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.
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.
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.
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