Anglo American plc (LON:AAL) has the resources and capabilities to make a success of Sirius Minerals PLC’s (LON:SXX) partially built fertiliser mine, so says Shore Capital analyst Yuen Low.
In a note, Low reacted to Wednesday’s news that Anglo American has made a proposal to potentially buy Sirius for £386mln, or 5.5p per share.
Sirius Minerals and Anglo American are now in advanced talks to potentially bring forward a deal.
This morning, in a stock market statement, Sirius said that its management would be prepared to recommend an offer at the indicated price.
READ: Sirius Minerals in advanced talks over sale to Anglo American
At 5.5p, the potentially offer would be pitched at a premium of 34.1% premium to yesterday’s closing price of 4.1p, and a 61% premium to the three-month volume-weighted average price of 3.4p. Nonetheless, it remains a long way off the prices seen prior to the collapse of Sirius’s mine financing in mid-2019.
Significantly, according to Shore Cap’s Yuen Low, as a much larger group Anglo American will have the wherewithal to deliver Sirius’s large and ambitious project.
“As one of the world’s leading miners, AAL possesses the financial, technical and marketing resources and capabilities to make a success of the project,” the analyst said in a note.
“AAL expects project development to be broadly in-line with Sirius’s revised development plan for the first two years after an offer is successfully completed. It intends to update the development timeline thereafter, optimise mine design and ensure appropriate integration with its own operating standards and practices.”
Low added that Anglo American’s takeover interest vindicates Shore Cap’s long held positive view on the mine project’s merits.
He said: “AAL said it had identified Sirius as being ‘of potential interest some time ago’, on the grounds of ‘the quality of the underlying asset in terms of scale, resource life, operating cost profile and the nature and quality of its product’.”
Anglo American is required to announce whether or not it will make a firm offer by 5pm on 5 February 2020.
Sirius shares shot up 33% with the news of the offer, with the shares changing hands slightly beneath the proposed offer price.