Sirius Minerals Share News (SXX)

(Sharecast News) - Sirius Minerals said it was pulling a $500m raising due to jittery bond markets and cutting the rate of development on the world's biggest potash project as the UK government also refused support.
The company needed to raise the $500m in order to unlock a $2.5bn credit facility arranged with JP Morgan that would give it access to the rest of the money it needs.

Sirius added that the government had declined to guarantee $1bn of bonds, which would have delivered the much-needed financing.

Chief executive Chris Fraser said the firm would now start a "comprehensive strategic review over the next six months to assess and incorporate optimisations to the project development plan and to develop a different financing structure for the funds required".

"The process will incorporate feedback from prospective credit providers around the risks associated with construction and will include seeking a major strategic partner for the project," he added.

Sirius said it had unrestricted cash reserves of £180m, enough to cover the review period, although it would have to return $400m raised via a convertible bond issue earlier this year and currently held in escrow.

A key part of Sirius plan is a 23-mile tunnel under the North York Moors National Park from the polyhalite deposit located 1,500m underground three miles south of Whitby to a port at Teesside, where the product would be crushed and shipped.

Analysts at AJ Bell said the government's refusal to support the project was "disappointing...when you consider that Sirius believes it can generate £100bn for the UK economy over the next 50 years should the mine become operational".

"However, the reality is that Sirius has never built a mine before, nor has it operated one. In that sense it is a high-risk entity from a lender's point of view."

"History would suggest that finding a strategic partner is harder than you think, so that option is not a certainty. Sirius will need to find someone with very deep pockets and an appetite to back a mine which will create a product for which there is not currently an established market."