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Sirius Minerals Yorkshire mine will be ‘on ice’ for a while after financing collapse says Proactive Research analyst

“The project has never stacked up for me. It has always been way too big," said Proactive Research analyst Christopher Ecclestone.

Sirius Minerals PLC - Sirius Minerals’s Yorkshire mine will be ‘on ice’ for a while after financing collapse says Proactive Research analyst
The pace of construction is now slowing to enable a strategic review

Proactive Research analyst Christopher Ecclestone says Sirius Minerals PLC’s (LON:SXX) Yorkshire mine project is not necessarily dead in the water, but, it is likely to be kept ‘on ice’ for a while.

Ecclestone, in an interview with the Proactive studio in London, said he wasn’t surprised that the project financing stalled as he reckoned the near US$4bn effort would’ve been “a stretch” even in the best of economic and political circumstances.

READ: Sirius Minerals financing falls apart amid Brexit bond turmoil

“I always thought that it was going to be a trial and it has proven to be a trial that’s failed,” he said.

Beyond Brexit and political uncertainty, which Ecclestone believes accounts for only 30% of the problem, the analyst believes there’s a more fundamental problem.

The project – which is supposed to include a large shaft, underground mining and processing, as well as a 23 mile transport tunnel from Teeside to Whitby - is too big and too expensive.

Sirius should’ve raised more money via equity and it should have designed a lower capex project, according to Ecclestone.

“The project has never stacked up for me. It has always been way too big.”

“The mining industry has suffered for the last fifteen year from gargantuanism, which is where projects are made bigger and bigger to appeal to bigger and bigger investors, but, in reality, if the really big investors are not prepared to put their money on the table, then why does a project have to be so massive?

He added: “This [project] had phenomenal capex that would’ve been challenging in the best of times.

“So it is no surprise they [the company] haven’t been able to get the funds either from the equity markets or from the bond markets.”

Ecclestone says the mine construction project wasn’t dead in the water but it was now “in the freezer for a while”. The question he emphasised, however, was whether the company would have enough money to keep the project on ice for long enough for bond markets to improve.

“Unfortunately, they seem to have gone too far to be able to ‘right size’ the project … they have created something that is unshrinkable.”

He added: “They’ve insisted on making it really, really big and that’s a [funding] hurdle that they’ve not been able to jump over.”



In the full interview, which you can watch here, Ecclestone details the remaining financial, technical, environmental, and political risks associated with Sirius’s project as well as discussing the state of the potash market and the potential ways forward for the London-listed company.

Quick facts: Sirius Minerals PLC

Price: 3.558 GBX

LSE:SXX
Market: LSE
Market Cap: £249.78 m
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