Sirius Minerals Plc, Scarborough, England, early this week announced the launch of its “markets-led” Stage 2 project financing, under which it aims to raise a total of US$3.8 billion (including financing costs) to fund its North Yorkshire polyhalite mine and processing plant project to completion.
The US$3.8 billion financing will comprise a US$400 million equity fundraising, a US$644 million issue of convertible bonds, a US$500 million senior secured bond issue, and a revolving credit facility for up to a maximum of US$2.5 billion.
Sirius has signed an engagement letter with JP Morgan Securities LLC for the proposed US$2.5 billion revolving credit facility. That credit facility is contingent upon the completion of the full US$500 million bond issue before Oct. 30, 2019.
Sirius revealed in March that it had secured a conditional proposal from “a major global financial institution” in respect of its stage 2 financing (GM March 15, p. 1). While JP Morgan is the sole lead arranger, it is expected that the credit facility will be syndicated to other lenders.
The polyhalite developer launched the US$400 million share placing on April 29, and later revealed that the shares would be sold for 15 UK pence each. The placing was oversubscribed, and Sirius on May 1 confirmed that it had raised a total of US$425 million via the share placing.
Sirius also this week launched the buy-back convertible bond issue, which is expected to close in May. The buy-back convertible bond issue, the underwritten placing, and open offer together will raise about US$1 billion of new funds.
Sirius will aim to issue the separate US$500 million senior secured bonds by the end of September. As long as it is completed by Oct. 30, the revolving credit facility will be put in place. However, while J.P. Morgan would endeavor to procure purchasers for the full US$500 million of these initial bonds, it would not be under any obligation to acquire any for which it cannot procure purchasers. As a result, Sirius said it does not have any certainty that it will receive the full US$500 million of gross proceeds of the initial bonds.
Despite the uncertainties, this week’s financing announcement will go some way to assuage skeptics that doubted whether the company could raise the rest of the required funding – and enough customers – for its polyhalite project. Sirius has been pursuing a senior debt financing for the project with a group of prospective lenders since 2016, and until now, without success.
Last September, the company revealed that it had upwardly revised the capital cost requirement of the polyhalite mining project to US$4.17 billion (including contingency), and would need an additional US$400-$600 million in its stage 2 funding, putting its revised stage 2 capital funding requirement at between $3.4-$3.6 billion, up from the previous estimate of $3 billion (GM Sept 7, 2018).
Last week, Sirius announced that it had secured its first European customer, and had signed an exclusive 10-year supply and distribution deal with Munich-based agri-business group BayWa Agri Supply & Trade BV (BAST) (GM April 26, p. 1). The deal has taken the polyhalite developer’s aggregate peak contracted sales volume to 10.7 million mt/y, which equates to slightly more than the North Yorkshire project’s targeted first-phase capacity, and up from 8.2 million mt/y at the end of last year.
As the project develops, the plan is for the short-term financing to be converted into further bond issues. Sirius is targeting the extraction of the first polyhalite from the Woodsmith Mine by the end of 2021.
The polyhalite developer this week reported a £12.5 million total loss for 2018, a marked improvement on its end-2017 loss position of £78.9 million. The company attributed the main driver of the loss as the fair value re-measurement of the derivatives associated with convertible loans. As of the end of last year, the company had total funds of £290.4 million, comprising cash and cash equivalents of £230.1 million and restricted cash of £60.3 million.