 26 Dec 2018 10:00:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/211658/sirius-minerals-and-other-london-listed-fertiliser-groups-have-big-year-ahead-211658.html
<![CDATA[News - Shore Capital highlights “exciting time construction-wise” for Sirius Minerals as it advances Woodsmith polyhalite mine ]]> https://www.proactiveinvestors.co.uk/companies/news/210895/shore-capital-highlights-exciting-time-construction-wise-for-sirius-minerals-as-it-advances-woodsmith-polyhalite-mine-210895.html Shore Capital has pointed that the first week in December has been “an exciting time construction-wise” for Sirius Minerals PLC (LON:SXX) as it advances the Woodsmith polyhalite mine in Yorkshire, with a number of significant miles achieved.

In a note to clients the City firm - joint ‘house’ broker to the FTSE 250-listed mine developer - highlighted construction of the diaphragm walls for the headgear chambers of the mine’s production and service shaft, excavation of the Service Shaft foreshaft reaching 30 metres of a planned 45 metres depth, and a tunnel portal breakthrough ceremony being held at Wilton on December 4.

READ: Could one of Sirius Minerals’ main rivals be about to throw the towel in?

It pointed out that the initial circa 125mln tunnel at Wilton is a shotcrete-lined (SCL) development section which is being constructed using ‘traditional’ civil engineering excavation techniques until it reaches a depth where the geology becomes appropriate to launch a tunnel-boring machine.

ShoreCap’s analysts also said that they believe it worth bearing in mind that at a conference last month, Kobi Altman, CEO of rival Yorkshire potash miner Israel Chemicals’ admitted that ICL is currently in a “wait and see mode” at its nearby Boulby polyhalite mine and would “probably try to exit” polyhalite if Sirius is successful (as we expect it will be) in raising its Stage 2 financing.

The analysts concluded: “All things considered, while Sirius is currently at the development stage and still some years from becoming a cash flow-generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”

]]>
Mon, 10 Dec 2018 15:55:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/210895/shore-capital-highlights-exciting-time-construction-wise-for-sirius-minerals-as-it-advances-woodsmith-polyhalite-mine-210895.html
<![CDATA[RNS press release - Total Voting Rights ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20181130073001_13886547/ Fri, 30 Nov 2018 07:30:01 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20181130073001_13886547/ <![CDATA[News - Sirius Minerals confirms completion of Cibra investment ]]> https://www.proactiveinvestors.co.uk/companies/news/209953/sirius-minerals-confirms-completion-of-cibra-investment-209953.html Sirius Minerals PLC (LON:SXX) has confirmed the completion of its acquisition into the Cibra Group Companies, as part of the company’s supply agreements for South America.

The London-listed company is issuing 95mln new Sirius shares to Cibra and chief executive Chris Fraser will be appointed to the board of both Cibra Group Companies with immediate effect.

READ: Is Sirius Minerals simply the best?

Earlier this month, Sirius Minerals told investors that the procurement is complete for the major construction packages in its Yorkshire mine development project.

"Procurement of the mineral transport system fit-out marks the completion of our major construction procurement programme to support our stage 2 senior debt financing process and is a significant milestone for the company,” said Chris Fraser, Sirius chief executive.

“Our efforts are now focussed on the successful execution of our financing plan to fully finance the construction of our world-class, long-life polyhalite project."

It confirmed the fit-out for the mineral transport system (MTS) – which will be capable of moving fertiliser product on 37 kilometres of conveyors, buried 360 metres beneath the ground - has been agreed and finalised with contractor STRABAG AG.

The MTS is expected to transport some 20mln tonnes of material per year.

]]>
Mon, 26 Nov 2018 14:51:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/209953/sirius-minerals-confirms-completion-of-cibra-investment-209953.html
<![CDATA[RNS press release - Completion of Cibra investment and share issue ]]> https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20181126140523_13880580/ Mon, 26 Nov 2018 14:05:23 +0000 https://www.proactiveinvestors.co.uk/companies/rns/914/LSE20181126140523_13880580/ <![CDATA[News - Is Sirius Minerals simply the best? Or are there other potash companies out there that offer better value? ]]> https://www.proactiveinvestors.co.uk/companies/news/209824/is-sirius-minerals-simply-the-best-or-are-there-other-potash-companies-out-there-that-offer-better-value-209824.html The Sirius Minerals PLC (LON:SXX) website makes a bold boast right from the top. The company has, it says, at Woodsmith, the largest and highest grade polyhalite project anywhere in the world - a total of 2.66bn tonnes to be exact, and that across only 7% of the ground Sirius has under licence.

Sounds impressive.

But is it really?

The answer to that remains to be seen. Certainly, some big names in mining finance, including Australia’s richest woman Gina Rinehart, are betting that the Sirius project will pay off, although it’s also true that Mrs Rinehart bought in after uncertainties about viability wiped significant value off the Sirius price and rendered it cheap to her experienced eye.

