Shares in potash mine developer Sirius Minerals PLC (LON:SXX) sank on Wednesday after Berenberg downgraded the stock to ‘hold’ from ‘buy’ and slashed its target price by 50% to 17p from 35p.
In a note, the German bank said that following news on Tuesday that the FTSE 250 firm had delayed a planned US$500mln bond offering, the risks relating to the group’s polyhalite project in Yorkshire were now “greater than the reward” and suggested that investors “wait until certainty is achieved” before taking any action.
READ: Sirius Minerals slumps as it slams brakes on US$500mln bond offering
“As outlined in the financing package, there is no guarantee that alternative methods of financing can be secured…and as such the company could again run into cash flow issues. With the deadline for completion now drawing closer, the risk is now too high to argue that Sirius Minerals’ shares currently represent an attractive investment”, the broker said.
However, despite the uncertainty, Berenberg’s analysts reiterated their long-term view of the project unchanged, saying that if the company managed to secure funding for its Woodsmith site the economics were “favourable”.
Sirius blamed unfavourable market conditions for its decision to suspend the offering earlier this week, adding that it would revisit the offer “when conditions have improved later this quarter”.
Sirius has said it needs to find enough buyers for the bonds to unlock a US$2.5bn revolving credit facility from JP Morgan.
The news has sent the share price tumbling, losing around a third of its value on Tuesday alone.
The slide continued in mid-morning trading on Wednesday, with the shares down 11.5% to 9.2p.