Some analysts believe that U.K. polyhalite developer Sirius Minerals plc could be vulnerable to an international takeover following the collapse of its ambitious stage-2 funding plan in September, according to the U.K’s Proactive Investors, citing FinnCap analyst Martin Potts.
Potts said it was “almost inevitable” that the Scarborough, Yorkshire-based firm will be taken over “at a huge discount” following the cancellation of its US$500-million bond issue (GM Sept. 20, p. 1). The US$500 million bond had been a critical part of Sirius’ ambitious US$3.8 billion Stage 2 financing needed to complete its North Yorkshire polyhalite mine and processing project as then-envisaged (GM May 3, p. 1).
The London-based FinnCap analyst believes the buyer is likely to be a Chinese player given – he said – that China is most in need of the fertilizer potential of Sirius’ polyhalite resource.
Certainly, and particularly since the collapse of its stage-2 financing plans, Sirius has been looking at the potential to bring in a partner for the acquisition of “a significant part” of the project. Analysts at the London branch of Germany’s Berenberg said in October a strategic investor could be the only lifeline left for the polyhalite developer (GM Oct. 4, p. 23).
Sirius is now working on a revised two-stage development plan for its polyhalite mine and processing project following a strategic review of the project (GM Nov. 15, p. 26). However, the revised plan is seen in some quarters as “highly optimistic.”
The plan comprises “an Initial Scope” to include progress of shaft sinking to achieve first polyhalite and the drive 1 materials transport system (MTS), and is estimated to require around US$600 million of funding to be raised (GM Nov. 15, p. 26).
The estimated capital costs of the second stage of the revised plan – the “Deferred Scope,” which incorporates the remainder of construction activities required to deliver 10 million mt/y of polyhalite capacity ramped-up and operational – is put by the company at up to around US$2.5 billion.
Since the decision to pull the bond issue, Sirius has slowed development work across the project in order to conserve funds (GM Nov. 15, p. 26; Sept. 20, p. 1). The company’s share value has plummeted some 76 percent since Aug., and as of close of trading on Dec. 5 stood at 3.52 U.K. pence.