READ: Could one of Sirius Minerals’ main rivals be about to throw the towel in?

The risks are plentiful. For one thing, the development of the underground infrastructure is one of the UK’s largest ongoing engineering projects. And as the developers of Crossrail, another of the UK’s largest engineering projects, know well, when things don’t go according to plan the overrun costs can run into millions of pounds or dollars.

So too with Sirius. But even more than that, there is the question about the 2.66bn tonnes of polyhalite. Just how marketable will it turn out to be? Because one reason why no one else has got a polyhalite resource of comparable size is that no-one really knows if there’s a market out there for the stuff.

To be sure, the world needs fertiliser, and it will need more of the stuff as the population continues to rise. But polyhalite isn’t currently a fertiliser that’s widely used. Sirius hopes to change all that and argues correctly that the market for the constituent components of Poly4, the name under which polyhalite will be marketed, runs into the hundreds of billions of dollars and could reach as much as US$245bn by 2020.

But the market for the constituent components might not be the same as the market for the actual product.

After all, as smaller fertiliser and potash firms like Harvest Minerals LRD (LON:HMI) know all too well a full season’s testing in local conditions is often an essential precursor to securing supply deals. And that’s where there’s already some understanding of the types of fertiliser that are on offer, be they sulphate or muriate of potash or some blend or variant of the two.

Because not all fertilisers are created equal, and neither are all soils. This makes marrying up supply with customers an interesting exercise of some subtlety that won’t necessarily happen quickly.

Influential friends

Still, a major tick in that box as far as Sirius is concerned is the participation of Fortune 500 company Archer Daniels Midland (NYSE:ADM). ADM plans to take a sizeable slug of the Woodsmith polyhalite output and sell it into the North American market, including Mexico, where it expects to find willing customers. ADM is no slouch in this market, so any investors jittery about the real potential of polyhalite should take heart – not long after the ADM deal, Gina Rinehart saw fit to stump up more cash.

But Rinehart is in a class of her own. Apart from her ability to negotiate generous payments to be sliced off the top off Sirius’s future income stream, she can also afford to bear the loss if things start to drift and go wrong.

For investors lower down the scale, the options present themselves a little differently. While it’s worth noting that Sirius shares at the current 22p are trading at double where they were four years ago, it’s also true that the performance in the past few months has been poor, as doubts about the billions of dollars of required funding have continued to plague sentiment. A third of the value of the company has been wiped out since July, and some internet commentators are beginning to wonder if the earlier 38p highs will ever be seen again.

That’s partly because of the uncertainty, but also, as a corollary, because there is always the possibility, despite protestations to the contrary, that Sirius will end up having to raise more money through equity. And if that were to happen, in this market the discount would undoubtedly be quite steep.

Still, the fundamentals underlying the fertiliser business remain robust, and global demand is set to increase still further as general wealth levels increase and more people are able to afford better food.

The competition?

Where then should investors look if they are baulking at the size and risk associated with Sirius. The major established producers in North America are the obvious first port of call, in particular, Mosaic (NYSE:MOS) and Agrium (TSE:NTR). The London-listed majors Rio Tinto (LON:RIO) and BHPBilliton also have significant production, although their shares tend to trade more in line with base metals and iron ore prices.

Then further down the scale, where the upside is greater but so are the rewards, there are the likes of Salt Lake Potash (LON:SO4), Danakali (ASX:DNK)(LON:DNK) and Kore Potash (LON:KP2).

Danakali’s project at Colluli in Eritrea would be one favourite for investors to swap out Sirius for since it at least has a scale that’s some way towards being comparable to Woodsmith. With a 1.1bn tonne reserve of the higher quality sulphate of potash, this is a project that will make a mark on the global scale, and it too has off-take agreements in place.

Kore Potash meanwhile, is also developing a project of some scale, the 508mln tonne Kola sylvanite project in the Republic of Congo, and might also make an attractive alternative. That’s partly because it’s now in the final stages of completing a definitive feasibility study for Kola, and partly because when the nearby Dougou deposits are taken into account the total amount of potash ore available to Kore rises to well over 1bn tonnes.

Salt Lake Potash is somewhat smaller, as it’s currently working up the Lake Way project in Western Australia, where it plans a 50,000 tonnes per year sulphate of potash demonstration plant. In time this could be scaled up too, though, so the upside could be that much greater.

With all these companies, investors will want to weigh up the balancing factors of jurisdiction, product type and financial risk. All are moving towards production, all still face significant financing hurdles, and all could end up selling into a strong market. Investors who make the right choices here could be sitting on handsome returns.

 

 

]]>
Fri, 23 Nov 2018 08:45:00 +0000 https://www.proactiveinvestors.co.uk/companies/news/209824/is-sirius-minerals-simply-the-best-or-are-there-other-potash-companies-out-there-that-offer-better-value-209824.html